|
on Macroeconomics |
|
Issue of 2008‒06‒07
forty-six papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Raquel Fonseca; Lise Patureau |
| Abstract: | This paper investigates the sources of business cycle comovement within the New Open Economy Macroeconomy framework. It sheds new light on the business cycle comovement issue by examining the role of cross-country divergence in labor market institutions. The authors first document stylized facts supporting that heterogeneous labor market institutions are associated with lower cross-country GDP correlations among OECD countries. They then investigate this fact within a two-country dynamic general equilibrium model with frictions on the good and labor markets. On the good-market side, they model monopolistic competition and nominal price rigidity. Labor market frictions are introduced through a matching function ˆ la Mortensen and Pissarides (1999). Their conclusions disclose that heterogenous labor market institutions amplify the crosscountry GDP differential in response to aggregate shocks. In quantitative terms, they contribute to reduce cross-country output correlation, when the model is subject to real and/or monetary shocks. Their overall results show that taking into account labor market heterogeneity improves their understanding of the quantity puzzle. |
| Keywords: | International business cycle, labor market institutions, wage bargaining |
| JEL: | E24 E32 F41 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:ran:wpaper:562&r=mac |
| By: | John V. Duca; Tao Wu |
| Abstract: | Laubach and Williams (2003) employ a Kalman filter approach to jointly estimate the neutral real federal funds rate and trend output growth using an IS relationship and an output gap based inflation equation. They find a positive link between these two variables, but also much error surrounding neutral real rate estimates. We modify their approach by including variables for regulations on deposit interest rates and on wages and prices. These variables are statistically significant and notably affect estimates of two policy relevant coefficients: the sensitivity of output to the real interest rate and that of inflation to the output gap. |
| Keywords: | Monetary policy ; Federal funds rate |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:0807&r=mac |
| By: | Grégory Levieuge (Laboratoire d'Economie d'Orléans (LEO), UMR CNRS 6221); Alexis Penot (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France,) |
| Abstract: | Compared with the U.S., the amplitude of the European monetary policy rate cycle is strikingly narrow. Is it an evidence of a less reactive ECB? This observation can certainly reflect the preferences and then the strategy of the ECB. But its greater inertia must also be assessed in the light of the singularity of the European structure and of the shocks hitting it. From this perspective, several contributions assert that the nature, size and persistence of shocks mainly explain the different interest rate setting. Therefore, they rely on the idea that both areas share the same monetary policy rule and, more surprising, the same structure. This paper aims at examining this conclusions with an alternative modelling. The results confirm that the euro area and U.S. monetary policy rules are not fundamentally different. But we reject the differences of nature and amplitude of shocks. What is often interpreted as such is in fact the consequence of how distinctly both economies absorb shocks. So differences in the amplitude of the interest rate cycles in both areas are basically explained by structural dissimilarities. |
| Keywords: | interest rate, macroeconomic shocks, monetary policy rules, policy activism, structural divergence |
| JEL: | C51 E52 E58 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:0804&r=mac |
| By: | Dean Croushore |
| Abstract: | This paper examines the characteristics of the revisions to the inflation rate as measured by the personal consumption expenditures price index both including and excluding food and energy prices. These data series play a major role in the Federal Reserve’s analysis of inflation. ; The author examines the magnitude and patterns of revisions to both PCE inflation rates. The first question he poses is: What do data revisions look like? The author runs a variety of tests to see if the data revisions have desirable or exploitable properties. The second question he poses is related to the first: Can we forecast data revisions in real time? The answer is that it is possible to forecast revisions from the initial release to August of the following year. Generally, the initial release of inflation is too low and is likely to be revised up. Policymakers should account for this predictability in setting monetary policy. |
| Keywords: | Inflation (Finance) ; Monetary policy |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:08-8&r=mac |
| By: | Marco Battaglini; Stephen Coate |
| Abstract: | This paper presents a political economy theory of the behavior of fiscal policy over the business cycle. The theory predicts that, in both booms and recessions, fiscal policies are set so that the marginal cost of public funds obeys a submartingale. In the short run, fiscal policy can be pro-cyclical with government debt spiking up upon entering a boom. However, in the long run, fiscal policy is counter-cyclical with debt increasing in recessions and decreasing in booms. Government spending increases in booms and decreases during recessions, while tax rates decrease during booms and increase in recessions. Data on tax rates from the G7 countries supports the submartingale prediction, and the correlations between fiscal policy variables and national income implied by the theory are consistent with much of the existing evidence from the U.S. and other countries. |
| JEL: | D70 E62 H60 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14047&r=mac |
| By: | John Geanakoplos (Cowles Foundation, Yale University) |
| Abstract: | The OLG model of Allais and Samuelson retains the methodological assumptions of agent optimization and market clearing from the Arrow-Debreu model, yet its equilibrium set has different properties: Pareto inefficiency, indeterminacy, positive valuation of money, and a golden rule equilibrium in which the rate of interest is equal to population growth (independent of impatience). These properties are shown to derive not from market incompleteness, but from lack of market clearing "at infinity;" they can be eliminated with land or uniform impatience. The OLG model is used to analyze bubbles, social security, demographic effects on stock returns, the foundations of monetary theory, Keynesian vs. real business cycle macromodels, and classical vs. neoclassical disputes. |
| Keywords: | Demography, Inefficiency, Indeterminacy, Money, Bubbles, Cycles, Rate of interest, Impatience, Land, Infinity, Expectations, Social security, Golden rule |
| JEL: | D1 D3 D5 D6 D9 E11 E12 E13 E2 E3 E4 E6 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1663&r=mac |
| By: | Andrew Atkeson; Patrick J. Kehoe |
| Keywords: | Monetary policy |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmwp:662&r=mac |
| By: | Alexandre Sokic |
| Abstract: | This paper aims at providing some new theoretical support for money demand functions in monetary hyperinflation analysis given the well known failure of Cagan based inflationary finance models to produce explosive hyperinflation. An analytical approach is used to characterize the agents’ preferences which are compatible with monetary hyperinflation. In the context of a MIUF model, we show that the possibility of explosive hyperinflation paths depends on a sufficient level of money essentiality in the sense of Scheinkman (1980) which is conveyed by the agents’ preferences. This result emerges without any ad-hoc assumption implying the inclusion of some friction in the adjustment of some nominal variable. It suggests that monetary hyperinflation analysis under perfect foresight requires abandoning the Cagan money demand and adopting a demand for money respecting money essentiality. Theoretical support is brought to inelastic functional forms of money demand and specifically to the double-log schedule. |
