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on Macroeconomics |
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Issue of 2005‒11‒09
37 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Carlos J. Rodriguez-Fuentes; Antonio Olivera-Herrera; David Padron-Marrero |
| Abstract: | The primary goal of the European Central Bank’s (ECB) monetary policy is to achieve price stability. Whereas during the 1980s and 1990s there was a rapid and strong convergence in terms of price differential among the Euro countries, particularly in those countries with higher inflation rates in the past, single monetary policy has proved to be quite inefficient in continuing this trend and has not achieved further reductions in inflation rate differentials within the euro zone. Since the ECB sets the official interest rate according to the average inflation of the euro area, the persistence of such price differentials within the area would mean that the “one size interest rate policy” would not fit all. This paper studies empirically the inflation rate differentials and their persistence in some currency unions with the aim to draw some conclusions for the working of the ECB monetary policy. KEYWORDS: monetary policy; inflation persistence; currency unions |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p218&r=mac |
| By: | Karlo Kauko (Bank of Finland) |
| Abstract: | This paper presents econometric analyses on the determination of bank deposit and lending rates using longitudinal Finnish data. Interest rate pass-through is very strong, possibly complete, in the case of lending rates; in the case of deposit rates the pass-through is far from complete, even in the long term. The monetary union has benefited customers by decreasing the average rate on new loans. Credit and interest rate risk premiums are clearly observable in banks' lending rates. The impact of money market rates on loan stock rates seems to have been non-linear; no obvious explanation for this phenomenon has been found. |
| Keywords: | G21, E43, E44 |
| JEL: | G21 E43 E44 |
| Date: | 2005–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0508020&r=mac |
| By: | sunanda roy (drake university) |
| Abstract: | The paper studies asset prices and capital accumulation in a monetary economy with non-diversifiable idiosyncratic risks (incomplete markets). A government issued unbacked currency is introduced into agent's preferences in a dynamic GEI (General Equilibrium with Incomplete market) model with CARA preferences and normal disturbances. Closed form expressions for equlibrium allocations and prices are derived under finite and infinite horizons. The paper addresses several monetary issues. In particular, money is shown to be neutral but not superneutral at the steady state. The rate of inflation is shown to adversely affect the steady state capital stock under some situations. Finally the Friedman rule is shown to be non-optimal for some economies. |
| JEL: | C6 D5 D9 |
| Date: | 2005–08–09 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpge:0508002&r=mac |
| By: | Viv. B Hall; McDermott C. John |
| Abstract: | We use National Bank of New Zealand Regional Economic Activity data, to identify and characterise classical business cycle turning points, for New Zealand’s 14 regions and aggregate New Zealand activity. Using Concordance statistic measures, logistic model and GMM estimation methods, meaningful regional business cycles have been identified and a number of significant associations established. All regions exhibit cyclical asymmetry for both durations and amplitudes, and synchronisations between aggregate NZ activity and each region are contemporaneous. The regional cycles rarely die of old age but are terminated by particular events. The regions most highly synchronised with the NZ activity cycle are Auckland, Canterbury, and Nelson-Marlborough; those least so are Gisborne and Southland. Noticeably strong co-movements are evident for certain regions. Geographical proximity matters, and unusually dry conditions can be associated with cyclical downturns in certain regions. There is no discernable evidence of association with net immigration movements, and no significant evidence of regional cycle movements being associated with real house price cycles. The agriculture-based nature of the New Zealand economy is highlighted by the strong influence of external economic shocks on rural economic performance. In particular, there is considerable evidence of certain regional cycles being associated with movements in New Zealand’s aggregate terms of trade, real prices of milksolids, real dairy land prices and total rural land prices. JEL Classification: C22, E32, R11, R12, R15 Keywords: Classical business cycle; Turning Points; Regional business cycles; Concordance statistics; New Zealand |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p200&r=mac |
| By: | Hui Feng (Department of Economics, University of Victoria) |
| Abstract: | In this paper we investigate the impact of data revisions on forecasting and model selection procedures. A linear ARMA model and nonlinear SETAR model are considered in this study. Two Canadian macroeconomic time series have been analyzed: the real-time monetary aggregate M3 (1977-2000), and residential mortgage credit (1975-1998). The forecasting method we use is multi-step-ahead non-adaptive forecasting. |
| Keywords: | Vintage Data, Real-time Data, Model Selection, SETAR Model, ARMA model, Forecasting |
| JEL: | C22 C53 |
| Date: | 2005–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:vic:vicewp:0515&r=mac |
| By: | Riccardo Corradini (University La Sapienza of Rome) |
| Abstract: | This article explores by an econometric approach the permanent income hypothesis. The classical cointegration analysis applied by Cochrane and the Kalman filter technology with correlated error components are used. The latter approach compared with the former reveals a clear rejection of PIH for USA.These conclusions are reversed for Italy. |
| Keywords: | Kalman filter, trend, cycles, cointegration, correlated components,state space models, unobserved components |
| JEL: | C22 C32 E32 |
| Date: | 2005–09–05 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpem:0509009&r=mac |
