nep-mac New Economics Papers
on Macroeconomics
Issue of 2006‒09‒16
28 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Phillips Curves and Unemployment Dynamics: A Critique and a Holistic Perspective By Marika Karanassou; Hector Sala; Dennis J. Snower
  2. Assessing Different Drivers of the GreatModeration in the U.S. By Efrem Castelnuovo
  3. Slow Money Dissemination By Zeno Enders
  4. Changes in the Federal Reserve's Inflation Target: Causes and Consequences By Peter N. Ireland
  5. Trend Cycle Correlation, Drift Break and the Estimation of Trend and Cycle in Canadian GDP By Arabinda Basistha
  6. Monetary policy with model uncertainty: distribution forecast targeting By Svensson, Lars E.O.; Williams, Noah
  7. Futures prices as risk-adjusted forecasts of monetary policy By Monika Piazzesi; Eric T. Swanson
  8. Modelling the Duration of Interest Rate Spells Under Inflation Targeting in Canada By Ruby Shih; David E. A. Giles
  9. The Decline in German Output Volatility: A Bayesian Analysis By Aßmann, Christian; Hogrefe, Jens; Liesenfeld, Roman
  10. Expansionary fiscal consolidations in Europe: new evidence By António Afonso
  11. The production function approach to the Belgian output gap, Estimation of a Multivariate Structural Time Series Model By Philippe Moës
  12. Energy price shocks and the macroeconomy: the role of consumer durables By Rajeev Dhawan; Karsten Jeske
  13. Unemployment Fluctuations With Staggered Nash Wage Bargaining By Mark Gertler; Antonella Trigari
  14. The long-run Fisher effect: can it be tested? By Mark J. Jensen
  15. Is there a bank lending channel in Hungary? Evidence from bank panel data By Csilla Horváth; Judit Krekó; Anna Naszódi
  16. Turkish Experience With Implicit Inflation Targeting By Ali Hakan Kara
  17. Labor Market Institutions: Curse or Blessing? By Carsten Ochsen; Heinz Welsch
  18. Endogenous Business Cycles and Dynamic Inefficiency By Guido Cazzavillan; Patrik Pintus
  19. Seemingly Irrelevant Events Affect Economic Perceptions and Expectations: The FIFA World Cup 2006 as a Natural Experiment By Thomas Dohmen; Armin Falk; David Huffman; Uwe Sunde
  20. U.S. wage and price dynamics: a limited information approach By Argia M. Sbordone
  21. The quality of fiscal adjustment and the long-run growth impact of fiscal policy in Brazil By Blanco, Fernando; Herrera, Santiago
  22. Political and Institutional Determinants of the Cyclicality of Fiscal Policy: Evidence from the OECD and Latin America By Nuno Venes
  23. Are Monetary Rules and Reforms Complements or Substitutes? A Panel Analysis for the World versus OECD Countries By Ansgar Belke; Bernhard Herz; Lukas Vogel
  24. El proyecto de presupuesto y el carácter procíclico de la política fiscal By FEDESARROLLO
  25. Does aggregate relative risk aversion change countercyclically over time? evidence from the stock market By Hui Guo; Zijun Wang; Jian Yang
  26. The Returns to Currency Speculation By Craig Burnside; Martin Eichenbaum; Isaac Kleshchelski; Sergio Rebelo
  27. The Cost of Banking Regulation By Luigi Guiso; Paola Sapienza; Luigi Zingales
  28. Tendencies and problems of economical insolvency (bankruptcy) institution development in Belarus: 1991-2005 By Aliaksei Smolski

  1. By: Marika Karanassou (Queen Mary, University of London and IZA Bonn); Hector Sala (Universitat Autònoma de Barcelona and IZA Bonn); Dennis J. Snower (Kiel Institute for World Economics, University of Kiel, CEPR and IZA Bonn)
    Abstract: The conventional wisdom that inflation and unemployment are unrelated in the long-run implies that these phenomena can be analysed by separate branches of economics. The macro literature tries to explain inflation dynamics and estimates the NAIRU. The labour macro literature tries to explain unemployment dynamics and determine the real economic factors that drive the natural rate of unemployment. We show that the orthodox view that the New Keynesian Phillips curve is vertical in the long-run and that it cannot generate substantial inflation persistence relies on the implausible assumption of a zero interest rate. In the light of these results, we argue that a holistic framework is needed to jointly explain the evolution of inflation and unemployment.