| Keywords: | money demand, monetary hyperinflation, inflation tax, money essentiality. |
| JEL: | E31 E41 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2008-13&r=mac |
| By: | Viv Hall; John McDermott |
| Abstract: | An important requirement, prior to countries’ adopting a common currency or maintaining an independent monetary policy, is establishing the extent to which they share a common economic cycle and how susceptible they are to region-specific shocks. For example, Kouparitsas (2001) has examined whether 8 US BEA regions are largely subject to common sources of disturbance, and assesses whether their regional cycles are consistent with a common currency area for the US. Norman and Walker (2007) conclude for 6 Australian States that the major source of the State fluctuations is shocks which are common to all States. But their variance analysis also shows that each overall State cycle is driven partly by fluctuations specific to that State, in particular for Western Australia. Findings such as these also have important implications for the relative strengths of influence of fiscal and regional policies, and of external shocks. Using similar unobserved components methodology (e.g. Watson and Engle (1983), Kouparitsas (2001, 2002), Norman and Walker (2007), and Hall and McDermott (2008)), we establish an Australasian common cycle, and assess the extent to which the region-specific cycles of 6 Australian States and NZ are additionally important. Our results suggest that: (1) structural breaks play an important role; (2) New Zealand’s region-specific growth cycle has exhibited distinctively different features, relative to the common cycle; and (3) for every Australasian region, the regionspecific cycle variance dominates that of the common cycle. Our findings on the distinctiveness of New Zealand’s output and employment cycles are consistent with New Zealand retaining the flexibility of a separate currency and monetary policy. |
| JEL: | C32 E32 E52 F36 R11 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:acb:camaaa:2008-11&r=mac |
| By: | Mehrotra, Aaron (BOFIT); Kozluk , Tomasz (BOFIT) |
| Abstract: | We study the effects of Chinese monetary policy shocks on China’s major trading partners in East Asia by estimating structural vector autoregressive (SVAR) models for six economies in the region. We find that a monetary expansion in Mainland China leads to an increase in real GDP (temporary) and the price level (permanent) in a number of economies in our sample, most notably in Hong Kong and the Philippines. The impact could result from intertemporal substitution present in a general equilibrium framework which allows for positive domestic impacts of foreign monetary expansions. Our results emphasize the growing importance of China for its neighboring economies and the significance of Chinese shocks for the design of monetary policy in Asian economies. |
| Keywords: | monetary policy shocks; Asian production chain; SVAR; East Asia; China |
| JEL: | E52 F42 |
| Date: | 2008–06–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2008_005&r=mac |
| By: | Carlo Rosa |
| Abstract: | This paper examines and compares the communication strategies of the Federal Reserve and the European Central Bank, and their effectiveness. First we do a comparative study exercise. We find that on monetary policy committee meeting days both the ECB and the Fed can move market rates using either monetary policy or news shocks. However, the response of the long-end of the American term structure to the surprise component of Fed's statements is significantly larger than the reaction of European long-term yields to ECB's announcements. This result is intimately related to the higher transparency of U.S. Fed statements compared to ECB announcements rather than to the different institutional mandate of the two central banks. Second, we investigate the cross-effects i.e. the Fed's ability to move European interest rates and the corresponding ECB's capacity to move American rates. We find that the Fed has been more able to move the European interst rates of all maturities than the ECB to move American rates. This finding is tied to the predominance of dollar fixed income assets rather than to an attempt of the ECB to mimic the Fed. |
| Keywords: | European Central Bank, U.S. Federal Reserve, central bank communication, monetary policy and news shocks, term structure of interest rates |
| JEL: | E52 E58 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0855&r=mac |
| By: | Theodore M. Crone; N. Neil K. Khettry; Loretta J. Mester; Jason A. Novak |
| Abstract: | Two rationales offered for policymakers' focus on core measures of inflation as a guide to underlying inflation are that core inflation omits food and energy prices, which are thought to be more volatile than other components, and that core inflation is thought to be a better predictor of total inflation over time horizons of import to policymakers. The authors' investigation finds little support for either rationale. They find that food and energy prices are not the most volatile components of inflation and that depending on which inflation measure is used, core inflation is not necessarily the best predictor of total inflation. However, they do find that combining CPI and PCE inflation measures can lead to statistically significant more accurate forecasts of each inflation measure, suggesting that each measure includes independent information that can be exploited to yield better forecasts. |
| Keywords: | Inflation (Finance) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:08-9&r=mac |
| By: | Romain Restout (ECONOMIX (University Paris X) and 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) |
| Abstract: | This paper explores the consequences of introducing a monopolistic competition in an intertemporal two-sector small open economy model which produces traded and non traded goods. It is assumed that the non traded sector is the locus of the imperfectly competition. Our analysis shows that markup depends on the composition of aggregate non traded demand and is therefore endogenously determined in the model. Calibrating the model with OECD parameters, the effects of fiscal and technological shocks are simulated. Our findings are as follows. First, the model is consistent with the observed saving-investment correlations found in the data. Second, unlike the perfectly framework and in accordance with empirical studies, fiscal shocks cause real appreciation of the relative price of non traded goods, which in turn enlarges the responses of current account and investment. Third, the model is consistent with the empirical report that technological shocks result in current account deficits and investment rises. Fourth, the strength of the relative price appreciation following sector productivity differentials, i.e. the Balassa-Samuelson effect, is affected by the monopolistic competition hypothesis. Assume perfect competition when it is not, biases upward estimates of the Balassa-Samuelson effect. |
| Keywords: | fiscal policy, monopolistic competition, productivity |
| JEL: | E20 E62 F31 F41 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:0803&r=mac |