| By: | BENOIT BELLONE (OECD) |
| Abstract: | This paper introduces an upgraded version of MSVARlib, a Gauss and Ox- Gauss compliant library, focusing on Multivariate Markov Switching Regressions in their most general specification. This new set of procedures allows to estimate, through classical optimization methods, models belonging to the MSI(M)(AH)-VARX ``intercept regime dependent'' family. This research enhances the first package MSVARlib 1.1, which has been deeply inspired by the works of Hamilton and Krolzig. Not to mention the extension to a generalized multivariate regression framework, it notably augments the range of models with a possibly unlimited finite number of Markov states, offers automatic or manual intialization procedures and adds new statistical tests. The first part of this article provides the basic theoretical grounds of the related Markov-switching models. Following sections give some illustrations of the programs through univariate and multivariate examples. One is based on a non-linear reading of the american unemployment rate. A second study is focused on coincident stochastic models of US recessions and slowdowns. The paper concludes on possible extensions and new applications. Detailed guidelines in appendices and tutorial programs are provided to help the reader handling the Gauss package and the joined replication files. |
| Keywords: | Multivariate Markov-Switching Regressions, Hidden markov Models, Non linear regressions, Open source Gauss library, Business cycle, EM algorithm, Kittagawa-Hamilton Filtering, Recession Detection Models, MSVAR, MS-VAR, Hamilton's Model, Krolzig MSVAR library,Filtered probabilities, Smoothed probabilities. |
| JEL: | C32 E32 E44 |
| Date: | 2005–08–19 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpem:0508017&r=mac |
| By: | Valadkhani, Abbas (University of Wollongong); Robinson, Tim |
| Abstract: | Based on two snapshots taken from the Australian economy, this study quantifies the impacts of final demand aggregates on output and employment in various sectors using the 1989 and 1997 conversion matrices. The sectoral output and employment are linked with final demand deliveries in such a way that one can measure the impacts on changes in each component of aggregate demand, other components remaining unchanged, on output and employment. A comparison of the aggregate output and employment multipliers in 1989 to 1997 indicates that while the output multipliers have increased, the employment multipliers have declined. This means that through time, due to rising labour productivity, the various components of aggregate demand would need to grow at a faster rate in order to achieve a certain employment growth. It was also found that almost all employment generated between 1989 to 1997 was in three service industries, namely Community, Social & Personal Services; Wholesale Retail, and Restaurants; and Property and Business Services. These are industries that are least likely to have benefited from the productivity gains that resulted from the microeconomic reforms that characterised the Australian economy during this period. On a relative basis, a rise in various components of aggregate final demand can lead to a higher employment generation in these three industries. |
| Keywords: | final demand aggregates; output and employment conversion matrices; Australia |
| JEL: | E12 E24 C67 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:uow:depec1:wp05-12&r=mac |
| By: | Peter Dixon; James Giesecke; Maurreen Rimmer |
| Abstract: | Many studies, both of Australia and of comparable developed economies, have found that the economic benefits from investment in urban infrastructure are substantial. However the nature of this infrastructure is often such that it is under-provided by the private sector. In Australia, much of the responsibility for the provision of urban infrastructure rests with state and local government. However throughout the 1990’s many of Australia’s state governments embarked on a period of fiscal restraint, seeking to improve financial positions weakened by exposure to failed state government enterprises in the early 1990’s. Perhaps because of the deferred consequences of reducing spending on infrastructure, a large proportion of this fiscal adjustment appears to have been borne by spending on public infrastructure. Today, policy attention at the state government level is again focussing on public infrastructure. However in spite of the now robust fiscal positions of Australia’s state governments, there remains a reluctance on their part to finance public infrastructure through debt, and raising taxes is perceived as politically unpopular. Instead, governments are exploring alternative financing instruments, such as developer charges and public-private partnerships. This paper uses a dynamic multi-regional CGE model (MMRF) to evaluate the regional macro economic consequences of four alternative methods of financing an expansion in state government spending on public infrastructure. The four methods are developer charges, payroll tax, government debt, and residential rates. The paper confirms that the services provided by public infrastructure can have significant impacts on the regional macro economy. More importantly however, the paper demonstrates that the total gains from urban infrastructure are quite sensitive to the means chosen by government to finance infrastructure investment. In contrast to up-front financing methods (such as developer charges, payroll tax, and residential rates), the paper finds that the gains from urban infrastructure are greatest when the chosen financing method provides a closer match between the timing of the burden of financing the infrastructure and the timing of the benefits provided by the infrastructure. This can be achieved by instruments such as debt, public-private partnerships, and user charges. On this basis the paper finds that a greater reliance by regional government son debt financing might be warranted, and that the gains from infrastructure expenditure are least when that expenditure is financed by developer charges. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p116&r=mac |
| By: | Shrestha, Min B. (University of Wollongong); Chowdhury, Khorshed (University of Wollongong) |
