|
on Macroeconomics |
|
Issue of 2008‒01‒26
fifty-five papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Bhattacharya, Joydeep; Singh, Rajesh |
| Abstract: | The tug-o-war for supremacy between inflation targeting and monetary targeting is a classic yet timely topic in monetary economics. In this paper, we revisit this question within the context of a pure-exchange overlapping generations model of money where spatial separation and random relocation create an endogenous demand for money. We distinguish between shocks to real output and shocks to the real interest rate. Both shocks are assumed to follow AR(1) processes. Irrespective of the nature of shocks, the optimal inflation target is always positive. Under monetary targeting, shocks to endowment require negative money growth rates, while under shocks to real interest rates it may be either positive or negative depending on the elasticity of consumption substitution. Also, monetary targeting welfare-dominates inflation targeting but the gap between the two vanishes as the shock process approaches a random walk. In sharp contrast, for shocks to the real interest rate, we prove that monetary targeting and inflation targeting are welfare-equivalent only in the limit when the shocks become i.i.d.! The upshot is that persistence of the underlying fundamental uncertainty matters: depending on the nature of the shock, policy responses can either be more or less aggressive as persistence increases. |
| Keywords: | real shocks, persistence, overlapping generations, random relocation model, monetary targeting, inflation targeting |
| JEL: | E3 E4 E6 |
| Date: | 2008–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:12863&r=mac |
| By: | Gilles Dufrénot (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579); Roseline Joyeux (Macquarie University - Macquarie University); Anne Peguin-Feissolle (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579) |
| Abstract: | In the literature, two important views concerning the conduct of monetary policy are construed. One view is that the central banks’ monetary policy must be credible if the authorities want to curb inflation. A second view is that central banks set their monetary policy by using all the information relevant for inflation and output projections. In Europe, a controversy has emerged about the role of monetary aggregates as useful indicators of future inflation and output. On one hand, evidence in favour of the usefulness of nominal monetary aggregates as good predictors is provided by the literature. On the other hand, empirical evidence in favour of real money indicators is found. The purpose of this paper is to contribute to the ongoing debate on the role of money aggregates in the setting of monetary policy. The question we are interested in is whether the real money gap contains more information about future inflation in Europe, than an indicator based on the growth rate of nominal money. We use a panel data framework instead of the usual time series methods on aggregate Euro data. |
| Keywords: | monetary policy ; inflation ; panel data |
| Date: | 2008–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:hal-00207497_v1&r=mac |
| By: | Ichiro Muto (Institute for Monetary and Economic Studies, Bank of Japan (E-mail: ichirou.mutou@boj.or.jp)) |
| Abstract: | We examine the expectational stability (E-stability) of the rational expectations equilibrium (REE) in a simple New Keynesian model in which private agents engage in adaptive learning by referring to the central bank's forecast. In this environment, to satisfy the E-stability condition, the central bank must respond more strongly to the expected inflation rate than the so-called Taylor principle suggests. On the other hand, the central bank's strong reaction to the expected inflation rate raises the possibility of indeterminacy of the REE. In considering these problems, a robust policy is to respond to the current inflation rate to a certain degree. |
| Keywords: | Adaptive Learning, E-stability, New Keynesian Model, Monetary Policy, Taylor principle |
| JEL: | E52 D84 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:ime:imedps:08-e-01&r=mac |
| By: | Óscar J. Arce (Banco de España) |
| Abstract: | This paper shows that there exist fiscal strategies that deliver equilibrium uniqueness in a monetary economy in which the central bank follows an interest rate peg. In contrast to the fiscal theory of the price level (FTPL), such strategies always satisfy a government intertemporal budget constraint. The government is able to rule out most prices using strategically its fiscal instruments, undercutting the private-market price whenever it is inconsistent with the fiscal targets. In the spirit of the FTPL, along the fiscal strategies of this paper the government does not follow a rule that mechanically links the fiscal surplus to the real value of its outstanding nominal debt. Like in the monetarist paradigm, the fiscal authority is forced to blink in face of an independent monetary policy, although in equilibrium the former achieves its own targets. |
| Keywords: | Fiscal-monetary interactions, Fiscal Theory of the Price Level, interest rate peg, equilibrium (in)determinacy |
| JEL: | E31 E42 E61 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:0741&r=mac |
| By: | Andreas Billmeier; Rania Al-Mashat |
| Abstract: | This paper examines the monetary transmission mechanism in Egypt against the background of the central bank's intention to shift to inflation targeting. It first describes the changing transmission channels over the last decade. Second, the channels are evaluated in a VAR model. The exchange rate channel plays a strong role in propagating monetary shocks to output and prices. Most other channels (bank lending, asset price) are rather weak. The interest rate channel is underdeveloped but appears to be strengthening since the introduction of the interest corridor in 2005, which bodes well for adopting inflation targeting over the medium term. |
| Keywords: | Monetary policy , Egypt, Arab Republic of , Inflation targeting , Exchange rates , |
| Date: | 2007–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/285&r=mac |
| By: | David Kiefer |
| Abstract: | In the new Keynesian model of endogenous stabilization governments have objectives with respect to macroeconomic performance, but are constrained by an augmented Phillips curve. Because they react quickly to inflation shocks, governments can lean against the macroeconomic wind. We develop an econometric test of this characterization of the political-economic equilibrium using the Kalman filter. Applying this methodology to a variety of quadratic social welfare functions, we find that an inflation target functional form is consistent with US history. We also find it more likely that expectations of inflation are adaptive, rather than rational. |
| Keywords: | endogenous stabilization, policy objectives, adaptive expectations |
| JEL: | E61 E63 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:uta:papers:2008_03&r=mac |
| By: | Mirko Abbritti and Sebastian Weber (IUHEI, The Graduate Institute of International Studies, Geneva) |
