nep-mac New Economics Papers
on Macroeconomics
Issue of 2007‒12‒15
fifty-four papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Optimal monetary policy in a hybrid New Keynesian model with a cost channel By Bask, Mikael
  3. Simple interest rate rules with a role for money By Scharnagl, Michael; Gerberding, Christina; Seitz, Franz
  4. Search Frictions, Real Rigidities and Inflation Dynamics By Carlos Thomas
  5. The Maastricht Convergence Criteria and Optimal Monetary Policy for the EMU Accession Countries By Anna Lipinska
  6. Business Cycle Synchronization and Insurance Mechanisms in the EU By António Afonso; Davide Furceri
  7. International Macroeconomic Announcements and Intraday Euro Exchange Rate Volatility By Evans, Kevin; Speight, Alan E H
  8. Optimal Monetary Policy in the Euro Area in the Presence of Heterogeneity By Sophocles N. Brissimis; Ifigeneia Skotida
  9. Productivity, Aggregate Demand and Unemployment Fluctuations By Régis Barnichon
  10. Optimal monetary policy with a regime-switching exchange rate in a forward-looking model By Fernando Alexandre; Pedro Bação; John Driffill
  11. Robustly Optimal Monetary Policy By Kevin D. Sheedy
  12. Towards Measurement of Political Pressure on Central Banks in the Emerging Market Economies: The Case of the Central Bank of Egypt By Ibrahim L. Awad
  13. Yield curve reaction to macroeconomic news in Europe : disentangling the US influence By Marie Brière; Florian Ielpo
  14. Business Cycles and Growth: A Survey By Paul Gaggl; Sandra Steindl
  15. The Shimer Puzzle and the Correct Identification of Productivity Shocks By Régis Barnichon
  16. Intrinsic Inflation Persistence By Kevin D. Sheedy
  17. Inflation Persistence When Price Stickiness Differs Between Industries By Kevin D. Sheedy
  18. A Portofolio Balance Approach to Euro-Area Money Demand in a Time-Varying Environment By Stephen G.Hall; George Hondroyiannis; P.A.V.B. Swamy; George S. Tavlas
  19. Quantile Inferences for Inflation and Its Variability: Does a Threshold Inflation Rate Exist? By WenShwo Fang; Stephen M. Miller; Chih-Chuan Yeh
  20. Regional and Outward Economic Integration in South-East Asia By Weber, Enzo
  22. The Accuracy and Efficiency of the Consensus Forecasts: A Further Application and Extension of the Pooled Approach By Ager, Philipp; Kappler, Marcus; Osterloh, Steffen
  23. Interest rate rules and global determinacy: An alternative to the Taylor principle By Jean-Pascal Bénassy
  25. Wirtschaftswachstum in den MOEL zunehmend durch heimische Nachfrage getragen By Vasily Astrov
  26. E–stability and stability of adaptive learning in models with asymmetric information By Maik Heinemann
  28. On the Ramsey Equilibrium with heterogeneous consumers and endogenous labor supply By Stefano Bosi; Thomas Seegmuller
  29. Parasal Aktarım Mekanizmasında Para'nın Yeri: Türkiye için bir Analiz By Selva Demiralp
  30. Scylla and Charybdis. The European Economy and Polands Adherence to Gold, 1928-1936 By Nikolaus Wolf
  31. Capital-labor Substitution and Endogenous Fluctuations: a Monopolistic Competition<br />Approach with Variable Mark-up By Thomas Seegmuller
  32. Macroeconomic and Welfare Effects of Public Infrastructure Investment in Five Latin American Countries By Carlos Gustavo Machicado
  33. The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer? By Christopher A. Pissarides
  34. Economic Growth and Budgetary Components: a Panel Assessment for the EU By António Afonso; Juan González Alegre
  35. Technology Shocks and Asset Price Dynamics: The Role of Housing in General Equilibrium By Yoshida, Jiro
  36. Asset Pricing with Heterogeneous Agents, Incomplete Markets and Trading Constraints By Tsvetanka Karagyozova
  37. Reserves Accumulation in African Countries: Sources, Motivations, and Effects By Léonce Ndikumana; Adam Elhiraika
  38. Acnowledging for spatial effects in the Portuguese housing markets By G. Carvalho, Pedro; Ribeiro, Alexandra
  39. Gender responsive budgeting and fiscal decentralisation in India: A preliminary appraisal. By Chakraborty, Lekha S.
  40. Investment Complementarities, Coordination Failure and Systemic Bankruptcy¤ By Mei Li
  41. The Single Global Currency - Common Cents for Business By Bonpasse, Morrison M.
  42. Intergenerational Mobility and the Informative Content of Surnames By Maia Güell; Jose V. Rodriguez Mora; Chris Telmer
  43. Corporate Net Lending: a Review of Recent Trends By Christophe André; Stéphanie Guichard; Mike Kennedy; Dave Turner
  44. Does Financial Growth lead Economic Performance in India? Causality-Cointegration using Unrestricted Vector Error Correction Models By Kamat, Manoj; Kamat, Manasvi
  45. GROWTH CYCLES IN LATIN AMERICA AND DEVELOPED COUNTRIES By Adriana Moreira Amado; Marco Flávio da Cunha Resende; Frederico G. Jayme Jr.
  46. Creative Destruction with On-the-Job Search By Jean-Baptiste Michau
  47. Fiscal decentralisation and gender responsive budgeting in South Africa: An appraisal. By Chakraborty, Lekha S.; Bagchi, Amaresh
  50. Rupture structurelle et demande de monnaie au Rwanda By Jean-François Goux; Thomas Rusuhuzwa Kigabo
  52. CHARACTERIZING THE BRAZILIAN TERM STRUCTURE OF INTEREST RATES By Osmani Teixeira de Carvalho Guillén; Benjamin M. Tabak?
  54. El Encaje Bancario en Colombia Perspectiva General By Mauricio Avella Gómez

  1. By: Bask, Mikael (Bank of Finland Research)
    Abstract: This study shows that an expectations-based optimal policy rule has desirable properties in a standard macroeconomic model incorporating a cost channel for monetary disturbances and inflation rate expectations that are partly backward-looking. Specifically, optimal monetary policy under commitment is associated with a determinate REE that is stable under learning, whereas, under discretion, the central bank has to be sufficiently inflation averse for the equilibrium to have these properties.
