nep-mac New Economics Papers
on Macroeconomics
Issue of 2009‒01‒17
fifty-six papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Deep Habits and the Dynamic Effects of Monetary Policy Shocks By Morten O. Ravn; Stephanie Schmitt-Grohe; Martín Uribe; Lenno Uuskula
  2. Budgetary Policies in a DSGE Model with Finite Horizons By Annicchiarico, Barbara; Giammarioli, Nicola; Piergallini, Alessandro
  3. Optimal Operational Monetary Policy Rules in an Endogenous Growth Model: a calibrated analysis By Hiroki Arato
  4. Independence and Accountability of Monetary and Fiscal Policy Committees By Alexander Mihailov; Katrin Ullrich
  5. Banking competition, housing prices and macroeconomic stability By Javier Andrés; Óscar J. Arce
  6. Financial Structure and the Impact of Monetary Policy on Asset Prices By Assenmacher-Wesche, Katrin; Gerlach, Stefan
  7. Intergenerational Transmission of Inflation Aversion: Theory and Evidence By Etienne Farvaque; Alexander Mihailov
  8. Tax, Credit Constraints, and the Big Costs of Small Inflation By Andrew Coleman
  9. Term structure and the estimated monetary policy rule in the eurozone By Ramón María-Dolores; Jesús Vázquez
  10. Assessing Long-Term Fiscal Developments: Evidence from Portugal By Ricardo M. Sousa; António Afonso
  11. Tradeoff between Inflation Stabilization and Growth Maximization By Hiroki Arato
  12. Inventories, Markups, and Real Rigidities in Menu Cost Models By Oleksiy Kryvtsov; Virgiliu Midrigan
  13. Basel II Capital Requirements, Firms' Heterogeneity, and the Business Cycle By Ines Drumond; José Jorge
  14. The Small Open-Economy New Keynesian Phillips Curve: Empirical Evidence and Implied Inflation Dynamics By Alexander Mihailov; Fabio Rumler; Johann Scharler
  15. Is the financial crisis causing a recession? By Tatom, John
  16. Financial Integration and Macroeconomic Volatility: Does Financial Development Matter? By Eozenou, Patrick
  17. Price-Setting Behaviour in Switzerland Evidence from CPI Micro Data By Kaufmann, Daniel
  18. The Aftermath of Financial Crises By Carmen M. Reinhart; Kenneth S. Rogoff
  19. Measures of compliance with sustainable development objectives adopted by Romania in the pre-and post-accession By Duduiala-Popescu, Lorena
  20. Tax revenue and the macroeconomic framework in Italy By Alberto Locarno; Alessandra Staderini
  21. Bank Lending Channel of Monetary Policy: Evidence for Colombia, Using a Firms´ Panel By José E. Gómez González; Paola Morales Acevedo
  22. The Non-Convexity Issues in a Limited-Commitment Economy By Christian Calmès; Raymond Théoret
  23. Interaction between housing prices and household borrowing - the Finnish case By Elias Oikarinen
  24. Yield-Curve Based Probit Models for Forecasting U.S. Recessions: Stability and Dynamics By Heikki Kauppi
  25. Public and private sector wages:comovement and casuality By Ana Lamo; Javier J. Pérez; Ludger Schuknecht
  26. Portuguese banks in the euro area market for daily funds By Luísa Farinha; Vítor Gaspar
  27. Classifying Monetary Economics: Fields and Methods from Past to Future By Philip Arestis; Alexander Mihailov
  28. Narrow money and transaction technology: new disaggregated evidence By Columba, Francesco
  29. Quest for the best: How to measure central bank independence and show its relation with inflation? By Aleksandra Maslowska
  30. The Islamic Inter bank Money Market and a Dual Banking System ; The Malaysian Experience. By Bacha, Obiyathulla/I
  31. Technological change and the demand for currency: An analysis with household data By Francesco Lippi; Alessandro Secchi
  32. The impact of trade integration on business cycle synchronisation for Mercosur countries By Francesco Grigoli
  33. Do Bequests Increase or Decrease Wealth Inequalities? By Charles Yuji Horioka
  34. On Reputation: A Microfoundation of Contract Enforcement and Price Rigidity By Fehr, Ernst; Brown, Martin; Zehnder, Christian
  35. On the Role of Policy Interventions in Structural Change and Economic Development: The Case of Postwar Japan By Julen ESTEBAN-PRETEL; SAWADA Yasuyuki
  36. Fictitious Capital and Crises By Meacci, Ferdinando
  37. Life Expectancy and Old Age Savings By Mariacristina De Nardi; Eric French; John Bailey Jones
  38. Stages of the 2007/2008 Global Financial Crisis: Is There a Wandering Asset-Price Bubble? By Orlowski, Lucjan T
  39. Growth, the Environment and Keynes: Reflections on Two Heterodox Schools of Thought By Clive L Spash; Heinz Schandl
  40. Did Improvements in Household Technology Cause the Baby Boom? Evidence from Electrification, Appliance Diffusion, and the Amish By Martha J. Bailey; William J. Collins
  41. Taxes and Spending in Latin America: First Stability, Now Development By Jeff Dayton-Johnson
  42. Measuring Consumer Preferences and Estimating Demand Systems. By William Barnett; Apostolos Serletis
  43. Determinantes del Desempleo en Paraguay By Juan Eduardo Coeymans.
  44. Determinantes de la Inversión en Paraguay By Juan Eduardo Coeymans.
  45. Energy Consumption and Economic Growth: Evidence from COMESA Countries By Chali, Nondo; Mulugeta, Kahsai
  46. Survey data on household finance and consumption - research summary and policy use By The Eurosystem Household Finance and Consumption Network
  47. The Differential Approach to Demand Analysis and the Rotterdam Model. By William Barnett; Apostolos Serletis
  48. The Financial Crisis and the Policy Responses: An Empirical Analysis of What Went Wrong By John B. Taylor
  49. Aid Volatility and Macro Risks in Low-Income Countries By Eduardo Borensztein; Julia Cagé; Daniel Cohen; Cécile Valadier
  50. Measuring capital stocks and capital services in Switzerland By Rudolf, Barbara; Zurlinden, Mathias
  51. Applying Basel II Requirements in Romania By Miru, Oana Maria; Hetes-Gavra , Roxana; Nicolescu, Ana Cristina
  52. Measuring growth of labour quality and the quality-adjusted unemployment rate in Switzerland By Bolli, Thomas; Zurlinden, Mathias
  53. The home bias of the poor: terms of trade effects and portfolios across the wealth distribution By Tobias Broer
  54. Labor demand and information technologies: evidence for Spain, 1980-2005 By Manuel A. Hidalgo Pérez; Jesús Rodríguez López; José Mª O.Kean Alonso
  55. Testing directional forecast value in the presence of serial correlation By Oliver Blaskowitz; Helmut Herwartz
  56. Net Foreign Assets, Productivity and Real Exchange Rates in Constrained Economies By Dimitris K. Christopoulos; Karine Gente; Miguel A. Leon-Ledesma

  1. By: Morten O. Ravn; Stephanie Schmitt-Grohe; Martín Uribe; Lenno Uuskula
    Abstract: This paper introduces deep habits into a sticky-price sticky-wage economy and asks whether the countercyclical markup movements induced by deep habits is helpful for accounting for the dynamic effects of monetary policy shocks. We find that this is the case: When allowing for deep habits, the model can account very precisely for the persistent impact of monetary policy shocks on aggregate consumption and for the impact on inflation that other models have hard a time explaining. In particular, the model can account both for the price puzzle and for inflation persistence. We also show that the deep habits mechanism and nominal rigidities are complementary: The deep habits model can account for the dynamic effects of monetary policy shock at low to moderate levels of nominal rigidities. We show that the results are stable over time and are not caused by monetary policy changes.