| Abstract: | It is a stylised fact that financial "repression" retards economic growth. Hence, financial liberalisation is advocated to remove the stranglehold on the economy. Financial liberalisation policy argues that deregulation of interest rate would result into a higher real interest rate which would lead to increased savings, increased investment and achieve efficiency in financial resource allocation. Past studies have reported inconclusive results regarding the interest rate effects on savings and investment. This paper examines the financial liberalisation hypothesis by employing autoregressive distributed lag (ARDL) modelling approach on Nepalese data. Results show that the real interest rate affects both savings and investment positively. |
| Keywords: | Financial Liberalisation, Interest Rate Effects, Unit Roots, Cointegration, ARDL Modelling |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:uow:depec1:wp05-15&r=mac |
| By: | Hans Joachim Schalk; Attila Varga |
| Abstract: | Mainstream economic thinking is still characterized by a predominantly a-spatial theoretical structure. Though economists are able to model the impacts of capital, labor or technology on output, employment or prices at both macro and micro levels, our methodological tools are still not sensitive to the influence of geography on the way inputs contribute to production. Empirical investigations of the relationship between agglomeration and macroeconomic growth are still relatively rare in the literature. It is also a very recent advancement that geographical structure is modeled simultaneously with other variables in macroeconomic models. This paper introduces EcoRET the macroeconometric model with regionally endogenized technological change for Hungary. The unique feature of EcoRET is that it incorporates spatial structure into a traditional macroeconometric model by a regional block of technological change. The model can be applied for policy simulations on the macroeconomic effects of changing geographical distribution of regional financial supports. JEL classification: O31, H41, O40 Keywords: endogenous growth theory, new economic geography, knowledge spillovers, total factor productivity, agglomeration economies |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p521&r=mac |
| By: | Valadkhani, Abbas (University of Wollongong); Layton, Allan P.; Pahlavani, Mosayeb |
| Abstract: | This paper employs all available annual time series data to endogenously determine the timing of structural breaks for 10 macroeconomic variables in the Australian economy. The ADF (Augmented Dickey and Fuller) test and the LP (Lumsdaine and Papell, 1997) test are used to examine the time series properties of the data. The ADF test results provide no evidence against the unit root null hypothesis in all ten macroeconomic variables. After accounting for the two most significant structural breaks in the data impacting on both the intercept and trend, the results from the LP test indicate that the null of at least one unit root is rejected for four of the variables under investigation at the 10 per cent level or better. We also found that t he dates of structural breaks in most cases point to: (a) the oil/wages shock occurring in the 1973-1975 period, (b) the 1990-1991 recession; (c) the culmination of financial deregulation and innovation in the late 1980s; and (d) the 1997 Asian crisis. |
| Keywords: | Unit roots Hypothesis, structural breaks, Australian economy |
| JEL: | C12 C22 C52 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:uow:depec1:wp05-17&r=mac |
| By: | Matthias Kredler (New York University) |
| Abstract: | This paper revisits the question if the user cost of capital plays an important role for investment decisions using Bayesian estimation techniques. These methods offer advantages over classical econometric tools in this area: The most important are that prior distributions offer a convincing way to confine the support of model parameters and that confidence intervals are more reliable when model parameters approach the bounds of their support. I use aggregate investment data from six industrial sectors in the UK to estimate a parsimonious partial-equilibrium model. The Kalman Filter is used to evaluate the likelihood and MCMC methods are employed to draw from the posterior distribution. The main finding is that the real interest rate accounts for less than 10 percent of the variance in investment under the 99- percent confidence level; this result is robust across sectors. |
| Keywords: | Bayesian Estimation, MCMC, Kalman Filter, Investment |
| JEL: | C11 C15 C63 E22 |
| Date: | 2005–09–02 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpem:0509003&r=mac |
| By: | Fernando Barreiro-Pereira |
| Abstract: | This paper analyses how several spatial variables coming from cities and transportation system can affect money market, specially the income velocity of circulation, assuming an unit-elastic aggregate demand function and considering money velocity as a variable. Fluctuations in velocity caused by some spatial variables, under certain conditions, can affect the aggregate demand curve. The specification of the main relation-ship has found in the Baumol-Tobin model for transaction money demand, and in Christaller-Lösch central place theory. The estimation of the model has been based on panel data techniques and applied across 61 countries during 14 years in the 1978-1991 period. Theoretical and econometric results indicates that seven spatial variables like the country’s first city population, the population density, the passengers-kilometer transported by railways, and several ratios referred to some geographical variables, can provokes fluctuations on aggregate demand curve in the short run. In the long run, the aggregate supply can be also affected by means of these variables. In order to checking this question, considering that these spatial variables are not product factor, we propose to observe if these variables can affect the technological progress coefficient, A, concerning to an aggregate production function, according to a neo-classical growth model. Results by means of the Mankiw, Romer and Weil method, and also by means of an endogenous growth model of technology diffusion, indicates that some spatial variables affect the speed of convergence relative to the real per head income, across these 61 countries. However, a certain amount in some of these variables generates a congestion process in some countries. For checking it, we utilize a Barro and Sala i Martin endogenous growth model which reflects government activities. The concluding remarks indicates that some of these spatial variables above mentioned increases the speed of convergence but generates congestion in some countries. These spatial variables also affect the aggregate supply, and hence the price and output levels. Key words: transportation, regional growth, convergence, congestion. JEL Class.: R41 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p278&r=mac |
