nep-mac New Economics Papers
on Macroeconomics
Issue of 2009‒03‒14
53 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. On the role of money growth targeting under inflation targeting regime By Dai, Meixing
  2. Inflation Targets in a Monetary Union with Endogenous Entry By Stéphane Auray; Aurélien Eyquem; Jean-Christophe Poutineau
  3. Fiscal Policy in a Monetary Union in the Presence of Uncertainty about the Central Bank Preferences By Dai, Meixing; Sidiropoulos, Moise
  4. Out of reach? Convergence to an inflation target in the Central Bank of Iceland’s macroeconomic model By Baldursson, Fridrik M.; Hall, Axel
  5. Money, Infation and Interest Rate: Does the Link Change when the Policy Instrument Changes? By Castillo, Paul; Montoro, Carlos; Tuesta, Vicente
  6. Expected Monetary Policy and the Dynamics of Bank Lending Rates By Claudia Kwapil; Johann Scharler
  7. Bayesian Analysis of DSGE Models with Regime Switching By Eo, Yunjong
  8. The monetary policy rules in EU-15: before and after the euro By Borek Vasicek
  9. Reset Price Inflation and the Impact of Monetary Policy Shocks By Mark Bils; Peter J. Klenow; Benjamin A. Malin
  10. Do Asymmetric Central Bank Preferences Help Explain Observed Inflation Outcomes? By Matthew Doyle; Barry Falk
  11. Monetary policy transparency and inflation persistence in a small open economy By Dai, Meixing; Sidiropoulos, Moïse; Spyromitros, Eleftherios
  12. Global Slack and Domestic Inflation Rates: A Structural Investigation for G-7 Countries By Fabio Milani
  13. A Note on the Dynamics of Persistence in US Inflation By Noriega Antonio E.; Ramos Francia Manuel
  14. Common and Spatial Drivers in Regional Business Cycles By Artis, Michael J; Dreger, Christian; Kholodilin, Konstantin
  15. On the dynamics of inflation persistence around the world By Antonio E. Noriega; Manuel Ramos Francia
  16. Predicting European Union recessions in the euro era: The yield curve as a forecasting tool of economic activity By Gogas, Periklis; Chionis, Dionisios; Pragkidis, Ioannis
  17. Fiscal Convergence, Business Cycle Volatility and Growth By Davide Furceri
  18. Experts´ Macroeconomics Expectations: An Evaluation of Mexican Short-Run Forecasts. By Carlos Capistrán; Gabriel López-Moctezuma
  19. Do Latin American Central Bankers Behave Non-Linearly?: The experiences of Brazil, Chile, Colombia and Mexico By Luiz de Mello; Diego Moccero; Matteo Mogliani
  20. Money, Credit and Default By Sandra Lizarazo; Jose Maria Da-Rocha
  21. New Keynesian versus Old Keynesian Government Spending Multipliers By John F. Cogan; Tobias Cwik; John B. Taylor; Volker Wieland
  22. Transparency under Flexible Inflation Targeting: Experiences and Challenges By Svensson, Lars E O
  23. Uncertain Times, uncertain measures By Michelle Alexopoulos; Jon Cohen
  24. Stylized Facts of the Mexican Business Cycles. By Gabriel Cuadra
  25. Convergence of EMU Equity Portfolios By Giofré, Maela/M.
  26. Efficient Search on the Job and the Business Cycle, Second Version By Guido Menzio; Shouyong Shi
  27. An Affine Model of the Term Structure of Interest Rates in Mexico. By Josué Fernando Cortés Espada; Manuel Ramos Francia
  28. Quantifying the Effect of Financial Conditions in the Euro Area, Japan, United Kingdom and United States By Stéphanie Guichard; David Haugh; David Turner
  29. Deforestation and Seigniorage in Developing Countries:Better Environment or Lower Inflation? By Jean-Louis COMBES; Pascale COMBES MOTEL; Alexandru MINEA; P. VILLIEU
  30. The Long-Run Risks Model and Aggregate Asset Prices: An Empirical Assessment By Jason Beeler; John Y. Campbell
  31. The finance-dominated growth regime, distribution, and aggregate demand in the US By Özlem Onaran; Engelbert Stockhammer; Lukas Grafl
  32. Pro cyclicité de la politique budgétaire et surveillance multilatérale dans les unions monétaires africaines By Sylviane GUILLAUMONT JEANNENEY; Sampawende Jules TAPSOBA
  33. Credit Supply and Output Volatility By Cristiano Cantore; Mathan Satchi
  34. Assessing Long-Term Fiscal Developments: a New Approach By António Afonso; Luca Agnello; Davide Furceri; Ricardo M. Sousa
  35. A Likelihood Analysis of Models with Information Frictions By Leonardo Melosi
  36. Two speed Europe and business cycle synchronization in the European Union: The effect of the common currency By Gogas, Periklis; Kothroulas, George
  37. Real exchange rates and real interest rate differentials: a present value interpretation By Mathias Hoffmann; Ronald MacDonald
  38. "Cyclical Informality and Unemployment" By Mariano Bosch; Julen Esteban-Pretel
  39. Business Cycle Synchronization Across the Euro-Area: a Wavelet Analysis By Luís Francisco Aguiar; Maria Joana Soares
  40. Modeling the Dynamics of EU Economic Sentiment Indicators: An Interaction-Based Approach By Jaba Ghonghadze; Thomas Lux
  41. The Aftermath of Financial Crises By Reinhart, Carmen; Rogoff, Kenneth
  42. Determinants Of Demand For Different Types Of Investment Goods By John J. Heim
  43. Stabilization Effects of Social Spending: Empirical Evidence from a Panel of OECD Countries Overcoming the Financial Crisis in the United States By Davide Furceri
  44. Multiple Reserve Requirements, Exchange Rates, Sudden Stops and Equilibrium Dynamics in a Small Open Economy By Wang, Wen-Yao; Hernandez-Verme, Paula
  45. Why did we fail to predict GDP during the last cycle? A breakdown of forecast errors for Austria. By Martin Schneider; Christian Ragacs
  46. Efectos cualitativos y cuantitativos de la aplicación de la NIC 12 sobre la información fiscal consolidada de las empresas del IBEX 35 By Mata Melo, Julio; Ustariz Lapuente, Blanca
  47. Migration and the welfare state: Dynamic Political-Economy Theory By Assaf Razin; Efraim Sadka; Benjarong Suwankiri
  48. The Spanish economy in EMU: The first ten years By Ángel Estrada; Juan Francisco Jimeno; José Luis Malo de Molina
  49. Does Macroeconomics Need Microeconomic Foundations? By Da Silva, Sergio
  50. Should We Discount the Far-Distant Future at Its Lowest Possible Rate? By Gollier, Christian
  51. Monnaie, Consommation et Substitution Intertemporelle By Stéphane Auray
  52. Are Banks Different? Evidence from the CDS Market. By Burkhard Raunig; Martin Scheicher
  53. A Note on Mexico and U.S. Manufacturing Industries’ Long-term Relationship. By Daniel Chiquiar; Manuel Ramos Francia

  1. By: Dai, Meixing
    Abstract: The mainstream inflation-targeting literature makes the strong assumption that the central bank can exactly target the interest rate which affects investment and consumption decisions and hence the money supply plays no role in the monetary policy strategy. This assumption is equivalent to admitting the perfect credibility of inflation target announced by the central bank, the perfect functioning of money and financial markets and that the central bank is willing to inject as much liquidity as the economic agents demand. Neither of these assumptions corresponds to the reality. In effect, the inflation expectations can not be easily anchored by the cheap talk of central bankers. On the other hand, the central bank may have many difficulties to target, in a context of financial instability, the interest rates which affect the real and financial decisions of private agents. We suggest that under inflation-targeting regime, money and credit markets vehicle the inflation expectations that can be anchored with a well-specified feedback money growth rule. The latter, in contrast to the Friedman’s k percent money growth rule, can help managing the inflation expectations in a manner to guarantee the dynamic stability of the economy. Furthermore, the model can be easily used to discuss the implications of the zero interest rate policy and the quantitative easing policy.