| Abstract: | We build a model that combines two types of labor market rigidities: real wage rigidities and labor market frictions. The model is used to analyze the implications of the interaction of different degrees and types of labor market rigidities for the business cycle by looking at three dimensions (i) the persistence of key economic variables; (ii) their volatility; (iii) the length, average duration and intensity of recessions and expansions. We find that real wage rigidities and labor market frictions, while often associated under the same category of "labor market rigidities" may have opposite effects on business cycle fluctuations. When the rigidity lies in the wage determination mechanism, real wages cannot fully adjust and shocks tend to be absorbed through changes in quantities. A higher degree of real wage rigidities thus amplifies the response of the real economy to shocks, shortens the duration of the business cycle but makes it more intense. When the rigidity lies in the labor market, it is more costly for firms to hire new workers and therefore unemployment does not vary as much, thus increasing inflation volatility and smoothening the response of the real economy to shocks. The cycle gets longer but less severe. Analyzing the interaction of institutions we show that these effects are reinforcing if institutions are substitutes - in the sense that countries with high labor market frictions tend to have low real wage rigidities and vice versa - while they are offsetting if institutions are complements. The findings from the model are supported when compared to the data of a range of OECD countries. |
| Keywords: | monetary policy, labor market search, real wage rigidity, inflation volatility, labour market interactions |
| JEL: | E32 E24 J01 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heiwp01-2008&r=mac |
| By: | George Evans; Seppo Honkapohja |
| Abstract: | Expectations about the future are central for determination of current macroeconomic outcomes and the formulation of monetary policy. Recent literature has explored ways for supplementing the benchmark of rational expectations with explicit models of expectations formation that rely on econometric learning. Some apparently natural policy rules turn out to imply expectational instability of private agents’ learning. We use the standard New Keynesian model to illustrate this problem and survey the key results about interest-rate rules that deliver both uniqueness and stability of equilibrium under econometric learning. We then consider some practical concerns such as measurement errors in private expectations, observability of variables and learning of structural parameters required for policy. We also discuss some recent applications including policy design under perpetual learning, estimated models with learning, recurrent hyperinflations, and macroeconomic policy to combat liquidity traps and deflation. |
| Keywords: | Imperfect knowledge, learning, interest-rate setting, fluctuations, stability, determinacy. |
| JEL: | E52 E31 D84 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:san:cdmawp:0802&r=mac |
| By: | Benjamin Eden (Department of Economics, Vanderbilt University) |
| Abstract: | The welfare gains from adopting a zero nominal interest policy depend on the implementation details. Here I argue that implementing the Friedman rule by a government loan program may be better than implementing it by collecting taxes, even when lump sum taxes are possible. The government loan program will crowd out lending and borrowing and other money substitutes. Since money can be costlessly created the resources spent on creating money substitutes are a "social waste". Moving from an economy with strictly positive nominal interest rate to an economy with zero nominal interest rate will increase consumption by the amount of resources spent on lending and borrowing. But in general welfare will increase by more than that because consumption smoothing is better under zero nominal interest rate. |
| Keywords: | Government loans, welfare cost of inflation, money substitutes, wealth redistribution, Friedman rule |
| JEL: | E42 E52 E51 E58 H20 H21 H26 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:0804&r=mac |
| By: | Jean Boivin; Marc Giannoni |
| Abstract: | In this paper, we quantify the changes in the relationship between international forces and many key US macroeconomic variables over the 1984-2005 period, and analyze changes in the monetary policy transmission mechanism. We do so by estimating a Factor-Augmented VAR on a large set of US and international data series. We find that the role of international factors in explaining US variables has been changing over the 1984-2005 period. However, while some US series have become more correlated with global factors, there is little evidence suggesting that these factors have become systematically more important. We don't find strong evidence of a change in the transmission mechanism of monetary policy due to global forces. Taking our point estimates literally, global forces do not seem to have played an important role in the US monetary transmission mechanism between 1984 and 1999. In addition, since the year 2000, the initial response of the US economy following a monetary policy shock --- the first 6 to 8 quarters --- is essentially the same as the one that has been observed in the 1984-1999 period. However, point estimates suggest that the growing importance of global forces might have contributed to reducing some of the persistence in the responses, two or more years after the shocks. Overall, we conclude that if global forces have had an effect on the monetary transmission mechanism, this is a recent phenomenon. |
| JEL: | C32 C53 E31 E32 E40 F41 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13736&r=mac |
| By: | Timothy Cogley; Giorgio E. Primiceri; Thomas J. Sargent |
| Abstract: | We use Bayesian methods to estimate two models of post WWII U.S. inflation rates with drifting stochastic volatility and drifting coefficients. One model is univariate, the other a multivariate autoregression. We define the inflation gap as the deviation of inflation from a pure random walk component of inflation and use both of our models to study changes over time in the persistence of the inflation gap measured in terms of short- to medium-term predicability. We present evidence that our measure of the inflation-gap persistence increased until Volcker brought mean inflation down in the early 1980s and that it then fell during the chairmanships of Volcker and Greenspan. Stronger evidence for movements in inflation gap persistence emerges from the VAR than from the univariate model. We interpret these changes in terms of a simple dynamic new Keynesian model that allows us to distinguish altered monetary policy rules and altered private sector parameters. |
| JEL: | C11 C15 C32 E3 E52 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13749&r=mac |
| By: | Christina D. Romer; David H. Romer |