    Keywords: commitment; determinacy; discretion; expectations-based rule; least squares learning
    JEL: E52 E61
    Date: 2007–12–05
  2. By: Gilberto Tadeu Lima; Mark Setterfield
    Date: 2007
  3. By: Scharnagl, Michael; Gerberding, Christina; Seitz, Franz
    Abstract: The paper analyses the performance of simple interest rate rules which feature a response to noisy observations of inflation, output and money growth. The analysis is based on a small empirical model of the hybrid New Keynesian type which has been estimated on euro area data by Stracca (2007). To assess the magnitude of the measurement problems regarding the feedback variables, we draw upon the real-time data set for Germany compiled by Gerberding et al. (2004). We find that interest rate rules which include a response to money growth outperform both Taylor-type rules and speed limit policies once real-time output gap uncertainty is accounted for. One reason is that targeting money growth introduces history dependence into the policy rule which is desirable when private agents are forward-looking. The second reason is that money growth contains information on the “true” growth rate of output which can only be measured imperfectly.
    Keywords: Monetary policy rules, euro area, data uncertainty
    JEL: E43 E52 E58
    Date: 2007
  4. By: Carlos Thomas
    Abstract: The standard New Keynesian model suffers from the so-called .macro-micro pricing conflict:in order to match the dynamics of inflation implied by macroeconomic data, the model needsto assume an average duration of price contracts which is much longer than what is observedin micro data. Here I show how departing from the standard model's assumption of aperfectly competitive labor market can help resolve the pricing conflict. I do so by assumingsearch frictions in the labor market. In this framework, labor becomes firm-specific andmarginal cost curves become upward-sloping. This mechanism reduces the slope of the NewKeynesian Phillips curve given a frequency of price adjustment. Conversely, given anestimate of this slope, my model implies shorter price durations than the standard model. Fora plausible calibration and for different slope values, my model consistently delivers pricedurations that are roughly half of those implied by the standard model.
    Keywords: New Keynesian, macroeconomics, micro data, inflation, search and matching
    JEL: E52 E32 J40
    Date: 2007–08
  5. By: Anna Lipinska
    Abstract: The EMU accession countries are obliged to fulfill the Maastricht convergence criteria prior toentering the EMU. What should be the optimal monetary policy satisfying these criteria? To answer this question, the paper proposes a DSGE model of a two-sector small open economy.First, I derive the micro founded loss function that represents the objective function of theoptimal monetary policy not constrained to satisfy the criteria. I find that the optimal monetary policy should not only target inflation rates in the domestic sectors and aggregate output fluctuations but alsodomestic and international terms of trade. Second, I show how the loss function changes when themonetary policy is constrained to satisfy the Maastricht criteria. The loss function of such aconstrained policy is characterized by additional elements penalizing fluctuations of the CPI inflation rate, the nominal interest rate and the nominal exchange rate around the new targets which are different from the steady state of the unconstrained optimal monetary policy. Under the chosen parameterization, the optimal monetary policy violates two criteria:concerning the CPI inflation rate and the nominal interest rate. The constrained optimal policy ischaracterized by a deflationary bias. This results in targeting the CPI inflation rate and the nominal interest rate that are 0.7% lower (in annual terms) than the CPI inflation rate and the nominal interest rate in the countries taken as a reference. Such a policy leads to additional welfare costs amounting to 30% of the optimal monetary policy loss.
    Keywords: Optimal monetary policy, Maastricht convergence criteria, EMU accession countries
    JEL: F41 E52 E58 E61
    Date: 2007–07
  6. By: António Afonso; Davide Furceri
    Abstract: In this paper we provide a positive exercise on past business-cycle correlations and risk sharing in the European Union, and on the ability of insurance mechanisms and fiscal policies to smooth income fluctuations. The results suggest in particular that while some of the new Member States have well synchronized business cycles, for some of the other countries, business cycles are not yet well synchronized with the euro area’s business cycle, and risk-sharing mechanisms may not provide enough insurance against shocks.
    Keywords: EU; Optimum Currency Areas; Business Cycle Synchronization; Insurance Mechanisms.
    JEL: E32 E42 F41 F42
    Date: 2007
  7. By: Evans, Kevin (Cardiff Business School); Speight, Alan E H
    Abstract: The short-run reaction of Euro returns volatility to a wide range of macroeconomic announcements is investigated using five-minute returns for spot Euro-Dollar, Euro-Sterling and Euro-Yen exchange rates. The marginal impact of each individual macroeconomic announcement on volatility is isolated whilst controlling for the distinct intraday volatility pattern, calendar effects, and a latent, longer run volatility factor simultaneously. Macroeconomic news announcements from the US are found to cause the vast majority of the statistically significant responses in volatility, with US monetary policy and real activity announcements causing the largest reactions of volatility across the three rates. ECB interest rate decisions are also important for all three rates, whilst UK Industrial Production and Japanese GDP cause large responses for the Euro-Sterling and Euro-Yen rates, respectively. Additionally, forward looking indicators and regional economic surveys, the release timing of which is such that they are the first indicators of macroeconomic performance that traders observe for a particular month, are also found to play a significant role.
    Keywords: Intraday volatility; macroeconomic announcements; exchange rates
    JEL: G12 E44 E32
    Date: 2007–09
  8. By: Sophocles N. Brissimis (Bank of Greece and University of Piraeus); Ifigeneia Skotida (Bank of Greece and Athens University of Economics and Business)
    Abstract: This paper examines the optimal design of monetary policy in the European monetary union in the presence of structural asymmetries across union member countries. It derives analytically an optimal interest rate rule under commitment and studies the dependence of its coefficients on the parameters of the structural model of each economy, the central bank's preferences for inflation and output stabilization as shown in its loss function, and the relative size of each country. Based on a twocountry, forward-looking, general equilibrium model, which is estimated for two euro area countries (Germany and France), we show that there are gains to be achieved by the ECB taking into account the heterogeneity of economic structures. This finding appears to be robust under alternative weights given by the central bank to the stabilization of the target variables. Although the implementation of the proposed rule involves difficulties relating to data and estimation constraints as well as risks of accommodating structural divergences, it is important that the ECB takes into consideration national characteristics in formulating its monetary policy, especially in view of more countries joining the European monetary union in the future. However, as monetary and financial integration advances, the welfare benefits of monetary policy responding to individual countries' variables may become less significant.
    Keywords: Monetary policy rules; Heterogeneous monetary union
    JEL: E52 E58
    Date: 2007–11
  9. By: Régis Barnichon
    Abstract: This paper presents new empirical evidence on the cyclical behavior of US unemploymentthat poses a challenge to standard search and matching models. The correlation betweencyclical unemployment and the cyclical component of labor productivity switched sign at thebeginning of the Great Moderation in the mid 80s: from negative it became positive, whilestandard search models imply a negative correlation. I argue that the inconsistency arisesbecause search models do not allow output to be demand determined in the short run. Ipresent a search model with nominal rigidities that can rationalize the empirical findings, andI document two new facts about the Great Moderation that can account for the large and swiftincrease in the unemployment-productivity correlation in the mid-80s.