    Keywords: Interest rate rule; imperfect money and credit markets; inflation targeting; monetary targeting; inflation expectations; Friedman’s k percent money growth rule; feedback money growth rule; macroeconomic stability; zero interest rate policy; quantitative easing policy.
    JEL: E43 E51 E58 E52 E44
    Date: 2009–02–20
  2. By: Stéphane Auray (Université Lille 3 (GREMARS), Université de Sherbrooke (GREDI) and CIRPÉE); Aurélien Eyquem (GATE, UMR 5824, Université de Lyon and Ecole Normale Supérieure Lettres et Sciences Humaines, France); Jean-Christophe Poutineau (CREM (UMR 6211) Universite de Rennes 1 and Ecole Normale Superieure de Cachan, France.)
    Abstract: This paper shows that in a monetary union the interest rate rule of the Central Bank should react to the in°ation rate of the Harmonized Index of Consumption Price (HICP) rather than to the inflation rate of the Welfare-Based Consumption Price (WBCP). In a two{country general equilibrium model of the EMU with endogenous entry, we compare both monetary policy regimes and find that targeting the HICP inflation rate reduces the volatility of the Producer Price Index (PPI) in°ation rate and the volatility of the nominal .
    Keywords: monetary union, interest rate rule, harmonized index of consumption price
    JEL: E51 E58 F36 F41
    Date: 2009
  3. By: Dai, Meixing; Sidiropoulos, Moise
    Abstract: In this paper, we examine the link between political transparency of a common central bank (CCB) and decentralized supply-side fiscal policies in a monetary union. We find that the opacity of a conservative CCB has a restrictive effect on national fiscal policies since each government internalizes the influence of its actions on the common monetary policy and thus reinforces the disciplinary effect of institutional constraints such as the Stability and Growth Pact on national fiscal authorities. However, more opacity could imply higher inflation and unemployment when the union is large enough and induce higher inflation and output-gap variability. An enlargement of the union incites national governments to increase tax rate, and weakens the disciplinary effects of opacity on member countries if fiscal policymaking is relatively decentralized and the CCB quite conservative. It induces an increase in the level of inflation and unemployment, and could increase inflation and output-gap variability.
    Keywords: central bank transparency; supply-side fiscal policy; monetary union.
    JEL: E58 E52 E50 E63
    Date: 2008–06
  4. By: Baldursson, Fridrik M.; Hall, Axel
    Abstract: Inflation scenarios in forecasts of the Central Bank of Iceland (CBI) appear to converge to the inflation target (2.5%) in 8-9 quarters. We ask whether this is a coincidence or an inherent property of the CBI’s model, QMM. We formulate a sub-model, containing equations for inflation, inflation expectations, wages, exchange rate and the policy interest rate. We find that rapid convergence toward the inflation target is a property of the QMM when a Taylor-rule is included in the model. Underlying is an inflation expectations equation which assumes a high degree of credibility of the CBI. This equation, however, lacks empirical underpinnings. When we replace the QMM expectations equation with an estimated equation, a more realistic picture emerges where the Central Bank has to raise the policy rate considerably higher than in QMM scenarios and it takes much longer to reach the inflation target.
    Keywords: Inflation targeting; inflation forecasts; inflation expectations; macroeconomic models; credibility
    JEL: E27 E58 E52 E44
    Date: 2008–09
  5. By: Castillo, Paul (Banco Central de Reserva del Perú); Montoro, Carlos (Banco Central de Reserva del Perú); Tuesta, Vicente (Deutsche Bank)
    Abstract: The goal of this paper is to explain a recent regularity observed in economies in which central banks have moved from using a money aggregate as the instrument for the conduction of monetary policy towards a short-term interest rate (for example Peru in 2002). In particular, in those economies we observe that, after the change in the policy instrument, there is a decrease in the macroeconomic volatility accompanied by a reduction in the average level of both inflation and interest rates vis-à-vis an increase in the average level of money aggregates (an increase in the money demand). In order to explain the previous stylized fact, a second order solution of a general equilibrium model for a small open economy is evaluated. By analyzing the second order solution we relax the assumption of certainty equivalence which permits consider the role of uncertainty (risk) in the equilibrium solution of the economy. The previous solution takes into account the reduction of macroeconomic uncertainty (risk) as a consequence of changing the instrument (from money aggregates to interest rate rules), helping to explain the stylized fact. Our findings show that the use of the interest rate as the instrument for the conduction of monetary policy induces a reduction of macroeconomic risks. In turn, the previous reduction has driven a decrease in the average level of interest rates and inflation which is consistent with the increase in the demand for money observed in Peru in the 2000s. Hence, the recent increase in the growth rate of money aggregates should not be linked, whatsoever, to higher inflation rates.
    Keywords: Small Open Economy Model, Incomplete Markets, Second Order Solution
    JEL: E52 E42 E12 C63
    Date: 2009–01
  6. By: Claudia Kwapil (Oesterreichische Nationalbank, Economic Analysis Division, Otto-Wagner-Platz 3,POB 61, A-1011 Vienna, Austria); Johann Scharler (Department of Economics, University of Linz, Altenbergerstrasse 69, A-4040 Linz, Austria,)
    Abstract: In this paper we explore empirically to what extent expected monetary policy matters for the dynamics of bank lending rates in the U.S., the U.K. and Germany. We find that banks have increasingly behaved in a forward-looking fashion by taking expected changes in monetary policy rates into account when setting lending rates. We document that along with the shifts in monetary policy regimes towards inflation targeting, expected monetary policy has become more important as a determinant of bank lending rates. Overall, our results provide support for the hypothesis that monetary policy has become more effective by successfully influencing private sector expectations.
    Keywords: Monetary Policy, Expectations, Interest Rate Pass-Trough
    JEL: E52 E58
    Date: 2009–01–30
  7. By: Eo, Yunjong
    Abstract: I estimate DSGE models with recurring regime changes in monetary policy (inflation target and reaction coefficients), technology (growth rate and volatility), and/or nominal price rigidities. In the models, agents are assumed to know deep parameter values but make probabilistic inference about prevailing and future regimes based on Bayes’ rule. I develop an estimation method that takes these probabilistic inferences into account when relating state variables to observed data. In an application to postwar U.S. data, I find stronger support for regime switching in monetary policy than in technology or nominal rigidities. In addition, a model with regime switching policy that conforms to the long-run Taylor principle given in Davig and Leeper (2007) is preferred to a determinacy-indeterminacy model motivated by Lubik and Schorfheide (2004). These empirical results indicate that, even though a passive policy regime produced more volatility in the economy from the early 1970s to the mid-1980s, the economy can be explained by determinacy over the entire postwar period, implying no role for sunspot shocks in explaining the changes in volatility.
