nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2016‒05‒08
five papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Has foreign growth contributed to stagnation and inequality in Japan? By Kazuki Tomioka; Rod Tyers
  2. On the impact of dollar movements on oil currencies By Gabriel Gomes
  3. Financial supervision to fight fiscal dominance? The gold standard in Greece and South-East Europe between economic and political objectives and fiscal reality, 1841-1939 By Matthias Morys
  4. A Note on Home Bias and the Gain from Non-Preferential Taxation By Kaushal Kishore
  5. Intergenerational Mobility and the Rise and Fall of Inequality: Lessons from Latin America By Guido Neidhöfer

  1. By: Kazuki Tomioka; Rod Tyers
    Abstract: This paper examines the contributions of foreign growth (particularly in China), on Japan's domestic economic performance and inequality. While the standard approach to external sources of inequality has emphasized transmission through trade and labor markets, here the emphasis is on financial flows. We begin by exploring this link using a three factor, three sector, two-region dynamic computable general equilibrium model (CGE), in which the regions are interlinked by both trade and financial flows. To provide an empirical perspective, a lag-augmented vector autoregression (LA-VAR) and a sign restricted vector autoregression (Sign restricted VAR) are estimated. We find convincing evidence through numerical simulations that strong growth in a near neighbor not only retards domestic performance but also raises home inequality. Empirical results suggest that growth in China has a significant delayed effect in aggravating Japanese inequality and its importance in explaining Japanese inequality increases in magnitude over time.
    Keywords: Japanese inequality, Foreign growth, Stagnation, Financial linkages, CGE, Lag augmented, Sign restriction, VAR.
    JEL: C32 C68 E25 F21 F41 F60
    Date: 2016–05
  2. By: Gabriel Gomes
    Abstract: This paper investigates to which extent dollar real exchange rate fluctuations explain the unexpected divergent movement between the real exchange rate of oil exporting countries and the price of oil in certain periods. Estimating a panel cointegrating model for 11 OPEC and 5 major oil exporting countries over the 1980-2014 period, we find evidence to support they have oil currencies in the long term. In fact, a 10% increase in the price of oil leads to a 2.1% appreciation of their real exchange rate. To analyse how swings on the dollar exchange rate affect the co-movement between the two variables in the short run, we rely on a non-linear approach and estimate a panel smooth transition regression model. Results show that, in the short term, oil currencies move in concert with the price of oil only if the dollar appreciation is lower than 2.6%. After the dollar appreciates beyond this threshold, the real exchange rate of oil exporting economies is rather negatively affected by the price of oil.
    Keywords: Oil Price;Oil Currencies;Non-linearities
    JEL: C33 F31 Q43
    Date: 2016–05
  3. By: Matthias Morys
    Abstract: We add a historical and regional dimension to the debate on the Greek debt crisis. Analysing Greece, Romania, Serbia/Yugoslavia and Bulgaria from political independence to WW II, we find surprising parallels to the present: repeated cycles of entry to and exit from monetary unions, government debt build-up and default, and financial supervision by West European countries. Gold standard membership was more short-lived than in any other part of Europe due to fiscal dominance. Granger causality tests and money growth accounting show that the prevailing pattern of fiscal dominance was only broken under international financial control, when strict conditionality scaled back the treasury’s influence; only then were central banks able to conduct a rule-bound monetary policy and stabilize their exchange-rates. The long-run record of Greece suggests that the perennial economic and political objective of monetary union membership can only be achieved if both monetary and fiscal policy is effectively delegated abroad.
    Keywords: fiscal dominance, gold standard, financial supervision, South-East Europe
    JEL: N13 N14 N23 N24 E63 F34
    Date: 2016–04
  4. By: Kaushal Kishore (Department of Economics, University of Pretoria)
    Abstract: In a symmetric model of tax competition, we support the claim in Haupt and Peters (2005) that a non-preferential regime generates higher tax revenues compared to a preferential regime when investors have home bias. Further, we show that a complete ban on preferential taxation is desirable even when capital base is in?finitely elastic.
    Keywords: Tax competition, Nash Equilibrium, Non-preferential regime
    JEL: C72 F20 H26
    Date: 2016–04
  5. By: Guido Neidhöfer (School of Business & Economics, Freie Universität Berlin)
    Abstract: Countries with high income inequality also show a strong association between parents’ and children’s economic well-being; i.e. low intergenerational mobility. This study is the first to test this relationship in a between and within country setup, using harmonized micro data from 18 Latin American countries spanning multiple cohorts. It is shown that experiencing higher inequality in childhood has a negative effect on intergenerational mobility as adults. Furthermore, the influence of economic growth and public education is evaluated: both have a positive, significant, and substantial effect on intergenerational mobility.
    JEL: D63 I24 J62 O15
    Date: 2016–04

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