    Keywords: Unemployment Fluctuations, Labor productivity, Search and matching model, New-Keynesian model
    JEL: J64 E32 E37 E52
    Date: 2007–08
  10. By: Fernando Alexandre (NIPE and niversidade do Minho); Pedro Bação (GEMF and Faculdade de Economia, Universidade de Coimbra); John Driffill (Birkbeck College, University of London)
    Abstract: We evaluate the macroeconomic performance of different monetary policy rules when there is exchange rate uncertainty. We do this in the context of a non-linear rational expectations model. The exchange rate is allowed to deviate from its fundamental value and the persistence of the deviation is modeled as a Markov switching process. Our results suggest that taking into account the switching nature of the economy is important only in extreme cases.
    Keywords: Exchange Rates, Monetary Policy, Markov Switching
    JEL: E52 E58 F41
    Date: 2007
  11. By: Kevin D. Sheedy
    Abstract: This paper analyses optimal monetary policy in response to shocks using a model that avoidsmaking specific assumptions about the stickiness of prices, and thus the nature of the Phillipscurve. Nonetheless, certain robust features of the optimal monetary policy commitment arefound. The optimal policy rule is a flexible inflation target which is adhered to in the shortrun without any accommodation of structural inflation persistence, that is, inflation which itis costly to eliminate. The target is also made more stringent when it has been missed in thepast. With discretion on the other hand, the target is loosened to accommodate fully anystructural inflation persistence, and any past deviations from the inflation target are ignored.These results apply to a wide range of price stickiness models because the market failurewhich the policymaker should aim to mitigate arises from imperfect competition, not fromprice stickiness itself.
    Keywords: Inflation persistence, optimal monetary policy, rules versus discretion,stabilization bias, inflation targeting
    JEL: E5
    Date: 2007–11
  12. By: Ibrahim L. Awad (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: This paper assesses whether the legal independence granted to the Central Bank of Egypt (CBE) under the latest legislation is factual. I followed Fry’s methodology, which assumes that the level of independence of the central bank is determined by fiscal attributes. In an attempt to develop Fry’s method, I used a simple criterion to assess the central bank’s independence, namely, that the central bank is actually independent if it can fulfill its money supply target. Applying this criterion to the CBE and some other CBs in the developed countries and emerging market economies, we find that: (i) the legal independence granted to the CBE under the latest legislation is not factual; although the final objective of monetary policy is to achieve price stability, the CBE failed to fulfill its money supply target and achieve price stability, because it was responsive to political pressure and did not react to fulfill its money supply target; (ii) such political pressure on the CBE is due to fiscal attributes, as measured by domestic credit to the government; (iii) CBs whose independence is factual, according to our criterion, showed a negative relationship between the legal indices, as measured by the GMT index, and the fiscal attributes measured by DCGY. However, the relationship was anomalous when measured by the rate of inflation.
    Keywords: monetary policy, central bank independence, fiscal dominance political pressure
    JEL: E51 E59 H75 C23
    Date: 2007–12
  13. By: Marie Brière (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussel and Credit Agricole Asset Management SGR, Paris.); Florian Ielpo (Centre d’Economie de la Sorbonne, Paris, France.)
    Abstract: This paper analyses the response of the Euro yield curve to macroeconomic and monetary policy announcements. We present a new methodology for estimating the reaction of the Euro swap curve to economic news, in a data-rich environment. Given the sharp degree of interdependence between Euro rates and US rates, we propose to use the factors of the US yield curve to disentangle the daily variation in Euro rates stemming from US influence and the variation resulting from European news. We highlight the importance of taking the US yield curve influence into account and investigate the shape of the Euro term structure reaction to a range of news types. We find that the impact of economic announcements on the yield curve shows different patterns according to the news and we provide a hierarchy of the economic figures that have the strongest impact on the different maturities.
    Keywords: announcements, news, swap rates, yield curve, interest rates, Euro area.
    JEL: E43 E52 F42
    Date: 2007–09
  14. By: Paul Gaggl; Sandra Steindl (WIFO)
    Abstract: The paper surveys the evolution of modern macroeconomic models with the focus on the interrelations between endogenous growth and cyclical fluctuations. After reviewing models of the business cycle and endogenous growth, the paper discusses literature combining elements of both of them.
    Keywords: Business Cycles and Growth literature survey
    Date: 2007–11–28
  15. By: Régis Barnichon
    Abstract: Shimer (2005a) claims that the Mortensen-Pissarides search model of unemployment lacks anampiflication mechanism because it cannot generate the observed business cycle fluctuationsin unemployment given labor productivity shocks of plausible magnitude. This paper arguesthat part of the problem lies with the correct identification of productivity shocks. Because ofthe endogeneity of measured labor productivity, filtering out the trend component as inShimer (2005a) may not correctly identify the shocks driving unemployment. Using a New-Keynesian framework with search unemployment, this paper estimates that close to 50% ofthe Shimer puzzle is due to the misidentification of productivity shocks. In addition, I showthat extending the search model with an aggregate demand side remarkably improves theability of the standard search model to match the moments of key labor market variables.
    Keywords: unemployment fluctuations, labor productivity, search and matching model, New-Keynesian model
    JEL: E32 E37 J63 J64
    Date: 2007–08
  16. By: Kevin D. Sheedy
    Abstract: It is often argued that the New Keynesian Phillips curve is at odds with the data because itcannot explain inflation persistence — the difficulty of returning inflation immediately totarget after a shock without any loss of output. This paper explains how a model where newerprices are stickier than older prices is consistent with this phenomenon, even though itintroduces no deviation from optimizing, forwards-looking price setting. The probability ofadjusting new and old prices is estimated using a novel method that draws only onmacroeconomic data, and the findings strongly support the premise of the model.
    Keywords: inflation persistence, hazard function, time-dependent pricing, New Keynesian Phillips curve
    JEL: E3
    Date: 2007–11
  17. By: Kevin D. Sheedy
    Abstract: There is much evidence that price-adjustment frequencies vary widely across industries. This paper shows that inflation persistence is lower with heterogeneity in price stickiness than without it, taking as given the degree of persistence in variables affecting inflation. Differences in the frequency of price adjustment mean that the pool of firms which responds to any macroeconomic shock is unrepresentative, containing a disproportionately large number of firms from industries with more flexible prices. Consequently, this group of firms is more likely to reverse any initial price change after a shock has dissipated, making inflation persistence much harder to explain.