| By: | Maurício Yoshinori Une (Banco Itaú S.A.); Marcelo Savino Portugal (PPGE/UFRGS) |
| Abstract: | In the literature, little role is attributed to the country risk conditional volatility in the determination of the macroeconomic equilibrium in a developing small open economy (DSOE). This paper posits the prime hypothesis that, in the presence of multiple equilibria and self-fulfilling prophecies, one of the reasons why investors prefer to speculate in a determined country’s sovereign bonds, raising its country risk levels, is the switch of the expected macroeconomic fundamentals’ conditional variance towards a higher regime. Non-linear GARCH models are applied to monitor different switching regimes of the Brazilian country risk conditional volatility, with special emphasis on Markov switching regimes. Results indicate that the high volatility regime periods, better identified by the latter, coincide with all the severe liquidity crisis episodes suffered by Brazil from May 1994 through September 2002. Thus, although not free of limitations, the country risk’s high conditional volatility regime might determine a bad equilibrium and its monitoring might work as a practical tool to assess the duration of liquidity crises in a DSOE highly dependent on foreign capital inflows such as Brazil. |
| Keywords: | Markov switching, non-linear GARCH, conditional volatility, country risk, multiple equilibria, self-fulfilling prophecies, liquidity crisis. |
| JEL: | C22 E44 F41 G15 |
| Date: | 2005–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpem:0509005&r=mac |
| By: | Tadeusz Markowski |
| Abstract: | The paper deals with urban development processes in Poland in the historical context. These processes are confronted with Western European urban development pattern. The author focuses its considerations on specific developments and distortion aspects like historical huge scale war devastations and large scale developments from the period of centrally planned economy. The influence of these events on dynamic and cycles of present-day urban processes and urban policy challenges is analyzed. In conclusions author suggests that Poland has own specific business and urban cycles, which makes Poland different than its neighboring countries. Past historical development has left is a strong footprint which should be taken very seriously in contemporary national urban policy. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p365&r=mac |
| By: | Alicia Garcia-Herrero (Bank of Spain); Sergio Gavila (Bank of Spain); Daniel Santabarbara (Bank of Spain) |
| Abstract: | The Chinese banking system, characterized by massive government intervention, poor asset quality and low capitalization, has started a reform process based on three main pillars: (i) bank restructuring, through the cleaning-up of non-performing loans and public capital injections, particularly in the four largest state-owned banks; (ii) financial liberalization, with the gradual flexibilization of quantity and price controls, the opening-up to foreign competition and cautious steps toward capital account liberalization; and (iii) strengthened financial regulation and supervision, coupled with efforts to improve corporate governance and transparency. Although the reform is still ongoing, our preliminary assessment indicates that changes are needed for the reform to be fully successful. Asset quality has improved, particularly in the recapitalized banks, but there is a high risk of a new build-up of non performing loans. Capitalization has increased in the largest banks, as a consequence of the government capital injections, but it generally remains low and profitability has fallen even further. China’s huge financing needs, to maintain high economic growth, and its commitment to fully open up its banking system to foreign competition urgently require a more comprehensive and time-bound strategy, with a long-term vision of the desired structure of the Chinese banking system. Bank recapitalization should be completed immediately, not only to ensure bank soundness, but also to increase profitability, which could be affected negatively as competition increases with full financial liberalization. Bank recapitalization, however, needs to be accompanied by a radical improvement in corporate governance, which would clearly be facilitated by a change in the property structure. |
| Keywords: | Chinese financial system, financial reform, bank restructuring, financial liberalization, bank regulation and supervision. |
| JEL: | E44 E66 G2 G21 |
| Date: | 2005–08–22 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0508010&r=mac |
| By: | J. Andrés Faíñaa; Jesús López-Rodríguez |