    Keywords: New Keynesian DSGE; Markov-switching; Monetary Policy; Indeterminacy; Long-run Taylor Principle; Bayesian Analysis;
    JEL: C51 C32 E32 C52 E52 C11
    Date: 2008–08
  8. By: Borek Vasicek (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: The objective of this paper is to identify empirically the logic behind short-term interest rates setting of: 1) the monetary authorities of the 15 EU countries before the launch of the European Monetary Union (EMU) and 2) the European Central Bank (ECB) and the central banks of the non-EMU participants since 1999. We find that the Taylor rule, based on the response to inflation and to the output gap, is a reasonable description of the interest rate setting for only a few economies. In addition, the foreign interest rate and the long-term interest rate are often crucial to explain short-term interest rate developments. On the contrary, the impact of other variables often proposed in the literature (exchange rates, monetary growth and asset prices) is negligible. The application of singleequation analysis to Euro area aggregate data to identify the ECB.
    Keywords: monetary policy, Taylor rule, European Monetary Union, panel data
    JEL: E52 E58
    Date: 2008–12
  9. By: Mark Bils; Peter J. Klenow; Benjamin A. Malin
    Abstract: A standard state-dependent pricing model generates little monetary non-neutrality. Two ways of generating more meaningful real effects are time-dependent pricing and strategic complementarities. These mechanisms have telltale implications for the persistence and volatility of "reset price inflation." Reset price inflation is the rate of change of all desired prices (including for goods that have not changed price in the current period). Using the micro data underpinning the CPI, we construct an empirical measure of reset price inflation. We find that time-dependent models imply unrealistically high persistence and stability of reset price inflation. This discrepancy is exacerbated by adding strategic complementarities, even under state-dependent pricing. A state-dependent model with no strategic complementarities aligns most closely with the data.
    JEL: E31 E32 E52
    Date: 2009–03
  10. By: Matthew Doyle (Department of Economics, University of Waterloo); Barry Falk (Department of Economics, James Madison University)
    Abstract: When the central banker’s loss function is asymmetric, changes in the volatility of inflation and/or unemployment affect equilibrium inflation. This suggests that changing macroeconomic volatilities may be an important driving force behind trends in observed inflation. Previous evidence, which has offered support for this idea, suffers from a spurious regression problem. Once this problem is controlled for, the evidence suggests that the volatility of unemployment does not help explain inflation outcomes. There is some evidence of a relationship between inflation and its volatility, but overall the data does not support the view that changing economic volatility, as filtered through asymmetric central bank preferences, is an important driver of inflation trends.
    Keywords: Inflation, Monetary Policy, Asymmetric Loss Function.
    JEL: E50 E61
    Date: 2009–02
  11. By: Dai, Meixing; Sidiropoulos, Moïse; Spyromitros, Eleftherios
    Abstract: Using a New Keynesian small open economy model, we examine the effects of central bank transparency on inflation persistence. We have found that more opacity could reinforce the effect of persistent shocks on the level and variability of endogenous variables if the difference between the interest elasticity of domestic goods demand and the degree of trade openness is sufficient large or sufficiently low, judging on structural parameters characterising the economy, the central bank preference and its initial degree of opacity. Our result implies that, under perfect capital mobility, a high degree of domestic financial development is a good reason for increasing the transparency.
    Keywords: Central bank’s transparency; open economy; inflation persistence; real exchange rate persistence.
    JEL: E58 E52 F41
    Date: 2008–12
  12. By: Fabio Milani (Department of Economics, University of California-Irvine)
    Abstract: Recent papers have argued that one implication of globalization is that domestic inflation rates may have now become more a function of ``global", rather than domestic, economic conditions, as postulated by closed-economy Phillips curves. This paper aims to assess the empirical importance of global output in determining domestic inflation rates by estimating a structural model for a sample of G-7 economies. The model can capture the potential effects of global output fluctuations on both the aggregate supply and the aggregate demand relations in the economy and it is estimated using full-information Bayesian methods. The empirical results reveal a significant effect of global output on aggregate demand in most countries. Through this channel, global economic conditions can indirectly affect inflation. The results, instead, do not seem to provide evidence in favor of altering domestic Phillips curves to include global slack as an additional driving variable for inflation.
    Keywords: Globalization; Global Slack; Inflation Dynamics; Phillips Curve; Bayesian Estimation
    JEL: E31 E50 E52 E58 F41
    Date: 2009–02
  13. By: Noriega Antonio E.; Ramos Francia Manuel
    Abstract: Empirical research on the degree and stability of inflation persistence in the US has produced mixed results: some suggest high and unchanged persistence during the last few decades, while others argue in favor of a decline in persistence since the early 1980s. We show that post-WWII US inflation (monthly and quarterly) became highly persistent during the´Great Inflation´ period, and then switched back to a low persistence process during 1984, and has remained stationary until the present day.
    Keywords: Inflation, Multiple change in persistence, Stationarity, Great inflation.
    JEL: C12 C22 E31 E52
    Date: 2008–08
  14. By: Artis, Michael J; Dreger, Christian; Kholodilin, Konstantin
    Abstract: We examine real business cycle convergence for 41 euro area regions and 48 US states. Results obtained by a panel model with spatial correlation indicate that the relevance of common business cycle factors is rather stable over the past two decades in the euro area and the US. Ongoing business cycle convergence often detected in cross-country data is not confirmed at the regional level. The degree of synchronization across the euro area is similar to that to be found for the US states. Thus, the lack of convergence does not seem to be an impediment to a common monetary policy.
    Keywords: Business cycle convergence; Spatial correlation; spatial panel model
    JEL: C51 E32 E37
    Date: 2009–03
  15. By: Antonio E. Noriega; Manuel Ramos Francia
    Abstract: We study the dynamics of inflation persistence in 45 countries for the period 1960-2008. We use a nonparametric unit root test robust to nonlinearities, error distributions, structural breaks and outliers, many of them typical features of inflation data, and a test for multiple changes in persistence, which decomposes the sample information between adjacent I(0) and I(1) periods. We find that (1) With very few exceptions, inflation around the world rejects a unit root, (2) for several countries there is evidence of significant changes in persistence, (3) bursts and drops in the level of inflation and in inflation persistence tend to coincide, (4) these drops occurred during “the Great Moderation” and during the adoption of inflation targeting. We conclude that inflation is characterized by either a stationary behaviour throughout the sample, or by switches of the type I(0)-I(1)-I(0). For all countries in our sample, any indication of nonstationarity seems to be temporary.
    Keywords: Inflation, Multiple persistence change, Stationarity, Unit root tests, Unknown direction of change, Monetary policy
    JEL: C12 C22 E31 E52 E58
    Date: 2009–02
  16. By: Gogas, Periklis; Chionis, Dionisios; Pragkidis, Ioannis
    Abstract: Several studies have established the predictive power of the yield curve, ie: the difference between long and short term bond rates, in terms of real economic activity, for the U.S. and various European countries. In this paper we use data from the European Union (EU15), ranging from 1994:Q1 to 2008:Q3. The seasonally adjusted real GDP is used to extract the long run trend and the cyclical component of the European output, while the European Central Bank’s euro area government benchmark bonds of various maturities are used for the calculation of the yield spreads. We also augment the models tested with non monetary policy variables: the unemployment and a composite European stock price index constructed from the indices of the three major European stock markets of London, Frankfurt and Paris. The methodology employed in the effort to forecast recessions, is a probit model of the inverse cumulative distribution function of the standard distribution, using several formal forecasting evaluation tests. The results show that the yield curve augmented with the composite stock index has significant forecasting power in terms of the EU15 real output.