| By: | Jean-Pierre Allégret (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France); Alain Sand-Zantman (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France) |
| Abstract: | This paper analyses the monetary consequences of the Latin-American trade integration process. We consider a sample of five countries –Argentina, Brazil, Chile, Mexico and Uruguay- spanning the period 1991-2007. The main question raised pertains to the feasibility of a monetary union between L.A. economies. To this end, we study whether this set of countries is characterized by business cycle synchronization with the occurrence of common shocks, a strong similarity in the adjustment process and the convergence of policy responses. We focus especially our attention on two points. First, we try to determine to what extent international disturbances influence the domestic business cycles through trade and/or financial channels. Second, we analyze the impact of the adoption of different exchange rate regimes on the countries’ responses to shocks. All these features are the main issues in the literature relative to regional integration and OCA process. |
| Keywords: | bayesian VAR, business cycles, Latin American countries, optimum currency area |
| JEL: | C32 E32 F42 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:0809&r=mac |
| By: | Peter Stella; Åke Lonnberg |
| Abstract: | Conventional economic policy models focus only on selected elements of the central bank balance sheet, in particular monetary liabilities and sometimes foreign reserves. The canonical model of an "independent" central bank assumes that it chooses money (or an interest rate) unconstrained by a need to generate seignorage for itself or the government. Whereas a long line of literature has emphasized the dangers of fiscal dominance influencing the conduct of monetary policy, this paper considers the relatively novel idea that an independent central bank could be constrained in achieving its policy objectives by its own balance sheet situation. If one accepts this potential constraint as a valid concern, the financial strength of the central bank as a stand-alone entity becomes highly relevant for ascertaining monetary policy credibility. We consider several strands of evidence that clearly indicate fiscal backing for central banks cannot be assumed, and hence financial independence is relevant to operational independence. First, we examine 135 central bank laws to illustrate the variety of legal approaches adopted with respect to central bank financial independence. Second, we examine the same data set with regard to central bank recapitalization provisions to show that even in cases where the treasury is nominally responsible for keeping the central bank financially strong, it may do so in purely a cosmetic fashion. Third, we show that, in actual practice, treasuries have frequently not provided central banks with genuine financial support on a timely basis, leaving them excessively reliant on seignorage to finance their operations or forcing them to abandon policy objectives. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2008-13&r=mac |
| By: | Bukhari, S. Adnan H. A. S. Bukhari; Hanif, Muhammad Nadeem |
| Abstract: | An artificial neural network (ANN) is an information-processing paradigm that is inspired by the way biological nervous systems, such as the brain, process information. In previous two decades, ANN applications in economics and finance; for such tasks as pattern reorganization, and time series forecasting, have dramatically increased. Many central banks use forecasting models based on ANN methodology for predicting various macroeconomic indicators, like inflation, GDP Growth and currency in circulation etc. In this paper, we have attempted to forecast monthly YoY inflation for Pakistan by using ANN for FY08 on the basis of monthly data of July 1993 to June 2007. We also compare the forecast performance of the ANN model with that of univariate AR(1) model and observed that RMSE of ANN based forecasts is much less than the RMSE of forecasts based on AR(1) model. At least by this criterion forecast based on ANN are more precise. |
| Keywords: | artificial neural network; forecasting; inflation |
| JEL: | C51 C53 E31 C52 E37 |
| Date: | 2007–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8898&r=mac |
| By: | Enrique G. Mendoza; Marco E. Terrones |
| Abstract: | This paper proposes a methodology for measuring credit booms and uses it to identify credit booms in emerging and industrial economies over the past four decades. In addition, we use event study methods to identify the key empirical regularities of credit booms in macroeconomic aggregates and micro-level data. Macro data show a systematic relationship between credit booms and economic expansions, rising asset prices, real appreciations, widening external deficits and managed exchange rates. Micro data show a strong association between credit booms and firm-level measures of leverage, firm values, and external financing, and bank-level indicators of banking fragility. Credit booms in industrial and emerging economies show three major differences: (1) credit booms and the macro and micro fluctuations associated with them are larger in emerging economies, particularly in the nontradables sector; (2) not all credit booms end in financial crises, but most emerging markets crises were associated with credit booms; and (3) credit booms in emerging economies are often preceded by large capital inflows but not by financial reforms or productivity gains. |
| JEL: | E32 E44 E51 F3 G21 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14049&r=mac |
| By: | Athanasios Orphanides; John C. Williams |
| Abstract: | This paper examines the robustness characteristics of optimal control policies derived under the assumption of rational expectations to alternative models of expectations. We assume that agents have imperfect knowledge about the precise structure of the economy and form expectations using a forecasting model that they continuously update based on incoming data. We find that the optimal control policy derived under the assumption of rational expectations can perform poorly when expectations deviate modestly from rational expectations. We then show that the optimal control policy can be made more robust by deemphasizing the stabilization of real economic activity and interest rates relative to inflation in the central bank loss function. That is, robustness to learning provides an incentive to employ a "conservative" central banker. We then examine two types of simple monetary policy rules from the literature that have been found to be robust to model misspecification in other contexts. We find that these policies are robust to empirically plausible parameterizations of the learning models and perform about as well or better than optimal control policies. |
| Keywords: | Rational expectations (Economic theory) ; Econometric models |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2008-05&r=mac |
| By: | Alexandre Sokic |
| Abstract: | This paper uses an analytical approach and the precise definition of money essentiality given by Scheinkman (1980) with the aim to establish a formal theoretical link between the possibility of hyperinflationary paths and the concept of money essentiality. In this respect the paper contributes to the understanding of the well known failure of Cagan based inflationary finance models to produce explosive hyperinflation. We consider two standard optimizing monetary models representing alternative ways of modelling the transaction role of money. The paper considers a money-in-the-utility-function model and a cash-in-advance model where representative agent’s preferences are represented by general utility functions. We show that modelling monetary hyperinflation with perfect foresight is closely linked to the concept of money essentiality as defined by Scheinkman (1980). The possibility of explosive monetary hyperinflation in a perfect foresight inflationary finance model always relies on a sufficient level of money essentiality. The main contribution of this paper is to show that, whether in a cash-in-advance or in a money-in-the-utility-function framework, this sufficient level of money essentiality does not depend on the specific way, cash-in-advance or moneyin- the-utility-function, of modelling the role of money as a medium of exchange. |
