|
on Macroeconomics |
|
Issue of 2008‒12‒14
fifty-two papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Benk, Szilárd; Gillman, Max (Cardiff Business School); Kejak, Michal |
| Abstract: | The post-1983 moderation coincided with an ahistorical divergence in the money aggregate growth and velocity volatilities away from the downward trending GDP and inflation volatilities. Using an endogenous growth monetary DSGE model, with micro-based banking production, enables a contrasting characterization of the two great volatility cycles over the historical period of 1919-2004, and enables this puzzle to be addressed more easily. The volatility divergence is explained by the upswing in the credit volatility that kept money supply variability from translating into inflation and GDP volatility. |
| Keywords: | Volatility; money and credit shocks; growth; inflation |
| JEL: | E13 E32 E44 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2008/28&r=mac |
| By: | Todd E. Clark; Troy Davig |
| Abstract: | This paper uses a detailed literature review and an empirical analysis of three models to assess the links among inflation and survey measures of long- and short-term expectations. In the first approach, we jointly estimate a model of inflation, survey expectations and monetary policy, where each is a function of a common time-varying inflation trend. In the estimates, long-term expectations track closely the unobserved trend that is an important factor in inflation dynamics, implying that changes in long-run expectations can lead to persistent movements in inflation. In the second approach, we estimate a time-varying parameter VAR with stochastic volatility. This model relaxes the cross-equation and constant parameter restrictions from the first model. Impulse response analysis shows a relatively stable relationship between inflation and survey measures of inflation, although with some modest changes consistent with improved anchoring of long-term expectations. Finally, we rely on a conventional VAR framework incorporating several macroeconomic variables, including both short- and long-term measures of expected inflation. In these estimates, shocks to either measure of expectations lead to a rise in the other measure and some limited pass-through to inflation. Shocks to inflation cause both short- and long-term expectations to rise. Other factors such as monetary policy, economic activity, and food price inflation also affect expectations and inflation. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedkrw:rwp08-05&r=mac |
| By: | Sosunov, Kirill; Khramov, Vadim |
| Abstract: | In recent papers it is shown that in the presence of price stickiness, investment and capital accumulation activity, active monetary policy (MP) rules can lead to indeterminacy under various assumptions about the structure of the model. We analyze the conditions for real indeterminacy to occur in the model with capital accumulation. The key assumption is that we add response to output to the monetary policy rule. In our paper we show that adding Current or Expected Output to MP rule substantially changes the conditions for real indeterminacy to occur. In contrast to some existing research we show that under current-looking with respect to output MP rules indeterminacy is almost impossible; under forward-looking with respect to output MP rules indeterminacy is almost impossible under active MP rules and very likely to occur under passive MP rules. We also show that stability conditions are almost not sensitive to changes in capital share in output and aggregate markup. We provide the nominal determinacy analysis and show that active and forward-looking MP rules with respect to output give |
| Keywords: | Macroeconomics; Monetary Econimics; Indeterminacy |
| JEL: | E0 E32 E31 E30 E5 E4 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11996&r=mac |
| By: | Ulf Söderström |
| Abstract: | I revisit the potential costs and benefits for Sweden of joining the Economic and Monetary Union (EMU) of the European Union. I first show that the Swedish business cycle since the mid-1990s has been closely correlated with the Euro area economies, suggesting that common shocks have been an important driving force of business cycles in Europe. However, evidence from an estimated model of the Swedish economy instead suggests that country-specific shocks have been important for fluctuations in the Swedish economy since 1993, implying that EMU membership could be costly. The model also indicates that the exchange rate has to a large extent acted to destabilize, rather than stabilize, the Swedish economy, pointing to the costs of independent monetary policy with a flexible exchange rate. Finally, counterfactual simulations of the model suggest that Swedish inflation and GDP growth might have been slightly higher if Sweden had been a member of EMU since the launch in 1999, but also that GDP growth might have been more volatile. The evidence is therefore not conclusive about whether or not participation in the monetary union would be advantageous for Sweden. |
| JEL: | E42 E58 F41 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14519&r=mac |
| By: | Chadha, J.S.; Corrado, L.; Holly, S. |
| Abstract: | We re-connect money to in.ation using Goodfriend and McCallum's (2007) model where banks supply loans to cash-in-advance constrained consumers on the basis of the value of collateral provided and the monitoring skills of banks. We show that when shocks to monitoring and collateral dominate those to goods productivity and the velocity of money demand, money and the external finance premium become closely linked. This is because increases in asset prices allow banks to raise the supply of loans leading to an expansion in aggregate demand, via a compression of financial interest rates spreads, which in turn tends to be inflationary. Thus money and financial spreads are negatively correlated when banking sector shocks dominate. We suggest a simple augmented stabilising monetary policy rule that exploits the joint information from money and the external finance premium. |
| Keywords: | money, DSGE, policy rules, external finance premium. |
| JEL: | E31 E40 E51 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0852&r=mac |
| By: | Andrew Mountford; Harald Uhlig |
| Abstract: | We propose and apply a new approach for analyzing the effects of fiscal policy using vector autoregressions. Specifically, we use sign restrictions to identify a government revenue shock as well as a government spending shock, while controlling for a generic business cycle shock and a monetary policy shock. We explicitly allow for the possibility of announcement effects, i.e., that a current fiscal policy shock changes fiscal policy variables in the future, but not at present. We construct the impulse responses to three linear combinations of these fiscal shocks, corresponding to the three scenarios of deficit-spending, deficit-financed tax cuts and a balanced budget spending expansion. We apply the method to US quarterly data from 1955-2000. We find that deficit-financed tax cuts work best among these three scenarios to improve GDP, with a maximal present value multiplier of five dollars of total additional GDP per each dollar of the total cut in government revenue five years after the shock. |
| JEL: | C32 E60 E62 H20 H50 H60 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14551&r=mac |
| By: | Sek, Siok Kun |