    Keywords: forecasting; yield spread; recession; probit; term structure; monetary policy; real growth.
    JEL: E43 E32 E37
    Date: 2009–03
  17. By: Davide Furceri
    Abstract: This paper analyzes the effects of fiscal convergence on business cycle volatility and growth. Using a panel 21 OECD countries (including 11 EMU countries) and 40 years of data, we find that countries with similar government budget positions tend to have smoother business cycles. That is, fiscal convergence (in the form of persistently similar ratios of government surplus/deficit to GDP) is systematically associated with smoother business cycles. We also find evidence that reduced business cycle volatility through higher fiscal convergence stimulates growth. Our empirical results are economically and statistically significant and robust.<P>Convergence budgétaire, volatilité des cycles économiques et croissance<BR>Ce document analyse les effets de la convergence budgétaire sur la volatilité des cycles économiques et la croissance. En utilisant un échantillon de 21 pays de l’OCDE (incluant 11 pays de la zone euro) sur 40 ans, nous trouvons que les pays qui ont des positions budgétaires similaires tendent à avoir des cycles plus lisses. Cela signifie que la convergence budgétaire (sous la forme de ratios de déficit en point de PIB constamment similaires) est systématiquement associée à des cycles économiques plus lisses. Nous trouvons également qu’une volatilité des cycles économiques réduite grâce à une convergence budgétaire stimule la croissance. Nos résultats empiriques sont économiquement et statistiquement significatifs et robustes.
    Keywords: croissance économique, economic growth, business cycle volatility, volatilité des cycles économiques, fiscal convergence, convergence budgétaire
    JEL: E44 G20 G21 G28 R21
    Date: 2009–02–25
  18. By: Carlos Capistrán; Gabriel López-Moctezuma
    Abstract: This document analyzes inflation, exchange rate, interest rate, and GDP growth forecasts from the monthly Survey of Specialists in Economics from the Private Sector, maintained by Banco de México. The study concentrates on the mean across forecasters for the period from January 1995 to April 2008. The study evaluates the efficiency in the use of information and the relative performance using as benchmarks forecasts from time series models and from other macroeconomic variables. Inflation, interest rate, and GDP expectations seem to incorporate information in a relatively efficient manner. These forecasts appear to be better, in mean squared error terms, than the benchmark forecasts, except for the case of one-yearahead inflation. In addition, exchange rate forecasts do not seem to optimally incorporate available information and do not seem to improve upon forecasts obtained from a random walk model.
    Keywords: Predictive ability, Rational expectations, Rolling-forecasts.
    JEL: C22 C53 E17 E37 E47 F37
    Date: 2008–08
  19. By: Luiz de Mello; Diego Moccero; Matteo Mogliani
    Abstract: This papers estimates unrestricted monetary reaction functions for four Latin American countries (Brazil, Chile, Colombia and Mexico) and tests for the presence of non-linear effects in central bank behaviour. The analysis covers the post-1999 inflation-targeting period. We deal with the presence of unit roots in the data by estimating the policy rules in a co-integration setting. We test for linear and non-linear co-integration among the variables of interest. The results suggest that a non-linear specification is not rejected by the data for Brazil, Colombia and Mexico, but it is for Chile. Estimation of smooth-transition models by NLLS and EN-NLLS suggests that the central bank’s response to the inflation gap (i.e. deviations of expected inflation from the target) is invariant across policy regimes in Colombia. It becomes stronger in Mexico as expected inflation deviates from the target. Policy responses appear to weaken in Brazil as the inflation gap widens, a finding that most probably reflects a history of adverse supply shocks and upward adjustments in targets in the early years of inflation targeting. Non-linearity is also found in the central bank’s response to the exchange rate in Brazil and Colombia.<P>Les banques centrales d’Amérique latine se comportent-elles d’une manière non-linéaire? : Les expériences du Brésil, du Chili, de la Colombie et du Mexique<BR>Ce document estime des fonctions de réaction monétaires non-contraintes pour quatre pays d’Amérique latine (Brésil, Chili, Colombie et Mexique) et teste l’existence d’effets non-linéaires dans le comportement des banques centrales. L’analyse couvre la période post-1999 où la politique monétaire se caractérise par le ciblage d’inflation. Nous traitons la question de la présence de racines unitaires dans les données en estimant les règles de politique monétaire dans un cadre de cointégration. Nous testons l’existence d’une cointégration linéaire et non-linéaire de nos variables d’intérêt. Les résultats suggèrent que la spécification non-linéaire ne peut être rejetée pour les données brésiliennes, colombiennes et mexicaines ; elle l’est en revanche dans le cas du Chili. L’estimation de modèles de transition douce par des NLLS et EN-NLLS suggère que la réponse de la banque centrale à la différence entre l’inflation espérée et la cible d’inflation ne change pas selon le régime de politique monétaire au Chili. Elle se durcit au Mexique lorsque l’inflation espérée s’éloigne de la cible. Les réponses semblent s'assouplir au Brésil lorsque la différence entre l’inflation espérée et la cible d’inflation s’accroît ; ce résultat est certainement dû à des chocs d’offre négatifs et à des ajustements à la hausse des cibles dans les premières années de politique monétaire à cible d’inflation. Nous trouvons aussi un effet non-linéaire de la réponse de la Banque centrale au taux de change au Brésil et en Colombie.
    Keywords: cible d'inflation, co-intégration multiple, inflation targeting, reaction function, fonction de réaction, non-linear co-integration, smooth-transition model, modèle de transition douce
    JEL: C22 E52 O54
    Date: 2009–03–06
  20. By: Sandra Lizarazo (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM)); Jose Maria Da-Rocha (Facultade de Ciencias Económicas e Empresariais, Universidade de Vigo)
    Abstract: This paper develops a quantitative model of unsecured debt, default, and money demand for heterogenous agents economies. The paper generates a theory of money demand for the case in which money is a dominate asset that is not needed to carry-out transactions. In this environment holding money helps the agents to smooth their consumption during those periods in which they are excluded from credit markets following a default in their debts. In the model the welfare of the individuals is affected by the inflation rate: high inflation rates preclude individuals of using money as an asset that helps them smooth their consumption profile but low inflation rates tend to make softer the punishment for default making it diffcult to sustain high levels of debt at equilibrium. This two opposite effects imply that in equilibrium the inflation rate that maximizes individuals welfare is positive but not too high.
    Keywords: Default, Inflation, Money, Endogenous Borrowing Constraint
    JEL: F34 F36 F42
    Date: 2009
  21. By: John F. Cogan; Tobias Cwik; John B. Taylor; Volker Wieland
    Abstract: Renewed interest in fiscal policy has increased the use of quantitative models to evaluate policy. Because of modelling uncertainty, it is essential that policy evaluations be robust to alternative assumptions. We find that models currently being used in practice to evaluate fiscal policy stimulus proposals are not robust. Government spending multipliers in an alternative empirically-estimated and widely-cited new Keynesian model are much smaller than in these old Keynesian models; the estimated stimulus is extremely small just when needed most, and GDP and employment effects are only one-sixth as large, with private sector employment impacts likely to be even smaller.