    Keywords: natural rate of unemployment, NAIRU, New Keynesian Phillips Curve, inflation-unemployment tradeoff, inflation dynamics, unemployment dynamics
    JEL: E24 E31
    Date: 2006–08
  2. By: Efrem Castelnuovo (University of Padua)
    Abstract: This paper employs a calibrated new-Keynesian DSGE model to assess the relative importance of two different, potentially important drivers of the Great Moderation in the U.S., namely 'good policy' vs. 'good luck'. The calibrated model is capable to replicate the actual standard deviations of inflation and output. Factual and counterfactual simulations are run in order to gauge the relative importance of the systematic monetary policy vs. the stochastic shocks hitting the economic system in shaping some macroeconomic volatilities. Importantly, under the bad policy scenario sunspots may influence the equilibrium values of the macroeconomic variables of interest, and distortions in the transmission mechanism going from the structural shocks to the variables of interest are allowed for. Our findings support the relevance of both drivers in causing inflation volatility. By contrast, output volatility can hardly be explained by a monetary policy switch like the one occurred in the U.S. at the end of the '70s.
    JEL: E30 E52
    Date: 2006–08
  3. By: Zeno Enders
    Abstract: A model of limited participation in the asset market is developed, in which varieties of consumption bundles are purchased sequentially. By this, heterogeneity in money holdings and in the effective elasticity of substitution of consumers arises, which affects optimal markups chosen by oligopolistic firms. The model generates a short-term inflation-output trade off, although all firms can set their optimal price each period and no informational problems exist. The responses are persistent even after a one-time monetary shock due to an internal propagation mechanism that stems from the slow dissemination of newly injected money. Furthermore, a liquidity effect, countercyclical markups, procyclical profits and marginal costs after monetary shocks are obtained. The model is simple and tractable, such that analytical results for the linearized model can be derived.
    Keywords: Limited Participation, Countercyclical Markups, Liquidity Effect Phillips Curve, Oligopolistic Competition
    JEL: E31 E32 E51
    Date: 2006
  4. By: Peter N. Ireland
    Abstract: This paper estimates a New Keynesian model to draw inferences about the behavior of the Federal Reserve's unobserved inflation target. The results indicate that the target rose from 1 1/4 percent in 1959 to over 8 percent in the mid-to-late 1970s before falling back below 2 1/2 percent in 2004. The results also provide some support for the hypothesis that over the entire postwar period, Federal Reserve policy has systematically translated short-run price pressures set off by supply-side shocks into more persistent movements in inflation itself, although considerable uncertainty remains about the true source of shifts in the inflation target.
    JEL: E31 E32 E52
    Date: 2006–08
  5. By: Arabinda Basistha (Department of Economics, West Virginia University)
    Abstract: This paper argues, using Monte Carlo experiments, that bivariate correlated unobserved components (UC) framework delivers more accurate estimation results for trend and cycle parameters than the univariate framework.The paper estimates stochastic trend and cyclical fluctuations in Canada from a bivariate, correlated UC model with drift breaks. In contrast to the univariate results, bivariate estimation shows a fairly volatile stochastic trend after accounting for the drift break along with a negative trend-cycle shock correlation. The estimated cyclical component is moderately large, persistent and consistent with ECRI denoted Canadian recessions.
    Keywords: Stochastic trend, Inflation, GDP, Unobserved components model
    JEL: E31 E32 E50
    Date: 2005
  6. By: Svensson, Lars E.O.; Williams, Noah
    Abstract: We examine optimal and other monetary policies in a linear-quadratic setup with a relatively general form of model uncertainty, so-called Markov jump-linear-quadratic systems extended to include forward-looking variables. The form of model uncertainty our framework encompasses includes : simple i.i.d. model deviations; serially correlated model deviations; estimable regimeswitching models; more complex structural uncertainty about very different models, for instance, backward- and forward-looking models; time-varying central-bank judgment about the state of model uncertainty; and so forth. We provide an algorithm for finding the optimal policy as well as solutions for arbitrary policy functions. This allows us to compute and plot consistent distribution forecasts–fan charts–of target variables and instruments. Our methods hence extend certainty equivalence and “mean forecast targeting” to more general certainty non-equivalence and “distribution forecast targeting.”