    Keywords: Inflation persistence, heterogeneity, price stickiness, New Keynesian PhillipsCurve
    JEL: E3
    Date: 2007–11
  18. By: Stephen G.Hall (Leicester University and NIESR); George Hondroyiannis (Bank of Greece); P.A.V.B. Swamy (U.S. Bureau of Labor Statistics); George S. Tavlas (Bank of Greece a)
    Abstract: As part of its monetary policy strategy, the European Central Bank has formulated a reference value for M3 growth. A pre-requisite for the use of a reference value for M3 growth is the existence of a stable demand function for that aggregate. However, a large empirical literature has emerged showing that, beginning in 2001, essentially all euro area M3 demand functions have exhibited instability. This paper considers euroarea money demand in the context of the portfolio-balance framework. Our basic premise is that there is a stable demand-for-money function but that the models that have been used until now to estimate euro area money-demand are not well-specified because they do not include a measure of wealth. Using two empirical methodologies - - a co-integrated vector equilibrium correction (VEC) approach and a time-varying coefficient (TVC) approach - - we find that a demand-for-money function that includes wealth is stable. The upshot of our findings is that M3 behaviour continues to provide useful information about medium-term developments on inflation.
    Keywords: Money demand; VEC, time varying coefficient estimation; Euro area
    JEL: C20 E41
    Date: 2007–10
  19. By: WenShwo Fang (Feng Chia University); Stephen M. Miller (University of Nevada, Las Vegas, and University of Connecticut); Chih-Chuan Yeh (The Overseas Chines Institute of Technology, Taichung)
    Abstract: Using quantile regressions and cross-sectional data from 152 countries, we examine the relationship between inflation and its variability. We consider two measures of inflation - the mean and median - and three different measures of inflation variability - the standard deviation, coefficient of variation, and median deviation. Using the mean and standard deviation or the median and the median deviation, the results support both the hypothesis that higher inflation creates more inflation variability and that inflation variability raises inflation across quantiles. Moreover, higher quantiles in both cases lead to larger marginal effects of inflation (inflation variability) on inflation variability (inflation). Using the mean and the coefficient of variation, however, the findings largely support no correlation between inflation and its variability. Finally, we also consider whether thresholds for inflation rate or inflation variability exist before finding such positive correlations. We find evidence of thresholds for inflation rates below 3 percent, but mixed results for thresholds for inflation variability.
    Keywords: inflation, inflation variability, inflation targeting, threshold effects, quantile regression
    JEL: C21 E31
    Date: 2007–12
  20. By: Weber, Enzo
    Abstract: The subject of this paper tackles macroeconomic integration of the South-East Asian countries South Korea, Singapore and Taiwan. Economically, the analysis is based on notions of stochastic long-run convergence and business cycle synchrony in the GDPs. According tests for cointegration and common serial correlation features reveal a high degree of coherence in long-run growth and medium-run fluctuations. This allows extracting a common stochastic growth trend and a common business cycle. Further analysis shows that both of these components are subject to stronger influences from the US than from Japan. Convergence towards these matured economies conspicuously appears since the 1990s.
    Keywords: Economic Integration; Cointegration; Common Cycles; South-East Asia
    JEL: F15 C32 E32
    Date: 2007–04
  21. By: Ernst Fehr; Jean-Robert Tyran
    Abstract: Much evidence suggests that people are heterogeneous with regard to their abilities to make rational, forward-looking decisions. This raises the question as to when the rational types are decisive for aggregate outcomes and when the boundedly rational types shape aggregate results. We examine this question in the context of a long-standing and important economic problem: the adjustment of nominal prices after an anticipated monetary shock. Our experiments suggest that two types of bounded rationality – money illusion and anchoring – are important behavioral forces behind nominal inertia. However, depending on the strategic environment, bounded rationality has vastly different effects on aggregate price adjustment. If agents’ actions are strategic substitutes, adjustment to the new equilibrium is extremely quick, whereas under strategic complementarity, adjustment is both very slow and associated with relatively large real effects. This adjustment difference is driven by price expectations, which are very flexible and forward-looking under substitutability but adaptive and sticky under complementarity. Moreover, subjects’ expectations are also considerably more rational under substitutability.
    Date: 2007–10
  22. By: Ager, Philipp; Kappler, Marcus; Osterloh, Steffen
    Abstract: In this paper we analyze the macroeconomic forecasts of the Consensus Forecasts for 12 countries over the period from 1996 to 2006 regarding bias and information efficiency. A pooled approach is employed which permits the evaluation of all forecasts for each target variable over 24 horizons simultaneously. It is shown how the pooled approach needs to be adjusted in order to accommodate the forecasting scheme of the Consensus Forecasts. Furthermore, the pooled approach is extended by a sequential test with the purpose of detecting the critical horizon after which the forecast should be regarded as biased. Moreover, heteroscedasticity in the form of year-specific variances of macroeconomic shocks is taken into account. The results show that in the analyzed period which was characterized by pronounced macroeconomic shocks, several countries show biased forecasts, especially with forecasts covering more than 12 months. In addition, information efficiency has to be rejected in almost all cases.
    Keywords: business cycle forecasting, forecast evaluation, Consensus Forecasts
    JEL: C52 E32 E37
    Date: 2007
  23. By: Jean-Pascal Bénassy
    Abstract: A most wellknown determinacy condition on interest rate rules is the "Taylor principle", which says that nominal interest rates should respond more than hundred percent to inflation. Unfortunately, notably because interest rates must be positive, the Taylor principle cannot be satisfied for all inflation rates, and as a consequence global determinacy may not prevail even though there exists a locally determinate equilibrium. We propose here a simple alternative to the Taylor principle, which takes the form of a new condition on interest rate rules that ensures global determinacy. An important feature of the policy package is that it does not rely at all on any of the fiscal policies associated with the "fiscal theory of the price level", which was so far the main alternative for determinacy.