    JEL: C52 E62
    Date: 2009–03
  22. By: Svensson, Lars E O
    Abstract: I report some personal views and reflections on transparency experiences and transparency challenges following my first year and a half as Deputy Governor at Sveriges Riksbank regarding (1) flexible inflation targeting, (2) the role of transparency in inflation targeting and committee decisions on instrument-rate paths, (3) the management of interest-rate expectations, and (4) the publishing of attributed minutes. I also mention some future developments and improvements in transparency and flexible inflation targeting that I believe would be desirable.
    Keywords: Inflation targeting; interest rate path; transparency
    JEL: E42 E43 E52 E58
    Date: 2009–03
  23. By: Michelle Alexopoulos; Jon Cohen
    Abstract: Are uncertainty shocks an important source of post WWII business cycle fluctuations? The evidence we present in this paper suggests they are. Using both the traditional measure of uncertainty – the stock market volatility index – and a new one - based on the number of New York Times’ articles on uncertainty and economic activity - we demonstrate that these shocks generate short sharp recessions and recoveries. Output, employment, productivity, consumption and investment all decrease in response to an unanticipated rise in uncertainty. Moreover, we find that wide spread changes in the level of uncertainty captured by our new newspaper index can account for between 10 and 25 percent of the short-run variation in these variables.
    Keywords: Uncertainty shocks, Business cycles
    JEL: E32 E2 C82
    Date: 2009–02–24
  24. By: Gabriel Cuadra
    Abstract: This paper provides a description of some of the empirical regularities for the Mexican business cycle. The purpose is to have a benchmark for assessing dynamic stochastic general equilibrium models for the Mexican case. We follow the Kydland and Prescott methodology to describe the cyclical properties of the Mexican business cycle. We describe the volatility of several macroeconomic variables as well as their correlation with GDP. We use two filters to remove trends from the data: Hodrick-Prescott filter and Baxter-King filter. The idea is to check the robustness of the results. Qualitatively the findings are similar across both filtering methods. In order to analyze changes in the properties of the Mexican business cycle, the whole period of analysis is divided into two sub-periods, 1980- 1995 and 1996-2006. The first sub-period is marked by high economic instability and the second and most recent sub-period is marked by a significant decrease in the volatility of all variables.
    Keywords: Mexican Economy, Business Cycles.
    JEL: E30
    Date: 2008–12
  25. By: Giofré, Maela/M.
    Abstract: This paper demonstrates that, after integration, equity portfolios of countries that joined the European Monetary Union have converged at faster rate than those of NON EMU countries. This outcome canbe interpreted as a combination of the convergence of inflation rates and the convergence of investment barriers. On the one hand, the common monetary policy might have driven a stronger comovement in inflation rates, leading to increasingly similar hedging strategies among member countries. On the other hand, exposure to the common currency might have homogenized bilateral investment barriers, thus inducing increasingly similar portfolio allocations among member countries. We find that the comovement of inflation rates has not significantly increased after EMU inception, pointing toward an exclusive role for convergence in investment barriers.
    Keywords: financial integration; EMU; inflation hedging; investment barriers
    JEL: G11 F30 G15 F21 F36
    Date: 2008–12
  26. By: Guido Menzio (Department of Economics, University of Pennsylvania); Shouyong Shi (Department of Economics, University of Toronto)
    Abstract: We build a directed search model of the labor market in which workers’ transitions between unemployment, employment, and across employers are endogenous. We prove the existence, uniqueness and efficiency of a recursive equilibrium with the property that the distribution of workers across employment states affects neither the agents’ values and strategies nor the market tightness. Because of this property, we are able to compute the equilibrium outside the non-stochastic steady-state. We use a calibrated version of the model to measure the effect of productivity shocks on the US labor market. We find that productivity shocks generate procyclical fluctuations in the rate at which unemployed workers become employed and countercyclical fluctuations in the rate at which employed workers become unemployed. Moreover, we find that productivity shocks generate large counter-cyclical fluctuations in the number of vacancies opened for unemployed workers and even larger procyclical fluctuations in the number of vacancies created for employed workers. Overall, productivity shocks alone can account for 80 percent of unemployment volatility, 30 percent of vacancy volatility and for the nearly perfect negative correlation between unemployment and vacancies.
    Keywords: Directed search, On the Job Search, Business Cycles
    JEL: E24 E32 J64
    Date: 2008–08–11
  27. By: Josué Fernando Cortés Espada; Manuel Ramos Francia
    Abstract: We develop and estimate an affine model that characterizes the dynamics of the term structure of interest rates in Mexico. Moreover, we provide empirical evidence on the relationship between the term structure factors and macroeconomic variables. First, we show that the model fits the data remarkably well. Second, we show that the first factor captures movements in the level of the yield curve, while the second factor captures movements in the slope of the curve. Third, the variance decomposition results show that the level factor accounts for a substantial part of the variance at the long end of the yield curve at all horizons. At short horizons, the slope factor accounts for much of the variance at the short end of the yield curve. Finally, we show that movements in the level of the yield curve are associated with movements in long-term inflation expectations, while movements in the slope of the curve are associated with movements in the short-term nominal interest rate.
    Keywords: No-Arbitrage, Latent Factors, Term-Structure
    JEL: C13 E43 G12
    Date: 2008–07
  28. By: Stéphanie Guichard; David Haugh; David Turner
    Abstract: This paper constructs a broad measure of financial conditions for the United States, Japan, the Euro Area and the United Kingdom, by extending monetary condition indices which are traditionally used to gauge the impact of monetary policy on the economy. In addition to changes in the exchange rate and short and long interest rates, the change in credit availability, corporate bond spreads and household wealth are taken into account to gauge the evolution of financial conditions. Since the onset of the financial crisis, financial conditions have tightened by an unprecedented degree in the four countries/regions and this is evaluated to exert a major drag on activity.<P>Quantifier l’impact des conditions financières dans la Zone Euro, le Japon, le Royaume-Uni et les États-Unis<BR>Ce document propose une mesure des conditions financières au sens large pour les États-Unis, le Japon, la Zone Euro et le Royaume-Uni, en étendant les indices des conditions monétaires traditionnellement employés pour mesurer l’impact de la politique monétaire sur l’économie. En plus des variations du taux de change et des taux d’intérêt à court et long terme, l’évolution de la disponibilité du crédit, des primes de risques sur les obligations des sociétés et de la richesse des ménages sont prises en considération pour apprécier l’évolution des conditions financières. Depuis le début de la crise financière, le resserrement des conditions financières a attient un degré sans précédent dans les quatre pays/régions et ceci devrait peser fortement sur l’activité.