    Keywords: Optimal policy, multiplicative uncertainty
    JEL: E42 E52 E58
    Date: 2005
  7. By: Monika Piazzesi; Eric T. Swanson
    Abstract: Many researchers have used federal funds futures rates as measures of financial markets' expectations of future monetary policy. However, to the extent that federal funds futures reflect risk premia, these measures require some adjustment. In this paper, we document that excess returns on federal funds futures have been positive on average and strongly countercyclical. In particular, excess returns are surprisingly well predicted by macroeconomic indicators such as employment growth and financial business-cycle indicators such as Treasury yield spreads and corporate bond spreads. Excess returns on eurodollar futures display similar patterns. We document that simply ignoring these risk premia significantly biases forecasts of the future path of monetary policy. We also show that risk premia matter for some futures-based measures of monetary policy shocks used in the literature.
    Keywords: Federal funds rate ; Federal funds market (United States) ; Monetary policy
    Date: 2006
  8. By: Ruby Shih (Department of Economics, University of Victoria); David E. A. Giles (Department of Economics, University of Victoria)
    Abstract: We use survival models to analyze the duration of the spells associated with the interest rate used by the Bank of Canada as its monetary policy instrument. Both non-parametric and parametric models are estimated, allowing for right-censoring of the data, and time-varying covariates. We find that the data are explained well by an accelerated failure time Weibull model, with the annual rate of inflation and the quarterly rate of growth in GDP as covariates. The model indicates that there is positive duration dependence in the interest rate spells, and that unemployment and exchange rate effects are insignificant.
    Keywords: Inflation target, survival analysis, monetary policy
    JEL: C14 C42 E43
    Date: 2006–09–08
  9. By: Aßmann, Christian; Hogrefe, Jens; Liesenfeld, Roman
    Abstract: Empirical evidence suggests a sharp volatility decline of the growth in U.S. gross domestic product (GDP) in the mid-1980s. Using Bayesian methods, we analyze whether a volatility reduction can also be detected for the German GDP. Since statistical inference for volatility processes critically depends on the specification of the conditional mean we assume for our volatility analysis different time series models for GDP growth. We find across all specifications evidence for an output stabilization around 1993, after the downturn following the boom associated with the German reunification. However, the different GDP models lead to alternative characterizations of this stabilization : In a linear AR model it shows up as smaller shocks hitting the economy, while regime switching models reveal as further sources for a stabilization, a narrowing gap between growth rates during booms and recessions or flatter trajectories characterizing the GDP growth rates. Furthermore, it appears that the reunification interrupted an output stabilization emerging already around 1987.
    Keywords: business cycle models, Gibbs sampling, Markov Chain Monte Carlo, regime switching, structural breaks
    JEL: C11 C15 C32 E32
    Date: 2005
  10. By: António Afonso
    Abstract: In order to assess the existence of expansionary fiscal consolidations in Europe, panel data models for private consumption are estimated for the EU15 countries, using annual data over the period 1970–2005. Three alternative approaches to determine fiscal episodes are used, and the level of government indebtedness is also taken into account. The results show some evidence in favour of the existence of expansionary fiscal consolidations, for a few budgetary spending items (general government final consumption, social transfers, and taxes), depending on the specification and on the time span used. On the other hand, the possibility of asymmetric effects of fiscal episodes does not seem to be corroborated by the results.
    Keywords: fiscal policy; expansionary fiscal consolidations; non-Keynesian effects; panel data models; European Union.
    JEL: C23 E21 E62
  11. By: Philippe Moës (National Bank of Belgium, Research Department)
    Abstract: A multivariate structural time series model is applied to the factor inputs of a production function (or components thereof) to estimate the Belgian output gap. The usefulness of capacity utilization is also investigated but the variable is not given a prominent status. The number of independent cycles - there may be more than one - and the frequencies retained in the cycles are not restricted a priori. To allow for leads and lags between variables, phase shifts à la Rünstler are introduced at a later stage. Additivity of leads and lags is not imposed. Over 1983-2004, a 3.5 years periodicity is found in the cycles. At that periodicity, the cycles in the participation and unemployment rates are negligible. Two independent cycles hide behind the cycles of the other variables: hours, TFP and capacity utilization. A common cycle restriction is rejected, even allowing for idiosyncratic cycles. The cycles present in the whole data set cannot be subsumed in a single measure such as capacity utilization. Phase shifts are significant, with hours leading by as much as 3 quarters and capacity utilization lagging but additivity of leads and lags is rejected. The resulting output gap has much in common with the NBB business survey indicator.