| Abstract: | This paper investigates empirically how the reaction of monetary policy to exchange rate has changed after the adoption of inflation targeting regime in three East Asian countries. Using a structural VAR and single equation methods, this study shows that the reactions of monetary policy to exchange rate shocks as well as CPI (demand shocks) and output (supply shocks) have declined under the inflation targeting environment. The policy function reacts weakly to the exchange rate movements before and after the financial crisis of 1997 in two out of the three countries. |
| Keywords: | exchange rate; inflation targeting; policy reaction function |
| JEL: | E58 E52 F41 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:12034&r=mac |
| By: | Essahbi Essaadi (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France); Zied Ftiti (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France) |
| Abstract: | In this paper, we study the inflation dynamics in an industrial inflation-targeting country (New Zealand). Our objective is to check if the inflation targeting policy has a transition period or not. Loosely speaking, we try to give some response to the famous debate: if the inflation targeting is a framework or a simple monetary rule. For this purpose, we use a frequency approach: Evolutionary Spectral Analysis, as defined by Priestley (1965-1996). Then, we detect endogenously a structural break point in inflation series, by applying a non-parametric test. This is the first time that this method is used in the case of inflation-targeting countries. Our main finding is that the adoption of the inflation-targeting policy in New Zealand was characterized by a transition period before the adoption of this framework. This period was characterized by many radical reforms, which caused a structural break in the New Zealand inflation series. These reforms were made to lead back the inflation close to the initial target. In addition, these reforms increased the transparency and the credibility of the monetary policy. We conclude from our frequency analysis that the inflation series becomes stable in long-term after the adoption of the inflation targeting. This can be a justification of the effectiveness of this policy to ensure the price stability. |
| Keywords: | New Zealand, Inflation Targeting, Spectral Analysis and Structural Change |
| JEL: | C16 E52 E63 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:0830&r=mac |
| By: | Marek Jarociński (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper compares impulse responses to monetary policy shocks in the euro area countries before the EMU and in the New Member States (NMS) from central-eastern Europe. We mitigate the small sample problem, which is especially acute for the NMS, by using a Bayesian estimation that combines information across countries. The impulse responses in the NMS are broadly similar to those in the euro area countries. There is some evidence that in the NMS, which have had higher and more volatile inflation, the Phillips curve is steeper than in the euro area countries. This finding is consistent with economic theory. JEL Classification: C11, C32, C33, E40, E52. |
| Keywords: | monetary policy transmission, Structural VAR, Bayesian estimation, exchangeable prior. |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080970&r=mac |
| By: | Tweneboah , George; Adam, Anokye M. |
| Abstract: | We estimate a Vector Error Correction Model to explore the long run and short run linkages between the world crude oil price and economic activity in Ghana for the period 1970:1 to 2006:4. The results point out that there is a long run relationship between the variables under consideration. We find that an unexpected oil price increase is followed by an increase in price level and a decline in output in Ghana. We argue that monetary policy has in the past been with the intention of lessening negative growth consequences of oil price shocks, at the cost of higher inflation. |
| Keywords: | Oil price shock; cointegration; vector error correction; impulse response |
| JEL: | E31 E52 Q43 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11968&r=mac |
| By: | Bennett T. McCallum |
| Abstract: | Cochrane (2007) has strongly questioned the basic economic logic of current mainstream monetary policy analysis, arguing that the standard notion --that "determinacy" of a rational expectations (RE) equilibrium suffices to imply that stable inflation behavior will be generated -- is incorrect. This is because New Keynesian (NK) models are typically consistent with the existence of RE paths with explosive inflation rates (in addition to one or more stable paths) that normally do not imply explosions in real variables relevant for transversality conditions. Consequently, the usual logic does not imply the absence of explosive inflation. That result does not, however, justify negative conclusions about NK analysis. For there is a different criterion that is logically satisfactory for the purpose at hand. This is the requirement that, to be plausible, a RE solution must satisfy the property of least-squares learnability. Adoption of this criterion, which should be attractive to analysts concerned with actual monetary policy, serves to justify in principle the bulk of current mainstream analysis. |
| JEL: | E4 E5 E52 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14534&r=mac |
| By: | Carmen Broto (Banco de España) |
| Abstract: | During the last years, a number of countries have adopted formal inflation targeting (IT) monetary policy frameworks in a context of global inflation moderation. This paper studies inflation dynamics in eight Latin American countries, some of which have adopted formal targets. We analyze possible benefits associated with IT in terms of lower inflation, inflation volatility and volatility persistence. To describe inflation dynamics and evaluate its impact, we use an unobserved components model, where each component can follow a GARCH type process. In general, the main findings of the empirical exercise show that the adoption of IT has been useful to reduce the inflation level and volatility in these countries. |
| Keywords: | Inflation targets, inflation uncertainty, GARCH, structural time series models |
| JEL: | C22 C51 E52 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:0826&r=mac |
| By: | Joseph G. Haubrich; George Pennacchi; Peter Ritchken |
| Abstract: | This paper develops and estimates an equilibrium model of the term structures of nominal and real interest rates. The term structures are driven by state variables that include the short term real interest rate, expected inflation, a factor that models the changing level to which inflation is expected to revert, as well as four volatility factors that follow GARCH processes. We derive analytical solutions for the prices of nominal bonds, inflation-indexed bonds that have an indexation lag, the term structure of expected inflation, and inflation swap rates. The model parameters are estimated using data on nominal Treasury yields, survey forecasts of inflation, and inflation swap rates. We find that allowing for GARCH effects is particularly important for real interest rate and expected inflation processes, but that long–horizon real and inflation risk premia are relatively stable. Comparing our model prices of inflation-indexed bonds to those of Treasury Inflation Proected Securities (TIPS) suggests that TIPS were underpriced prior to 2004 but subsequently were valued fairly. We find that unexpected increases in both short run and longer run inflation implied by our model have a negative impact on stock market returns. |