    Keywords: wealth effects, effet de richesse, financial conditions index, interest rate spreads, credit crunch, credit channel, macro-financial linkages, indice des conditions financières, écarts de taux d’intérêt, contraction du crédit, canal du crédit, relations macro-financières, monetary conditions index, indice des conditions monétaires
    JEL: E32 E44 E47 E51
    Date: 2009–03–09
  29. By: Jean-Louis COMBES (Centre d'Etudes et de Recherches sur le Développement International); Pascale COMBES MOTEL (Centre d'Etudes et de Recherches sur le Développement International); Alexandru MINEA; P. VILLIEU
    Abstract: The forest covers an important share of land area in many developing countries and represents an important source of revenue for governments. The other major contribution to government revenues comes from printing money, namely the seigniorage. Using a simple theoretical model, we show that tighter monetary policies exert a positive effect on deforestation rates. Consequently, there exists a substitution effect between deforestation rates and seigniorage. Empirical evidence for a panel of countries seems to support our theoretical conclusion. This finding sheds some new light on policies that limit seigniorage revenues, as for example IMF's low-inflation recommendations.
    Keywords: deforestation, developing countries, inflation, panel data analysis, seigniorage
    Date: 2009
  30. By: Jason Beeler; John Y. Campbell
    Abstract: The long-run risks model of asset prices explains stock price variation as a response to persistent fluctuations in the mean and volatility of aggregate consumption growth, by a representative agent with a high elasticity of intertemporal substitution. This paper documents several empirical difficulties for the model as calibrated by Bansal and Yaron (BY, 2004) and Bansal, Kiku, and Yaron (BKY, 2007a). BY's calibration counterfactually implies that long-run consumption and dividend growth should be highly persistent and predictable from stock prices. BKY's calibration does better in this respect by greatly increasing the persistence of volatility fluctuations and their impact on stock prices. This calibration fits the predictive power of stock prices for future consumption volatility, but implies much greater predictive power of stock prices for future stock return volatility than is found in the data. Neither calibration can explain why movements in real interest rates do not generate strong predictable movements in consumption growth. Finally, the long-run risks model implies extremely low yields and negative term premia on inflation-indexed bonds.
    JEL: E21 G12
    Date: 2009–03
  31. By: Özlem Onaran (Department of Economics, Vienna University of Economics & B.A.); Engelbert Stockhammer (Department of Economics, Vienna University of Economics & B.A.); Lukas Grafl (Department of Economics, Vienna University of Economics & B.A.)
    Abstract: The finance-dominated growth regime has affected key macroeconomic variables in several contradictory ways. This paper investigates some of these effects: an increase of rentiers income, housing wealth and net financial wealth on private consumption expenditures and the effects of changes in payments to the rentier by the business on private investment expenditures. A Post-Kaleckian macro model is used as a starting point for this investigation. The paper thus contributes to two debates. First, it aims at clarifying some important macroeconomic effects of financialization. Second, it extends the analysis of distribution-led demand regimes by controlling for financialization variables.
    JEL: E12 E20 E22 E25 E61
    Date: 2009–02
  32. By: Sylviane GUILLAUMONT JEANNENEY (Centre d'Etudes et de Recherches sur le Développement International); Sampawende Jules TAPSOBA
    Abstract: The devaluation of the CFA Francs in 1994 has highlighted the relevance of fiscal coordination in African monetary unions. After 1994, African monetary unions have adopted a fiscal rule which prescribes a permanent nil or positive budgetary balance. This article studies how this fiscal rule affects the cyclicality of fiscal policies. The results show that compared to other African states, such a fiscal rule creates a pro cyclical bias in public expenditure during recessions. The bias justifies a modification of the rule in order to impose a fiscal surplus during expansions.
    Keywords: Africa., Fiscal policies, Fiscal rules, Pro cyclicality, currency union
    Date: 2009
  33. By: Cristiano Cantore; Mathan Satchi
    Abstract: The link between aggregate profits and investment has been widely analysed through the impact of profits on net worth and therefore the firm’s ability to borrow, in the presence of credit market imperfections. How the business cycle is affected if profits also affect investment through an impact on savings and therefore the intermediary’s ability to lend, is the topic of this paper. We find that the fluctuations in the supply of credit that result from this may significantly amplify output responses to shocks in comparison to a situation where the net worth mechanism operates alone.
    Keywords: Business Cycles; Credit Market Imperfections; Loan Supply
    JEL: E32 E44 E51
    Date: 2009–03
  34. By: António Afonso (European Central Bank and ISEG/TULisbon); Luca Agnello (University of Palermo); Davide Furceri (OECD and University of Palermo); Ricardo M. Sousa (Universidade do Minho - NIPE)
    Abstract: We use a new approach to assess long-term fiscal developments. By analyzing the time-varying behaviour of the two components of government spending and revenue – responsiveness and persistence – we are able to infer about the sources of fiscal behaviour. Drawing on quarterly data we estimate recursively these components within a system of government revenue and spending equations using a Three-Stage Least Square method. In this way we track fiscal developments, i.e. possible fiscal deteriorations and/or improvements for eight European Union countries plus the US. Results suggest that positions have not significantly changed for Finland, France, Germany, Spain, the United Kingdom and the US, whilst they have improved for Belgium, Italy, and the Netherlands.
    Keywords: Fiscal Deterioration, Fiscal Sustainability.
    JEL: E62 H50
    Date: 2009
  35. By: Leonardo Melosi (Department of Economics, University of Pennsylvania)
    Abstract: This paper develops a dynamic stochastic general equilibrium model where firms are imperfectly informed. We estimate the model through likelihood-based methods and find that it can explain the highly persistent real effects of monetary disturbances that are documented by a benchmark VAR. The model of imperfect information nests a model of rational inattention where firms optimally choose the variances of signal noise, subject to an information-processing constraint. We present an econometric procedure to evaluate the predictions of this rational inattention model. Implementing this procedure delivers insights on how to improve the fit of rational inattention models.
    Keywords: Imperfect common knowledge; rational inattention; Bayesian econometrics; real effects of nominal shocks; VAR identification
    JEL: E3 E5 C32 D8
    Date: 2009–02–27
  36. By: Gogas, Periklis; Kothroulas, George
    Abstract: The purpose of this paper is to examine the effectiveness of the policies and procedures towards economic convergence between the countries that participated in the European Exchange Mechanism I and which are now members states of the Eurozone. The question is whether the introduction of the common currency has led to more synchronisation of the business cycles of member states or it has acted as the monetary ground for the creation of a multi-speed Europe that includes economies that bear little resemblance in terms of their basic economic features and figures and especially with respect to the fluctuations in their Gross Domestic Product. The empirical analysis is done through the use of linear regressions, the estimation of the correlation coefficient, and also a proposed sign concordance index (SCI). The results provide evidence that the synchronisation of the cycles seem to become weaker since the adoption of the new currency. Especially for G6, the group of the smaller regional economies, the results are consistent throughout all three methodologies used and for both groups of countries’ cycles used as a comparison base, the broad EU15 and the narrow G3.
    Keywords: Business Cycle; Synchronization; Eurozone.
    JEL: E32 E42 E52
    Date: 2009–02
  37. By: Mathias Hoffmann; Ronald MacDonald
    Abstract: Although the real exchange rate - real interest rate (RERI) relationship is central to most open economy macroeconomic models, empirical support for the relationship is generally found to be rather weak. In this paper we re-investigate the RERI relationship using bilateral U.S. real exchange rate data spanning the period 1978 to 2007. Instead of testing one particular model, we build on Campbell and Shiller (1987) to propose a metric of the economic significance of the relationship. Our empirical results provide robust evidence that the RERI link is economically significant and that the real interest rate differential is a reasonable approximation of the expected rate of depreciation over longer horizons.