| Abstract: | In this paper we use a generalized entropy index such as the Theil index to analyze regional inequalities in Europe. We proved that there is a synchronization between the convergence and catching-up process of objective 1 regions towards the EU15 average with the reform of the EU regional policy. During the period 1982-1988 the Theil index shows that inequalities between objective 1 regions and non-objective 1 regions have increased while from 1989 onwards the reduction in the inequalities between these two groups has been the norm. We also remark the fact that there are high disparate rates of growth among objective 1 regions both within countries and across countries but our computations show also a trend towards a more balanced growth among objective 1 regions within and across EU countries. This success of the European Union regional policy in objective 1 regions will mean a big opportunity for Central and Eastern European countries and hence the increases in competition arising from an enlarged European market combined with a suitable regional development policy should in the future boost the growth of those countries. In the last part of the paper we made a simulation for the funding envelope from 2007, based on the 2000-2006 budget. We show that the figures of the Agenda 2000 provide enough financial support for 90% of the total CEEC population and for 75% of “current” objective 1 population. Key Words: Regional Policy, European Enlargement, Central and Eastern European Countries, Strategic Planning, Regional Growth, Regional Development |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p32&r=mac |
| By: | Pierangelo De Pace (Johns Hopkins University) |
| Abstract: | I use numerical methods to test for the presence of one-time structural breaks in the conditional variance of nominal interest rate spreads in four European countries over a period of eleven years (Jan 1988 to Dec 1998). I start with an intuitive approach consisting of a sequence of breakpoint Chow tests performed at subsequent dates over a given subsample of the squared residuals of the autoregressions used to model the yield spreads. Results from this procedure are misleading and spurious to some extent because of the incorrect critical values produced, which make the interpretation of the test stastistics basically unreliable. I then switch to large Monte Carlo simulations and to a fixed-regressor grid-bootstrap method to derive the right critical values and refine the previous conclusions. Finally, I utilize classical Bayesian econometrics to estimate alternative models for the series of nominal spreads and to detect potential shifts in the innovation variances of the equations describing the data. Outcomes need some interpretation: in the cases of Germany and Spain a break might have occurred in 1990 and 1994 espectively, as derived from the grid- bootstrap approach. Likewise, there is evidence of a shift in the case of France in 1996 according to the Bayesian techniques employed, which also validate the hypothesis of a break for Italian yield spreads in 1995. |
| Keywords: | Conditional Variance, Chow Test; Structural Breaks; Fixed- Regressor Grid-Bootstrap Method, Classical Bayesian Analysis |
| JEL: | C11 C12 C15 E3 E44 |
| Date: | 2005–09–06 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpem:0509011&r=mac |
| By: | Andrej Horvat; Gunther Maier |
| Abstract: | Based on the review of literature and our own conceptual considerations, we show that absorption problems regarding the EU Structural Funds may be important. Our brief covering of some general macroeconomic aspects of absorption problems brings us closer to the central topic of our paper, namely, the question of how to measure the administrative capacities of particular Candidate Countries for Structural Funds. First, we describe a suitable methodology for calculating the administrative absorption capacities of Candidate Countries. We then turn to some of the Candidate Countries’ institution-building activities in preparation for the EU’s Structural Policy. This shows that the process of preparing programming documents was the central point of the overall institution-building exercise. At the end of this chapter we present calculations on administrative capacities in five Candidate Countries: the Czech Republic, Hungary, Slovakia, Estonia and Slovenia, respectively. These calculations are based on previous calculations by the European Commission and on the strategic documents negotiated between the Commission and these Candidate Countries before the end of 2003. By calculating the key indicators of administrative capacity, we offer some preliminary statements regarding the present administrative capacity in a particular prospective new Member State and provide additional information on the overall absorption capacity of the countries in the 2004-2006 programme period. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p591&r=mac |
| By: | Anna Iara; Iulia Traistaru |
| Abstract: | The transition to a market economy and increased economic integration have fostered regional disparities in Central and Eastern European countries. This paper investigates whether and to what extent wages could act as an equilibrating mechanism in these countries by adjusting to local market conditions. Using regional data for the 1990s, we estimate static and dynamic wage curve models for Bulgaria, Hungary, Poland and Romania. We find empirical evidence for a wage curve in Bulgaria, Hungary and Poland suggesting that wages could help equilibrate labour markets following labour demand shocks. In the case of Romania, the unemployment elasticity of pay is not significantly different from zero. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p191&r=mac |
| By: | John Conlon (University of Mississippi) |
| Abstract: | Policy towards speculative bubbles is examined in a model of a finite horizon 'greater fool' bubble, with rational agents, asymmetric information and short-sales constraints. This model permits the use of standard tools of comparative dynamics and welfare economics to analyze bubble policies. Government policy is modeled as deflating overpriced assets by revealing information about whether or not the asset is overpriced. It is shown that such a policy tends to improve welfare if it protects less-informed buyers from 'bad' sellers, who know the asset is overpriced. However, if policy deflates prices only in 'strong bubbles,', where all private agents know the asset is overpriced, this tends to reduce welfare. This is because, in those states where the central bank turns out not to deflate prices, bad sellers become more confident of selling the asset. That is, bubble bursting protects bad sellers from each other, which, in turn, can exacerbate the lemons problem in states where the asset is valuable. |
| Keywords: | Bubbles, Asymmetric Information, Policy |
| JEL: | D82 E52 G14 |
| Date: | 2005–08–12 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpga:0508007&r=mac |