| Abstract: | Should monetary policymakers take the staff forecast of the effects of policy actions as given, or should they attempt to include additional information? This paper seeks to shed light on this question by testing the usefulness of the FOMC's own forecasts. Twice a year, the FOMC makes forecasts of major macroeconomic variables. FOMC members have access to the staff forecasts when they prepare their forecasts. We find that the optimal combination of the FOMC and staff forecasts in predicting inflation and unemployment puts a weight of essentially zero on the FOMC forecast and essentially one on the staff forecast: the FOMC appears to have no value added in forecasting. The results for predicting real growth are less clear-cut. We also find statistical and narrative evidence that differences between the FOMC and staff forecasts help predict monetary policy shocks, suggesting that policymakers act in part on the basis of their apparently misguided information. |
| JEL: | E37 E52 E58 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13751&r=mac |
| By: | Mame Astou Diouf |
| Abstract: | This paper investigates how consumer price inflation is determined in Mali for 1979-2006 along three macroeconomic explanations: (1) monetarist theories, emphasizing the impact of excess money supply, (2) the structuralist hypothesis, stressing the impact of supply-side constraints, and (3) external theories, describing the effects of foreign transmission mechanisms on a small open economy. The analysis makes use of cointegration techniques and general-to-specific modeling. Average national rainfall, and to a lesser extent deviations from monetary and external sector equilibrium are found to be the main long-run determinants of inflation. The paper offers policy recommendations for controlling inflation in Mali. |
| Keywords: | Inflation , Mali , Real effective exchange rates , Demand for money , |
| Date: | 2008–01–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/295&r=mac |
| By: | Brzoza-Brzezina, Michał; Chmielewski, Tomasz; Niedźwiedzińska, Joanna |
| Abstract: | In this paper we ask a question about the impact of monetary policy on total bank lending in the presence of a developed market for foreign currency denominated loans and potential substitutability between domestic and foreign currency loans. Our results, based on a panel of three biggest Central European countries (the Czech Republic, Hungary and Poland) confirm the existence of the substitution effect between these loans. Restrictive monetary policy leads to a decrease in domestic currency lending but simultaneously accelerates foreign currency denominated loans. This makes the central bank's job harder with respect to providing both, monetary and financial stability. |
| Keywords: | domestic and foreign currency loans; substitution; monetary policy; financial stability; Central Europe |
| JEL: | E58 E52 E44 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:6759&r=mac |
| By: | Robert R. Reed; Stacey L. Schreft |
| Abstract: | This paper develops a general equilibrium monetary model with performance incentives to study the inflation-unemployment relationship. A long-run downward-sloping Phillips curve can exist with perfectly anticipated inflation because workers’ incentive to exert effort depend on financial market returns. Consequently, higher inflation rates can reduce wages and stimulate employment. An upward-sloping or vertical Phillips Curve can arise instead, depending on agents’ risk aversion and the possibility of capital formation. Welfare might be higher away from the Friedman rule and with a central bank putting some weight on employment. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedkrw:rwp07-12&r=mac |
| By: | Shanaka J. Peiris; Magnus Saxegaard |
| Abstract: | This paper evaluates monetary policy-tradeoffs in low-income countries using a dynamic stochastic general equilibrium (DSGE) model estimated on data for Mozambique taking into account the sources of major exogenous shocks, and level of financial development. To our knowledge this is a first attempt at estimating a DSGE model for Sub-Saharan Africa excluding South Africa. Our simulations suggests that a exchange rate peg is significantly less successful than inflation targeting at stabilizing the real economy due to higher interest rate volatility, as in the literature for industrial countries and emerging markets. |
| Keywords: | Monetary policy , Africa , Currency pegs , Inflation targeting , Low-income developing countries , |
| Date: | 2007–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/282&r=mac |
| By: | Deborah Gefang; Rodney Strachan |
| Abstract: | Employing a Bayesian approach, we investigate the impact of international business cycles on the UK economy in the context of a smooth transition VAR. We find that British business cycle is asymmetrically influenced by the US, France and Germany. Overall, positive and negative shocks generating in the US or France affect the UK in the same directions of the shock. Yet, a shock emanating from Germany always exerts negative accumulative effects on the UK. More strikingly, a positive shock arising from Germany negatively affects UK output growth more than a negative shock from Germany of the same size. These results suggest that the appropriate UK economic policy depends upon the origin, size and direction of the external shocks. |
| Keywords: | International business cycle; Bayesian; smooth transition vector autoregression model |
| JEL: | C11 C32 C52 E32 F42 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:08/4&r=mac |
| By: | Deborah Gefang |
| Abstract: | This paper proposes a Baysian approach to explore money-output causality within a logistic smooth transition VECM framework. Our empirical results provide substantial evidence that the postwar US money-output relationship is nonlinear, with regime changes mainly governed by the lagged inflation rates. More importantly, we obtain strong support for long-run non-causality and nonlinear Grangercausality from money to output. Furthermore, our impulse response analysis reveals that a shock to money appears to have negative accumulative impact on real output over the next fifty years, which calls for more caution when using money as a policy instrument. |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:08/5&r=mac |
| By: | Koray Alper |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:wpaper:0707&r=mac |
| By: | Antoine Martin; Cyril Monnet |
| Abstract: | We compare two stylized frameworks for the implementation of monetary policy. The first framework relies only on standing facilities, and the second one relies only on open market operations. We show that the Friedman rule cannot be implemented in the first framework, but can be implemented using the second framework. However, for a given rate of inflation, we show that the first framework unambiguously achieves higher welfare than the second one. We conclude that an optimal system of monetary policy implementation should contain elements of both frameworks. Our results also suggest that any such system should pay interest on both required and excess reserves. |
| Keywords: | Monetary policy ; Open market operations ; Friedman, Milton ; Banks and banking, Central |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:313&r=mac |