    Date: 2007
  24. By: Luciano Dias Carvalho; José Luís Oreiro
    Date: 2007
  25. By: Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: GERMAN: Die Konjunkturbelebung in der EU 15 trug 2006 zu einer Beschleunigung des Wirtschaftswachstums in den MOEL bei. Während in den neuen EU-Ländern in Mitteleuropa der Außenhandel kräftig wuchs und eine weitere Aufwertung bewirkte, geht die Dynamik in den meisten anderen MOEL vor allem auf die hohe Verschuldungsbereitschaft der privaten Haushalte zurück. Die Lage auf dem Arbeitsmarkt entspannte sich in den neuen EU-Ländern weiter, der Strukturwandel ist dort weitgehend abgeschlossen. In den Westbalkanländern verschlechterte sich die Situation jedoch zum Teil sogar. Die Performance der russischen Wirtschaft hat sich von der Entwicklung der Weltmarktpreise für Energie weitgehend entkoppelt; in der Ukraine schwankt das Wachstum dagegen erheblich und nicht zuletzt durch politische Faktoren bedingt. ---- ENGLISH: The economic recovery in the EU 15 in 2006 resulted in an acceleration of growth in Central and Eastern European countries (CEECs), particularly in the new EU member states of Central Europe. Helped by the recent massive inflows of FDI, these countries have become serious competitors on the European markets, particularly those of manufactured goods. The continuous nominal currency appreciations in Poland, the Czech Republic and Slovakia reflect their gains in international competitiveness and will not affect their economic growth. In contrast, the contribution of foreign trade to growth was decidedly negative in most other CEECs, including the Baltics and the new EU members in Southeast Europe. Their growth rates - quite high in some instances - were first of all due to a boom in private consumption, largely financed by external borrowing facilitated by the dominance of foreign-owned banks. In some cases, the credit boom is about to overheat and produce ¿bubbles¿, especially in real estate. However, the available policy options are limited: while monetary policy is constrained by fixed exchange rate regimes, fiscal policy is already quite restrictive in general. In the new EU member states, the labour market situation is continuing to improve given that their industrial restructuring is nearing completion, and not least due to the sizeable outward migration flows. In the West Balkan countries, on the other hand, unemployment rates are generally high and rising. Their recent progress towards EU integration has been generally modest, even though greater political stability and growing foreign trade both support their economic recovery. With the exception of Hungary (where large-scale efforts at fiscal consolidation have induced a noticeable economic slowdown), short- and medium-term economic prospects for the CEECs are positive, whereas growth in Serbia and Ukraine remains relatively vulnerable to political risks.
    Keywords: transitional economies, comparative study, macroeconomic forecast, macroeconomic analysis, Macroeconomic Analysis and Forecasts; Labour and Migration; International Trade and Competitiveness; Foreign Direct Investment; EU Integration; Fiscal and Monetary Policy
    JEL: P2 O57 E17
    Date: 2007–05
  26. By: Maik Heinemann (Institute of Economics, Leuphana University of Lüneburg)
    Abstract: The paper demonstrates how the E–stability principle introduced by Evans and Honkapohja [2001] can be applied to models with heterogeneous and private information in order to assess the stability of rational expectations equilibria under learning. The paper extends already known stability results for the Grossman and Stiglitz [1980] model to a more general case with many differentially informed agents and to the case where information is endogenously acquired by optimizing agents. In both cases it turns out that the rational expectations equilibrium of the model is inherently E-stable and thus locally stable under recursive least squares learning.
    Keywords: Adaptive Learning, Eductive Stability, Rational Expectations
    JEL: D31 E62 O41 P16
    Date: 2007–12
  27. By: Fabiana Rocha
    Date: 2007
  28. By: Stefano Bosi (EQUIPPE - Département d'Economie - Université des Sciences et Technologie de Lille - Lille I, EPEE - Université d'Evry-Val d'Essonne); Thomas Seegmuller (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: In this paper, we address the stability issue, stressing the role of labor supply, in a Ramsey model with heterogeneous households subject to borrowing constraints. Making labor supply endogenous leads us to prove the existence of two kinds of steady state : the one where everybody supplies labor, the other where only the most patient agent refrains from working. Focusing on the latter and going beyond models with inelastic labor supply, we show how preferences of impatient agents affect the saddle-path stability and the occurence of endogenous cycles. When their elasticity of intertemporal substitution in consumption exceeds one, instability and cycles are less likely, requiring lower degrees of capital- labor substitution. Conversely, elasticity values below one promote the emergence of fluctuations.
    Keywords: Saddle-path stability, endogenous cycles, heterogeneous agents, endogenous labor supply, borrowing constraint.
    Date: 2007–06
  29. By: Selva Demiralp (Koç University)
    Abstract: Bu çalışma Türkiye’deki parasal aktarım mekanizmasında para’nın rolünü incelemektedir. Çalışmamız Carpenter ve Demiralp (2007)’in yapmış olduğu araştırmayı bütünleyici niteliktedir. Carpenter ve Demiralp (2007) gelişmiş finansal piyasalarda banka kredilerinin zorunlu karşılığa tabi olmayan “kontrollü pasifler” (“managed liabilities”) ile finanse edildiğini ileri sürmektedirler. Bu şartlar altında banka borç verme kanalı (“bank lending channel”) ve basit parasal çarpan modeli işlevlerini yitirirler. Carpenter ve Demiralp (2007)’in analizindeki temel dayanak bankaların fon sağlama konusunda mevduat dışı kaynaklara sahip olmalarıdır. Böyle bir alternatif olmadığı zaman ise banka borç verme kanalının varsayımları tekrar işler hale gelir. Dolayısı ile finansal yapıları az gelişmiş olan ülkelerde bu kanalın işlevsel olmasını bekleriz. Bu çalışmada bankalar borç verme kanalı ve basit parasal çarpan modelinin az gelişmiş bir piyasa örneği olan Türkiye için işleyip işlemediğini ampirik olarak inceledik. Abstract: Analiz sonuçlarımız Carpenter ve Demiralp’te öngörüldüğü şekilde parasal çarpan ve borç verme kanalının Türkiye’de işlemekte olduğunu teyid etmektedir.
    Abstract: This study analyzes the role of money in the monetary transmission mechanism in Turkey. Our work complements the analysis done by Carpenter and Demiralp (2007). Carpenter and Demiralp (2007) argue that in well-developed financial markets, bank loans are funded by “managed liabilities” which are not subject to reserve requirements. Under these conditions, a “bank lending channel” of the monetary transmission mechanism and a simple money multiplier model are not functional. The essential idea that underlies Carpenter and Demiralp’s analysis is the existence of non-deposit sources of funding for depository institutions. In the absence of these alternatives, however, the assumptions of the bank lending channel are valid assumptions and we expect this channel to be operative in countries which do not posses developed financial markets. In that respect, it is plausible to expect the bank lending channel to be operative in Turkey, which is a good example of a less developed financial market. In this study, we investigate empirically whether a bank lending channel and a multiplier framework are indeed functional in Turkey. Our analysis confirms Carpenter and Demiralp (2007)’s predictions that the simple multiplier framework is operative in Turkey.