| By: | Georg Mosburger (University of Vienna); Paul Schneider (Vienna University of Economics & Business Administration) |
| Abstract: | This paper investigates the performance of international affine term structure models (ATSMs) that are driven by a mutual set of global state variables. We discuss which mixture of Gaussian and square root processes is best suited for modelling international bond markets. We derive necessary conditions for the correlation and volatility structure of mixture models to accommodate various empirical stylized facts such as the forward premium puzzle and differently shaped yield curves. Using UK-US data we estimate international ATSMs taking into account the joint transition density of yields and exchange rates without assuming normality. We find strong empirical evidence for negatively correlated global factors in international bond markets. Further, the empirical results do not support the existence of local factors in the UK-US setting, suggesting that diversification benefits from holding currency- hedged bond portfolios in these markets are likely to be small. Altogether, we find that mixture models greatly enhance the performance of ATSMs. |
| Keywords: | International affine term structure models, Estimation, Exchange rate, Model Selection |
| JEL: | C33 E43 F31 G12 |
| Date: | 2005–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0509003&r=mac |
| By: | António Almeida |
| Abstract: | The financial perspectives in the after 2006 are clearly unfavourable for the Portuguese autonomous regions. Financial resources and investment will be channelled to the Easter Europe, and only the outer-most regions able to convince about their specificity (and need for substantial financial support) will receive similar levels of financial transfers. Like the majority of small island economies, the Madeira economy depends on a restricted group of sectors. It’s unquestionable that the EU transfers are decisive in the dynamics of the regional economy. Therefore, post-2007 perspective is not encouraging, which is a concerning scenario. The communitarian funds transfers and tourism have a great effect on the economy dynamics. We intended to contribute to the on-going debate providing some empirical evidence about the importance of the EU and national transfers in the Portuguese autonomous regions. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p610&r=mac |
| By: | Isidro Frías; A. David Carballas |
| Abstract: | In this paper we focus on the major determinants of exports and imports in the member states of EU-15, giving a special emphasis on those belonging to the Economic and Monetary Union. For this reason we drive a general picture on the evolution of exports and imports. We analyse also the evolution of export and import prices, as well as the average labour productivity. Finally we estimate foreign trade equations both for imports and exports using the Johansen methodology. Among the major findings we can mention that we can reject the no cointegration among the import and export variables in the EU countries. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p398&r=mac |
| By: | Kirby Adam J.R. Faciane (Kirby Faciane / KAJR Faciane) |
| Abstract: | Over the past two decades, many economists believe that financial changes have greatly benefited society. Others argue that welfare gains have been a mixed blessing; a minority would probably go so far as to say that costs have outweighed their benefits. There is naturally no satisfactory resolution to this debate, considering the complexity of the issues as well as the judgmental nature of benefit and cost calculations. A look at the presumed positive effects and difficulties might be helpful in providing a perspective on the debate. |
| Keywords: | finance; financial evolution; transactions; economic efficiency; cost calculations |
| JEL: | G0 G00 E I |
| Date: | 2005–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0508015&r=mac |
| By: | Zoltan Acs; Attila Varga |
| Abstract: | Technological change is a central element in macroeconomic growth explanation. Endogenous growth models take a revolutionary step towards better understanding the economic growth process by deriving technological change from profit-motivated individual behavior. In endogenous growth theory knowledge spillovers play a fundamental role in the determination of the rate of technological progress. As such the efficiency of transmitting knowledge into economic applications is a crucial factor in explaining macroeconomic growth. Endogenous growth models take this factor exogenous. We argue that variations across countries in entrepreneurship and the spatial structure of economic activities could potentially be the source of different efficiencies in knowledge spillovers and ultimately in economic growth. We develop an empirical model to test both the entrepreneurship and the geography effects on knowledge spillovers. To date the only international data that are collected on the basis of exactly the same principles in each country are the Global Entrepreneurship Monitor (GEM) data. We use the 2001 GEM cross-country data to measure the level of entrepreneurship in each particular economy. For this purpose we apply the TEA index developed within the framework of the GEM project and calculated for each country participating in this international research. Additionally, data on employment, production, patent applications, public and private R&D expenditures originating from different international and national sources are applied in the paper. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p516&r=mac |
| By: | Valadkhani, Abbas (University of Wollongong) |
| Abstract: | This paper selectively reviews various approaches of macroeconometric modelling and highlights some important lessons from more than half a century of model-building particularly in the context of Asian countries. Addressing several issues discussed in this paper can improve the use of macroeconometric models (MEM) in forecasting and policy analysis in the foreseeable future. This survey shows that most MEMs in developing countries are either becoming smaller in size or not being subject to a thorough diagnostic investigation. In the specification of models one should consider the interplay among macroeconomic policies of different countries via international trade and global financial markets. It is argued that the Project Link and the Fair multi-country model are two initiatives in the right direction. It also appears that with advancement of econometric "know-how", the disparity of opinions between advocates and critics of macroeconometric modelling can be narrowed. |