| Keywords: | monetary hyperinflation, inflation tax, money essentiality. |
| JEL: | E31 E41 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2008-12&r=mac |
| By: | Balazs Egert |
| Abstract: | This paper provides a comprehensive review of the factors that can cause price levels to diverge and which are at the root of different inflation rates in Europe including the EU-27. Among others, we study the structural and cyclical factors influencing market and non-marketbased service, house and goods prices, and we summarise some stylised facts emerging from descriptive statistics. Subsequently, we set out the possible mismatches between price level convergence and inflation rates. Having described in detail the underlying economic factors, we proceed to demonstrate the relative importance of these factors on observed inflation rates first in an accounting framework and then by relying on panel estimations. Our estimation results provide the obituary notice for the Balassa-Samuelson effect. Nevertheless, we show that other factors related to economic convergence may push up inflation rates in transition economies. Cyclical effects and regulated prices are found to be important drivers of inflation rates in an enlarged Europe. House prices matter to some extent in the euro area, whereas the exchange rate plays a prominent (but declining) role in transition economies. |
| Keywords: | price level, inflation, Balassa-Samuelson, tradables, house prices, regulated prices, Europe, transition |
| JEL: | C22 E43 E50 E52 G21 O52 |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2007-895&r=mac |
| By: | Barbara Petrongolo; Christopher A. Pissarides |
| Abstract: | In this paper we study the contribution of inflows and outflows to the dynamics of unemployment in three European countries, the United Kingdom, France and Spain. We compare performance in these three countries making use of both administrative and labor force survey data. We find that the impact of the 1980s reforms in Britain is evident in the contributions of the inflow and outflow rates. The inflow rate became a bigger contributor after the mid 1980s, although its significance subsided again in the late 1990s and 2000s. In France the dynamics of unemployment are driven virtually entirely by the outflow rate, which is consistent with a regime with strict employment protection legislation. In Spain, however, both rates contribute significantly to the dynamics, very likely as a consequence of the prominence of fixed-term contracts since the late 1980s. |
| Keywords: | unemployment dynamics, job finding rates, job separation rates |
| JEL: | E24 E32 J6 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0853&r=mac |
| By: | Marco Del Negro; Christopher Otrok |
| Abstract: | We develop a dynamic factor model with time-varying factor loadings and stochastic volatility in both the latent factors and idiosyncratic components. We employ this new measurement tool to study the evolution of international business cycles in the post-Bretton Woods period, using a panel of output growth rates for nineteen countries. We find 1) statistical evidence of a decline in volatility for most countries, with the timing, magnitude, and source (international or domestic) of the decline differing across countries; 2) some evidence of a decline in business cycle synchronization for Group of Seven (G-7) countries, but otherwise no evidence of changes in synchronization for the sample countries, including European and euro-area countries; and 3) convergence in the volatility of business cycles across countries. |
| Keywords: | Time-series analysis ; International economic integration ; Business cycles ; Group of Seven countries |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:326&r=mac |
| By: | Ivan O. Kitov (Institute for the Geospheres' Dynamics, Russian Academy of Sciences); Oleg I. Kitov (Warwick University) |
| Abstract: | The evolution of labor force participation rate is modeled using a lagged linear function of real economic growth, as expressed by GDP per capita. For the U.S., our model predicts at a two-year horizon with RMSFE of 0.28% for the period between 1965 and 2007. Larger part of the deviation between predicted and measured LFP is explained by artificial dislocations in measured time series induced by major revisions to the CPS methodology in 1979 and 1989. Similar models have been developed for Japan, the UK, France, Italy, Canada, and Sweden. |
| Keywords: | labor force participation, real GDP per capita, prediction |
| JEL: | C2 E6 J2 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2008-90&r=mac |
| By: | John H. Munro |
| Abstract: | This is a substantially revised version of an earlier Working Paper (posted in 2002, with a different title), based on much new data and other information. It re-examines Earl Hamilton’s famous 1929 thesis on ‘Profit Inflation’ and the ‘birth of modern industrial capitalism’: namely, that the inflationary forces of the Price Revolution era produced a widening gap between prices and wages, thus providing industrial entrepreneurs with windfall profits, which they reinvested in larger-scale, more capital intensive forms of industry. Hamilton’s analyses of price and wage data for 16th- and 17th-century Spain, France, and England led him to conclude that: Spain had enjoyed virtually no ‘profit inflation’, since wages had generally kept pace with prices; and that early-modern England had experienced the greatest degree of such ‘profit inflation’. Such a contrast in their national economic experiences helps to explain, in Hamilton’s view, why Spain subsequently ‘declined’, while England became the homeland of the modern Industrial Revolution. A major reason for the significance and fame of the Hamilton thesis was its enthusiastic endorsement by John Maynard Keynes, in his Treatise of Money, published the following year, in 1930. Subsequently, the Hamilton ‘profit inflation’ thesis was subjected to severe attacks: by John Nef (1936-37) and David Felix (1956). But they had to rely on the same dubious and indeed often untrustworthy price and wage data for England and France (and of course on Hamilton’s data for Spain, which was of much higher quality). Both rightly noted that the proper comparison had to be made between industrial wages and industrial prices, not the price level in general. Since industrial prices generally rose less than did the overall price level (heavily weighted with foodstuffs), they found much less evidence for ‘profit inflation’ than had Hamilton. Nef developed a counter thesis to argue that sharply rising raw material costs, especially for wood and charcoal, forced industrialists to devise new furnace technologies to burn coal instead of wood or charcoal: changes that not inly reduced such costs but resulted in much larger-scale, more capital-intensive forms of industry. In this revised paper, I offer new data to demonstrate that neither the ‘energy’ nor the new furnace technologies took place until after the 1640s. This study is based on newer sets of price and wage indices that