    Keywords: Real Exchange Rates, Real Interest Rates, Present Value Model.
    JEL: E43 F31 F41
    Date: 2009–02
  38. By: Mariano Bosch (Departamento de Fundamentos del Analisis Economico, Universidad de Alicante); Julen Esteban-Pretel (Faculty of Economics, University of Tokyo)
    Abstract: The proportion of informal or unprotected workers in developing countries is large. In developing economies, the fraction of informal workers can be as high as 70% of total employment. For economies with significant informal sectors, business cycle fluctuations and labor market policy interventions can have important effects on the unemployment rate, and also produce large reallocations of workers between "regulated" and "unregulated" jobs. In this paper, we report the main cyclical patterns of one such labor market: Brazil. We then use the empirical regularities found in the data to build, calibrate, and simulate a two-sector search and matching labor market model, in which firms have the choice of hiring workers formally or informally. We find that our model, built in the spirit of traditional search and matching models, can explain well most of the cyclical properties found in the data. We also show that government policies that decrease the cost of formal jobs, or increase the cost of informality, raise the share of formal employment while reducing unemployment.
    Date: 2009–02
  39. By: Luís Francisco Aguiar (Universidade do Minho - NIPE); Maria Joana Soares (Universidade do Minho - Departamento de Matemática)
    Abstract: We use wavelets, cross-wavelets, wavelet-phase analysis, wavelet-clustering and multidimensional mapping to study business cycle synchronization across countries that are part of the Euro12 Area. Based on the wavelet spectra, we propose a metric to measure business cycle disynchronicity. We identify Germany, France, Spain, Austria and the Benelux countries as the core of the Euroland and another group with a less synchronous business cycle and ask whether these latter countries are converging to the Euroland core, and, if so, at what frequencies. With the exception of Portugal,all countries are converging to the Euro core. This convergence is particularly strong in the case of Ireland and Italy.
    Date: 2009
  40. By: Jaba Ghonghadze; Thomas Lux
    Abstract: This paper estimates a simple univariate model of expectation or opinion formation in continuous time adapting a ‘canonical’ stochastic model of collective opinion dynamics (Weidlich and Haag, 1983; Lux, 1995, 2007). This framework is applied to a selected data set on survey-based expectations from the rich EU business and consumer survey database for twelve European countries. The model parameters are estimated through maximum likelihood and numerical solution of the transient probability density functions for the resulting stochastic process. The model's performance is assessed with respect to its out-of-sample forecasting capacity relative to univariate time series models of the ARMA(p; q) and ARFIMA(p; d; q) varieties. These tests speak for a slight superiority of the canonical opinion dynamics model over the alternatives in the majority of cases
    Keywords: expectation formation, survey-based expectations, opinion dynamics, Fokker-Planck equation, forecasting
    JEL: E32 C53
    Date: 2009–02
  41. By: Reinhart, Carmen; Rogoff, Kenneth
    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.
    Keywords: duration; financial crisies; real estate; unemployment
    JEL: E44 F30 N20
    Date: 2009–03
  42. By: John J. Heim (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA)
    Abstract: This paper compares the demand for the three individual components of aggregate investment demand: (1) demand by businesses for plant and equipment, (2) business inventory investment and (3) residential housing construction. The models tested are largely based on Keynesian theories of business investment demand, with some allowance for residential housing demand being more driven by Keynes’ consumer demand variables. Other possible determinants of investment are also tested, including ”crowd out” effects of government deficits on business investment and demographic effects on the residential construction market. Annual data for the U.S., 1960 – 2000, are tested using two stage least squares regression techniques modified to eliminate heteroskedasticity in the data. The models are estimated in “first differences”, rather than levels of the data to reduce the effects of multicollinearity, non stationarity and autocorrelation. The models explain about 90% of the variance in plant and equipment demand, 85% of the variance in residential housing demand for and 67% of inventory demand. The results indicate that demand for each of these three types of investment goods is driven by different combinations of variables Business investment in plant and equipment appears determined by how much the overall economy is growing (the accelerator effect), the availability of credit (crowd out), the availability of depreciation reserves, the prime interest rate lagged three years, business profits and stock values lagged one year, and the effects of an exchange rate change over the four year period following the change. Inventory investment seems mainly determined by availability of depreciation reserves, crowd out, interest rates, unexpected changes in consumer demand and the accelerator. Residential construction demand seems mainly driven by disposable income, the effect of general growth in the economy on consumer spending (the accelerator), credit availability (crowd out), current year mortgage rates, and prior year consumer wealth levels.
    JEL: E12 E22 M11 M31
    Date: 2009–02
  43. By: Davide Furceri
    Abstract: The aim of this paper is to assess the ability of social spending to smooth output shocks and to provide stabilization. The results show that overall social spending is able to smooth about 16 percent of a shock to GDP. Among its subcategories, social spending devoted to Old Age and Unemployment are those that contribute more to provide smoothing. Moreover, the stabilization effects of social spending are significantly larger in those countries where the size of social spending is higher. The empirical results are economically and statistically significant and robust.<P>Les effets de stabilisation des dépenses sociales : Étude empirique sur un échantillon de pays de l’OCDE<BR>L’objectif de ce document est d’évaluer la capacité des dépenses sociales à lisser les chocs sur la production et stabiliser l’économie. Les résultats montrent que le total des dépenses sociales est capable de lisser environ 16 pour cent d’un choc sur le PIB. Au sein des différentes sous catégories, les dépenses sociales relatives aux pensions et au traitement du chômage sont celles qui contribuent le plus au lissage. Par ailleurs, les effets de stabilisation des dépenses sociales sont significativement plus grandes dans les pays où la taille des dépenses sociales est plus élevée. Les résultats empiriques sont économiquement et statistiquement significatifs et robustes.
    Keywords: fiscal policy, politique budgétaire, social spending, dépenses sociales, output stabilization, stabilisation de production
    JEL: E0 E6
    Date: 2009–02–25
  44. By: Wang, Wen-Yao; Hernandez-Verme, Paula
    Abstract: We model a typical Asian-crisis-economy using dynamic general equilibrium techniques. Meaningful exchange rates obtain from nontrivial demands for fiat currencies. Sudden stops/bank-panics are possible, and key for evaluating the relative merits of alternative exchange rate regimes in promoting stability. Strategic complementarities contribute to the severe indeterminacy of the continuum of equilibria; there is a strong association between the scope for existence and indeterminacy of equilibria, the properties along dynamic paths and the underlying policy regime. Binding multiple reserve requirements reduce the scope for financial fragility and panic equilibria; backing the money supply acts as a stabilizer only in fixed regimes.
    Keywords: Sudden stops; Exchange rate regimes; Multiple reserve requirements
    JEL: E31 E44 F41
    Date: 2009–03–05
  45. By: Martin Schneider (Oesterreichische Nationalbank, Economic Analysis Division, P.O. Box 61, A-1010 Vienna,); Christian Ragacs (Oesterreichische Nationalbank, Economic Analysis Division, P.O. Box 61, A-1010 Vienna,)
    Abstract: This paper proposes an informal taxonomy to break down forecast errors of institutional forecasts. This breakdown is demonstrated for the forecasts of the Oesterreichische Nationalbank (OeNB) for Austrian GDP. The main result is that the largest part of the forecast errors can be explained by erroneous projections of the international environment. Data revisions also substantially contribute to the forecasting error for the forecast of the current year. Domestic exogenous variables play a minor role only. The inclusion of judgement improves the forecasting performance.