    Keywords: Business cycle, output gap, phase shifts, structural time series models
    JEL: C32 E32
    Date: 2006–09
  12. By: Rajeev Dhawan; Karsten Jeske
    Abstract: So far, the literature on dynamic stochastic general equilibrium models with energy price shocks uses energy on the production side only. In these models, energy shocks are responsible for only a negligible share of output fluctuations. We study the robustness of this finding by explicitly modeling private consumption of energy at the household level in addition to energy use at the firm level to account for total energy use in the economy. Additionally, we distinguish between investment in consumer durables and investment in capital goods. The model economy is calibrated to match total energy use and durable goods consumption as observed in the U.S. data. Simulation results indicate that, despite higher total energy use, this economy has an even smaller proportion of output fluctuations attributable to energy price shocks. Productivity shocks continue to be the primary force behind business cycle fluctuations. The driving force behind our results is that the household now has the flexibility to rebalance its investment portfolio. Specifically, the energy price hike is absorbed by reducing durable goods investment more than investment in capital goods, thereby cushioning the hit to future production at the expense of current consumption. Hence, our model better matches the consumption volatility observed in the data.
    Date: 2006
  13. By: Mark Gertler; Antonella Trigari
    Abstract: A number of authors have recently emphasized that the conventional model of unemployment dynamics due to Mortensen and Pissarides has difficulty accounting for the relatively volatile behavior of labor market activity over the business cycle. We address this issue by modifying the MP framework to allow for staggered multiperiod wage contracting. What emerges is a tractable relation for wage dynamics that is a natural generalization of the period-by-period Nash bargaining outcome in the conventional formulation. An interesting side-product is the emergence of spillover effects of average wages on the bargaining process. We then show that a reasonable calibration of the model can account well for the cyclical behavior of wages and labor market activity observed in the data. The spillover effects turn out to be important in this respect.
    JEL: E24 E32 J23 J3
    Date: 2006–08
  14. By: Mark J. Jensen
    Abstract: Empirical support for the long-run Fisher effect, a hypothesis that a permanent change in inflation leads to an equal change in the nominal interest rate, has been hard to come by. This paper provides a plausible explanation of why past studies have been unable to find support for the long-run Fisher effect. This paper argues that the necessary permanent change to the inflation rate following a monetary shock has not occurred in the industrialized countries of Australia, Austria, Belgium, Canada, Denmark, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom, and the United States. Instead, this paper shows that inflation in these countries follows a mean-reverting, fractionally integrated, long-memory process, not the nonstationary inflation process that is integrated of order one or larger found in previous studies of the Fisher effect. Applying a bivariate maximum likelihood estimator to a fractionally integrated model of inflation and the nominal interest rate, the inflation rate in all seventeen countries is found to be a highly persistent, fractionally integrated process with a positive differencing parameter significantly less than one. Hence, in the long run, inflation in these countries will be unaffected by a monetary shock, and a test of the long-run Fisher effect will be invalid and uninformative as to the truthfulness of the long-run Fisher effect hypothesis.
    Date: 2006
  15. By: Csilla Horváth; Judit Krekó (Magyar Nemzeti Bank); Anna Naszódi (Magyar Nemzeti Bank)
    Abstract: In this paper we analyze the bank lending channel in Hungary. We provide a brief overview of the theory and the empirical approaches used to investigate the existence of bank lending channel. From the possible methods we use the generally applied approach suggested by Kahsyap and Stein (1995) which relies on discovering asymmetries in changes in the amount of loans to monetary actions in order to isolate supply and demand effects. We estimate an ARDL model where the asymmetric effects are captured by interaction-terms. We find significant asymmetric adjustment of loan quantities along certain bank characteristics. The existence of bank lending channel, and therefore loan supply decisions of banks, can explain these asymmetries. In addition, we do not find any sign for asymmetric loan demand adjustment along these variables. According to these findings, we cannot rule out the existence of the bank lending channel in Hungary.
    Keywords: monetary transmission, credit channel, bank lending channel, ARDL model.