| Keywords: | Interest rates ; Inflation (Finance) ; Asset pricing |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:0810&r=mac |
| By: | Renato Faccini; Salvador Ortigueira |
| Abstract: | Shocks to investment-specific technology have been identified as a main source of U.S. aggregate output volatility. In this paper we assess the contribution of these shocks to the volatility of labor market variables, namely, unemployment, vacancies, tightness and the job-finding rate. Thus, our paper contributes to a recent body of literature assessing the ability of the search-and-matching model to account for the large volatility observed in labor market variables. To this aim, we solve a neoclassical economy with search and matching in the labor market, where neutral and investment-specific technologies are subject to shocks. The three key features of our model economy are: i) Firms are large, in the sense that they employ many workers. ii) Adjusting capital and labor is costly. iii) Wages are the outcome of an intra-firm Nash-bargaining problem between the firm and its workers. In our calibrated economy, we find that shocks to investment-specific technology explain 40 percent of the observed volatility in U.S. labor productivity. Moreover, these shocks generate relative volatilities in vacancies and the workers' job finding rate which match those observed in U.S. data. Relative volatilities in unemployment and labor market tightness are 55 and 75 percent of their empirical values, respectively. |
| Keywords: | Business Cycles; Labor Market Fluctuations; Investment-Specific Technical Change; Search and Matching; Adjustment Costs; Wage Bargaining. |
| JEL: | E22 E24 E32 J41 J64 O33 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2008/39&r=mac |
| By: | Döpke, J.; Funke, M.; Holly, S.; Weber, S. |
| Abstract: | In a standard dynamic stochastic general equilibrium framework, with sticky prices, the cross sectional distribution of output and inflation across a population of firms is studied. The only form of heterogeneity is confined to the probability that the ith firm changes its prices in response to a shock. In this Calvo setup the moments of the cross sectional distribution of output and inflation depend crucially on the proportion of firms that are allowed to change their prices. We test this model empirically using German balance sheet data on a very large population of firms. We find a significant counter-cyclical correlation between the skewness of output responses and the aggregate economy. Further analysis of sectoral data for the US suggests that there is a positive relationship between the skewness of inflation and aggregates, but the relation with output skewness is less sure. Our results can be interpreted as indirect evidence of the importance of price stickiness in macroeconomic adjustment. |
| JEL: | D12 E52 E43 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0853&r=mac |
| By: | Domenico Giannone; Michele Lenza; Lucrezia Reichlin |
| Abstract: | This paper shows that the EMU has not affected historical characteristics of member countries’ business cycles and their cross-correlations. Member countries which had similar levels of GDP percapita in the seventies have also experienced similar business cycles since then and no significant change associated with the EMU can be detected. For the other countries, volatility has been historically higher and this has not changed in the last ten years. We also find that the aggregate euro area per-capita GDP growth since 1999 has been lower than what could have been predicted on the basis of historical experience and US observed developments. The gap between US and euro area GDP per capita level has been 30% on average since 1970 and there is no sign of catching up or of further widening. |
| Keywords: | Euro area, International Business Cycle, European monetary union, European integration |
| JEL: | E32 C5 F2 F43 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2008_040&r=mac |
| By: | Maria Demertzis; Massimiliano Marcellino; Nicola Viegi |
| Abstract: | Our objective is to identify a way of checking empirically the extent to which expectations are de-coupled from inflation, how well they might be anchored in the long run, and at what level. This methodology allows us then to identify a measure for the degree of anchorness, and as anchored expectations are associated with credibility, this will serve as a proxy for credibility. We apply this methodology to the US history of inflation since 1963 and examine how well our measure tracks the periods for which credibility is known to be either low or high. Of particular interest to the validity of the measure is the start of the Great Moderation. Following the narrative of a number of well documented incidents in this period, we check how well our measure captures both the evolution of credibility in US monetary policy, as well as reactions to inflation scares. |
| Keywords: | Great Inflation, Great Moderation, Anchors for Expectations |
| JEL: | E52 E58 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2008/38&r=mac |
| By: | Newby, E. |
| Abstract: | This paper models the gold standard as a state contingent commitment rule that is only feasible during peace. It shows that monetary policy during war, when the gold convertibility rule is suspended, can still be credible, if the policy maker's plan is to resume the gold standard at the old par value in the future. The DGE model developed in this paper suggests that the resumption of the gold standard was a sustainable plan, which replaced the gold standard as a commitment rule and made monetrary policy time consistent. The equilibrium is supported by trigger strategies, where private agents retaliate if a policy maker defaults its policy plan to resume the gold standard rule. |
| Keywords: | Gold standard, Time consistency, Monetary policy, Monetary regimes. |
| JEL: | C61 E31 E4 E5 N13 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0856&r=mac |
| By: | Joshua Aizenman; Michael Hutchison; Ilan Noy |
| Abstract: | We examine the inflation targeting (IT) experiences of emerging market economies, focusing especially on the roles of the real exchange rate and the distinction between commodity and non-commodity exporting nations. In the context of a simple empirical model, estimated with panel data for 17 emerging markets using both IT and non-IT observations, we find a significant and stable response running from inflation to policy interest rates in emerging markets that are following publically announced IT policies. By contrast, central banks respond much less to inflation in non-IT regimes. IT emerging markets follow a “mixed IT strategy†whereby both inflation and real exchange rates are important determinants of policy interest rates. The response to real exchange rates is much stronger in non-IT countries, however, suggesting that policymakers are more constrained in the IT regime—they are attempting to simultaneously target both inflation and real exchange rates and these objectives are not always consistent. We also find that the response to real exchange rates is strongest in those countries following IT policies that are relatively intensive in exporting basic commodities. We present a simple model that explains this empirical result. |
| JEL: | E52 E58 F15 F3 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14561&r=mac |