    Keywords: deep habits, monetary policy, price puzzle, inflation persistence, countercyclical markups
    JEL: E21 E31 E32 E52
    Date: 2008
  2. By: Annicchiarico, Barbara; Giammarioli, Nicola; Piergallini, Alessandro
    Abstract: This paper presents a dynamic stochastic general equilibrium model with nominal rigidities, capital accumulation and finite horizons. Our New Keynesian framework exhibits intergenerational wealth effects and is intended to investigate the macroeconomic implications of fiscal policy, which is specified by either a debt-based tax rule or a balanced-budget rule allowing for temporary deficits. When calibrated to euro area quarterly data, the model predicts that fiscal expansions generate a trade-off in output dynamics between short-term gains and medium-term losses. It is shown that the effects of fiscal shocks crucially depend upon the conduct of monetary policy. Simulation analysis suggests that balanced-budget requirements enhance the determinacy properties of feedback interest rate rules by guaranteeing inflation stabilization.
    Keywords: Fiscal Policy; Monetary Policy; Nominal Rigidities; Capital Accumulation; Finite Lifetime; Simulations.
    JEL: E52 D58 E63
    Date: 2009–01
  3. By: Hiroki Arato (Japan Society for the Promotion of Science and Graduate School of Economics, Kyoto University)
    Abstract: This paper constructs an endogenous growth New Keynesian model and considers growth and welfare effect of Taylor-type (operational) monetary policy rules. The Ramsey equilibrium and optimal operational monetary policy rule is also computed. In the calibrated model, the Ramseyoptimal volatility of inflation rate is smaller than that in standard exogenous growth New Keynesian model with physical capital accumulation. Optimal operational monetary policy rule makes nominal interest rate respond strongly to inflation and mutely to real activity, as in standard New Keynesian model. Growth-maximizing operational monetary policy is not identical to optimal operational monetary policy. Welfare cost of responding to real activity is two or three times larger than that of exogenous growth New Keynesian model.
    Keywords: Monetary policy, Sticky price, Endogenous growth
    JEL: E31 E52 O41
    Date: 2009–01
  4. By: Alexander Mihailov (School of Economics, University of Reading); Katrin Ullrich (Centre for European Economic Research, Mannheim)
    Abstract: The democratic accountability of policymaking institutions which are autonomous within delegated mandates has not received as much attention as their independence. We analyze in a theoretical model the effects of accountability inthe form of possible overriding of economic policy decisions by the government under different degrees of independence of expert committees conducting monetary and fiscal policy. The equilibrium outcomes of such alternative institution-design frameworks are compared according to key macroeconomic performance criteria. Our results stress the trade-off between anchoring inflation expectations on target and output stabilization that is not solved with accountability.
    Keywords: independence, accountability, monetary policy, fiscal policy, expert committees, institution design
    JEL: E52 E58 E61 E63
    Date: 2008
  5. By: Javier Andrés (Universidad de Valencia); Óscar J. Arce (Banco de España)
    Abstract: We develop a dynamic general equilibrium model with an imperfectly competitive bank-loans market and collateral constraints that tie investors credit capacity to the value of their real estate holdings. Banks set optimal lending rates taking into account the effects of their price policies on their market share and on the volume of funds demanded by each customer. Lending margins have a significant effect on aggregate variables. Over the long run, fostering banking competition increases total consumption and output by triggering a reallocation of available collateral towards investors. However, as regards the short-run dynamics, we find that most macroeconomic variables are more responsive to exogenous shocks in an environment of highly competitive banks. Key to this last result is the reaction of housing prices and their effect on borrowers' net worth. The response of housing prices is more pronounced when competition among banks is stronger, thus making borrowers' net worth more vulnerable to adverse shocks and, specially, to monetary contractions. Thus, regarding changes in the degree of banking competition, the model generates a trade-off between the long run level of economic activity and its stability at the business cycle frequency.
    Keywords: banking competition, collateral constraints, housing prices
    JEL: E32 E43 E44 G21
    Date: 2009–01
  6. By: Assenmacher-Wesche, Katrin (Swiss National Bank); Gerlach, Stefan (Goethe University, Frankfurt)
    Abstract: We study the responses of residential property and equity prices, inflation and economic activity to monetary policy shocks in 17 countries, using data spanning 1986-2006, using single-country VARs and panel VARs in which we distinguish between groups of countries depending on their financial systems. The effect of monetary policy on property prices is only about three times as large as its impact on GDP. Using monetary policy to guard against financial instability by offsetting asset-price movements thus has sizable effects on economic activity. While the financial structure influences the impact of policy on asset prices, its importance appears limited.
    Keywords: asset prices; monetary policy; panel VAR
    JEL: C23 E52
    Date: 2008–09–10
  7. By: Etienne Farvaque (Equippe - Universités de Lille, and DULBEA - Université Libre de Bruxelles.); Alexander Mihailov (School of Economics, University of Reading)
    Abstract: We study the evolution of inflation aversion preferences across generations. In the theoretical part of the paper, we analyze the dynamics of such preferences in an overlapping-generations model with heterogenous mature agents characterized by different degrees of inflation aversion. We show how the stability of a society’s degree of inflation aversion depends on the strength and speed of changes in the structure of the population. The empirical part then proposes two applications in support of the theoretical results. We first link demographic structures to inflation aversion, and then proceed by looking at the relations between income (in)equality and measures of inflation aversion.
    Keywords: Intergenerational transmission, evolving preferences, inflation aversion, central bank independence, demographic change, income inequality
    JEL: E24 E31 E58 J10
    Date: 2008
  8. By: Andrew Coleman (Motu Economic and Public Policy Research)
    Abstract: This paper develops an overlapping generations model incorporating credit constraints, owner-occupier and rental sectors, and detailed tax regulations to examine how the interaction of inflation and the tax system affect the housing market. It shows that even modest rates of inflation can have very large effects on the home-ownership rates of young households, particularly at low real interest rates. This occurs even if there is a large supply response in the quantity of housing. The model suggests that the welfare costs of inflation could be ameliorated by exempting the inflation component of interest payments from income tax.