    Keywords: Parasal çarpan, parasal aktarım mekanizması, borç verme kanalı
    JEL: E51 E52
    Date: 2007–12
  30. By: Nikolaus Wolf
    Abstract: This paper examines the timing of exit from the gold-exchange standard for European countriesbased on a panel of monthly observations 1928-1936 for two purposes: first it aims to understandthe enormous variation in monetary policy choices across Europe. I show that the pattern of exitfrom gold can be understood in terms of variation in factors commonly suggested in thetheoretical literature, which makes it possible to predict with reasonable accuracy the very monthwhen a country will exit gold in the 1930s. Second, I analyse the case of Poland more closelybecause it appears to be an intriguing outlier. Poland did not leave gold until April 1936 andsuffered through one of the worst examples of a depression, with massive deflation and acomplete collapse of industrial production. The estimated model fares worst for Poland, andpredicts an exit even later than April 1936. By closer inspection, the factors that drive thisprediction are the non-democratic character of the regime and a surprisingly high degree of tradeintegration with France. I argue that Poland's monetary policy was determined by attempts of thePilsudski regime to defend Poland against foreign (esp. German) aggression. I provide evidencethat strongly supports this view until about mid-1933. Ironically, just when Poland had joined thegold-bloc there were signs of a broad strategic reorientation, which paved the way for an exit in1936.
    Keywords: Gold-Exchange Standard, Interwar Period, Europe, Poland
    JEL: E42 E44 N14
    Date: 2007–11
  31. By: Thomas Seegmuller (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Ecole d'économie de Paris - Paris School of Economics - Université Panthéon-Sorbonne - Paris I)
    Abstract: In macroeconomics, economists introduce most frequently imperfect competition on product markets using the Dixit and Stiglitz (1977) monopolistic competition model. However, by assumption, this framework ignores one important feature of imperfect competition: strategic interactions between producers. Taking into account this remark and following Yang and Hejdra (1993), this paper analyzes an overlapping generations model where strategic interactions between producers are introduced and examines how they affect the stability properties of the steady state. Because of free entry, strategic interactions between producers imply a new dynamic feature, mark-up variability, promoting indeterminacy and endogenous cycles. Indeed, in contrast to the model without strategic interaction, endogenous fluctuations can occur when the substitution between the production factors, capital and labor, is not too weak, but in accordance with empirical estimates.
    Keywords: Endogenous fluctuations ; imperfect competition ; strategic interactions ; mark-up variability ; capital-labor substitution ; overlapping generations
    Date: 2007–12–06
  32. By: Carlos Gustavo Machicado (Institute for Advanced Development Studies)
    Abstract: It has been widely documented that investment in infrastructure is important for economic growth, but little work has been done in relation to the impact of infrastructure investment on other macroeconomic variables. This paper develops a Dynamic Stochastic General Equilibrium (DSGE) model of a small open economy to study the effects of public investment in infrastructure on output, consumption, private investment, trade balance and welfare. The model is parameterized and solved for five representative countries from The Initiative for the Integration of Regional Infrastructure in South America (IIRSA), which include: Bolivia, Chile, Brazil, Venezuela and Argentina. I also analyze the growth effects on GDP by increasing or decreasing the effectiveness index of infrastructure in each of these countries. Naturally output will grow at a larger rate, if infrastructure is handled with greater efficiency.
    Keywords: Infrastructure, Economic Growth, Welfare
    JEL: H54 O40 D60
    Date: 2007–12
  33. By: Christopher A. Pissarides
    Abstract: I study the cyclical behavior of an equilibrium search model with endogenous job creationand destruction, with focus on the model's failure to match the observed cyclical volatility ofunemployment. Job creation in the model is influenced by wages in new matches. Isummarize microeconometric evidence on wages in new matches and show that the keymodel elasticities are consistent with the evidence. Therefore explanations of theunemployment volatility puzzle have to preserve the cyclical volatility of wages. I discusssome extensions of the model that can increase cyclical unemployment volatility throughmechanisms other than wage stickiness.
    Keywords: wages, unemployment, wage stickiness, job creation
    JEL: J63 J64 E3
    Date: 2007–11
  34. By: António Afonso; Juan González Alegre
    Abstract: In this paper we test whether a reallocation of government budget items can enhance long-term GDP growth in a set of European countries. We apply modern panel data techniques to the period 1970-2006, and we use three alternative dependent variables in a growth regression: economic growth, total factor productivity and labour productivity. Our results are able to identify also the distortions induced by public expenditure in the private factors allocation. In particular, we detect a strong crowding-in effect associated to public investment, which have enhanced economic growth by boosting private investment. We also associate a significant dependence of productivity on public expenditure on education as well as the role of social security and health issues in growth and the labour market.
    Keywords: economic growth; panel models; fiscal policy.
    JEL: C23 E62 H50 O40
    Date: 2007
  35. By: Yoshida, Jiro
    Abstract: A general equilibrium model, that incorporates endogenous production and local housing markets, is developed in order to explain the price relationship among human capital, housing, and stocks, and to uncover the role of housing in asset pricing. Housing serves as an asset as well as a durable consumption good. It is shown that housing market conditions critically affect asset price correlations and risk premia. The first result is that the covariation of housing prices and stock prices can be negative if land supply is elastic. Data from OECD countries roughly support the model's predictions on the relationship among land supply elasticity, asset price correlations, and households' equity holdings. The second result is that housing rent growth serves as a risk factor in the pricing kernel. The risk premium becomes higher as land supply becomes inelastic and as housing services become more complementary with other goods. Finally, the housing component in the pricing kernel is shown to mitigate the equity premium puzzle and the risk-free rate puzzle.
    Keywords: General equilibrium; asset pricing; housing; the equity premium puzzle
    JEL: R30 G12 E32 R20
    Date: 2007–12–13
  36. By: Tsvetanka Karagyozova (University of Connecticut and University of British Columbia)
    Abstract: The consumption capital asset pricing model is the standard economic model used to capture stock market behavior. However, empirical tests have pointed out to its inability to account quantitatively for the high average rate of return and volatility of stocks over time for plausible parameter values. Recent research has suggested that the consumption of stockholders is more strongly correlated with the performance of the stock market than the consumption of non-stockholders. We model two types of agents, non-stockholders with standard preferences and stock holders with preferences that incorporate elements of the prospect theory developed by Kahneman and Tversky (1979). In addition to consumption, stockholders consider fluctuations in their financial wealth explicitly when making decisions. Data from the Panel Study of Income Dynamics are used to calibrate the labor income processes of the two types of agents. Each agent faces idiosyncratic shocks to his labor income as well as aggregate shocks to the per-share dividend but markets are incomplete and agents cannot hedge consumption risks completely. In addition, consumers face both borrowing and short-sale constraints. Our results show that in equilibrium, agents hold different portfolios. Our model is able to generate a time-varying risk premium of about 5.5% while maintaining a low risk free rate, thus suggesting a plausible explanation for the equity premium puzzle reported by Mehra and Prescott (1985).