appeared after their publications: those by Phelps Brown and Hopkins for England (which I have modified, after using their data sheets in the LSE Archives), and for this version, additional price date for England. For the southern Netherlands, I have utilized Herman Van der Wee Consumer Price Index. My analyses of both industrial prices and industrial wages suggest that, for England, there is more evidence for potential ‘profit inflation’, in some industries, than Nef or Felix had been willing to concede. But the major discovery was that the Antwerp region continuously experienced, over the 16th and 17th centuries, the contrary phenomenon: what Keynes had called ‘Profit Deflation’ (for him, a truly negative force), in that industrial wages rose faster than industrial prices. And yet indisputably the southern Netherlands had a much more industrialized and more rapidly growing economy than did England, at least until the Revolt of the Netherlands (1568-1609). The concept of ‘profit inflation’ is not, therefore, a useful analytical tool, if based only on labour costs. This study concludes with a brief examination of the effects on inflation on two other factor costs: land, in terms of real rents, and capital, in terms of real interest rates, which did fall with inflation. In all likelihood both such costs did lag behind industrial prices in early-modern England and the Low Countries (and contrary to Eric Kerridge’s 1953 assertions on English rents), though real interest rates lagged more than did real rents. While disputing the Nef thesis, I do analyse the forms and nature of other new, larger-scale industries in this era (mining, metallurgy shipbuilding). I also provide a new appendix on the role of coinage debasements, as an another important monetary factor in determining regional differences in inflation rates; and this contradicts the almost universal assumption that debasements were irrelevant. |
| Keywords: | gold and silver, money, coinage, Price Revolution, Profit Inflation, prices, nominal and real wages, masons |
| JEL: | B2 E2 E3 J3 N N3 O O5 |
| Date: | 2008–05–23 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-320&r=mac |
| By: | Christophe Rault; Antonio Alfonso |
| Abstract: | We assess the sustainability of public finances in the EU15 over the period 1970-2006 using stationarity and cointegration analysis. Specifically, we use panel unit root tests of the first and second generation allowing in some cases for structural breaks. We also apply modern panel cointegration techniques developed by Pedroni (1999, 2004), generalized by Banerjee and Carrion-i-Silvestre (2006) and Westerlund and Edgerton (2007), to a structural long-run equation between general government expenditures and revenues. While estimations point to fiscal sustainability being an issue in some countries, fiscal policy was sustainable both for the EU15 panel set, and within sub-periods (1970-1991 and 1992-2006) |
| Keywords: | intertemporal budget constraint, fiscal sustainability, EU, panel unit root, panel cointegration |
| JEL: | C23 E62 H62 H63 |
| Date: | 2007–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2007-893&r=mac |
| By: | Aleksander Berentsen; Cyril Monnet |
| Abstract: | Channel systems for conducting monetary policy are becoming increasingly popular. Despite its popularity, the consequences of implementing policy with a channel system are not well understood. The authors develop a general equilibrium framework of a channel system and study the optimal policy. A novel aspect of the channel system is that a central bank can "tighten" or "loosen" its policy without changing its policy rate. This policy instrument has so far been overlooked by a large body of the literature on the optimal design of interest-rate rules. |
| Keywords: | Monetary policy |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:08-7&r=mac |
| By: | Jan J. J. Groen; George Kapetanios |
| Abstract: | This paper revisits a number of data-rich prediction methods that are widely used in macroeconomic forecasting, such as factor models, Bayesian ridge regression, and forecast combinations, and compares these methods with a lesser known alternative: partial least squares regression. In this method, linear, orthogonal combinations of a large number of predictor variables are constructed such that the linear combinations maximize the covariance between the target variable and each of the common components constructed from the predictor variables. We provide a theorem that shows that when the data comply with a factor structure, principal components and partial least squares regressions provide asymptotically similar results. We also argue that forecast combinations can be interpreted as a restricted form of partial least squares regression. Monte Carlo experiments confirm our theoretical results that principal components and partial least squares regressions are asymptotically similar when the data has a factor structure. These experiments also indicate that when there is no factor structure in the data, partial least square regression outperforms both principal components and Bayesian ridge regressions. Finally, we apply partial least squares, principal components, and Bayesian ridge regressions on a large panel of monthly U.S. macroeconomic and financial data to forecast CPI inflation, core CPI inflation, industrial production, unemployment, and the federal funds rate across different subperiods. The results indicate that partial least squares regression usually has the best out-of-sample performance when compared with the two other data-rich prediction methods. ; These experiments also indicate that when there is no factor structure in the data, partial least square regression outperforms both principal components and Bayesian ridge regressions. Finally, we apply partial least squares, principal components, and Bayesian ridge regressions on a large panel of monthly U.S. macroeconomic and financial data to forecast CPI inflation, core CPI inflation, industrial production, unemployment, and the federal funds rate across different subperiods. The results indicate that partial least squares regression usually has the best out-of-sample performance when compared with the two other data-rich prediction methods. |
| Keywords: | Time-series analysis ; Economic forecasting ; Business cycles ; Econometric models |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:327&r=mac |
| By: | Ralf Fendel, Eliza M. Lis and Jan-Christoph Rülke |
| Abstract: | This paper uses monthly survey data for the G7 countries for the time period 1989 - 2007 to explore the link between expectations on nominal wages, prices and unemployment rate as suggested by the traditional and Samuelson-and-Solow-type Phillips curve. Three ma- jor ¯ndings stand out: First, we ¯nd that survey participants trust in the original as well as the Samuelson-and-Solow-type Phillips curve relationship. Second, we ¯nd evidence in favor of nonlinearities in the expected Samuelson-and-Solow-type Phillips curve. Third, when we take into account a kink in the expected Phillips curve indicating that the slope of the Phillips curve di®ers during the business cycle, we ¯nd strong evidence of this feature in the data which con¯rms recent the- oretical discussions in the literature that the Phillips curve is °atter in case of an economic downturn. |
| Keywords: | Phillips curve, Forecasting, Panel data model |
| JEL: | C23 E37 E31 |
| Date: | 2008–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:got:cegedp:73&r=mac |
| By: | Daron Acemoglu; Simon Johnson; Pablo Querubin; James A. Robinson |