    Keywords: Inflation, credit constraints, capital income taxes, housing markets, home-ownership rates, monetary policy
    JEL: E40 E58
    Date: 2008–12
  9. By: Ramón María-Dolores (Universidad de Murcia); Jesús Vázquez (Euskal Herriko Unibertsitatea)
    Abstract: In this paper we estimate a standard version of the New Keynesian Monetary (NKM) model augmented with term structure in order to analyze two issues. First, we analyze the effect of introducing an explicit term structure channel in the NKM model on the estimated parameter values of the model, with special emphasis on the interest rate smoothing parameter using data for the Eurozone. Second, we study the ability of the model to reproduce some stylized facts such as highly persistent dynamics, the weak comovement between economic activity and inflation, and the positive, strong comovement between interest rates observed in actual Eurozone data. The estimation procedure implemented is a classical structural method based on the indirect inference principle.
    Keywords: NKM model, term structure, policy rule, indirect inference
    JEL: C32 E30 E52
    Date: 2008–12
  10. By: Ricardo M. Sousa (Universidade do Minho - NIPE); António Afonso (European Central Bank, Directorate General Economics)
    Abstract: Drawing on quarterly data for Portugal, we use a Three-Stage Least Square method and a system of equations to recursively estimate two components of fiscal policy - responsiveness and persistence - and to infer about the sources of fiscal deterioration (improvement). The results suggest that: (i) government spending exhibits higher persistence than government revenue; and (ii) government revenue is more responsive to the business cycle than government spending.
    Keywords: Fiscal deterioration, Portugal.
    JEL: E62 H50
    Date: 2009
  11. By: Hiroki Arato (Japan Society for the Promotion of Science and Graduate School of Economics, Kyoto University)
    Abstract: This paper analyzes monetary policy implication in an endogenous growth model in which the average growth rate is inefficiently low and in which the capital accumulation technology is concave. This paper does two exercises. First, we derive the utility-based welfare criterion of the model. The welfare measure suggests that even if the natural rate of growth moves parallel to its efficient rate, the increase of inflation volatility may improve welfare through the increase of average growth. Second, we test this hypothesis numerically and show that in our calibrated model the tradeoff between inflation stabilization and average growth maximization exists. In addition, the tradeoff is resolved by highly growth-stimulating (investment stabilization) policy. The reason is the existence of concavity in the capital accumulation technology, through which investment stabilization rises average growth.
    Keywords: Endogenous Growth; Monetary Stabilization Policy
    JEL: E3
    Date: 2009–01
  12. By: Oleksiy Kryvtsov; Virgiliu Midrigan
    Abstract: Real rigidities that limit the responsiveness of real marginal cost to output are a key ingredient of sticky price models necessary to account for the dynamics of output and inflation. We argue here, in the spirit of Bils and Kahn (2000), that the behavior of marginal cost over the cycle is directly related to that of inventories, data on which is readily available. We study a menu cost economy in which firms hold inventories in order to avoid stockouts and to economize on fixed ordering costs. We find that, for low rates of depreciation similar to those in the data, inventories are highly sensitive to changes in the cost of holding and acquiring them over the cycle. This implies that the model requires an elasticity of real marginal cost to output approximately equal to the inverse of the elasticity of intertemporal substitution in order to account for the countercyclical inventory-to-sales ratio in the data. Stronger real rigidities lower the cost of acquiring and holding inventories during booms and counterfactually predict a procyclical inventory-to-sales ratio.
    JEL: E31 E32
    Date: 2009–01
  13. By: Ines Drumond (CEMPRE and Faculdade de Economia, Universidade do Porto); José Jorge (CEMPRE and Faculdade de Economia, Universidade do Porto)
    Abstract: This paper assesses the potential procyclical effects of Basel II capital requirements by evaluating to what extent those effects depend on the composition of banks' asset portfolios and on how borrowers' credit risk evolves over the business cycle. By developing a heterogeneous-agent general equilibrium model, in which firms' access to credit depends on their financial position, we find that regulatory capital requirements, by forcing banks to finance a fraction of loans with costly bank capital, have a negative effect on firms' capital accumulation and output in steady state. This effect is amplified with the changeover from Basel I to Basel II, in a stationary equilibrium characterized by a significant fraction of small and highly leveraged firms. In addition, to the extent that it is more costly to raise bank capital in bad times, the introduction of an aggregate technology shock into a partial equilibrium version of the model supports the Basel II procyclicality hypothesis: Basel II capital requirements accentuate the bank loan supply effect underlying the bank capital channel of propagation of exogenous shocks.
    Keywords: Business Cycles, Procyclicality, Financial Constraints, Bank Capital Channel, Basel II, Heterogeneity
    JEL: E44 E32 G28 E10
    Date: 2009–01
  14. By: Alexander Mihailov (School of Economics, University of Reading); Fabio Rumler (Economic Analysis Division, Oesterreichische Nationalbank); Johann Scharler (Department of Economics, University of Linz)
    Abstract: This paper applies GMM estimation to assess empirically the small open-economy New Keynesian Phillips Curve derived in Galí and Monacelli (2005). We obtain a testable specification where fluctuations in the terms of trade enter explicitly, thus allowing a comparison of the relevance of domestic versus external determinants of CPI inflation dynamics. For most countries in our sample the expected relative change in the terms of trade emerges as a more relevant inflation driver than the contemporaneous domestic output gap. Overall, our results indicate some, albeit moderate, support for the tested relationship based on data from ten OECD countries typically classified as open economies.
    Keywords: New Keynesian Phillips Curve, small open economies, terms of trade fluctuations, inflation dynamics, GMM estimation
    JEL: C32 C52 E31 F41
    Date: 2008
  15. By: Tatom, John
    Abstract: The U.S. entered a recession in December 2007. Coming in train with a foreclosure crisis that began in late 2006 and its associated financial crisis that began in August 2007, there is a tendency for analysts to attribute the recession to the financial crisis. The worst aspects of the financial crisis that attract attention today did not begin until September 2008 well after the recession began. Other factors account for the recession and could portend the imminent end to the current recession. A leading candidate for the cause of the current recession is the Federal Reserve (Fed). The Fed has caused every post-world war II recession, according to most experts, especially Milton Friedman. In late 2006 there already were signs of a sharp slowing in money growth in place portending recession; see Tatom (2006). This slowing lasted until September 2008. The recent recession has also been influenced by sharp increase in oil prices in 2007-08 that raised the relative price of energy. Subsequently, oil prices fell sharply. Thus, like the monetary policy influence, the energy price shock influence on the recession is in the process of rapidly disappearing and reversing. This is similar to the oil price shock related to the first Kuwait-Iraq war in 1990-91 when a larger and faster run-up in oil prices created a recession followed by a quick reversal of oil prices and economic recovery. Oil prices are falling faster in the current recession from their peak in July 2008. If the Fed caused the current recession and energy prices made it worse and longer, and if there were no other factors influencing it, then a quick end could be in sight, in the first or second quarter of 2009.
    Keywords: Financial crisis; recession; monetary policy; oil price shocks
    JEL: E30 E52 E44
    Date: 2008–12–19
  16. By: Eozenou, Patrick
    Abstract: In this paper, we analyze the relationship between international financial integration and macroeconomic volatility. Looking at a panel of 90 countries over the period 1960-2000, we find that domestic financial conditions matter when assessing the impact of financial integration on consumption growth volatility. More specifically, consumption growth volatility is found to increase with the degree of financial integration in countries with low level of financial development and to decrease in countries with high level of financial development. When measuring domestic financial conditions by the share of private credits to GDP, the threshold level of financial development above which financial integration yields consumption smoothing benefits is estimated to be around 60%-70% GDP.