| Keywords: | Macroeconometric modelling, Asian Developing Countries |
| JEL: | B23 C52 C51 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:uow:depec1:wp05-10&r=mac |
| By: | Joaquim J.M. Guilhoto |
| Abstract: | Following Furtuoso and Guilhoto (2003) the GDP of the Brazilian Agribusiness is estimated to be around 27% of the Brazilian GDP in 2000, and the latest numbers show that it could be reaching 30% of the Brazilian GDP in 2003. Despite its importance for the Brazilian economy as a whole, the size of the Brazilian territory and the regional differences draws attention for the fact that the importance of the agribusiness is not uniform over the Brazilian regions, and if the agribusiness is also divided into its four components, i.e., a) inputs to agriculture; b) agriculture; c) agriculture based industry; and d) final distribution, the differences are even bigger. In this paper it is made a study of the importance of the agribusiness for the 27 states of the Brazilian economy, taking into consideration its four components. The analysis is conduct for the year of 1999 using an interregional input-output system constructed for the Brazilian economy by Guilhoto et al. (2004). |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p10&r=mac |
| By: | Viktor Trasberg |
| Abstract: | The Baltic countries’ local governments have been functioned during the last decade in a permanently changing environment. Like other transition countries, they inherited from the past extremely centralized administrative system. Along with radical reforms, administrative system was decentralized and various functions were devolved from central to lower levels of government. Despite that, municipalities are still fiscally strongly dependent from central authorities. Often their fiscal capacity is not adequate to act in accordance with functions stipulated by laws. Many local governments’ revenues from taxes and user-charges are insufficient to finance efficiently their expenditures. Disparities in municipalities’ fiscal situation are correlated with unbalanced regional growth, social degradation in the low-income regions and growing differentiation by municipalities’ residents on access to education and healthcare. Membership of the European Union brings new tasks and responsibilities for the Baltic local governments. Municipalities should increase their economic sustainability and enhance administrative capacity to explore EU accession funds and implement EU policies. Considering the above-mentioned problems, the paper focuses on current fiscal situation of local governments in the Baltic countries. The main interest is to analyze local municipalities’ revenue level and structure, expenditure composition and fiscal autonomy conditions |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p153&r=mac |
| By: | Linda Veiga; Francisco Veiga |
| Abstract: | The political article tests for rational political business cycles models on an unexplored and large data set of Portuguese municipalities. This data allows for a clean test of the models due to its high level of detail on expenditure items, an exogenous fixed election schedule and the homogeneity of local governments with respect to policy instruments and institutions. Estimation results clearly reveal the opportunistic behaviour of local governments, that in pre-electoral periods, increase expenditure on items highly visible to the electorate such as roads and street construction, in an effort to signal competence and increase their chances of re-election. JEL classification: H72, D72, D78 Keywords: political business cycles, public finance, local governments |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p427&r=mac |
| By: | M. Jose Prieto; Agustin Manzano |
| Abstract: | From to beginning of year 2002, the Spanish Autonomous Communities (CC. AA.) fiscal performance is conditioned by a new legal framework compounded from the financial agreement and the legislation on budget stability. This new framework implies a change in the CC. AA. fiscal behaviour. Are the CC. AA. ready to provide its citizens the public services they demand and fulfil its fiscal stability commitments? Are all the CC. AA. in the same position? Using political economic models and data on past budget execution, this paper is aimed at shedding light over the factors that jeopardize the CC. AA. budget stability in the future and the differences between CC. AA. relevant to its fiscal performance. JEL classification: H61, H62, H71, H72, H77 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p262&r=mac |
| By: | Jens Suedekum; Uwe Blien |
| Abstract: | We address the effects of wages on employment growth on the basis of a theoretical model from which cost and demand effects can be derived. In the empirical analysis we take a highly disaggregated perspective and apply a newly developed shift-share regression technique on an exhaustive and very accurate data set for West Germany. The regression shows that the impact of regional wages on employment growth is significantly negative. There is some variation of this effect across sectors, but in no case we find support for the claim that an exogenous wage increase leads to higher employment growth. Keywords: Employment Growth, Shift-Share-Analysis, Regional Wages, Purchasing Power Argument. JEL- Classification: J23, E24, R11 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p641&r=mac |
| By: | Juan R. Cuadrado-Roura; Rubén Garrido-Yserte; Miguel Ángel Marcos-Calvo |