    Keywords: asset pricing, equity premium puzzle, prospect theory, heterogeneous agents
    JEL: G12 E44
    Date: 2007–11
  37. By: Léonce Ndikumana (University of Massachusetts, Amherst, and UNECA, Addis Ababa); Adam Elhiraika (UNECA, P.O.B 3005, Addis Ababa, Ethiopia)
    Abstract: African countries have accumulated substantial foreign currency reserves in recent years, mostly from higher commodity exports as well as aid flows. In the context of macroeconomic stabilization, which remains at the forefront of national economic policymaking and aid conditionality, African countries are induced to hold reserves to allow monetary authorities to intervene in markets to control the exchange rate and inflation. Adequate reserves also allow the country to borrow from abroad and to hedge against instability and uncertainty of external capital flows. However, reserve accumulation can have high economic and social costs, including a high opportunity cost emanating from low returns on reserve assets, losses due to reserve currency depreciation, and forgone gains from investment and social expenditures that could be financed by these reserves. Therefore, African countries need to have a better understanding of the determinants and economic costs of reserve accumulation and to design optimal reserve management strategies to minimize these costs and maximize the gains from resource inflows. This study uses panel data from 21 African countries to examine the sources, motivation and economic implications of reserve accumulation with a focus on the impact on the exchange rate, inflation, and public and private investment. While the level of reserves remains adequate on average, some countries have accumulated excessive reserves especially in recent years. The empirical analysis in this paper shows that the recent reserve accumulation cannot be justified by portfolio choice motives (in terms of returns to assets) or stabilization objectives. At the same time it has resulted in exchange rate appreciation while it has yielded little benefits in terms of public and private investment. The evidence suggests that African countries, especially those endowed with natural resources, need to adopt a more pro-growth approach to reserve management. JEL Categories: E22; E51; F31; F41
    Keywords: external reserves; exchange rate appreciation; sub-Saharan Africa; private and public investment; macroeconomic stabilization.
    Date: 2007–12
  38. By: G. Carvalho, Pedro; Ribeiro, Alexandra
    Abstract: The aim of this paper is to revisit a former paper on the Portuguese housing market (1995), acknowledging for spatial effects in order to interpret housing market changes over 1995-2001. The paper will include a first section devoted to explain the differences between the OLS regression analysis and spatial econometrics, explaining the theoretical background used to develop a spatial lag model with the same database; the second section will show the misspecification problems we found when we ran the same model for after 1995-1998 databases; the third section is devoted to describe new housing literature findings relating housing market evolution with the macroeconomic cycles in Portugal; as a consequence the fourth section will include the method we developed with recent census data, to explain the evolution of the country macroeconomic cycles and the agents’ new behavioural attitudes concerning housing; finally and using spatial analysis we can understand the main changes occurred over the 1995-2001 period. The evaluation of the results contradicts some mainstream scholar and political knowledge to explain spatial inequalities between coast and interior municipalities. Complexity issues seem to be present when we consider the way different market agents make decisions on housing markets, looking this good either as a place to live or an alternative investment asset. In the concluding remarks we raise some new interesting questions for further research.
    JEL: C51 E32 R21 C21 R11 D01
    Date: 2007–12–01
  39. By: Chakraborty, Lekha S. (National Institute of Public Finance and Policy)
    Keywords: Gender ; Fiscal decentralisation
    Date: 2007–05
  40. By: Mei Li (Queen's University)
    Abstract: I argue that systemic bankruptcy of firms can originate from coordination failure in an economy with investment complementarities. This new explanation about the origin of systemic bankruptcy promotes better understanding of how financial fragility arises, and provides theoretical guidance for central banks to establish an "early warning system" to prevent the occurrence of financial crises. In a global game setup, investment decisions of firms are studied in the presence of uncertainty and investment complementarities. Uncertainty is twofold here: first, firms are uncertain about economic fundamentals; second, firms are also uncertain about other firms' investment decisions. I demonstrate that even small uncertainty about economic fundamentals can be magnified through the uncertainty about other firms' investment decisions and can lead to coordination failure, which may be manifested as systemic bankruptcy. Moreover, my model reveals that systemic bankruptcy tends to arise when economic fundamentals are in the middle range where coordination matters. High financial leverage of firms greatly increases the severity of systemic bankruptcy. Optimistic beliefs of firms and banks can alleviate coordination failure, but can also increase the severity of systemic bankruptcy once it happens.
    Keywords: Systemic Bankruptcy, Financial Crises, Global Games
    JEL: D82 E44 G21
    Date: 2007–07
  41. By: Bonpasse, Morrison M.
    Abstract: As globalization continues, businesses are increasingly importing and exporting from countries with different currencies. To conduct that business, they (whether one or both parties) must pay fees for exchanging one currency for another and they must determine the exchange rate for a particular time. If the transaction is to be conducted over time, they may purchase currency instruments to hedge against currency fluctuation. All of these tasks add up to an average of about 5% of revenue for international businesses. As an increasing number of international businesses understand that these expensive tasks are unnecessary for trade conducted within a monetary union, these businesses are likely candidates to lead the effort to implement a Single Global Currency, to be managed by a Global Central Bank within a Global Monetary Union. In short, a "3-G" world. It's common cents.
    Keywords: Single Global Currency; monetary union; dollar; euro; European Monetary Union; Global Central Bank; Global Monetary Union; international monetary system; Bretton Woods; foreign exchange; currency; currency crisis; transaction costs
    JEL: F4 F5 E5 E6
    Date: 2007–07–04
  42. By: Maia Güell; Jose V. Rodriguez Mora; Chris Telmer
    Abstract: We propose an alternative method for measuring intergenerational mobility. Traditional methods based on panel data provide measurements that are scarce, difficult to compare across countries and almost impossible to get across time. In particular this means that we do not know how intergenerational mobility is correlated with growth, income or the degree of inequality. Our proposal is to measure the informative content of surnames inone census. The more information does the surname have on the income of an individual, the more important is background in determining outcomes; and thus, the less mobility there is. The reason for this is that surnamesinform on family relationships because the distribution of surnames is necessarily much skewed. A large percentage of the population is bound to have a very unfrequent surname. For them the partition generated bysurnames is very informative on family linkages. First, we develop a model whose endogenous variable is the joint distribution of surnames and income. Then we explore the relationship between mobility and the informative content of surnames. We allow for assortative mating to be a determinant of both. Then, we use our methodology to show that in a large Spanish region the informative content of surnames is large and consistent with the model. We also show that it has increased over time, indicating a substantial drop in the degree ofmobility. Finally, using the peculiarities of the Spanish surname convention we show that the degree of assortative mating has also increased over time, in such a manner that might explain the decrease in mobilityobserved. Our method allows us to provide measures of mobility comparable across time. It should also allow us to study other issues related to inheritance.