    Keywords: GMM-IV; Dynamic Pane;; Financial Integration; Financial Development.
    JEL: F30 G15 C23 O16 E44
    Date: 2008–09
  17. By: Kaufmann, Daniel (Swiss National Bank)
    Abstract: This paper investigates price-setting behaviour of firms based on the individual price quotes underlying the Swiss consumer price index. The data set covers the years from 1993 to 2005. Six main findings emerge from the analysis. (i) Prices are sticky; the median duration amounts to 4.6 quarters. (ii) Price-setting behaviour is heterogeneous across sectors and outlet characteristics. (iii) Price changes are sizeable; the median absolute size amounts to 9.4%. (iv) There is no indication of general downward price stickiness; even in the case of positive inflation, 41.3% of all price adjustments are decreases and the distributions of price changes do not show substantial asymmetries. (v) Firms respond to expected cost shocks at the date of their occurrence; VAT rate changes do not lead to more price adjustments before they take effect. (vi) There is some evidence that firms adjust their behaviour according to the state of the economy; in particular, firms facing higher rates of inflation adjust prices more frequently.
    Keywords: Price-setting; frequency of price changes; nominal price rigidity; time-dependent pricing; statedependent pricing
    JEL: D40 E31
    Date: 2008–08–04
  18. By: Carmen M. Reinhart; Kenneth S. Rogoff
    Abstract: This paper examines the depth and duration of the slump that invariably follows severe financial crises, which tend to be protracted affairs. We find that asset market collapses are deep and prolonged. On a peak-to-trough basis, real housing price declines average 35 percent stretched out over six years, while equity price collapses average 55 percent over a downturn of about three and a half years. Not surprisingly, banking crises are associated with profound declines in output and employment. The unemployment rate rises an average of 7 percentage points over the down phase of the cycle, which lasts on average over four years. Output falls an average of over 9 percent, although the duration of the downturn is considerably shorter than for unemployment. The real value of government debt tends to explode, rising an average of 86 percent in the major post–World War II episodes. The main cause of debt explosions is usually not the widely cited costs of bailing out and recapitalizing the banking system. The collapse in tax revenues in the wake of deep and prolonged economic contractions is a critical factor in explaining the large budget deficits and increases in debt that follow the crisis. Our estimates of the rise in government debt are likely to be conservative, as these do not include increases in government guarantees, which also expand briskly during these episodes.
    JEL: E32 E44 F3 N20
    Date: 2009–01
  19. By: Duduiala-Popescu, Lorena
    Abstract: Developing the National Strategy for Sustainable Development (SNDD) is the result of the obligation assumed by Romania, as a member of the European Union, in accordance with the objectives agreed at EU and methodological prescriptions of the European Commission. Defining element of this policy is fully connecting Romania to a new philosophy of development, the European Union and its own widely shared around the world - that of sustainable development.
    Keywords: the rural economy; the National Strategic Framework of Reference; The National Reform Program; the convergence program
    JEL: F00 F15 E32 E24 F41 E44 F43 E60
    Date: 2008–11–30
  20. By: Alberto Locarno (Bank of Italy); Alessandra Staderini (Bank of Italy)
    Abstract: The performance of tax receipts in Italy during the period 1978-2006 is analysed through the relationship between the growth of revenue and the evolution of the macroeconomic framework. Series of actual tax receipts are adjusted to take account of discretionary measures, transformed into implicit tax rates, and then broken down into the structural components. A regression analysis of the trend element shows that the performance of tax revenue depends not only on the main variables used in forecasting models, but also on a number of factors, some of which (interest rates, oil prices, the output gap, and inflation) have a direct impact on implicit tax rates. Other factors (the share of profits of banks and listed companies, the proportion of energy consumption in total spending, and purchases of durable goods) indirectly effect the incidence of taxation by causing shifts in the tax base among sectors with different opportunities for tax evasion.
    Keywords: tax receipts, discretionary measures, breakdown into structural components
    JEL: C22 E62 H2
    Date: 2008–12
  21. By: José E. Gómez González; Paola Morales Acevedo
    Abstract: In this paper we find empirical evidence of bank lending channel for Colombia, using a balanced panel data of about four thousand non-financial firms. We find that increases in the interest rate, proxiing for the monetary policy instrument, lead to a reduction in the proportion of bank loans, out of total debt, of the .rms. This bank lending channel amplifies the effect of the traditional interest rate channel, which leads to a reduction in total debt and spending when monetary policy tightens. Our result agrees with, and complements, those obtained by Gómez González and Grosz (2007), who provide evidence of the existence of a bank lending channel in Colombia using bank-specific financial variables.
    Date: 2009–01–07
  22. By: Christian Calmès (Département des sciences administratives, Université du Québec (Outaouais), et LRSP); Raymond Théoret (Département de stratégie des affaires, Université du Québec (Montréal), et Chaire d'information financière et organisationnelle)
    Abstract: After reviewing some basic self-enforcing labour contracts models, we expose how self-enforcing labour market theory can help explain some important dynamic properties of key macroeconomic variables. Calmès (1999, 2003) detail how self-enforcing labour contracts improve the way macroeconomic models account for the response of the economy to external shocks. The introduction of a state-dependent outside opportunity for the manager is the first step in generalizing the theory (Calmès 2007, Thomas and Worrall 2007). In this paper, we discuss the next step, the endogenization of capital. Although desirable, this task is not straightforward as the contract set might no longer be compact in this case. Relatedly, we also discuss the introduction of a third agent (the financial intermediary) in the model. We also analyse the link between stationarity and set convexity when incorporating growth in the model. A stochastic trend may be considered but then the non-convexity issue arises again. The aggregation of heterogeneous individual contracts can also lead to the same problem.
    Keywords: Internal propagation mechanisms; Real business cycle; Self-enforcing contract; Risk-sharing hypothesis; Non-convexity.
    JEL: E12 E49 J30 J31 J41
    Date: 2009–01–05
  23. By: Elias Oikarinen (Department of Economics, Turku School of Economics)
    Abstract: Housing prices and household borrowing are expected to be tightly connected to each other. Better availability of credit eases liquidity constraints of households, which is likely to lead to higher demand for housing. On the other hand, housing prices may significantly influence household borrowing through various wealth effects. Employing time series econometrics this study shows that since the financial liberalization in the late 1980s there has been a significant two-way interaction between housing prices and housing loan stock in Finland. Before the financial deregulation the interaction was substantially weaker. Furthermore, housing appreciation has a notable positive impact on the amount of consumption loans withdrawn by households. It appears that there is no similar relationship between stock price movements and household borrowing. Understanding the two-way interaction between housing prices and credit is of importance, since the interdependence is likely to augment boom-bust cycles in the economy and increase the fragility of the financial sector.