| Abstract: | Economic and Social Cohesion is one of the principal aims of European Union according to the Treaty. Although it has a clear and rather well defined political dimension, there is not a unique definition that permits a technical definition. ¿Has an increase of Economic and Social Cohesion been observed in recent decades? ¿How could this be measured? To answer these two questions it is necessary to define, first, what is the acceptable degree of regional inequalities and, second, which could be the variables or indexes to measure it properly (not only GDP per capita). The aim of this paper is to propose new answers to the problem, using REGIO database and applying multicriteria methods. We have researched a new empirical approach to the European Cohesion and we have calculated the accomplishment of a higher Economic and Social Cohesion between the European regions. The period analysed is 1987-1999 and the results are rather shocking and suggestive, particularly compared to the ones arising from the most conventional analysis on the evolution of GDP per capita. Key words: Social and Economic Cohesion; Regional Convergence; EU Regional Policy, multicriteria methods. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p657&r=mac |
| By: | Kirby Adam J.R. Faciane (Kirby Faciane / KAJR Faciane) |
| Abstract: | What is the extent to which financial markets are too volatile when left to themselves and, consequently, the extent to which the authorities should intervene to change the situation? Notice that I have referred to “volatility” and not to “inefficiency.” One of the interesting questions is the degree to which volatility reflects inefficiency, but I shall have more to say about that below. Notice also that the central question is probably not one which can be answered purely by reference to empirical evidence. The evidence is relevant, but it is usually impossible to say how alternative systems would have coped with particular events. Most importantly, students who are relatively new to the study of markets should be aware that debates for and against free markets have been going on for a very long time - in fact, as long as markets have existed. We should not, therefore, expect a quick resolution of the issue, but neither should we forget that much as been learned from previous rounds of the debate. A majority of the prior academic literature is concerned with markets in general and attempts to explain why there appeared to be booms and slumps in real activity. Could some method of central government intervention improve the situation - the most extreme form of such intervention being central planning? Dramatic evidence on this question has recently been provided by the collapse of central planning regimes in Eastern Europe. These countries have decided to adopt market economies as quickly as possible and to introduce a full range of financial markets. Thus the overwhelming benefits of a market economy over a planned economy are clearly demonstrated. However, the failure of “command” economies does not establish that market economies work best with a total absence of government intervention. Indeed, in contrast to the enthusiasm for free markets expressed in Eastern Europe, there is still a widespread suspicion of unbridled market forces in most Western economies. This is especially true in relation to those financial markets which have proved to be the most volatile. In many aspects of financial-market regulation there are ongoing debates about restrictions on trading activity which may make the market outcome “better.” The grounds for interference differ from area to area, but there is a common theme based upon market “failure” of some kind. This paper will first outline the argument for greater intervention as it has come up in three different areas of the financial system - foreign-exchange market, stock markets and retail financial markets. The detail is slightly different in each case but the issue is basically the same - can the market be left alone or do we need intervention? I shall then argue that in almost all cases government intervention makes things worse not better. The one exception to this is the foreign exchange market where it is arguable that an acceptable solution may be to do away with foreign-exchange markets entirely. |
| Keywords: | financial markets, foreign exchange, stock, financial retail markets, government intervention, kirby faciane |
| JEL: | G G0 G00 |
| Date: | 2005–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0508022&r=mac |
| By: | Niall Ferguson (Harvard University); Moritz Schularick (Free University of Berlin) |
| Abstract: | Would the movement of capital from to poor countries greatly increase, if the commitment to protecting property and allowing capital to move freely were more credible? This paper asks whether the British Empire provided global public goods that supported large-scale development finance before 1914. We reassess the importance of colonial status to investors by means of multivariable regression analysis. We show that British colonies were able to borrow in London at significantly lower rates of interest than non-colonies precisely because of their colonial status, which overruled economic factors. We conclude that these findings have important implications for the current globalization debate: lacking jurisdictional integration is a major impediment to capital flows from rich to poor. |
| Keywords: | sovereign risk, development finance, economic history, imperialism, globalization, bond spreads, capital market integration |
| JEL: | E F3 K |
| Date: | 2005–09–06 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpeh:0509002&r=mac |
| By: | Giuseppe Arbia; Gianfranco Piras |
| Abstract: | This paper studies the convergence of per capita GDP across European regions over a fairly long period. Most of the works are based on either cross-sectional or fixed-effects estimates. We propose the estimation of convergence in per capita GDP across European regions by making use of panel-data models extended to include spatial error autocorrelation and spatially lagged dependent variable (Anselin,1988;Elhorst,2002). This will allow us to extend the traditional ß convergence model to include a rigorous treatment of the spatial correlation among the intercept terms. A spatial analysis of such intercept terms will also be performed in order to shed light on the concept spatially conditional convergence. |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa04p524&r=mac |