| By: | Alan S. Blinder; Jeremy B. Rudd |
| Abstract: | U.S. inflation data exhibit two notable spikes into the double-digit range in 1973-1974 and again in 1978-1980. The well-known "supply-shock" explanation attributes both spikes to large food and energy shocks plus, in the case of 1973-1974, the removal of price controls. Yet critics of this explanation have (a) attributed the surges in inflation to monetary policy and (b) pointed to the far smaller impacts of more recent oil shocks as evidence against the supply-shock explanation. This paper reexamines the impacts of the supply shocks of the 1970s in the light of the new data, new events, new theories, and new econometric studies that have accumulated over the past quarter century. We find that the classic supply-shock explanation holds up very well; in particular, neither data revisions nor updated econometric estimates substantially change the evaluations of the 1972-1983 period that were made 25 years (or more) ago. We also rebut several variants of the claim that monetary policy, rather than supply shocks, was really to blame for the inflation spikes. Finally, we examine several changes in the economy that may explain why the impacts of oil shocks are so much smaller now than they were in the 1970s. |
| JEL: | E3 N1 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14563&r=mac |
| By: | Russell Cooper (University of Texas - Department of Economics); Hubert Kempf (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, Banque de France - Direction de la Recherche); Dan Peled (University of Haifa - Department of Economics) |
| Abstract: | This paper studies the inflationary implications of interest bearing regional debt in a monetary union. Is this debt simply backed by future taxation with non inflationary consequences ? Or will the circulation of region debt induce monetization by a central bank ? We argue here that both outcomes can arise in equilibrium. In the model economy, there are multiple equilibria which reflect the perceptions of agents regarding the manner in which the debt obligations will be met. In one equilibrium, termed Ricardian, the future obligations are met with taxation by a regional government while in the other, termed Monetization, the central bank is induced to print money to finance the region's obligations. The multiplicity of equilibria reflects a commitment problem of the central bank. A key indicator of the selected equilibrium is the distribution of the holdings of the regional debt. We show that regional governments, anticipating central bank financing of their debt obligations, have an incentive to create excessively large deficits. We use the model to assess the impact of policy measures within a monetary union. |
| Keywords: | Monetary union ; inflation tax ; seigniorage ; public debt |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00344475_v1&r=mac |
| By: | Basso, Henrique S (Department of Economics) |
| Abstract: | This paper analyzes the effectiveness of delegation in solving the time inconsistency problem of monetary policy using a microfounded general equilibrium model where delegation and reappointment are explicitly included into the government's strategy. The method of Chari and Kehoe (1990) is applied to characterize the entire set of sustainable outcomes. Countering McCallum's (1995) second fallacy, delegation is able to eliminate the time inconsistency problem, with the commitment policy being sustained under discretion for any intertemporal discount rate. |
| Keywords: | Central Bank; Monetary Policy; Institutional Design |
| JEL: | E52 E58 E61 |
| Date: | 2008–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uunewp:2008_015&r=mac |
| By: | Domenico Giannone; Michele Lenza; Lucrezia Reichlin |
| Abstract: | This paper shows that the EMU has not affected historical characteristics of member countries' business cycles and their cross-correlations. Member countries which had similar levels of GDP per-capita in the seventies have also experienced similar business cycles since then and no significant change associated with the EMU can be detected. For the other countries, volatility has been historically higher and this has not changed in the last ten years. We also find that the aggregate euro area per-capita GDP growth since 1999 has been lower than what could have been predicted on the basis of historical experience and US observed developments. The gap between US and euro area GDP per capita level has been 30% on average since 1970 and there is no sign of catching up or of further widening. |
| JEL: | C5 E32 F2 F43 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14529&r=mac |
| By: | Russell Cooper (University of Texas - Department of Economics); Hubert Kempf (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, Banque de France - Direction de la Recherche); Dan Peled (University of Haifa - Department of Economics) |
| Abstract: | This paper studies the inflationary implications of interest bearing regional debt in a monetary union. Is this debt simply backed by future taxation with non inflationary consequences ? Or will the circulation of region debt induce monetization by a central bank ? We argue here that both outcomes can arise in equilibrium. In the model economy, there are multiple equilibria which reflect the perceptions of agents regarding the manner in which the debt obligations will be met. In one equilibrium, termed Ricardian, the future obligations are met with taxation by a regional government while in the other, termed Monetization, the central bank is induced to print money to finance the region's obligations. The multiplicity of equilibria reflects a commitment problem of the central bank. A key indicator of the selected equilibrium is the distribution of the holdings of the regional debt. We show that regional governments, anticipating central bank financing of their debt obligations, have an incentive to create excessively large deficits. We use the model to assess the impact of policy measures within a monetary union. |
| Keywords: | Monetary union ; inflation tax ; seigniorage ; public debt |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00344475_v1&r=mac |
| By: | Yi Wen |
| Abstract: | It is widely believed in the literature that inventory fluctuations are destabilizing to the economy. This paper re-assesses this view by developing an analytically-tractable general-equilibrium model of inventory dynamics based on a precautionary stockout-avoidance motive. The model's predictions are broadly consistent with the U.S. business cycle and key features of inventory behavior, including (i) a large inventory stock-to-sales ratio and a small inventory investment-to-sales ratio in the long run, (ii) excess volatility of production relative to sales, (iii) procyclical inventory investment but countercyclical stock-to-sales ratio over the business cycle, and (iv) more volatile input inventories than output inventories. However, contrary to common beliefs, the model predicts that inventories are stabilizing, rather than destabilizing. The volatility of aggregate output could rise by 30% if inventories were eliminated from the economy. Key to this seemingly counter-intuitive result is that a stockout-avoidance motive leads to procyclical liquidity-value of inventories (hence, procyclical relative prices of final goods), which acts as an automatic stabilizer that discourages final sales in a boom and encourages final sales during a recession, thereby reducing the variability of GDP. |