    Keywords: lending, borrowing, housing, dynamics
    JEL: E41 E51 R21
    Date: 2008–02
  24. By: Heikki Kauppi (Department of Economics, University of Turku)
    Abstract: Recent research provides controversial evidence on the stability of yield-curve based binary probit models for forecasting U.S. recessions. This paper reviews so far applied specifications and presents new procedures for examining the stability of selected probit models. It finds that a yield-curve based probit model that treats the binary response (a recession dummy) as a nonhomogeneous Markov chain produces superior in-sample and out-of-sample probability forecasts for U.S. recessions and that this model specification is stable over time. Thus, the failure of yieldcurve based forecasts to signal the 1990-1991 and 2001 recessions should not be attributed to parameter instability, instead the evidence suggests that these events were inherently uncertain.
    Keywords: recession forecast, yield curve, dynamic probit models, parameter stability
    JEL: C22 C25 E32 E37
    Date: 2008–05
  25. By: Ana Lamo (European Central Bank); Javier J. Pérez (Bank of Spain); Ludger Schuknecht (European Central Bank)
    Abstract: This paper looks at public and private sector wages interactions since the 1960s in the euro area, euro area countries and a number of other OECD countries. It focuses on co-movements and causal relationships. To obtain the most robust results possible, we apply a number of alternative empirical methodologies, and perform the analysis for two data samples and different price deflators. The paper reports, first, a strong positive annual contemporaneous correlation of public and private sector wages over the business cycle; this finding is robust across methods and measures of wages and quite general across countries. Second, we show evidence of long-run relationships between public and private sector wages in all countries. Finally, causality analysis suggests that feedback effects between private and public wages occur in a direct manner and, importantly also via prices. While influences from the private sector appear on the whole to be stronger, there are direct and indirect feedback effects from public wage setting in a number of countries as well. We show how country-specific institutional features of labour and product markets contain helpful information to explain the heterogeneity across countries of our results on public/private wage leadership.
    Keywords: government wages; private sector wages; causality; co-movement.
    JEL: J30 C32 J51 J52 E62 E63 H50
    Date: 2008
  26. By: Luísa Farinha (Banco de Portugal, 148, Rua do Comercio, P-1101 Lisbon Codex, Portugal.); Vítor Gaspar (Bureau of European Policy Advisers, European Commission, Rue de la Loi 100, B-1049 Brussels, Belgium.)
    Abstract: In this paper, we use the Furfine (1999) statistical procedure to identify Money market operations from Payments Systems data. Given the availability of an alternative data set, recording money market operations we could confirm the accuracy of the method. We examine evidence on integration of the Money market in the euro area. We ask, “how do Portuguese banks participate in the market for daily funds?” and look for a possible hierarchical structure in the market. We find strong evidence of integration and mixed evidence on hierarchical structure. JEL Classification: E52, E58.
    Keywords: Money market, Furfine procedure, financial integration, hierarchical structure, Portuguese banks.
    Date: 2008–12
  27. By: Philip Arestis (Department of Land Economy, University of Cambridge); Alexander Mihailov (Department of Economics, University of Reading)
    Abstract: We propose a simple, yet sufficiently encompassing classification scheme of monetary economics. It comprises three fundamental fields and six recent areas that expand within and across these fields. The elements of our scheme are not found together and in their mutual relationships in earlier studies of the relevant literature, neither is this an attempt to produce a relatively complete systematization. Our intention in taking stock is not finality or exhaustiveness. We rather suggest a viewpoint and a possible ordering of the accumulating knowledge. Our hope is to stimulate an improved understanding of the evolving nature and internal consistency of monetary economics at large.
    Keywords: monetary economics, monetary theory, monetary policy, public finance, classification, methodology
    JEL: E40 E50 E60
    Date: 2008
  28. By: Columba, Francesco
    Abstract: This paper analyses the effect of transaction technology innovation on narrow money using Italian data disaggregated at provincial level. In particular, this study assesses the impact of the diffusion of ATMs (automated teller machines) and of POS (points of sale), on the demand for currency and on the demand for M1 using a unique data set. We find that transaction technology innovation has a negative effect on the demand for currency in circulation, while its effect on M1 is positive; additionally, heterogeneity in the use of cash within Italy is detected.
    Keywords: Currency; Demand for money; Financial innovation; Monetary aggregates
    JEL: E51 E41
    Date: 2009–01–08
  29. By: Aleksandra Maslowska (Department of Economics, University of Turku)
    Abstract: We use several numerical tests in order to receive answers to our three questions. First, this paper aims to indicate, which measure of central bank independence explains economic changes the most accurately, and hence gives the most exact guidance onto institutional design of monetary authorities. Second, our aim is to prove that differences in legal proxies matter as much as institutional development of countries. Finally, we show that results are vulnerable to data modification. This experiment is performed by an empirical verification of the quality of CBI indices, comparing several widely used measures for around 100 countries, using a panel data approach. After a brief description of imprecision in CBI measures methodology and their definitions, a comparison using OLS method is made. Additional tests of TSLS, PCA and stepwise selection are used, as well. In the final conclusion we are able to point the ``winner'' of this experiment but also we indicate that a minor modification of data can change the result.
    Keywords: institution, central bank independence, panel data
    JEL: E42 E50
    Date: 2008–09
  30. By: Bacha, Obiyathulla/I
    Abstract: This paper examines the operation of an Islamic Interbank Money market (IIMM), within a dual banking system. The paper argues that even though an Islamic Money market operates in an interest free environment and trades shariah compliant instruments, many of the risks associated with conventional money markets, including interest rate risk is relevant to an Islamic Money Market operating within a dual banking system. The empirical evidence based on Malaysian data, points to Islamic money market profit rates/yields that are highly correlated and move in sync with conventional money market rates. Given the dynamics of fund flows and cross linkages, an IIMM operating within a dual banking system cannot sterilize itself from interest rate risk. In fact, the paper argues that such an IIMM may actually enhance interest rate risk transmission to the Islamic banking sector, by providing additional channels of transmission. Ironical as it may be, the operations of an IIMM in a dual banking system may serve to bring the Islamic banking sector into closer orbit with the conventional sector.
    Keywords: Islamic Interbank Money Market; Dual Banking; Malaysia
    JEL: D53 D02 E44
    Date: 2008
  31. By: Francesco Lippi (University of Sassari, EIEF and CEPR); Alessandro Secchi (Bank of Italy, Economics and International Relations)
    Abstract: Advances in transaction technology allow agents to economize on the cost of cash management. We argue that accounting for the impact of new transaction technologies on currency holding behaviour is important to obtain theoretically consistent estimates of the demand for money. We modify a standard inventory model to study the effect of withdrawal technology on the demand for currency. An empirical specification for households’ demand schedule is suggested, in which both the level of currency holdings and the interest rate elasticity of demand depend on the withdrawal technology available to agents (e.g. ATM card ownership or a high/low density of bank branches, ATMs). The theoretical implications are tested using a unique panel of Italian household data (on currency holdings, deposit interest rates, consumption, development of banking services, etc.) for the period 1989-2004.