| By: | Pier Francesco Asso; George A. Kahn; Robert Leeson |
| Abstract: | This paper examines the intellectual history of the Taylor Rule and its considerable influence on macroeconomic research and monetary policy. The paper traces the historical antecedents to the Taylor rule, emphasizing the contributions of three prominent advocates of rules--Henry Simons, A.W. H. Phillips, and Milton Friedman. The paper then examines the evolution of John Taylor's thinking as an academic and policy advisor leading up to his formulation of the Taylor rule. Finally, the paper documents the influence of the Taylor rule on macroeconomic research and the Federal Reserve's conduct of monetary policy. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedkrw:rwp07-11&r=mac |
| By: | James M. Nason; Gregor W. Smith |
| Abstract: | The Great Moderation refers to the fall in U.S. output growth volatility in the mid-1980s. At the same time, the United States experienced a moderation in inflation and lower average inflation. Using annual data since 1890, we find that an earlier, 1946 moderation in output and consumption growth was comparable to that of 1984. Using quarterly data since 1947, we also isolate the 1969–83 Great Inflation to refine the asset pricing implications of the moderations. Asset pricing theory predicts that moderations—real or nominal—influence interest rates. We examine the quantitative predictions of a consumption-based asset pricing model for shifts in the unconditional average of U.S. interest rates. A central finding is that such shifts probably were related to changes in average inflation rather than to moderations in inflation and consumption growth. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2008-01&r=mac |
| By: | Ozlem Aytac (Indiana University Bloomington) |
| Abstract: | The literature on the exchange-rate-based stabilization has focused almost exclusively in Latin America. Many other countries however, such as Egypt, Lebanon and Turkey; have undertaken this sort of programs in the last 10-15 years. I depart from the existing literature by developing a model specifically for the 2000-2001 heterodox exchange-rate-based stabilization program in Turkey: When the government lowers the rate of crawl, the rate of domestic credit creation is set equal to the lower rate of crawl, bond sales finance the fiscal deficit, and money growth occurs only through capital inflows. Without appealing to high intertemporal elasticity of substitution, the model does very well at replicating the magnitude of the current account deficit (5.5% of GDP predicted vs. 5% of GNP actual), the peak in total consumption spending (10.08% predicted vs. 9.6% actual), average growth rate in total consumption spending (6.7% predicted vs. 6% actual), the peak in durables spending (37.06% predicted vs. 39.5% actual), and the average growth rate in durables spending (24% predicted vs. 27.4% actual) observed in Turkey following the inception of the program. |
| Keywords: | inflation, exchange-rate-based stabilization, durables |
| JEL: | E31 E63 F41 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:inu:caeprp:2008-001&r=mac |
| By: | Philippe Moutot (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Alexander Jung (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Francesco Paolo Mongelli (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | The ECB’s monetary policy has received considerable attention in recent years. This is less the case, however, for its regular monetary policy preparation and decision-making process. This paper reviews how the factors usually considered as critical for the success of a central banking system and the federal nature of the Eurosystem are intertwined with its overall design and the functioning of its committee architecture. In particular, it examines the procedures for preparing monetary policy decisions and the role of the decision-making bodies and the committees therein. We suggest that technical committees, involving all national central banks (NCBs), usefully contribute to the regular processing of a vast amount of economic, financial and monetary data, as well as to the consensus building at the level of the Governing Council. A federal organisational structure, including a two-tier committee structure with the Executive Board taking the lead in preparing the monetary policy decisions and the Governing Council in charge of the decisions with collective responsibility for them, as well as committee work at the various hierarchical levels, contributes to the efficiency of the ECB’s monetary policy decision-making, and thereby facilitates the maintenance of price stability in the euro area. A fully-fledged committee structure has also contributed to the smooth integration of non-euro area Member States into the Eurosystem’s monetary policy decision-making process. JEL Classification: E42, E58, F33, F42. |
| Keywords: | European economic and monetary integration, monetary arrangements, central banks and their policies. |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:20070079&r=mac |
| By: | Fernando M. Goncalves; Edmar L. Bacha; Marcio Holland |
| Abstract: | We investigate the role of financial dollarization in the determination of real interest rates in emerging economies. In a simple analytical model, we show that a strategy of "dedollarizing" the economy, if it fails to address fundamental macroeconomic risks, leads to higher domestic real interest rates. We confirm this prediction in an empirical model, but find that the effect is small after controlling for the risks of dilution and default. Brazil provides a natural case study given its low degree of financial dollarization and very high real interest rates. The estimated model is unable to explain the high interest rate levels in the aftermath of Brazil's 1994 inflation stabilization. However, since the adoption in 1999 of inflation targeting and floating exchange rates, Brazil's real interest rates are gradually converging to the model's predicted values. The estimation also shows that further drops in Brazil's real interest rates could be achieved more effectively through improvements in fundamentals that lead to investment-grade status rather than through financial dollarization. |
| Keywords: | Dollarization , Brazil , Interest rates , Emerging markets , |
| Date: | 2008–01–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/294&r=mac |
| By: | Eric Le Borgne; Paulo A. Medas |
| Abstract: | This paper looks at the role Sovereign Wealth Funds have played in the Pacific Island Countries in achieving key macro-fiscal policy objectives, namely, protecting the budget from high revenue volatility and strengthening fiscal prospects. Evidence shows that the funds' effectiveness has been hampered by lack of integration with the budget, institutional weaknesses, and inadequate controls. These factors, together with weak asset management, have sometimes led to substantial financial losses and undermined fiscal policy. Funds, if well designed, could be used as a tool to support a sound fiscal framework, but should not be seen as a substitute for fiscal reforms. |