    JEL: C23 E44 E52 G21
    Date: 2006
  16. By: Ali Hakan Kara
    Date: 2006
  17. By: Carsten Ochsen (University of Rostock); Heinz Welsch (University of Oldenburg)
    Abstract: Previous literature has identified considerable non-pecuniary costs to macroeconomic fluctuation and uncertainty. The present paper investigates whether and to what extent labor market institutions can mitigate those costs. We study how life satisfaction of European citizens is affected by employment protection and the level and duration of unemployment benefit payments. We differentiate between direct effects (at given macroeconomic conditions) and total effects (including the feedback through the institutions? effect on macroeconomic outcomes). We find that the total effect of employment protection is positive, whereas the total effect of benefit duration is negative. The direct and indirect effects of a higher benefit level nearly neutralize each other.
    Keywords: unemployment benefit; employment protection; macroeconomic uncertainty; cost-benefit analysis; life satisfaction; happiness
    JEL: J30 E24 E60 D71 I31
    Date: 2006
  18. By: Guido Cazzavillan (Department of Economics, University Of Venice Cà Foscari); Patrik Pintus (Universitè de la Mèditerranée and GREQAM-IDEP, France)
    Abstract: This paper explores how the occurrence of local indeterminacy and endogenous business cycles relates to dynamic inefficiency, as defined by Malinvaud (1953), Phelps (1965) and Cass (1972). We follow Reichlin (1986) and Grandmont (1993) by considering a two-period OLG model of capital accumulation with labor-leisure choice into the first-period of agents’ life and consumption in both periods. We first show that local indeterminacy and Hopf bifurcation are necessarily associated with a capital-labor ratio that is, at steady state, larger than the Golden Rule level. Consequently, paths converging asymptotically towards the steady state are shown to be dynamically inefficient, as there always exists another trajectory that starts with the same initial conditions and produces more aggregate consumption at all future dates. More surprising, however, is our main result showing that stable orbits, generated around a dynamically inefficient steady state through a supercritical Hopf bifurcation, may, in contrast, be dynamically efficient.
    Keywords: Overlapping generations, endogenous labor supply, multiple equilibria, endogenous fluctuations, dynamic inefficiency
    JEL: C62 D61 E32
    Date: 2006
  19. By: Thomas Dohmen (IZA Bonn); Armin Falk (IZA Bonn and University of Bonn); David Huffman (IZA Bonn); Uwe Sunde (IZA Bonn and University of Bonn)
    Abstract: Prominent economic theories have emphasized the role of commonly held perceptions and expectations for determining macroeconomic outcomes. A key empirical question is how such collectively held beliefs are formed. We use the FIFA World Cup 2006 as a natural experiment. We provide direct evidence that seemingly irrelevant events (the outcomes of soccer matches) can systematically affect individual perceptions about economic prospects, both on a personal and economy-wide level.
    Keywords: expectation formation, sunspots, soccer world cup, macroeconomic outcomes, psychology
    JEL: D8 D0 E0
    Date: 2006–08
  20. By: Argia M. Sbordone
    Abstract: This paper analyzes the dynamics of prices and wages using a limited information approach to estimation. I estimate a two-equation model for the determination of prices and wages derived from an optimization-based dynamic model in which both goods and labor markets are monopolistically competitive; prices and wages can be reoptimized only at random intervals; and, when prices and wages are not reoptimized, they can be partially adjusted to previous-period aggregate inflation. The estimation procedure is a two-step minimum distance estimation that exploits the restrictions imposed by the model on a time-series representation of the data. In the first step, I estimate an unrestricted autoregressive representation of the variables of interest. In the second, I express the model solution as a constrained autoregressive representation of the data and define the distance between unconstrained and constrained representations as a function of the structural parameters that characterize the joint dynamics of inflation and labor share. This function summarizes the cross-equation restrictions between the model and the time-series representations of the data. I then estimate the parameters of interest by minimizing a quadratic function of that distance. I find that the estimated dynamics of prices and wages track actual dynamics quite well and that the estimated parameters are consistent with the observed length of nominal contracts.