    Keywords: money demand, inventory models, technological change
    JEL: E5
    Date: 2008–12
  32. By: Francesco Grigoli
    Abstract: Frankel and Rose (1998) reassessed the Mundellian criteria on OCAs and considered their application to be untenable, since trade integration and cycle synchronisation may be endogenous. This research aims at testing this hypothesis for Mercosur countries. In particular it intends to evaluate empirically the impact of reduced trade barriers, and then, increased trade on the synchronisation of business cycles. Using a panel data spanning the members over sixty-four quarters since the establishment of the FTA, my findings indicate a positive effect, implying intra-industry trade. JEL Classification Code: F15, E32
    Keywords: Trade Integration, Business Cycle Synchronisation, Mercosur
    Date: 2009–01
  33. By: Charles Yuji Horioka
    Abstract: This paper finds that individuals in Japan do not leave very significant bequests, that parents often require a quid pro quo for bequests to their children, and that wealthier individuals leave less bequests, meaning that bequests ameliorate wealth inequalities.
    JEL: D12 D91 E21
    Date: 2009–01
  34. By: Fehr, Ernst (University of Zurich); Brown, Martin (Swiss National Bank); Zehnder, Christian (Harvard Business School)
    Abstract: We study the impact of reputational incentives in markets characterized by moral hazard problems. Social preferences have been shown to enhance contract enforcement in these markets, while at the same time generating considerable wage and price rigidity. Reputation powerfully amplifies the positive effects of social preferences on contract enforcement by increasing contract efficiency substantially. This effect is, however, associated with a considerable bilateralisation of market interactions, suggesting that it may aggravate price rigidities. Surprisingly, reputation in fact weakens the wage and price rigidities arising from social preferences. Thus, in markets characterized by moral hazard, reputational incentives unambiguously increase mutually beneficial exchanges, reduce rents, and render markets more responsive to supply and demand shocks.
    Keywords: Reputation; Reciprocity; Relational Contracts; Price Rigidity; Wage Rigidity
    JEL: C90 D82 E24 J30 J41
    Date: 2008–07–01
  35. By: Julen ESTEBAN-PRETEL; SAWADA Yasuyuki
    Abstract: In this paper, we study the structural change occurring in Japan's post-World War II era of rapid economic growth. We use a two-sector neoclassical growth model with government policies to analyze the evolution of the Japanese economy in this period and to assess the role of such policies. Our model is able to replicate the empirical behavior of the main macroeconomic variables. Three findings emerge from our policy analysis. First, neither price and investment subsidies to the agricultural sector, nor industrial policy play a crucial role in the rapid postwar growth. Second, while a government subsidy for families in urban areas could have facilitated migration from the agricultural to the non-agricultural sector, such a policy would not have improved the overall performance of the Japanese economy. Finally, had there existed a labor migration barrier, the negative long-run level effect on output would have been substantial.
    Date: 2009–01
  36. By: Meacci, Ferdinando
    Abstract: This paper is concerned with chapters 25-35 of Part V, The Division of Profit into Interest and Profit of Enterprise, of Volume 3 of Capital. These chapters may be properly grouped in an ideal Part to be possibly titled "Credit and Crises, or Money Capital and Fictitious Capital" and is referred to in this paper as 'the unidentified Part'. This Part should be strictly considered as a follow-up of Part IV, The Transformation of Commodity Capital and Money Capital into Commodity-Dealing Capital and Money-Dealing Capital (Merchant's Capital) in the sense that while the former deals with the role played by merchant's capital, and particularly by money-dealing capital, the latter deals with the obstruction or perversion inflicted on this role by money capital being turned into fictitious capital by an improper use of credit. The paper is structured in three ideal sections. The aim of the first section is to clear the debris of 'the unidentified Part' and to reconstruct Marx's own thinking about the nature and role of credit and of fictitious capital in relation to the concept of merchant's capital and to the phenomenon of crises. On the contrary, the second section, which is mostly focused on different forms versus different sets of crises, highlights some contradictions in Marx's unsystematic treatment of the relations between financial and real crises. The third section is derived from the arguments set out in the previous two sections. Its aim is to assess Marx's similarity with Keynes on the matter of 'money as money' and of financial crises. Its conclusion (which is also the conclusion of the paper) is that this similarity, however strong with regard to the role of money as a store of value, is bound to collapse if Marx's law of the falling rate of profit is believed to be true. For in this case the fictitious-capital theory of crises developed in 'the unidentified Part' acquires a secondary importance while financial crises come to be viewed as a typical effect, rather than as the cause, of real crises.
    Keywords: Marx; fictitious capital; money capital; financial crises
    JEL: E32 B14 E11
    Date: 1998
  37. By: Mariacristina De Nardi; Eric French; John Bailey Jones
    Abstract: Rich people, women, and healthy people live longer. We document that this heterogeneity in life expectancy is large, and we use an estimated structural model to assess its effect on the elderly's saving. We find that the differences in life expectancy related to observable factors such as income, gender, and health have large effects on savings, and that these factors contribute by similar amounts. We also show that the risk of outliving one's expected lifespan has a large effect on the elderly's saving behavior.
    JEL: D1 D31 D91 E2 E21 E6 H31 I1
    Date: 2009–01
  38. By: Orlowski, Lucjan T
    Abstract: This study identifies five distinctive stages of the current global financial crisis: the meltdown of the subprime mortgage market; spillovers into broader credit market; the liquidity crisis epitomized by the fallout of Northern Rock, Bear Stearns and Lehman Brothers with counterparty risk effects on other financial institutions; the commodity price bubble, and the ultimate demise of investment banking in the U.S. The study argues that the severity of the crisis is influenced strongly by changeable allocations of global savings coupled with excessive credit creation, which lead to over-pricing of varied types of assets. The study calls such process a “wandering asset-price bubble”. Unstable allocations elevate market, credit and liquidity risks. Monetary policy responses aimed at stabilizing financial markets are proposed.
    Keywords: subprime mortgage crisis; credit crisis; liquidity crisis; market risk; credit risk; default risk; counterparty risk; collateralized debt obligations; Level 3 Assets; Basel II
    JEL: G12 G15 E44 G21
    Date: 2008–12–10
  39. By: Clive L Spash; Heinz Schandl (CSIRO Sustainable Ecosystems, Australia)
    Abstract: This paper explores the approach of Post Keynesian Economics (PKE) in comparison with ecological economics. While PKE, like all macroeconomics, has failed to address environmental problems it does have many aspects which make compatibility with ecological economics seem feasible. Ecological economics has no specific macroeconomic approach although it has strong implications for economic growth and how this should be controlled, directed and in materials terms limited. We highlight growth as the key area of difference and reflect upon how Keynes himself saw capital accumulation as a means to an end not an end in itself, regarded it as a temporary measure and also was well aware of some of its psychological and social drawbacks.
    Keywords: environment, Keynes, post keynesian, ecological economics
    JEL: E12 O40 P16 Q01
    Date: 2008–12
  40. By: Martha J. Bailey; William J. Collins
    Abstract: More than a half century after its peak, the baby boom's causes remain a puzzle. A novel argument posits that rapid changes in household technology from 1940 to 1960 account for this large increase in fertility. We present new empirical evidence that is inconsistent with this claim. Rapid advances in household technology began long before 1940 while fertility declined, and differences and changes in appliance ownership and electrification in U.S. counties are negatively correlated with fertility rates from 1940 to 1960. Finally, the Amish, a group strictly limiting the use of modern technologies, experienced a coincident and sizable baby boom.