| Keywords: | Fiscal policy , Pacific Island Countries , Economic stabilization , |
| Date: | 2008–01–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/297&r=mac |
| By: | Bertocco Giancarlo (Department of Economics, University of Insubria, Italy) |
| Abstract: | Mainstream economic theory underlines the close relation between saving decisions and credit supply: the saving decisions determine the credit supply and thus the investment flow carried out by all the firms. The objective of this paper is to highlight the theoretical limits of this causal sequence on the basis of the arguments developed by Schumpeter, who instead maintains that in a capitalist economy the credit supply and investment decisions are independent of saving decisions JEL classification code: E21, E22, G20, O10. Key words: saving, credit, investment, development, Schumpeter |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:ins:quaeco:qf07012&r=mac |
| By: | António Afonso; Davide Furceri |
| Abstract: | This paper analyses the effects in terms of size and volatility of government revenue and spending on growth in OECD and EU countries. The results of the paper suggest that both variables are detrimental to growth. In particular, looking more closely at the effect of each component of government revenue and spending, the results point out that i) indirect taxes (size and volatility); ii) social contributions (size and volatility); iii) government consumption (size and volatility); iv) subsidies (size); and v) government investment (volatility) have a sizeable, negative and statistically significant effect on growth. |
| Keywords: | Fiscal Policy; Government Size; Fiscal Volatility; Economic Growth. |
| JEL: | E62 H50 O40 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp42008&r=mac |
| By: | Neil Arnwine |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:bil:bilpap:0709&r=mac |
| By: | Seater, John J. |
| Abstract: | A transactions model of the demand for multiple media of exchange is developed. Some results are expected, and others are both new and surprising. There are both extensive and intensive margins to currency substitution, and inflation may affect the two margins differently, leading to subtle incentives to adopt or abandon a substitute currency. Variables not previously considered in the literature affect currency substitution in complex and somewhat unexpected ways. In particular, the level of income and the composition of consumption expenditures are important, and they interact with the other variables in the model. Independent empirical work provides support for the theory. |
| Keywords: | Currency substitution, Dollarization |
| JEL: | E31 E41 E42 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:6867&r=mac |
| By: | Michael B. Devereux; Alan Sutherland |
| Abstract: | What does financial globalization imply for the design of monetary policy? Does the case for price stability change in an environment of large cross country gross asset holdings?. This paper is concerned with the effects of monetary policy under endogenous international portfolio choice and incomplete markets. With endogenous portfolios, monetary policy takes on new importance due to its impact on the distribution of returns on nominal assets. Surprisingly, we find an even stronger case for price stability in this environment. Even without nominal rigidities, price stability has a welfare benefit by enhancing the risk sharing capacity of nominal bond returns. |
| Keywords: | Globalization , Monetary policy , Capital flows , Exchange rate instability , International capital markets , |
| Date: | 2007–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/279&r=mac |
| By: | António Afonso; Christophe Rault |
| Abstract: | We apply recent panel cointegration methods to a structural equation between government expenditure and revenue. Allowing for multiple endogenous breaks and after computing appropriate bootstrap critical values, we conclude for fiscal sustainability in the overall EU15 panel. |
| Keywords: | fiscal sustainability; EU; panel cointegration. |
| JEL: | C23 E62 H62 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp12008&r=mac |
| By: | Robert Pollin (Univ. of Massachusetts); Gerald Epstein (Univ. of Massachusetts); James Heintz (Univ. of Massachusetts) |
| Keywords: | Pro-Growth Alternatives for Monetary and Financial Policies in Sub-Saharan Africa |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipc:pbrief:6&r=mac |
| By: | Brian Lucey, Ali Nejadmalayeri and Manohar Singh |
| Date: | 2008–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:iis:dispap:iiisdp240&r=mac |
| By: | Gregory W. Huffman (Department of Economics, Vanderbilt University) |
| Abstract: | The effects of distortional fiscal policies are studied within a model in which there is endogenous investment-specific technological change. Labor is used in the production of output and also for research purposes. Labor or capital taxes then distort the trade-off between developing new technologies, and investing in existing types of capital. It is shown that if there is an externality in the research activity, then it may be socially optimal to impose both a capital tax, and an investment tax credit. The growth rate is shown to be <i>increasing</i> in the rate of capital taxation and <i>decreasing</i> in the rate of labor taxation, although the effect of taxation on the growth rate is modest. This supports the observation that there is relatively little relationship between growth rates of economies, and their rates of taxation. |
| Keywords: | Investment-specific technological change, investment tax credit, optimal taxation, capital taxation, endogenous growth, externalities <br><br> |
| JEL: | E2 E6 H2 O4 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:0801&r=mac |
| By: | Marco Del Negro; Frank Schorfheide |
| Abstract: | The paper discusses prior elicitation for the parameters of dynamic stochastic general equilibrium (DSGE) models, and provides a method for constructing prior distributions for a subset of these parameters from beliefs about the moments of the endogenous variables. The empirical application studies the role of price and wage rigidities in a New Keynesian DSGE model and finds that standard macro time series cannot discriminate among theories that differ in the quantitative importance of nominal frictions. |
| JEL: | C11 C32 E3 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13741&r=mac |
| By: | Jonas D. M. Fisher; Martin Gervais |
| Abstract: | Like other macroeconomic variables, residential investment has become much less volatile since the mid-1980s (recent experience notwithstanding.) This paper explores the role of structural change in this decline. Since the the early 1980s there have been many changes in the underlying structure of the economy, including those in the mortgage market which have made it easier to acquire a home. We examine how these changes affect residential investment volatility in a life-cycle model consistent with micro evidence on housing choices. We find that a decline in the rate of household formation, increased delay in marriage, and an increase in the cross-sectional variance of earnings drive the decline in volatility. Our findings provide support for the view that the “Great Moderation” in aggregate fluctuations is not just due to smaller aggregate shocks, but is driven at least in part by structural change. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-07-15&r=mac |