    Keywords: Forecast error taxonomy; Breakdown; Austria; Judgement; Technical forecast.
    Date: 2009–02–11
  46. By: Mata Melo, Julio (Departamento de Economía y Administración de Empresas, Facultad de Ciencias Económicas y Empresariales, Universidad de Burgos); Ustariz Lapuente, Blanca (Departamento de Economía y Administración de Empresas, Facultad de Ciencias Económicas y Empresariales, Universidad de Burgos)
    Abstract: El objetivo del presente trabajo es verificar el grado de cumplimiento de la normativa contable respecto a la información fiscal a revelar en la memoria de las cuentas anuales consolidadas de las empresas del IBEX 35, entre los periodos 2002 a 2004 y 2005 a 2006, así como poner de manifiesto la repercusión y el efecto que ha podido tener el cambio normativo sobre la información cuantitativa de carácter fiscal en dichas cuentas anuales, concretamente en la evolución de los activos y pasivos fiscales en balance de situación entre el periodo anterior y posterior al cambio normativo que supuso la aplicación de la NIC 12 “Impuesto sobre las ganancias”. Por último también se analiza si ha existido un cambio en la presión fiscal en los periodos anterior y posterior al cambio normativo. Los resultados obtenidos permiten concluir que los grupos consolidados mantienen un grado de cumplimiento elevado respecto a la normativa contable, así como que el cambio normativo entre los dos periodos no afecta a la presión fiscal, pero ha influido en la evolución de los pasivos fiscales, observándose un aumento estadísticamente significativo de dichas partidas en el periodo 2005-2006.
    Keywords: información fiscal, presión fiscal y activos y pasivos fiscales.
    Date: 2008–12
  47. By: Assaf Razin; Efraim Sadka; Benjarong Suwankiri
    Abstract: Milton Friedman, the Nobel-prize laureate economist, had it right: "It's just obvious that you can't have free immigration and a welfare state." That is, national welfare states can almost never coexist with the free movement of labor. This fact underscores the relevance of the analysis in this paper, which is a part of a forthcoming book on migration and the welfare state. It focuses on the demographic, and economic, fundamentals behind policy-restricted migration, and the policy-restricted generosity of the welfare state.
    JEL: E0 F2 H11
    Date: 2009–03
  48. By: Ángel Estrada (Banco de España); Juan Francisco Jimeno (Banco de España); José Luis Malo de Molina (Banco de España)
    Abstract: This paper has been prepared to mark the tenth anniversary of Economic and Monetary Union (EMU). It seeks to give an overview of the Spanish economy’s experience in this new institutional setting. It should be viewed as the result of a joint effort by a sizeable group of researchers from the Banco de España Directorate General Economics, Statistics and Research to rationalise the implications of a structural change on this scale. To do this, the paper firstly defines the starting conditions of the Spanish economy, at the time when there was only a commitment to join the Monetary Union as a founding member; in this connection, it sets out the advantages of belonging to the euro area versus the possibility of having remained outside it. Next, it describes the main transformations made in converting this commitment into reality. Further, it reviews developments in the economic variables that best document the main events of the past decade, focusing both on the factors underpinning the expansion and the headway in convergence, and on the imbalances that triggered the start of the adjustment, and assesses the scope of these imbalances. Finally, it describes the basic features of the process of adjustment towards a new path of sustained economic growth, emphasising the difficulties added by the superimposition of the international financial crisis.
    Keywords: Spanish economy, EMU, international financial crisis
    JEL: E58 E66 F33
    Date: 2009–02
  49. By: Da Silva, Sergio
    Abstract: The author argues that it is microeconomics that needs foundations, not macroeconomics. Preferences need to be built on biology, and, in particular, on neuroscience. In contrast, macroeconomics could benefit from rationalizations of aggregate economic phenomena by non-equilibrium statistical physics.
    Keywords: Microfoundations, neuroeconomics, econophysics
    JEL: B22 B41 C82 D87
    Date: 2009
  50. By: Gollier, Christian
    Abstract: In this paper, we elaborate on an idea initially developed by Weitzman (1998) that justifies taking the lowest possible discount rate for far-distant future cash flows. His argument relies on the arbitrary assumption that when the future rate of return of capital (RRC) is uncertain, one should invest in any project with a positive expected net present value. We examine an economy with a risk-averse representative agent facing an uncertain evolution of the RRC. In this context, we characterize the socially efficient stochastic consumption path, which allows us in turn to use the Ramsey rule to characterize the term structure of socially efficient discount rates. We show that Weitzman’s claim is qualitatively correct if shocks on the RRC are persistent. On the contrary, in the absence of any serial correlation in the RRC, the term structure of discount rates should be flat.
    Keywords: Discount rate, term structure, certainty equivalent rate, Ramsey rule, sustainable development
    JEL: E43 G12 Q51
    Date: 2009
  51. By: Stéphane Auray (Université Lille 3 (GREMARS), Université de Sherbrooke (GREDI) and CIRPÉE)
    Abstract: Cet article cherche µa montrer l'interet de l'hypothµese de persistance des habitudes dans le comportement de consommation au regard des effets de la politique monetaire. Les mecanismes au coeur de certaines modµeles monetaires sont mis en exergue. Nous insistons alors, µa l'aide d'un modµele simple de choix intertemporels, sur le role que peut jouer la persistance des habitudes de consommation en termes de substitution intertemporelle.
    Keywords: Monnaie, Consommation, Persistance des habitudes.
    JEL: E21 E32 E4
    Date: 2009
  52. By: Burkhard Raunig (Oesterreichische Nationalbank, Economic Studies Division, P.O. Box 61, A-1010 Vienna,); Martin Scheicher (European Central Bank, Kaiserstrasse 29, D – 60311, Frankfurt am Main, Germany,)
    Abstract: This paper uses regression analysis to compare the market pricing of the default risk of banks to that of other firms. We study how CDS traders discriminate between banks and other type of firms and how their judgement changes over time, in particular, since the start of the recent financial turmoil. We use monthly data on the Credit Default Swaps (CDS) of 41 major banks and 162 non-banks. By means of panel analysis, we decompose the CDS premia into the expected loss and the risk premium. Our primary result is that market participants indeed viewed banks differently and that they drastically changed their mind during the recent turmoil that started in August 2007.
    Keywords: Credit default swap, market discipline, default risk, risk premium
    JEL: E43 G12 G13
    Date: 2009–02–16
  53. By: Daniel Chiquiar; Manuel Ramos Francia
    Abstract: The results in Chiquiar and Ramos-Francia (2005) suggested that the long-run relationship between the US’s and Mexico’s manufacturing sectors was weakened after China joined the World Trade Organization (WTO). When that paper was made, however, this shock was too recent and, therefore, the analysis was based only on end-of-sample structural break tests. In this note we use updated information to revisit this issue. The results suggest that, by shifting resources towards those sectors where it remained competitive, Mexico’s response allowed the effect of China’s entry to the WTO on its long-term relationship with the U.S. manufacturing sector to be only temporary.
    Keywords: Business Cycle Synchronization, Trade Integration, NAFTA
    JEL: E32 F15 F32
    Date: 2008–07

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