    JEL: E0 J1 N3
    Date: 2009–01
  41. By: Jeff Dayton-Johnson
    Abstract: Latin America has not neglected fiscal policy. Since the end of the debt crisis of the 1980s, governments in the region have tightened their belts assiduously. Fiscal deficits have fallen from 11 per cent of public revenues in the 1970s and 1980s, to only 8 per cent since 2000. The year-to-year volatility of taxes, spending and deficits – long a feature of fiscal policy making in the region with harmful effects for economic performance – has likewise fallen: an index of deficit volatility calculated by the OECD Latin American Economic Outlook 2009 shows a fall of a third from 1990-94 to 2000-06, with Latin America standing just 6 per cent above the volatility levels in OECD countries in the latter period.
    Date: 2008–10
  42. By: William Barnett (Department of Economics, The University of Kansas); Apostolos Serletis (Department of Economics, University of Calgary)
    Abstract: This chapter is an up-to-date survey of the state-of-the art in consumer demand analysis. We review (and evaluate) advances in a number of related areas, in the spirit of the recent survey paper by Barnett and Serletis (2008). In doing so, we only deal with consumer choice in a static framework, ignoring a number of important issues, such as, for example, the effects of demographic or other variables that affect demand, welfare comparisons across households (equivalence scales), and the many issues concerning aggregation across consumers.
    Keywords: Demand systems, Consumer preferences, Theoretical regularity.
    JEL: D12 E21
    Date: 2009–01
  43. By: Juan Eduardo Coeymans. (Instituto de Economía. Pontificia Universidad Católica de Chile.)
    Abstract: En este artículo se describe cómo se determina la tasa de desempleo de la economía de Paraguay en el periodo 1985-2007. En el modelo teórico se supone la existencia de rigideces salariales que generan desempleo de tipo involuntario, los salarios son el resultado de un proceso de negociación entre trabajadores y dueños del capital y el poder de negociación salarial de los trabajadores depende negativamente del desempleo. <br><br>Al combinar las ecuaciones de demanda de trabajo, de reacción salarial y la identidad de la tasa de desempleo, se puede obtener una ecuación de forma semireducida para determinar el desempleo, el cual depende del crecimiento del stock de capital y de la oferta de trabajo. <br><br>El enfoque teórico es validado ampliamente en el análisis empírico, obteniéndose signos de acuerdo a lo esperado y aceptándose las restricciones teóricas sobre los coeficientes. El cumplimiento de estas restricciones está condicionado al uso de población en edad de trabajar como sustituto de la fuerza de trabajo.
    Keywords: Mercado Laboral, Desempleo, Paraguay.
    JEL: E24 O54 C13
    Date: 2008
  44. By: Juan Eduardo Coeymans. (Instituto de Economía. Pontificia Universidad Católica de Chile.)
    Abstract: En este artículo se describe cómo se determina la inversión en capital fijo en la economía de Paraguay. El enfoque utilizado es el modelo neoclásico de Jorgenson, el cual es adaptado a las características de una economía en desarrollo. Se consideraron dos modelos alternativos. El primer modelo incluye la tasa de interés y el periodo de la estimación es 1994-2007. El segundo modelo excluye a esta variable, pero permite lograr una muestra más larga que abarca el periodo 1984-2007. <br><br>Cuando se incluye la tasa de interés real, se encuentra que esta variable sí afecta a la inversión, pero el efecto de la tasa de rentabilidad es muy superior en magnitud. Restricciones de liquidez podrían explicar esta diferencia, ya que cuando sube la rentabilidad aumentan los recursos propios para financiar la inversión. Si el modelo estimado excluye la tasa de interés real, utilizando como variable explicativa solo la tasa de rentabilidad, se encuentra una ecuación notablemente estable que logra explicar bastante bien la dinámica de la inversión en el periodo analizado.
    Keywords: Inversión, Corrección de Errores, Paraguay.
    JEL: E22 O54 C13
    Date: 2008
  45. By: Chali, Nondo; Mulugeta, Kahsai
    Abstract: This study applies panel data techniques to investigate the long-run relationship between energy consumption and GDP for a panel of 19 African countries (COMESA) based on annual data for the period 1980-2005. In the first step, we examine the degree of integration between GDP and energy consumption by employing three panel unit root tests and find that the variables are integrated of order one. In the second step, we investigate the long-run relationship between energy consumption and GDP. Results overwhelming show that GDP and energy consumption move together in the long-run. In the third step, we estimate the long-run relationship and test for causality using panel-based error correction models. The results indicate that long-run and short-run causality is unidirectional, running from energy consumption to GDP.
    Keywords: Energy consumption, GDP, Panel Causality tests, International Development, Resource /Energy Economics and Policy, O13, O55,
    Date: 2009–01–31
  46. By: The Eurosystem Household Finance and Consumption Network
    Abstract: The first part of this paper provides a brief survey of the recent literature that employs survey data on household finance and consumption. Given the breadth of the topic, it focuses on issues that are particularly relevant for policy, namely i) wealth effects on consumption, ii) housing prices and household indebtedness, iii) retirement income, consumption and pension reforms, iv) access to credit and credit constraints, v) financial innovation, consumption smoothing and portfolio selection and vi) wealth inequality. The second part uses concrete examples to summarise how results from such surveys feed into policy-making within the central banks that already conduct such surveys. JEL Classification: C42, D12, D14.
    Keywords: Household finance, consumption, survey data.
    Date: 2009–01
  47. By: William Barnett (Department of Economics, The University of Kansas); Apostolos Serletis (Department of Economics, University of Calgary)
    Abstract: This paper presents the differential approach to applied demand analysis. The demand systems of this approach are general, having coefficients which are not neces- sarily constant. We consider the Rotterdam parameterization of differential demand systems and derive the absolute and relative price versions of the Rotterdam model, due to Theil (1965) and Barten (1966). We address estimation issues and point out that, unlike most parametric and semi-nonparametric demand systems, the Rotterdam model is econometrically regular.
    Keywords: Diffrential demand systems, Theoretical regularity, Econometric regularity.
    JEL: D12 E21
    Date: 2009–01
  48. By: John B. Taylor
    Abstract: This paper is an empirical investigation of the role of government actions and interventions in the financial crisis that flared up in August 2007. It integrates and summarizes several ongoing empirical research projects with the aim of learning from past policy. The evidence is presented in a series of charts which are backed up by statistical analysis in these research projects.
    JEL: E0
    Date: 2009–01
  49. By: Eduardo Borensztein; Julia Cagé; Daniel Cohen; Cécile Valadier
    Abstract: The report argues that aid volatility is an important source of volatility for the poorest countries. Following a method already applied by the Agence Française de Développement, the report argues that loans to LICs should incorporate a floating grace period, which the country could draw upon when hit by a shock. The definition of a shock should include aid uncertainty, along with others such as commodity shocks and natural disasters. The idea is calibrated to a key IMF policy instrument towards Low-Income Countries, the Poverty-Reducing and Growth Facility (PRGF).