| Keywords: | Inventories ; Liquidity (Economics) ; Business cycles |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2008-045&r=mac |
| By: | R. Kraeussl (VU University Amsterdam); A. Lucas (VU University Amsterdam); D. Rijsbergen (VU University Amsterdam); P.J. van der Sluis (VU University Amsterdam); E. Vrugt (APG Investments) |
| Abstract: | This paper tests the policitcal dimensions of the presidential cycle effect in U.S. financial markets. The presidential cycle effect states that average stock market returns are significantly higher in the last two years compared to the first two years of a presidential term. We confirm the robust existence of this cycle in U.S. stock markets as well as bond markets. As most rational theories to explain the cycle were falsified by earlier empirical work, this paper sets out to test the presidential cycle election (PCE) theory as an alternative explanation. The PCE theory states that incumbent parties and presidents have an incentive to manipulate the economy (via budget expansions, taxes, etc.) to remain in power. We formulate seven different propositions relating to fiscal, monetary, tax, and political implications of PCE theory. We find no statistically significant evidence confirming the PCE theory as a plausible explanation for the presidential cycle effect. The existence of the presidential cycle effect in U.S. financial markets thus remains a puzzle that cannot be easily explained by politicians mis-using their economic influence to remain in power. |
| Keywords: | political economy; inefficient markets; market anomalies; calendar effects |
| JEL: | G14 P16 E32 |
| Date: | 2008–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20080101&r=mac |
| By: | Marcos Chamon; Eswar Prasad |
| Abstract: | From 1995 to 2005, the average urban household saving rate in China rose by 7 percentage points, to about one quarter of disposable income. We use household-level data to explain why households are postponing consumption despite rapid income growth. Tracing cohorts over time indicates a virtual absence of consumption smoothing over the life cycle. Saving rates have increased across all demographic groups although the age profile of savings has an unusual pattern in recent years, with younger and older households having relatively high saving rates. We argue that these patterns are best explained by the rising private burden of expenditures on housing, education, and health care. These effects and precautionary motives may have been amplified by financial underdevelopment, as reflected in constraints on borrowing against future income and low returns on financial assets. |
| JEL: | D12 E21 O16 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14546&r=mac |
| By: | Weshah Razzak; Rabie Nasser |
| Abstract: | We use a variety of nonparametric test statistics to evaluate the inflation- targeting regimes of Australia, Canada, New Zealand, Sweden and the UK. We argue that a sensible approach of evaluation must rely on a variety of methods, among them parametric and nonparametric econometric methods, for robustness and completeness. Our evaluation strategy is based on examining two possible policy implications of inflation targeting: First, a welfare implication and second, a real variability implication. The welfare implication involves evaluating a utility function, and tested by testing whether (1) the distributions of the levels and the growth rates of private consumption and leisure per capita remained unchanged under inflation targeting, i.e., first-order stochastic dominance; and (2) testing a linear combination of consumption and leisure per capita, where the parameter describing the utility of leisure or the relative preference of leisure is calibrated. Then we introduce nonparametric univariate and multivariate statistical methods to test whether the first and second moments of a variety of real variables, such as the real exchange rate depreciation rate, real GDP per capita growth rate in addition to private consumption per capita and leisure per capita growth rates, remained unchanged under inflation targeting, decreased or increased significantly. There seems to be some evidence of increased welfare under inflation-targeting regimes, but no concrete evidence is found that inflation targeting policy, in general, reduces real variability. Some cross country differences are also found. |
| Keywords: | Nonparametric, First-order stochastic dominance, sudden shift in the distribution, inflation targeting. |
| JEL: | C02 C12 C14 E31 |
| Date: | 2008–11–18 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2008_18&r=mac |
| By: | David, DE LA CROIX (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)) |
| Abstract: | This note derives the Golden Rule of capital accumulation in a Chakraborty-type economy, i.e. a two-period OLG economy where longevity is endogenous. It is shown that the capital per worker maximizing steady-state consumption per head is inferior to the Golden Rule capital level prevailing under exogenous longevity. We characterize also the lifetime Golden Rule, that is, the capital per worker maximizing steady-state expected lifetime consumption per head, and show that this tends to exceed the standard Golden Rule capital level. |
| Keywords: | Golden Rule, longevity, OLG models |
| JEL: | E13 E21 E22 I12 |
| Date: | 2008–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvec:2008032&r=mac |
| By: | Hubert Kempf (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Banque de France - Direction de la Recherche); Leopold Von Thadden (European Central Bank - ECB) |
| Abstract: | This paper offers a framework to study commitment and cooperation issues in games with multiple policymakers. To reconcile some puzzles in the recent literature on the nature of policy interactions among nations, we prove that games characterized by different commitment and cooperation schemes can admit the same equilibrium outcome if certain spillover effects vanish at the common solution of these games. We provide a detailed discussion of these spillovers, showing that, in general, commitment and cooperation are non-trivial issues. Yet, in linear-quadratic models with multiple policymakers commitment and cooperation schemes are shown to become irrelevant under certain assumptions. The framework is sufficiently general to cover a broad range of results from the recent literature on policy interactions as special cases, both within monetary unions and among fully sovereign nations. |
| Keywords: | Credibility, commitment, monetary policy, fiscal policy, policy mix. |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00344773_v1&r=mac |
| By: | Xu, Zhiwei |
| Abstract: | In this note, we revisit the univariate unobserved-component (UC) model of US GDP by relaxing the traditional random-walk assumption of the permanent component. Since our general UC model is unidentified, we investigate the upper bound of the contribution of the transitory component, and find it is dominated by the permanent component. |
| Keywords: | Unobserved-Component Model; Random Walk Assumption; Permanent and Transitory Shocks |
| JEL: | E32 C22 C49 |
| Date: | 2008–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:12038&r=mac |
| By: | Cecilia Frale; Massimiliano Marcellino; Gian Luigi Mazzi; Tommaso Proietti |