    Keywords: Prices ; Wages ; Estimation theory ; Inflation (Finance)
    Date: 2006
  21. By: Blanco, Fernando; Herrera, Santiago
    Abstract: The authors describe the main trends of Brazil ' s fiscal policy during the past decade and analyze (1) the ability to raise the primary surplus in response to external shocks, (2) the pro-cyclical nature of fiscal policy, and (3) the long-run impact of government expenditure composition and taxation. They analyze the use of the primary balance as a policy tool within the Drudi-Prati model, wherein the government uses the primary balance to reveal its commitment to service its debt. The authors verify that both the debt ratio and the primary balance are determinants of spreads and credit ratings in Brazil. But the relationship is nonlinear: the impact of the primary balance on spreads is amplified as the debt ratio increases. Using an Autoregressive Distributed Lag (ARDL) approach, the authors analyze the relationship between the primary balance and economic activity, finding a positive correlation in the long run. However, in the short run fiscal expansions are associated with primary balance reductions and vice-versa during output contractions, confirming the procyclical nature of fiscal policy in the short run. The authors use two approaches, ARDL and a cointegrating value at risk (VAR), to analyze the interaction between public expenditure composition and taxation on growth. Similar results are obtained: large elasticities of output with respect to capital stocks, a significant negative impact of taxation on long-run GDP, and a negative impact of increasing government consumption and transfer payments on GDP. These results shed light on the contribution of fiscal policy to disappointing growth performance in Brazil during the past decade.
    Keywords: Economic Stabilization,Public Sector Expenditure Analysis & Management,Economic Theory & Research,Fiscal Adjustment,Banks & Banking Reform
    Date: 2006–09–01
  22. By: Nuno Venes
    Abstract: In this paper, we analyse the role of political and institutional variables on the cyclical patterns of central government expenditure and revenue. Working with a sample of 38 OECD and Latin-American countries in 1960-2003, we find that higher levels of income inequality are associated with stronger expenditure procyclicality, and that better institutions do not seem to mitigate this effect. IMF interventions are, in general, statistically insignificant in explaining the cyclical behaviour of expenditure, as well as the degree of development of financial systems. On the revenue side, income inequality leads to less procyclical policies. In general, political and institutional variables explain the cyclicality of government expenditure better than that of revenue.
    Keywords: Fiscal policy; cyclicality; political and institutional determinants; OECD; Latin America
    JEL: E62 H61
  23. By: Ansgar Belke (University of Hohenheim); Bernhard Herz (University of Bayreuth); Lukas Vogel (University of Bayreuth)
    Abstract: This paper investigates the relationship between the exchange rate regime and the degree of structural reforms using panel data techniques. We look at a broad sample of countries (the “world sample”) and also an OECD sample. Our main findings suggest that adopting a fixed exchange rate rule is positively correlated with the degree of overall structural reforms and the trade component. The paper also highlights the fact that considering a heterogeneous panel of countries as opposed to a limited does not matter for this results.
    Date: 2006–06–07
    Abstract: El debate sobre el proyecto de presupuesto para 2007 y las metas que se ha fijado el Gobierno dentro Marco Fiscal de Mediano Plazo debe aprovecharse para dar una discusión acerca del caracter procíclico de la política fiscal. Las cifras del presupuesto evidencian que la asignación del gasto público presenta una gran inflexibilidad y que la inversión pública termina siendo una de las principales variables de ajuste Resulta trascendental no sólo reducir las inflexibilidades del ejercicio presupuestal, sino también recuperar el carácter contracíclico de la política fiscal, con el fin de que ésta pueda jugar su papel estabilizador. Esto nos lleva a insistir en la importancia que tiene para el país el paso exitoso de las reformas que buscan asegurar la sostenibilidad de las finanzas públicas hacia el futuro. En el logro de este objetivo no sólo está comprometido el Gobierno, sino también el Congreso, la Corte Constitucional y la sociedad colombiana en general. La cuenta corriente de la balanza de pagos en un contexto histórico y regional. La economía colombiana se ha caracterizado por mantener una posición deficitaria en la cuenta corriente. Frente a otros períodos de auge económico, el déficit de cuenta corriente actual es menor. Además, el ahorro externo parece estar dirigido más al financiamiento de la inversión productiva que al del consumo. Así mismo, la composición del financiamiento es más estable, en la medida en que la inversión extranjera ha aumentado de manera importante. Sin embargo, en otros países de América Latina se han registrado superávit en la cuenta corriente, lo que sugiere una tendencia diferente en Colombia. Fedesarrollo espera que el déficit en cuenta corriente en los próximos años esté alrededor de 2.5% y 3% del PIB. Además, por ahora no se avizora un cambio abrupto en las condiciones de financiación externa Si bien hoy en día la vulnerabilidad externa del país es menor que en otros tiempos, resulta importante que el tamaño del déficit en la cuenta corriente no se incremente a niveles insostenibles. Para ello resulta necesario tomar las medidas necesarias que permitan un mayor dinamismo del sector exportador y aquellas dirigidas a asegurar la sostenibilidad de las finanzas públicas. Encuesta de Opinión Financiera Los administradores de portafolio esperan que el spread disminuya Aumenta la preferencia por los títulos atados a la DTF Los administradores de portafolio incrementan sus expectativas de inflación. Encuesta de Confianza del Consumidor La confianza del consumidor presenta un leve retroceso La capacidad de ahorro de los hogares muestra una tendencia a la recuperación. Aumenta la disposición para la compra de automóviles. Encuesta de Opinión Empresarial La confianza industrial sigue creciendo. Aumenta el número de empresarios que percibe que la capacidad instalada puede resultar insuficiente La actividad exportadora muestra un buen dinamismo.