    Date: 2008–11
  50. By: Rudolf, Barbara (Swiss National Bank); Zurlinden, Mathias (Swiss National Bank)
    Abstract: This paper presents estimates of the aggregate net (wealth) capital stock and aggregate capital services for Switzerland. We derive these estimates in a consistent manner using the perpetual inventory method. Due to changes in data availability, the time series cover the period 1970-2005 for a 2-asset breakdown (equipment and structures) and 1990-2005 for a 12-asset breakdown (nine categories of equipment and three of structures). The sensitivity of the results is examined by varying assumptions on the initial capital stocks, the length of asset lives, the method for calculating service prices, and the choice of ICT deflators. Differences to the estimates published recently by the Federal Statistical Office are summarised in the appendix.
    Keywords: capital stock; capital services; ICT goods
    JEL: C43 D24 D92 E22
    Date: 2008–05–01
  51. By: Miru, Oana Maria; Hetes-Gavra , Roxana; Nicolescu, Ana Cristina
    Abstract: The Basel II Agreement is a new stage in the development of prudential regulations. Compared to the initial agreement, Basel I, this one allows a more large and precise analysis of banking risks. The European approach of Basel II requirements aims to offer some common conditions for all the credit institutions. Secondly, in order to achieve the objectives of Basel II, an active implication of the supervisory authorities is needed, as well as a tighter cooperation between them in order to increase the financial integration at the European Union level. In what concerns Romania, that has recently joined the European Union, the implementation of Basel II requirements imply a new series of challenges both for credit institutions and for the Central Bank. These challenges, for the commercial banks, reside in adjusting the risk management techniques and the informational system, training the staff, obtaining the databases, etc. and for the Central Bank in both adapting the surveillance process and elaborating new regulations. This paper tries to analyze the main implications of implementing these requirements, both for the Romanian commercial banks and for the National Bank.
    Keywords: banking; prudential regulations; supervision; capital requirements
    JEL: E5 E50
    Date: 2008
  52. By: Bolli, Thomas (Swiss National Bank); Zurlinden, Mathias (Swiss National Bank)
    Abstract: This paper presents results on human capital accumulation for the Swiss economy. We find that the index of labour quality has grown at a rate of 0.5% per year from 1991 to 2006. The main sources are the growth in average levels of education and the passing of the baby boom cohort through the age structure of the workforce. Projections over the period 2006-2050 suggest that labour quality growth will slow down with time. We also calculate a quality-adjusted unemployment rate and find that the unemployment rate is reduced by about 0.3 pp when human capital accumulation is taken into account.
    Keywords: human capital; labour quality; unemployment rate
    JEL: E24 J24 J31
    Date: 2008–04–01
  53. By: Tobias Broer
    Abstract: Wealthier people generally hold a larger part of their savings in risky assets. Using the US Survey of Consumer Finances, I show that wealthier households also have a higher portfolio share of foreign assets. This relative home bias of the poor does not seem to be explained by fixed participation costs alone, as the portfolio share of foreign assets increases with financial wealth even among participants in foreign asset markets. This paper shows how both biases of poorer agents' portfolios, towards safe and home assets, can arise in a simple 2 country economy with income and portfolio heterogeneity. Poor investors are naturally biased against domestic equity when wages and capital returns are positively correlated, making equity a bad hedge against fluctuations in labour income relative to bonds. Moreover poor investors prefer home to foreign bonds if equilibrium terms of trade movements systematically lead to a fall in the purchasing power of domestic assets in periods of high wages. I show that this is likely to be the case if aggregate supply shocks at home are more important than abroad. Finally, the model shows that aggregate home bias in the country portfolio implies relative home bias of the poor and vice versa.
    Keywords: Heterogeneous Agents, Home Bias, Inequality, International Asset Diversification, Portfolio Choice
    JEL: F36 G11 E21 D11 D31
    Date: 2008
  54. By: Manuel A. Hidalgo Pérez (Universidad Pablo de Olavide); Jesús Rodríguez López (Universidad Pablo de Olavide); José Mª O.Kean Alonso (Universidad Pablo de Olavide)
    Abstract: Utilizando la base de datos EU KLEMS, se contrasta la hipótesis de complementariedad entre habilidad y capital en los distintos sectores productivos en España en el periodo 1980-2005. Se analizan tres tipos de trabajadores clasificados según su nivel de habilidad sea alto, medio o bajo. Los activos de capital se van a clasificar entre activos TIC (tecnologías de la información y la comunicación) y activos no-TIC. La adquisición y el uso de activos TIC son costosos pero ha ido disminuyendo en el periodo en consideración en términos relativos a otros activos y al factor trabajo. El principal resultado que se obtiene es que existe un grado de sustituibilidad entre los trabajadores y los activos TIC a medida que la habilidad del trabajador va aumentando. De hecho, los activos TIC son muy complementarios con los trabajadores de alta habilidad. A lo largo del periodo analizado, la fracción de trabajadores con habilidad media y alta ha crecido un 21% y un 12%, respectivamente, en detrimento de los trabajadores de baja habilidad. Después de descomponer estos cambios, se descubre que existe un ajuste dentro de los sectores más que un ajuste del trabajo entre sectores.
    Keywords: capital-skill complementarity, ICT, translog cost function, elasticity of substitution.
    JEL: E22 J24 J31 O33
    Date: 2008
  55. By: Oliver Blaskowitz; Helmut Herwartz
    Abstract: Common approaches to test for the economic value of directional forecasts are based on the classical Chi-square test for independence, Fisher’s exact test or the Pesaran and Timmerman (1992) test for market timing. These tests are asymptotically valid for serially independent observations. Yet, in the presence of serial correlation they are markedly oversized as confirmed in a simulation study. We summarize serial correlation robust test procedures and propose a bootstrap approach. By means of a Monte Carlo study we illustrate the relative merits of the latter. Two empirical applications demonstrate the relevance to account for serial correlation in economic time series when testing for the value of directional forecasts.
    Keywords: Directional forecasts, directional accuracy, forecast evaluation, testing independence, contingency tables, bootstrap
    JEL: C32 C52 C53 E17 E27 E47 F17 F37 F47 G11
    Date: 2008–12
  56. By: Dimitris K. Christopoulos (Panteion University); Karine Gente (University of Aix-Marseilles); Miguel A. Leon-Ledesma (University of Kent)
    Abstract: Empirical evidence suggests that real exchange rates (RER) behave differently in developed and developing countries. We develop an exogenous 2-sector growth model in which RER determination depends on the country's capacity to borrow from international capital markets. The country faces a constraint on capital inflows. With high domestic savings, the country converges to the world per capita income and RER only depends on productivity spread between sectors (Balassa-Samuelson effect). If the constraint is too tight and/or domestic savings too low, RER depends on both net foreign assets (transfer effect) and productivity. We then analyze the empirical implications of the model and find that, in accordance with the theory, RER is mainly driven by productivity and net foreign assets in constrained countries and exclusively by productivity in unconstrained countries.
    Keywords: Real exchange rate; capital inflows constraint; overlapping generations
    JEL: E39 F32 F41
    Date: 2008–10

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