| By: | Michael J. Dueker; Martin Sola |
| Abstract: | This article deals with using panel data to infer regime changes that are common to all of the cross section. The methods presented here apply to Markov switching vector autoregressions, dynamic factor models with Markov switching and other multivariate Markov switching models. The key feature we seek to add to these models is to permit cross-sectional units to have different weights in the calculation of regime probabilities. We apply our approach to estimating a business cycle chronology for the 50 U.S. States and the Euro area, and we compare results between country-specific weights and the usual case of equal weights. The model with weighted regime determination suggests that Europe experienced a recession in 2002-03, whereas the usual model with equal weights does not. |
| Keywords: | Business cycles ; France ; Finland |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2008-001&r=mac |
| By: | Daniel Kanda |
| Abstract: | This paper discusses Ireland's trade and financial linkages with key partner countries, and uses a vector autoregression to examine the impact of shocks to partner country GDP and shocks to Irish competitiveness on Irish GDP. Two main findings are that shocks to U.S. GDP have a larger impact on Irish GDP than shocks to the euro area or the U.K. Also, the share of the variance of Irish GDP explained by shocks to competitiveness rises with the forecast horizon, suggesting that past erosion of competitiveness may yet have a more substantial impact on economic activity. |
| Keywords: | Trade , Ireland , External shocks , |
| Date: | 2008–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:08/2&r=mac |
| By: | William Coleman |
| Abstract: | A critique is advanced of the contention of Obstfeld and Rogoff (1983) that in a fiat money regime, 'speculative hyperinflations can be excluded only through severe restrictions' on preferences. It is maintained here, in contrast, that no more than the infinity of the marginal utility of real balances at zero real balances is sufficient to rule out speculative hyperinflations. What Obstfeld and Rogoff have successfully drawn attention to is the theoretical possibility of money having strictly zero purchasing power. But the phenomenon of zero purchasing power has no explanatory power for historically observed hyperinflations, or any historically observed modern economy. |
| JEL: | E31 E41 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:acb:cbeeco:2008-487&r=mac |
| By: | Michael B. Devereux; Alan Sutherland |
| Abstract: | This paper presents a general approximation method for characterizing time-varying equilibrium portfolios in a two-country dynamic general equilibrium model. the method can be easily adapted to most dynamic general equilibrium models, it applies to environments in which markets are complete or incomplete, and it can be used for models of any dimension. Moreover, the approximation provides simple, easily interpretable closed form solutions for the dynamics of equilibrium portfolios. |
| Keywords: | Payments imbalances , Markets , Trade , Bonds , |
| Date: | 2007–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/284&r=mac |
| By: | Boileau Loko; Kangni Kpodar; Oumar Diallo |
| Abstract: | The Government of Algeria has pursed a relatively expansionary fiscal policy in recent years, thanks to rising oil prices and revenues. The paper explores the potential effects of such a stance on real exchange rate and uncovers a relatively small appreciating effect of increased government capital expenditure. This is explained by the fact that a significant share of capital spending falls into tradable imported goods. However, the envisaged increase in capital spending, if well designed and implemented, might in the long-run translate into rising operations and maintenance expenditure-mostly nontradable goods-thereby causing a higher real appreciation. This implies that Algeria should carefully consider the implications of its public investment program on recurrent expenditure. |
| Keywords: | Government expenditures , Algeria , Oil , Real effective exchange rates , |
| Date: | 2007–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/286&r=mac |
| By: | Andrew Swiston; Tamim Bayoumi |
| Abstract: | This paper examines linkages across North America by estimating the size of spillovers from the major regions of the world-the United States, euro area, Japan, and the rest of the world-to Canada and Mexico, and decomposing the impact of these spillovers into trade, commodity price, and financial market channels. For Canada, a one percent shock to U.S. real GDP shifts Canadian real GDP by some ¾ of a percentage point in the same direction- with financial spillovers more important than trade in recent decades. Thus, a large proportion of the reduction in Canadian output volatility since the 1980s can be accounted for by the "Great Moderation" in U.S. growth. Before 1996, domestic volatility in Mexico swamped the contribution of external factors to the business cycle. After 1996, the response of Mexican GDP is 1½ times the size of the U.S. shock-"when the U.S. sneezes, Mexico catches a cold". These spillovers are transmitted through both trade and financial channels. |
| Keywords: | Trade , Canada , Mexico , Commodity prices , Capital markets , |
| Date: | 2008–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:08/3&r=mac |
| By: | Davide Debortoli; Ricardo Nunes |
| Abstract: | Due to time-inconsistency or policymakers' turnover, economic promises are not always fulfilled and plans are revised periodically. This fact is not accounted for in the commitment or the discretion approach. We consider two settings where the planner occasionally defaults on past promises. In the first setting, a default may occur in any period with a given probability. In the second, we make the likelihood of default a function of endogenous variables. We formulate these problems recursively, and provide techniques that can be applied to a general class of models. Our method can be used to analyze the plausibility and the importance of commitment and characterize optimal policy in a more realistic environment. We illustrate the method and results in a fiscal policy application. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:916&r=mac |
| By: | Marcelo Veracierto |
| Abstract: | This paper develops a Walrasian equilibrium theory of establishment level dynamics and matching frictions and uses it to evaluate the effects of congestion externalities in the matching process and determine the government interventions that are needed to implement a Pareto optimal allocation. The optimal policy, which involves a tax on the creation of help-wanted ads and an unemployment subsidy, is highly contractionary. However, it leads to large welfare gains. The policy also plays an important role in dampening the response of the economy to aggregate productivity shocks. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-07-16&r=mac |