    Keywords: inheritance, birth-death processes, cross-sectional data, population genetics
    JEL: C31 E24 J1
    Date: 2007–07
  43. By: Christophe André; Stéphanie Guichard; Mike Kennedy; Dave Turner
    Abstract: Since 2001, OECD corporate net lending has risen sharply. This paper examines the main forces at play behind this run-up and provides some insight into whether and how they might possibly unwind in the future, a process that may already be underway. It shows in particular that, the increase is partly temporary with some of it likely to fade with the cycle and the ongoing adjustments in the financial and housing sectors. On the other hand, part of the increase reflects structural changes in corporate behaviour and in their environment and is likely to persist. The paper also points to cross-country differences reflecting, for example, the role of competiveness in Japan and continental Europe, and of the financial sector in the United Kingdom. <P>Capacité de financement des entreprises : un examen des tendances récentes <BR>Depuis 2001, la capacité de financement des entreprises de l’OCDE a fortement cru. Ce papier examine les principaux phénomènes à l'origine de la hausse, et fournit des éléments sur leur éventuelle résorption future et les modalités selon lesquelles elle pourrait avoir lieu. Ce processus semble d’ailleurs avoir déjà commencé. Il montre en particulier qu’une part de l’augmentation est transitoire et pourrait disparaître avec le cycle et l’ajustement en cours dans les secteurs financier et de l’immobilier résidentiel. En revanche, une part de l’augmentation reflète des changements structurels dans le comportement des entreprises et dans leur environnement et va probablement persister. Le papier note également des différences entre pays reflétant par exemple le rôle de la compétitivité au Japon et en Europe continentale et celui du secteur financier au Royaume-Uni.
    Keywords: corporate net lending, corporate investment, corporate saving, financial corporations, capacité de financement des entreprises, investissement des entreprises, épargne des entreprises
    JEL: E21 E22 F21 G30
    Date: 2007–12–06
  44. By: Kamat, Manoj; Kamat, Manasvi
    Abstract: Using contemporary models this paper explores the time-series properties of financial infrastructure and economic growth indicators to investigate the nexus between developments in financial intermediation with the economic growth for India over the 1971-2004 periods. Both over short-run and the long-run perspective the paper seeks to answer; whether the financial infrastructure variables are complementary or a substitute for economic performance? and in what way economic growth is affected by the financial infrastructural development indicators? We find evidence in favor of a short run “financial infrastructure led economic growth”. Finance is found to be a leading sector only in the short-term link in Granger causality tests with stationary variables. The study provides robust empirical evidence in favor of supply leading hypothesis for the Indian economy.
    Keywords: Finance; Infrastructure; Development; Economic Growth; Lag-lead; Granger Causality; Cointegration; VAR; VECM; India
    JEL: G2 C5 E50 O4
    Date: 2007–11–11
  45. By: Adriana Moreira Amado; Marco Flávio da Cunha Resende; Frederico G. Jayme Jr.
    Date: 2007
  46. By: Jean-Baptiste Michau
    Abstract: This paper is about the labour market consequences of creative destruction with on-the-jobsearch. We consider a matching model in an economy with embodied technological progressand show that its dynamics are profoundly affected by allowing on-the-job search. We obtainthat the elasticity of unemployment with respect to growth shrinks from 1.63 to 0.13.Moreover, the underlying transmission channels change as the flow of obsolete jobspractically disappears and is replaced by a flow of job-to-job transitions. These effects persisteven if employed job seekers are significantly less efficient in the search process than theunemployed. Thus, we show that, rather than contributing to unemployment, creativedestruction induces a direct reallocation of workers from low to high productivity jobs. Theseresults could be strengthened by assuming that search efforts are unobservable by firmswhich induces more on-the-job search. However, the action of worker is no longer surplusmaximizing and, hence, the worker's welfare is increasing in the cost of search which acts asa commitment device. Finally, we show that the model could be extended by allowing forvariable search intensity.
    Keywords: commitment device, creative destruction, job flows, obsolescence, on-the-jobsearch, search equilibrium, unemployment
    JEL: E24 J41 J63 J64 O39
    Date: 2007–11
  47. By: Chakraborty, Lekha S. (National Institute of Public Finance and Policy); Bagchi, Amaresh (National Institute of Public Finance and Policy)
    Keywords: Gender ; Fiscal decentralisation
    Date: 2007–01
  48. By: Marco S. Matsumura
    Date: 2007
  49. By: Eduardo Correia de Souza; Jorge Chami Batista
    Date: 2007
  50. By: Jean-François Goux (University of Lyon, Lyon, F-69003, France; CNRS, UMR 5824, GATE, Ecully, F-69130, France; ENS LSH, Lyon, F-69007, France ; Centre Leon Berard, Lyon, F-69003, France); Thomas Rusuhuzwa Kigabo (Département d’Economie, Université Nationale du Rwanda et Banque Nationale du Rwanda)
    Abstract: This study examines, for the case of Rwanda, if the existence of a cointegration relation for money demand can be established by taking account of possibilities of break in the structure of trend of the variables used in modelling. We thus take into account the various events that the country knew for the selected period of study (First quarter 1980 - last quarter 1999). This method makes it possible indeed to highlight such a relation for the velocity of circulation of M1, sensitive to the interest rate and the rate of exchange. It also exists for the money demand M2.
    Keywords: sequential money demand, Rwanda, structural breaks
    JEL: C52 E41
    Date: 2007–11
  51. By: Paulo Roberto Arvate; George Avelino; José A. Tavares
    Date: 2007
  52. By: Osmani Teixeira de Carvalho Guillén; Benjamin M. Tabak?
    Date: 2007
  53. By: Paulo Roberto Arvate; Marcos Felipe Mendes Lopes
    Date: 2007
  54. By: Mauricio Avella Gómez
    Abstract: En las últimas dos décadas, coincidiendo con el florecimiento de nuevas visiones acerca de la política monetaria, de sus objetivos e instrumentos, así como acerca del papel de la intermediación financiera, la institución del encaje entró en decadencia; algunos países optaron por deshacerse de ella, al tiempo que otros la han mantenido en su lista de opciones de política, sin renunciar a ella, aunque con un papel muy limitado. En Colombia, desde los primeros estatutos financieros expedidos en los años veinte, el encaje no sólo estuvo presente, sino que hizo parte de un elenco de instituciones ligadas a la estabilidad financiera.
    Date: 2007–12–06

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