| Abstract: | We argue that the question of whether and when policy reform works should be investigated together with the political economy factors responsible for distortionary policies in the first place. These not only determine the initial distortions, but also often shape policy in the post-reform environment. Distortionary policies are more likely to be adopted when politicians are unconstrained and unaccountable to citizens. This reasoning implies that policy reform should have modest effects in societies where the political system already places constraints on politicians. It also implies, however, that in societies with weak political constraints, which are often those adopting the most distortionary policies, policy reforms may be ineffective because the underlying political economy problems are not typically altered by these reforms. Policy reform should therefore have its largest effect in societies with intermediate levels of constraints. In addition, when policy reform is (partly) effective, it may lead to a deterioration in other (unreformed) components of policy in order to satisfy the underlying demands on politicians – a phenomenon we call the seesaw effect. We provide reduced-form evidence consistent with these ideas by looking at the effect of central bank independence on inflation. The evidence is consistent with the notion that central bank reforms have reduced inflation in societies with intermediate constraints and have had no or little effects in countries with the high and low levels of constraints. We also present some evidence suggesting that, consistent with the seesaw effect, in countries where central bank reforms reduce inflation, government expenditure tends to increase. |
| JEL: | E31 P16 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14033&r=mac |
| By: | Niamh Hardiman (School of Politics and International Relations, University College Dublin); Patrick Murphy (School of Mathematical Sciences, University College Dublin); Orlaith Burke (School of Mathematical Sciences, University College Dublin) |
| Date: | 2008–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:ucd:wpaper:200813&r=mac |
| By: | Matthews, Kent; Minford, Patrick; Naraidoo, Ruthira |
| Abstract: | This paper develops a political economy model of multiple unemployment equilibria to provide a theory of an endogenous natural rate of unemployment. This model is applied to the UK and the US interwar period which is remembered as the decade of mass unemployment. The theory here sees the natural rate and the associated path of unemployment as a reaction to shocks (mainly demand in nature) and the institutional structure of the economy. The channel through which these two forces feed on each other is a political economy process whereby voters with limited information on the natural rate react to shocks by demanding more or less social protection. The reduced form results obtained confirm a pattern of unemployment behaviour in which unemployment moves between high and low equilibria in response to shocks. |
| Keywords: | "vicious" and "virtuous" circles; bootstrapping; Equilibrium unemployment; forecasting; Political economy |
| JEL: | E24 E27 P16 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6839&r=mac |
| By: | Steven J. Davis; James A. Kahn |
| Abstract: | We review evidence on the Great Moderation in conjunction with evidence about volatility trends at the micro level. We combine the two types of evidence to develop a tentative story for important components of the aggregate volatility decline and its consequences. The key ingredients are declines in firm-level volatility and aggregate volatility -- most dramatically in the durable goods sector -- but the absence of a decline in household consumption volatility and individual earnings uncertainty. Our explanation for the aggregate volatility decline stresses improved supply-chain management, particularly in the durable goods sector, and, less important, a shift in production and employment from goods to services. We provide evidence that better inventory control made a substantial contribution to declines in firm-level and aggregate volatility. Consistent with this view, if we look past the turbulent 1970s and early 1980s much of the moderation reflects a decline in high frequency (short-term) fluctuations. While these developments represent efficiency gains, they do not imply (nor is there evidence for) a reduction in economic uncertainty faced by individuals and households. |
| JEL: | E32 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14048&r=mac |
| By: | James T. E. Chapman |
| Abstract: | Given the increasing interdependence of both financial systems and attendant payment and settlement systems a vital question is what form should optimal policy take when there are two connected payment systems with separate regulators. In this paper I show that two central banks operating in a non-cooperative way will not have an incentive to achieve the optimal allocation of goods. I further show that this non-cooperative outcome will be supported by a zero intraday interest rate and constant fixed exchange rate. This is in contrast to recent research; which has shown that domestically a zero intraday interest rate will achieve a social optimum and that the central bank has an incentive to achieve it. |
| Keywords: | Payment, clearing, and settlement systems; Exchange rate regimes |
| JEL: | E58 E42 F31 F33 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:08-17&r=mac |
| By: | Arief Ramayandi (Center for Economics and Development Studies Dept. of Economics, Padjadjaran University) |
| Abstract: | This paper examines the suitability of a simple structural small open economy model in characterising the economic dynamics in five ASEAN economies. The model is a variant of a small open economy model with imperfect competition and nominal rigidities. It is then confronted to the data using maximum likelihood estimation. The structure of the underlying model is able to produce estimated parameters that largely capture the economic characteristics and dynamics of each of the economies in a plausible manner. It enables one to compare and contrast the behaviour of the five economies under consideration, particularly their monetary transmission mecha- nism. The estimation results are then used to revisit the structural shocks correlation issue in the region, and can also be used as the basis for constructing the relevant approximation for the aggregate welfare function for each of the economies. |
| Keywords: | ASEAN, small open economy model, maximum likelihood estimation |
| JEL: | C13 D58 E12 E17 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:unp:wpaper:200801&r=mac |
| By: | F. Gulcin Ozkan; Ahmet Kipici; Mustafa Ismihan |
| Abstract: | This paper develops an analytical framework to explore how financial sector characteristics shape domestic debt dynamics in emerging market economies. Our analysis suggests that the more competitive the banking sector and the more liquid and deeper the deposit market, the better would be the conditions in the public securities market. Our results also reveal that the lower the financial depth, the greater the scale of private sector credits that are crowded-out by public borrowing. To the extent that credit availability is associated with improved productivity and better output performance, the lack of financial depth in emerging market countries implies that extensive domestic borrowing in these countries may have consequences far beyond the concern with fiscal sustainability. As such, our results higlight the importance of developing domestic debt markets for financial and macroeconomic stability. |
| Keywords: | Financial sector; public debt; cost of borrowing. |
| JEL: | E52 E63 H63 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:08/11&r=mac |