| Abstract: | A continuous monitoring of the evolution of the economy is fundamental for the decisions of public and private decision makers. This paper proposes a new monthly indicator of the euro area real Gross Domestic Product (GDP), with several original features. First, it considers both the output side (six branches of the NACE classification) and the expenditure side (the main GDP components) and combines the two estimates with optimal weights reflecting their relative precision. Second, the indicator is based on information at both the monthly and quarterly level, modelled with a dynamic factor specification cast in state-space form. Third, since estimation of the multivariate dynamic factor model can be numerically complex, computational efficiency is achieved by implementing univariate filtering and smoothing procedures. Finally, special attention is paid to chain-linking and its implications, via a multistep procedure that exploits the additivity of the volume measures expressed at the prices of the previous year. |
| Keywords: | Temporal Disaggregation, Multivariate State Space Models, Dynamic factor Models, Kalman filter and smoother, Chain-linking |
| JEL: | E32 E37 C53 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2008/32&r=mac |
| By: | Acharya, Ram N.; Gentle, Paul F.; Mishra, Ashok K.; Paudel, Krishna P. |
| Abstract: | This paper analyzes historical movements in the commodity futures market and the relationship to inflation. Specifically, the relationship between the Commodity Research Bureau (CRB) Index and United States inflation is investigated. It is said that the relationship between the CRB index and the U.S. inflation rate was greater in the some periods than in another period. Then in recent times the CRB Index has proven to be a reliable early indicator of inflation. As the composition of the United States economy changes, the Commodity Research Bureau must make adjustments in order to provide a viable service. |
| Keywords: | CRB index, Commodities Research Bureau, inflation, Vector Autoregression, Marketing, Public Economics, E00, E30, |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saeaed:6760&r=mac |
| By: | Joseph Burke (Department of Economics, Ave Maria University) |
| Abstract: | I present an overview of the teachings of the Roman Catholic Church on usury. In 1515, the Fifth Lateran Council defined “the real meaning of usury: when, from its use, a thing which produces nothing is applied to the acquiring of gain and profit without any work, any expense or any risk.” I argue that the economic conditions of the Middle Ages could not have justified any interest, but structural changes to the economy, including the abolition of slavery, inflation, and the emergence of markets for investment, justify interest on the basis of default risk, the costs of inflation, and opportunity costs. |
| Keywords: | usury, commutative justice, Catholicism |
| JEL: | B11 Z12 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:avm:wpaper:0801&r=mac |
| By: | Laurent Ferrara (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Banque de France - Business Conditions and Macroeconomic Forecasting Directorate); Dominique Guegan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Patrick Rakotomarolahy (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I) |
| Abstract: | This papier formalizes the process of forecasting unbalanced monthly data sets in order to obtain robust nowcasts and forecasts of quarterly GDP growth rate through a semi-parametric modelling. This innovative approach lies on the use on non-parametric methods, based on nearest neighbors and on radial basis function approaches, ti forecast the monthly variables involved in the parametric modelling of GDP using bridge equations. A real-time experience is carried out on Euro area vintage data in order to anticipate, with an advance ranging from six to one months, the GDP flash estimate for the whole zone. |
| Keywords: | Euro area GDP, real-time nowcasting, forecasting, non-parametric models. |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00344839_v1&r=mac |
| By: | Laurent Ferrara (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Banque de France - Business Conditions and Macroeconomic Forecasting Directorate); Dominique Guegan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Patrick Rakotomarolahy (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I) |
| Abstract: | This papier formalizes the process of forecasting unbalanced monthly data sets in order to obtain robust nowcasts and forecasts of quarterly GDP growth rate through a semi-parametric modelling. This innovative approach lies on the use on non-parametric methods, based on nearest neighbors and on radial basis function approaches, ti forecast the monthly variables involved in the parametric modelling of GDP using bridge equations. A real-time experience is carried out on Euro area vintage data in order to anticipate, with an advance ranging from six to one months, the GDP flash estimate for the whole zone. |
| Keywords: | Euro area GDP, real-time nowcasting, forecasting, non-parametric models. |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00344839_v1&r=mac |
| By: | Silva Lopes, Artur C. B. da; Monteiro, Olga Susana |
| Abstract: | The purpose of this paper is to test both short- and long-run implications of the (rational) expectations hypothesis of the term structure of interest rates using Portuguese data for the interbank money market. The results support only a very weak, long-run or "asymptotic" version of the hypothesis, and broadly agree with previous (but separate) evidence for other countries. Empirical evidence supports the cointegration of Portuguese rates and the "puzzle" well known in the literature: although its forecasts of future short-term rates are in the correct direction, the spread between longer and shorter rates fails to forecast future longer rates. Further short-run implications of the hypothesis in terms of the predictive ability of the spread are also clearly rejected, even for the more stable period which emerged in the middle nineties. |
| Keywords: | Term structure; Expectations hypothesis; Hypothesis testing; Structural breaks; Portugal. |
| JEL: | E43 C32 C22 |
| Date: | 2008–09–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:12001&r=mac |
| By: | Olivier Cardi (ERMES, Université Panthéon-Assas Paris 2); Romain Restout (ECONOMIX, University Paris X, and GATE, ENS-LSH Lyon) |
| Abstract: | The ‘ratchet effect’ refers to a situation where a principal uses private information that is revealed by an agent’s early actions to the agent’s later disadvantage, in a context where binding multi-period contracts are not enforceable. In a simple, context-rich environment, we experimentally study the robustness of the ratchet effect to the introduction of ex post competition for principals or agents. While we do observe substantial and significant ratchet effects in the baseline (no competition) case of our model, we find that ratchet behavior is nearly eliminated by labor-market competition; interestingly this is true regardless of whether market conditions favor principals or agents. |
| Keywords: | Non Traded Goods, Investment, Employment, Tax Multiplier |
| JEL: | F41 E62 E22 F32 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:0829&r=mac |
| By: | Dean Baker |