    Date: 2006–09–03
  25. By: Hui Guo; Zijun Wang; Jian Yang
    Abstract: Using a semiparametric estimation technique, we show that the risk-return tradeoff and the Sharpe ratio of the stock market increases monotonically with the consumption wealth ratio (CAY) across time. While early studies have commonly interpreted such a finding as evidence of the countercyclical variation in aggregate relative risk aversion (RRA), we argue that it mainly reflects changes in investment opportunities for two reasons. First, we fail to reject the null hypothesis of constant RRA after controlling for CAY as a proxy for the hedge against changes in the investment opportunity set. Second, by contrast with habit formation models but consistent with ICAPM, we find that loadings on the conditional stock market variance scaled by CAY are negatively priced in the cross-sectional regressions. For illustration, we replicate the countercyclical stock market risk-return tradeoff using simulated data from Guo's (2004) limited stock market participation model, in which RRA is constant and CAY is a proxy for shareholders' liquidity conditions.
    Keywords: Capital assets pricing model ; Stock market
    Date: 2006
  26. By: Craig Burnside; Martin Eichenbaum; Isaac Kleshchelski; Sergio Rebelo
    Abstract: Currencies that are at a forward premium tend to depreciate. This `forward-premium puzzle' represents an egregious deviation from uncovered interest parity. We document the properties of returns to currency speculation strategies that exploit this anomaly. The first strategy, known as the carry trade, is widely used by practitioners. This strategy involves selling currencies forward that are at a forward premium and buying currencies forward that are at a forward discount. The second strategy relies on a particular regression to forecast the payoff to selling currencies forward. We show that these strategies yield high Sharpe ratios which are not a compensation for risk. However, these Sharpe ratios do not represent unexploited profit opportunities. In the presence of microstructure frictions, spot and forward exchange rates move against traders as they increase their positions. The resulting `price pressure' drives a wedge between average and marginal Sharpe ratios. We argue that marginal Sharpe ratios are zero even though average Sharpe ratios are positive.
    JEL: E24 F31 G15
    Date: 2006–08
  27. By: Luigi Guiso; Paola Sapienza; Luigi Zingales
    Abstract: We use exogenous variation in the degree of restrictions to bank competition across Italian provinces to study both the effects of bank regulation and the impact of deregulation. We find that where entry was more restricted the cost of credit was higher and - contrary to expectations- access to credit lower. The only benefit of these restrictions was a lower proportion of bad loans. Liberalization brings a reduction in rates spreads and an increased access to credit at a cost of an increase in bad loans. In provinces where restrictions to bank competition were most severe, the proportion of bad loans after deregulation raises above the level present in more competitive markets, suggesting that the pre-existing conditions severely impact the effect of liberalizations.
    JEL: E0 G0
    Date: 2006–08
  28. By: Aliaksei Smolski (Vitebsk State Technological University)
    Abstract: The paper investigates becoming and development of bankruptcy institution in Republic of Belarus after USSR disintegration. It shows the approaches of government to regulation of bankruptcy at different stages of transitional economy development and its current state. The economical, legal and political problems of bankruptcy institution application in Belarus are reviewed.
    Keywords: transition economy, insolvency, bankruptcy
    JEL: E61 G33 K12 P21

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