| By: | Francesco Giavazzi; Michael F. McMahon |
| Abstract: | In 1997 Chancellor Kohl proposed a major pension reform: he pushed the law through Parliament explaining that the German PAYG system had become unsustainable. One limitation of the new law - one that is crucial for our identification strategy - is that it left the generous pension entitlements of civil servants intact. The year after, in 1998, Kohl lost the elections and was replaced by Gerhard Shroeder. One of the first decisions of the new Chancellor was to revoke of the 1997 pension reform. We use the quasi-experiment of the adoption and subsequent revocation of the pension reform to study how households reacted to the increase in uncertainty about the future path of income that such an event produced. Our estimates are obtained from a diff-in-diff estimator: this helps us overcome the identification problem that often affects measures of precautionary saving. Departing from the majority of studies on precautionary saving we also analyze households' response in terms of labor market choices: we find evidence of a labor supply response by those workers who can use the margin offered by part-time employment. |
| Keywords: | Pension Reform, Precautionary saving, uncertainty, Germany |
| JEL: | E21 H55 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0863&r=mac |
| By: | Andrew Sharpe and Jean-François Arsenault |
| Abstract: | In 2005, the CSLS published a report that examined spending on information and communication technology (ICT) in Canada and the United States between 1987 and 2004. It found that Canadian firms lagged considerably behind US firms in ICT spending and that this situation accounted to some extent for the lower labour productivity growth experienced in Canada. This report provides an overview of the latest developments using the most recent update of the CSLS ICT database. It finds that ICT investment spending in the United States in 2005 and 2006 continued to outpace that in Canada, increasing an average of 5.6 per cent annually in the United States compared to 3.3 per cent in Canada when expressed in current dollars. Following this trend, nominal ICT investment per worker in domestic currencies also grew faster in the United States than in Canada in 2005 and 2006, 3.7 per cent versus 1.6 per cent. The recent increase in the Canadian dollar, however, lead to a sharper decrease in ICT prices in Canada than in the United States over the 2004-2006 period. This in turn led to an increase in the level of PPP-adjusted ICT investment per worker in Canada relative to the United States from 56.5 per cent in 2004 to 58.0 per cent in 2006, continuing the positive trend started in 2000 when it stood at 49.0 per cent. While Canada’s steady relative improvement since 2000 in terms of ICT investment per worker is encouraging, the low relative level of ICT investment per worker remains problematic and should be of concern to policy-makers as ICT investment is a key driver of productivity growth. |
| Keywords: | Machinery and equipment investment, information and communications technology, ICT, Investment gap, Business sector, Industrial structure, Firm size |
| JEL: | E22 G11 J21 M00 O47 Z10 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:sls:resrep:0801&r=mac |
| By: | Rangan Gupta (Department of Economics, University of Pretoria); Emmanuel Ziramba (Department of Economics, University of South Africa) |
| Abstract: | Using two dynamic monetary general equilibrium models characterized by endogenous growth, financial repression and endogenously determined tax evasion, we analyze whether financial repression can be explained by tax evasion. When calibrated to four Souther European economies, we show that higher degrees of tax evasion within a country, resulting from a higher level of corruption and a lower penalty rate, yields higher degrees of financial repression as a social optimum. However, a higher degree of tax evasion, due to a lower tax rate, reduces the severity of the financial restriction. In addition, we find the results to be robust across growth models with or without productive public expenditures. The only difference being that the policy parameters in the former case have higher optimal values. |
| Keywords: | Underground Economy, Tax evasion, Macroeconomic Policy |
| JEL: | E26 E63 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:200808&r=mac |
| By: | Tigran Poghosyan; Evzen Kocenda |
| Abstract: | We address the issue of foreign exchange risk and its macroeconomic determinants in several new EU members. The joint distribution of excess returns in the foreign exchange market and the observable macroeconomic factors is modeled using the stochastic discount factor (SDF) approach and a multivariate GARCH-in-mean model. We find that in post-transition economies real factors play a small role in determining foreign exchange risk, while nominal and monetary factors have a significant impact. Therefore, to contribute to the further stability of their domestic currencies, the central banks in the new EU member countries should continue stabilization policies aimed at achieving nominal convergence with the core EU members, as nominal factors play a crucial role in explaining the variability of the risk premium. |
| Keywords: | foreign exchange risk, time-varying risk premium, stochastic discount factor, multivariate GARCH-in-mean, post-transition and emerging markets |
| JEL: | C22 F31 G15 P59 |
| Date: | 2007–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2007-898&r=mac |
| By: | Tao Wu |
| Abstract: | This paper examines the effectiveness of the new liquidity facilities that the Federal Reserve established in response to the recent financial crisis. I develop a noarbitrage based affine term structure model with default risk and conduct a thorough factor analysis of the counterparty default risk among major financial institutions and the underlying mortgage default risk. The new facilities' effectiveness is examined, by first separately examining their effects in relieving financial institutions' liquidity concerns and reducing the counterparty risk premiums, and then quantifying their overall effects in reducing financial strains in the inter-bank money market. ; Empirical results indicate that the Term Auction Facility (TAF) has a strong effect in reducing financial strains in the inter-bank money market, primarily through relieving financial institutions' liquidity concerns. Heightened uncertainty regarding the macroeconomy, financial markets, and mortgage default risk have significantly raised counterparty risk premiums among financial institutions, but have had little effect on their liquidity premiums. The Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF), however, are found to have had less discernible effects so far in relieving financial strains in the Libor market. This is consistent with market observations of a weaker interest from primary dealers in participating in the TSLF auctions than banks have shown in tapping the TAF. |
| Keywords: | Liquidity (Economics) ; Monetary policy - United States ; Money market ; Financial markets ; Interbank market |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:0808&r=mac |
| By: | Alejandro Cuñat; Szabolcs Deak; Marco Maffezzoli |