| Abstract: | This report states that bringing about the rapid adjustment of house prices to trend levels is the best means of returning stability to the housing market. The paper also calls for the restriction of GSE capital in bubble-inflated markets, with the intent of forcing house prices in these areas to return to trend level. The removal of capital from bubble markets and the consequent infusion of loans into non-bubble markets would stabilize prices in these areas, thus preventing a downward price spiral and overshooting of trend-level prices on the negative side. The report also advocates mortgage appraisal based on a price-to-rent ratio of 15 to 1. As well, the paper suggests giving families facing foreclosure the right to rent their homes both to keep them in their houses and offer banks real incentives to avoid foreclosure. |
| Keywords: | housing bubble, home prices, household wealth, right to rent |
| JEL: | R21 L85 O51 E E21 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:epo:papers:2008-33&r=mac |
| By: | Milne , Alistair (Cass Business School); Wood, Geoffrey (Cass Business School) |
| Abstract: | In autumn of 2007 Britain experienced its first bank run of any significance since the reign of Queen Victoria. The run was on a bank called Northern Rock. This was extraordinary, for Britain had been free of such episodes because by early in the third quarter of the 19th century the Bank of England had developed techniques to prevent them. A second extraordinary aspect of the affair was that it was the decision to provide support for the troubled institution that triggered the run. And thirdly, unlike most runs in banking history, it was a run only on that one institution. This paper considers why the traditional techniques for the maintenance of banking stability failed – if they did fail – and then considers how these techniques may need to be changed or supplemented to prevent such problems in the future. The paper starts with a narrative of the events, then turns to banking policy before the event and to the policy responses after it. We suggest both why the decision to provide support triggered the run and why the run was confined to a single institution. That prepares the way for our consideration of what should be done to help prevent the recurrence of such episodes in the future. |
| Keywords: | bank failure; lender of last resort; money markets; bank regulation |
| JEL: | E42 E58 N24 |
| Date: | 2008–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2008_030&r=mac |
| By: | Frank A.G. den Butter (VU University Amsterdam); Pieter W. Jansen (Aegon Investment Management) |
| Abstract: | This paper assesses the performance of a number of long-term interest rate forecast approaches, namely time series models, structural economic models, expert forecasts and combinations thereof. The predictive performance of these approaches is compared using out of sample forecast errors, where a random walk forecast acts as benchmark. It is found that for five major OECD countries, namely United States, Germany, United Kingdom, The Netherlands and Japan, the other forecasting approaches do not outperform the random walk, or a somewhat more sophisticated time series model, on a 3 month forecast horizon. On a 12 month forecast horizon the random walk model can be outperformed by a model that combines economic data and expert forecasts. Here several methods of combination are considered: equal weights, optimized weights and weights based on forecast error. It appears that the additional information contents of the structural models and expert knowledge is only relevant for forecasting 12 months ahead. |
| Keywords: | interest rate forecasting; expert knowledge; combining forecasts; optimizing forecast errors |
| JEL: | C53 E27 E43 E47 |
| Date: | 2008–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20080102&r=mac |
| By: | Hasan , Iftekhar (Rensselaer Polytechnic Institute and Bank of Finland); Mester, Loretta (Federal Reserve Bank of Philadelphia and University of Pennsylvania) |
| Abstract: | Over the last decade, the legal and institutional frameworks governing central banks and financial market regulatory authorities throughout the world have undergone significant changes. This has created new interest in better understanding the roles played by organizational structures, accountability and transparency in increasing the efficiency and effectiveness of central banks in achieving their objectives and ultimately yielding better economic outcomes. Although much has been written pointing out the potential role institutional form can play in central bank performance, little empirical work has been done to investigate the hypothesis that institutional form is related to performance. This paper attempts to help fill this void. |
| Keywords: | central banking; institutional structure; accountability; transparency; performance |
| JEL: | E52 E58 |
| Date: | 2008–12–05 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2008_029&r=mac |
| By: | Atsue Mizushima |
| Abstract: | Although a large number of studies have been done on intergenerational transfers of goods, little is known about intergenerational transfers of time. In step with an increase in the aging of the population, the demand for time-intensive transfers in health care and other health services increases. Using an overlapping generations model which incorporates uncertain longevity, we set up a model which incorporates intergenerational transfers of time and examine the macroeconomic effect of public long-term care policy (LTC). Using the model, we show that LTC decreases the steady state level of capital, but that it enhances the welfare level when the rate of tax is sufficiently small. |
| Keywords: | time transfers, household production, overlapping generations model |
| JEL: | E60 I12 J14 J22 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2008/36&r=mac |
| By: | Michel Aglietta; Laurence Scialom |
| Abstract: | In the first part of this paperer, we emphasize the adaptability and continuity of the lender-of-last-resort doctrine beyond the diversity of financial structures from the 19th century to the present day. The second part deals with the global credit crisis and the analysis of the central banks’ innovative practices during the 2007-2008 financial crisis. We highlight that the lender of last resort’s role is not confined to providing emergency liquidity. It aims to provide orderly deleveraging in the financial system in order to preserve the financial intermediation process. Our conclusion underlines that the crisis management has become global and strategic. It opens the way to a major regulatory and supervisory reform. |
| Keywords: | lender of last resort, central banking, liquidity crisis |
| JEL: | E58 G12 G18 G21 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2008-21&r=mac |
| By: | Federico S. Mandelman; Andrei Zlate |
| Abstract: | We analyze the dynamics of labor migration and the insurance role of remittances in a two-country, real business cycle framework. Emigration increases with the expected stream of future wage gains but is dampened by the sunk cost reflecting border enforcement. During booms in the destination economy, the scarcity of established immigrants lessens capital accumulation, labor productivity, and the native wage. The welfare gain from the inflow of unskilled labor increases with the complementarity between skilled and unskilled labor and the share of the skilled among native labor. The model matches the cyclical dynamics of the unskilled immigration from Mexico. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2008-25&r=mac |