| By: | Sainan Jin; Yukako Ono; Qinghua Zhang |
| Abstract: | The growth rate of temporary help service employment is often considered to be a leading business cycle indicator, because the firing and hiring of temporary help workers typically lead that of permanent workers. However, few works in the literature focus on the mechanism that generates the lag between temporary and permanent growth. This paper investigates how demand volatility is related to the lag. Focusing on the relationship between a firm’s information extraction and their hiring/firing decisions, our simple model predicts that the average size of transitory demand shocks increase the lag while the average size of shocks that persist longer shortens the lag. Our empirical analysis based on cross-city variation finds supporting evidence to the above predictions, after controlling for city size and other city-specific demographic characteristics. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-07-19&r=mac |
| By: | James B. Davies (University of Western Ontario); Susanna Sandström (UNU-WIDER, Helsinki); Anthony Shorrocks (UNU-WIDER, Helsinki); Edward N. Wolff (New York University) |
| Abstract: | We provide the first estimate of the level and distribution of global household wealth. Mean assets and debts within countries are measured, partly or wholly, for 39 countries using household balance sheet and survey data centred on the year 2000. Determinants of mean financial assets, non-financial assets, and liabilities are studied empirically, and the results are used to impute values to countries lacking wealth data. Household wealth per adult is US$43,494 in PPP terms, and ranges regionally from US$11,655 in Africa to US$193,147 in North America. Data on the shape of the household distribution of wealth for 20 countries, accounting for 59 per cent of the world’s population and, we estimate, 84 per cent of its wealth are used to establish patterns of wealth inequality within countries. Imputations are again performed for countries lacking wealth data, on the basis of the observed relation between wealth and income distribution for the 20 countries with data. The Gini coefficient for the global distribution of wealth is 0.804, and the share of the top 10 per cent is 71 per cent. Wealth of US$8,325 is needed to be in the top half of the distribution, and US$517,601 is needed to be in the top one per cent. Between-country differences in wealth are two-thirds of global inequality according to the Gini coefficient, indicating a larger role for withincountry inequality than in the case of income according to recent estimates. |
| Keywords: | wealth; net worth; personal assets; inequality; households; balance sheets; portfolios |
| JEL: | D31 E01 E21 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:uwo:epuwoc:20075&r=mac |
| By: | Andrew Sharpe, Jean-Francois Arsenault, and Daniel Ershov |
| Abstract: | The Impact of Interprovincial Migration on Aggregate Output and Labour Productivity in Canada, 1987-2006 |
| Abstract: | Interprovincial migration has increased significantly in Canada since 2003. This article develops a methodology to estimate total output gains due to interprovincial migration from two sources: gains due to increased employment, and gains due to re-allocation of workers between provinces with different productivity levels. It estimates that in 2006 the net output gains arising from interprovincial migration were $883.1 million (1997 constant prices), or 0.074 per cent of GDP. Higher employment rates in provinces experiencing a net positive balance of interprovincial migrants were responsible for $398.0 million of the gains and higher output per worker in these provinces was responsible for $485.0 million. |
| Keywords: | Interprovincial migration, Canada, Labour Productivity, Economic Growth. |
| JEL: | J61 E20 O20 O47 O51 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:sls:resrep:0702&r=mac |
| By: | Patrick Musso (University of Nice-Sophia Antipolis); Stefano Schiavo (Observatoire Français des Conjonctures Économiques) |
| Abstract: | We propose a new approach for identifying and measuring the degree of financial constraint faced by firms and use it to investigate the effect of financial constraints on firm survival and development. Using panel data on French manufacturing firms over the 1996-2004 period, we find that (i) financial constraints significantly increase the probability of exiting the market, (ii) access to external financial resources has a positive effect on the growth of firms in terms of sales, capital stock and employment, (iii) financial constraints are positively related with productivity growth in the short-run. We interpret this last result as the sign that constrained firms need to cut costs in order to generate the resources they cannot raise on financial markets. |
| Keywords: | Financial constraints; Firm growth; Firm survival |
| JEL: | E44 G32 L25 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:0737&r=mac |
| By: | Konstantin A. Kholodilin; Jan-Oliver Menz; Boriss Siliverstovs |
| Abstract: | In this study, we suggest an explanation for the alarmingly low growth rates of real housing prices in Canada and Germany in comparison to other OECD countries over 1975-2005. We show that the long-run development of housing markets is determined by real disposable per capita income, real long-term interest rate, population growth, and urbanization. The differential development of real housing prices in Canada and Germany is attributed to the specific values of the fundamentals in these two countries. Canada and Germany are characterized by relatively low average growth rates of real disposable income and relatively high interest rates resulting in suppressed housing prices over long period of time. Institutional structure accentuates these tendencies. Given the importance of housing wealth for the private consumption, our paper aims at drawing attention of the policymakers to the necessity of preventing not only the overheating but also overcooling of the housing market that entails lower economic growth rate. |
| Keywords: | House prices; dynamic panel data; cointegration |
| JEL: | E30 C23 C51 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp758&r=mac |
| By: | Valeriya Dinger (University of Bonn valeriya.dinger@uni-bonn.de); Jürgen von Hagen (Zentrum für Europäische Integrationsforschung Rheinische Friedrich-Wilhelms-Universität Bonn Walter Flex Strasse 3 53113 Bonn Tel. (0228) 73-9199 Fax (0228) 73-1809 Email vonhagen@uni-bonn.de) |
| Abstract: | In this paper we investigate whether banks that borrow from other banks have lower risk levels. We concentrate on a large sample of Central and Eastern European banks which allows us to explore the impact of interbank lending when exposures are long-term and interbank borrowers are small banks. The results of the empirical analysis generally confirm the hypothesis that long-term interbank exposures result in lower risk of the borrowing banks. |