| Abstract: | A reduction in income tax rates generates substantial dynamic responses within the framework of the standard neoclassical growth model. The short-run revenue loss after an income tax cut is partly - or, depending on parameter values, even completely - offset by growth in the long-run, due to the resulting incentives to further accumulate capital. We study how the dynamic response of government revenue to a tax cut changes if we allow a Ramsey economy to engage in international trade: the open economy's ability to reallocate resources between labor-intensive and capital-intensive industries reduces the negative effect of factor accumulation on factor returns, thus encouraging the economy to accumulate more than it would do under autarky. We explore the quantitative implications of this intuition for the US in terms of two issues recently treated in the literature: dynamic scoring and the Laffer curve. Our results demonstrate the internaional trade enhances the response of government revenue to tax cuts by a relevant amount. In our benchmark calibration, a reduction in the capital-income tax rate has virtually no effect on government revenue in steady state. |
| Keywords: | international trade, Heckscher-Ohlin, dynamic macroeconomics, taxation, revenue estimation, Laffer curve |
| JEL: | E13 E60 F11 F43 H20 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0860&r=mac |
| By: | Vindigni, Andrea |
| Abstract: | This paper investigates the role that idiosyncratic uncertainty plays in shaping social preferences over the degree of labor market flexibility, in a general equilibrium model of dynamic labor demand where the productivity of firms evolves over time as a Geometric Brownian motion. A key result demonstrated is that how the economy responds to shocks, i.e. unexpected changes in the drift and standard deviation of the stochastic process describing the dynamics of productivity, depends on the power of labor to extract rents and on the status quo level of firing costs. In particular, we show that when firing costs are relatively low to begin with, a transition to a rigid labor market is favored by all and only the employed workers with idiosyncratic productivity below some threshold value. A more volatile environment, and a lower rate of productivity growth, i.e. "bad times", increase the political support for more labor market rigidity only where labor appropriates of relatively large rents. Moreover, we demonstrate that when the status quo level of firing costs is relatively high, the preservation of a rigid labor market is favored by the employed with intermediate productivity, whereas all other workers favor more flexibility. The coming of better economic conditions need not favor the demise of high firing costs in rigid high-rents economies, because "good times" cut down the support for flexibility among the least productive employed workers. The model described provides some new insights on the comparative dynamics of labor market institutions in the U.S. and in Europe over the last few decades, shedding some new light both on the reasons for the original build-up of "Eurosclerosis", and for its the persistence up to the present day. |
| Keywords: | employment protection, firing costs, productivity, political economy, rents, volatility, growth, institutional divergence. |
| JEL: | D71 D72 E24 J41 J63 J65 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:uca:ucapdv:106&r=mac |
| By: | Stephen Hansen; Michael F. McMahon |
| Abstract: | The use of independent committees for the setting of interest rates, such as the MonetaryPolicy Committee (MPC) at the Bank of England, is quickly becoming the norm in developedeconomies. In this paper we examine the issue of appointing external members (memberswho are outside the staff of the central bank) to these committees. We construct a model ofMPC voting behaviour, and show that members who begin voting for similar interest ratesshould not systematically diverge from each other at any future point. However, econometricresults in fact show that external members initially vote in line with internal members, butafter a year, begin voting for substantially lower interest rates. The robustness of this effect toincluding member fixed effects provides strong evidence that externals behave differentlyfrom internals because of institutional differences between the groups, and not someunobserved heterogeneity. We then examine whether career concerns can explain thesefindings, and conclude that they cannot. |
| Keywords: | Monetary Policy Committee (MPC), Bank of England, Committee Voting,Signalling |
| JEL: | E58 D71 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0862&r=mac |
| By: | Bonilla, Eugenio Diaz |
| Abstract: | "In the second half of the 1990s, a series of developments led to a renewed academic and policy interest in the intersection of macroeconomic policy and poverty issues in developing countries. The focus of that work was domestic macroeconomic policies. This paper, however, focuses on the international dimension and discusses the links between global macroeconomic conditions and poverty in developing countries since the 1960s. Of course, when analyzing policy impacts, both domestic and international aspects must be considered. However, debates about domestic policies, macro or otherwise, and their impacts on poverty cannot provide an accurate analysis of developing countries' alternatives and predicaments if they ignore the role, in many cases overwhelming, of external factors. That is the story this paper tries to tell. The objectives here are to present an overview of trends and cycles in the world economy, to summarize the events of the last half century in view of the current concerns about the likely economic slowdown in the United States and other industrialized economies, and to assess the possible repercussions on the rest of the world. The hope is that the paper will serve as background material for developing countries to better characterize potential scenarios and properly define policy options for the coming years, which look like they will be far less benign than the recent past." from Author's Abstract |
| Keywords: | Macroeconomics, Poverty, Development, Agriculture, |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:766&r=mac |
| By: | Balazs Egert; Dubravko Mihaljek |
| Abstract: | This paper studies the determinants of house prices in eight transition economies of central and eastern Europe (CEE) and 19 OECD countries. The main question addressed is whether the conventional fundamental determinants of house prices, such as GDP per capita, real interest rates, housing credit and demographic factors, have driven observed house prices in CEE. We show that house prices in CEE are determined to a large extent by the underlying conventional fundamentals and some transition-specific factors, in particular institutional development of housing markets and housing finance and quality effects. |
| Keywords: | house prices, housing market, transition economies, central and eastern Europe, OECD countries |
| JEL: | E20 E39 P25 R21 R31 |
| Date: | 2007–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wdi:papers:2007-894&r=mac |
| By: | Krasniqi, Mikra |
| Abstract: | This paper compares the traditional neoclassical economic perspective with the recent empirical findings regarding minimum wage effect on employment. The comparison is done by reviewing and analyzing relevant literature and data that have recorded, over time, the changing attitudes toward the issue since the Great Depression era. By taking this approach, the argument is made that in the face of recent scientific findings and empirical research studies, the neoclassical argument that minimum wage laws have a negative effect on employment is gradually losing its appeal among scholars as well as practitioners. As a result, a new public debate is taking place on the issue, which in turn, has begun to have a transformative impact in the policymaking of minimum wage at the state and federal levels. |
| Keywords: | Minimum Wage Laws;Labor Economics; |
| JEL: | E24 |
| Date: | 2007–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8896&r=mac |