| By: | Matthieu Lemoine (Observatoire Français des Conjonctures Économiques); Gian Luigi Mazzi (Eurostat); Paola Monperrus-Veroni (Observatoire Français des Conjonctures Économiques); Frédéric Reynes (Observatoire Français des Conjonctures Économiques) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:0834&r=mac |
| By: | Kyoji Fukao; Tsutomu Miyagawa; Kentaro Mukai; Yukio Shinoda; Konomi Tonogi |
| Abstract: | The purpose of this paper is to measure intangible assets, to construct the capital stock of intangible assets, and to examine the contribution of intangible capital to economic growth in Japan. We follow the approach of Corrado, Hulten, and Sichel (2005, 2006) to measure intangible investment using the 2008 version of the Japan Industrial Productivity (JIP) Database. We find that the ratio of intangible investment to GDP in Japan has risen during the past 20 years and now stands at 11.6%, which is lower than the ratio estimated for the United States in the early 2000s. The ratio of intangible to tangible investment in Japan is also lower than equivalent values estimated for the United States. In addition, we find that, in stark contrast with the United States, where intangible capital grew rapidly in the late 1990s, the growth rate of intangible capital in Japan declined from the late 1980s to the early 2000s. In order to examine the robustness of our results, we also conducted a sensitivity analysis and found that the slowdown of the contribution of intangible capital deepening to economic growth and the recovery in Multi-Factor Productivity (MFP) growth from the second half of the 1990s observed in our base case remain unchanged even if we take on-the-job training and Japanese data with respect to investment in firm-specific resources into account. |
| Keywords: | intangible investment, labor productivity, growth accounting |
| JEL: | E22 O32 O47 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:hst:ghsdps:gd08-015&r=mac |
| By: | Jim Dolmas |
| Abstract: | Tax rates on labor income, capital income and consumption-and the redistributive transfers those taxes finance-differ widely across developed countries. Can majority-voting methods, applied to a calibrated growth model, explain that variation? The answer I fund is yes, and then some. In this paper, I examine a simple growth model, calibrated roughly to U.S. data, in which the political decision is over constant paths of taxes on factor income and consumption, used to finance a lump-sum transfer. I first look at outcomes under probabilistic voting, and find that equilibria are extremely sensitive to the specification of uncertainty. I then consider other ways to restrict the range of majority-rule outcomes, looking at the model's implications for the shape of the Pareto set and the uncovered set, and the existence or non-existence of a Condorcet winner. Solving the model on discrete grid of policy choices, I find that no Condorcet winner exists and that the Pareto and uncovered sets, while small relativeto the entire issue space, are large relative to the range of tax policies we see in data for a collection of 20 OECD countries. Taking that data as the issue space, I find that none of the 20 can be ruled out on effciency grounds, and that 10 of the 20 are in the uncovered set. Those 10 encompass policies as diverse as those of the US, Norway and Austria. One can construct a Condorcet cycle including all 10 countries' tax vectors. ; The key features of the model here, as compared to other models on the endogenous determination of taxes and redistribution, is that the issue space is multidimensional and, at the same time, no one voter type is suffciently numerous to be decisive. I conclude that the sharp predictions of papers in this literature may not survive an expansion of their issue spaces or the allowance for a slightly less homogeneous electorate. |
| Keywords: | Taxation ; Consumption (Economics) ; Income tax ; Fiscal policy |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:0814&r=mac |
| By: | Andrés Vargas |
| Abstract: | El escenario de la crisis internacional contrasta con algunas declaraciones que dan señales de subestimación de los riesgos que enfrenta Colombia en materia económica. La política monetaria se ha adaptado con mayor rapidez en el sentido correcto, pero la fiscal, a pesar de los ajustes, tiene el peligro de quedarse un paso atrás. Se advierte una excesiva confianza en nuestro nivel de reservas, y una tendencia a desestimar los riesgos provenientes del endeudamiento de los hogares y de las empresas medianas. Aunque hay factores que nos fortalecen frente a una crisis en las condiciones que se dieron en el pasado, esto no necesariamente es suficiente para conjurar el efecto de la crisis actual. |
| Date: | 2008–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:col:000182:005190&r=mac |
| By: | Mevlud Islami (University of Wuppertal/European Institute for International Economic Relations (EIIW)) |
| Abstract: | In this analysis the interdependence between foreign exchange markets and stock markets for selected accession and cohesion countries is discussed. This includes basic theoretical approaches. Monthly data for the nominal stock market indices and nominal exchange rates are used, where Ireland, Portugal, Spain, Greece, Poland, Czech Republic, Slovenia, and Hungary are included in the analysis. From the cointegration analysis and VAR analysis both long-term links and short-term links for Poland are identified. Conversely, for Slovenia, Hungary, Ireland, and Spain merely short-term links resulted. Surprisingly, the direction of causation is unambiguously from the stock market index to the exchange rate for all five countries considered. |
| Keywords: | Exchange Rate; Stock Markets; Cointegration; VAR; European Integration |
| JEL: | G15 F31 E44 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:bwu:schdps:sdp08007&r=mac |
| By: | David R.F. Love (Department of Economics, Brock University) |
| Abstract: | We show that the deterministic Extended-Path (EP) method of Fair and Taylor (1983) solves standard dynamic stochastic general equilibrium models with similar accuracy to the best results reported in the literature for alternative methods. The EP method demands more computer time than other methods but has offsetting benefits in terms of simplicity and generality that make it an attractive choice. |
| Keywords: | Dynamic stochastic equilibrium, computational methods, non-linear solutions |
| JEL: | E10 E30 E37 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:brk:wpaper:0801&r=mac |
| By: | Michelle J. White |
| Abstract: | This paper discusses four bankruptcy-related policy issues. First, what is the economic rationale for having a bankruptcy procedure at all and what defines an economically efficient bankruptcy procedure? Second, why did the number of U.S. bankruptcy filings increase so dramatically between 1980 and 2005? Third, a major bankruptcy reform went into effect in the U.S. in 2005—what did it do and how did it affect credit and mortgage markets? Finally, the paper discusses the mortgage crisis, the high social cost of foreclosures, and the difficulty of avoiding foreclosure by voluntarily renegotiation of mortgage contracts, even when such renegotiations are in the joint interest of debtors and creditors. I also discuss the pros and cons of government programs to refinance mortgages and the possibility of giving bankruptcy judges new power to change the terms of mortgage contracts in bankruptcy. |
| JEL: | E44 K35 R31 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14549&r=mac |