| Keywords: | interbank market, bank risk, market discipline, transition countries |
| JEL: | G21 E53 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:223&r=mac |
| By: | Andrew Sharpe, Celeste Bradley, and Hans Messinger |
| Abstract: | To achieve efficient allocation of resources in the health care sector, accurate measures of health care output and productivity are essential. According to official estimates of productivity produced by Statistics Canada, labour productivity in the business sector of the health care (excluding hospitals) and social assistance industry declined 0.28 per cent per year between 1994 and 2003. Estimates of productivity produced by the CSLS, based on official Statistics Canada employment and real GDP figures, show that labour productivity in the health care and social assistance industry declined by 0.69 per cent per year between 1987 and 2006. It is widely recognized that official output and productivity figures may seriously underestimate the true contribution of the health care sector to real output, and more importantly to the economic well-being of Canadians. Alternative approaches show that price indices for health care output may be overestimated and, therefore, quality improvements may not be accurately captured by estimates of real health care output. More resources are needed to further investigate the alternative approaches discussed in this report and develop better output measures that adjust for outcomes directly related to health care spending. |
| Keywords: | Health sector, Productivity, Measurement, Canada, Outcomes. |
| JEL: | E20 C40 C80 C82 O47 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:sls:resrep:0706&r=mac |
| By: | HALICIOGLU, Ferda |
| Abstract: | This study attempts to examine empirically aggregate tourism outflows in the case of Turkey using the time series data for the period 1970-2005. As far as this article is concerned, there exists no previous empirical work dealing with the tourist outflows from Turkey. The previous tourism studies in the case of Turkey, by and large, focus on the inbound tourism demand analyses. As a developing country and an important tourism destination, Turkey has also been a significant source for generating a substantial number of tourists in recent years. Therefore, the tourist outflows from Turkey deserve to be analysed empirically too. The total tourist outflows from Turkey are related to real income and relative prices. The bounds testing to cointegration procedure proposed by Pesaran et al. (2001) is employed to compute the short and long-run elasticities of income and relative prices. An augmented form of Granger causality analysis is conducted amongst the variables of outbound tourist flows, income and relative prices to determine the direction of causality. In the long-run, causality runs interactively through the error correction term from income and relative prices to outbound tourist flows. However, in the short-run, causality runs only from income to outbound tourism flows. The aggregate tourism outflows equation is also checked for the parameter stability via the tests of cumulative sum (CUSUM) and cumulative sum of the squares (CUSUMSQ). The empirical results suggest that income is the most significant variable in explaining the total tourist outflows from Turkey and there exists a stable outbound tourism demand function. The results also provide important policy recommendations. |
| Keywords: | outbound tourism demand; cointegration; Granger causality; stability tests; Turkey. |
| JEL: | E0 O5 C1 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:6765&r=mac |
| By: | Fabio Veras Soares (International Poverty Centre); Tatiana Britto (Visiting researcher, IPC) |
| Abstract: | Este Documento de Trabajo ofrece un panorama institucional y un análisis comparativo de las experiencias en Transferencias Monetarias Condicionadas (TMC) de El Salvador (Red Solidaria) y Paraguay (Tekoporã). Enfocamos en las contradicciones y tensiones potenciales que emergen de los dos objetivos de estos programas, es decir aliviar la pobreza a corto plazo y romper el círculo intergeneracional de la pobreza a través de la acumulación de capital humano. También examinamos cómo ambos programas encaran estas tensiones y comparamos sus abordajes a la problemática de la implementación, así como sus factores administrativos e institucionales. Argüimos que temas de la economía política desempeñan un papel importante en las decisiones tomadas con relación a los criterios de focalización, el monitoreo de las condicionalidades, la ?graduación? y las reglas de salida del programa. Estas características de los programas no necesariamente son congruentes puesto que se apoyan en razonamientos diferentes. Estos problemas podrían exacerbarse en un escenario que es común en muchos países en desarrollo y que se caracteriza por limitaciones en la capacidad financiera e institucional y, a veces, por escaso apoyo político para un programa TMC. |
| Keywords: | transferencias monetarias condicionadas; programa gubernamental |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipc:wpespa:38&r=mac |
| By: | Andrew Sharpe, Jean-Francois Arsenault and Simon Lapointe |
| Abstract: | Investing in disadvantaged young people is one of the rare public policies with no equity-efficiency tradeoff. This report estimates the potential benefit for the Canadian economy of increasing the educational attainment level of Aboriginal Canadians. We find that increasing the number of Aboriginals who complete high school is a low-hanging fruit with significant and far-reaching economic and social benefits for Canadians. Not only would it significantly contribute to increase the personal well-being of Aboriginal Canadians, but it would also contribute somewhat to alleviating two of the most pressing challenges facing the Canadian economy: slower labour force growth and lackluster labour productivity growth. In fact, we find that in the best case scenario where by 2017 the educational attainment and the labour market outcomes at a given level of educational attainment of Aboriginal Canadians reach the same level non-Aboriginal Canadians had in 2001, the potential contribution of Aboriginal Canadians is up to an additional cumulative $160 billion (2001 dollars) over the 2001-2017 period. That represents an increase of $21.5 billion (2001 dollars) in 2017 alone. Moreover, the potential contribution of Aboriginal Canadians to the total growth of the labour force between 2001 and 2017 is projected to be up to 7.39 per cent of the total labour force growth, much higher than their projected 3.37 per cent share of the working age population in 2017. Finally, we find that the potential contribution of Aboriginal Canadians to the annual growth rate of labour productivity in Canada is up to 0.037 percentage point. |
| Keywords: | Aboriginal, Education, Canada, Forecast of economic growth, Equity and efficiency. |
| JEL: | J10 J11 I29 E27 O11 O47 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:sls:resrep:0704&r=mac |