nep-mac New Economics Papers
on Macroeconomics
Issue of 2009‒05‒09
twenty-six papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Optimal monetary policy in a model of the credit channel. By Fiorella De Fiore; Oreste Tristani
  2. Evaluating inflation forecast models for Poland: Openness matters, money does not (but its cost does) By Mukherjee, Deepraj; Kemme, David
  3. The impact of reference norms on inflation persistence when wages are staggered. By Markus Knell; Alfred Stiglbauer
  4. Dynamic Monetary-Fiscal Interactions and the Role of Monetary Conservatism By Stefan Niemann
  5. Optimal Monetary Policy with Partially Rational Agents By Orlando Gomes; Vivaldo M. Mendes; Diana A. Mendes
  6. Surprising comparative properties of monetary models: Results from a new data base By Taylor, John B.; Wieland, Volker
  7. Downward wage rigidity and optimal steady-state inflation By Gabriel Fagan; Julián Messina
  8. Monetary Transmission in three Central European Economies: Evidence from Time-Varying Coefficient Vector Autoregressions By Zsolt Darvas
  9. Real Time’ early warning indicators for costly asset price boom/bust cycles - a role for global liquidity By Lucia Alessi; Carsten Detken
  10. Inflation and welfare in long-run equilibrium with firm dynamics By Alexandre Janiak; Paulo Santos Monteiro
  11. Global Financial Crisis: Causes, Consequences and India’s Prospects By Rakesh Mohan
  12. Do Macroeconomic Variables Forecast Changes in Liquidity? An Out-of-sample Study on the Order-driven Stock Markets in Scandinavia By Söderberg, Jonas
  13. The term structure of equity premia in an affine arbitrage-free model of bond and stock market dynamics. By Wolfgang Lemke; Thomas Werner
  14. Financial Integration and Business Cycle Synchronization By Kalemli-Ozcan, Sebnem; Papaioannou, Elias; Peydró-Alcalde, José Luis
  15. Budgeting versus implementing fiscal policy in the EU By Beetsma, Roel; Giuliodori, Massimo; Wierts, Peter
  16. Does Lumy Investment Matter for Business Cycles? By Miao, Jianjun; Wang, Pengfei
  17. When Eastern Labour Markets Enter Western Europe CEECs. Labour Market Institutions upon Euro Zone Accession By Tyrowicz, Joanna
  18. A Joint Dynamic Bi-Factor Model of the Yield Curve and the Economy as a Predictor of Business Cycles By Chauvet, Marcelle; Senyuz, Zeynep
  19. The International Wealth Effect: A Global Error-Correcting Analysis By Holinski Nils; Vermeulen Robert
  20. Invoice currencies, import prices, and inflation By Ono, Masanori
  21. Demand for Money in the Asian Countries: A Systems GMM Panel Data Approach and Structural Breaks By Rao, B. Bhaskara; Tamazian, Artur; Singh, Prakash
  22. Tax Dodging in the Recycling Wastage Collecting Area By Ciumag, Marin
  23. A fair price for motor fuel in the United States By Kitov, Ivan; Kitov, Oleg
  24. Experience-earnings profile and earnings fluctuation: a missing piece in some labour market puzzles? By Istvan Gabor R.
  25. Financial Integration of North Africa Stock Markets By Onour, Ibrahim
  26. Trade's Impact on the Labor Share: Evidence from German and Italian Regions By Claudia M. Buch; Paola Monti; Farid Toubal

  1. By: Fiorella De Fiore (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Oreste Tristani (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: We consider a simple extension of the basic new-Keynesian setup in which we relax the assumption of frictionless financial markets. In our economy, asymmetric information and default risk lead banks to optimally charge a lending rate above the risk-free rate. Our contribution is threefold. First, we derive analytically the loglinearised equations which characterise aggregate dynamics in our model and show that they nest those of the new- Keynesian model. A key difference is that marginal costs increase not only with the output gap, but also with the credit spread and the nominal interest rate. Second, we find that financial market imperfections imply that exogenous disturbances, including technology shocks, generate a trade-off between output and inflation stabilisation. Third, we show that, in our model, an aggressive easing of policy is optimal in response to adverse financial market shocks. JEL Classification: E52, E44.
    Keywords: optimal monetary policy, financial markets, asymmetric information.
    Date: 2009–04
  2. By: Mukherjee, Deepraj; Kemme, David
    Abstract: Countries in which inflation targeting has been adopted require high quality inflation forecasts. The Polish National Bank adopted a variant of implicit inflation targeting and therefore the ability to forecast inflation is critically important to policy makers. Since the domestic price formation process is still evolving, medium term inflation forecasting is often difficult. Using quarterly data from 1995-2007, we estimate and evaluate three types of models for inflation forecasting: (1) output gap models, (2) models involving money, and (3) models which bring the foreign sector into the price formation process. We find that openness is significant in the price formation process and inflation targeting is associated with lower inflation. Traditional measures of forecast accuracy indicate that the simple price gap version of the P* model and the money demand model perform best of this group for medium term forecasting.
    Keywords: Monetary policy; inflation; forecasting; models.
    JEL: E0 E31 E52 E37
    Date: 2008–07–12
  3. By: Markus Knell (Oesterreichische Nationalbank, Otto-Wagner-Platz 3, POB-61, A-1011 Vienna, Austria.); Alfred Stiglbauer (Oesterreichische Nationalbank, Otto-Wagner-Platz 3, POB-61, A-1011 Vienna, Austria.)
    Abstract: In this paper we present an extension of the Taylor model with staggered wages in which wage-setting is also influenced by reference norms (i.e. by benchmark wages). We show that reference norms can considerably increase the persistence of inflation and the extent of real wage rigidity but that these effects depend on the definition of reference norms (e.g. how backward-looking they are) and on whether the importance of norms differs between sectors. Using data on collectively bargained wages in Austria from 1980 to 2006 we show that wage-setting is strongly influenced by reference norms, that the wages of other sectors seem to matter more than own past wages and that there is a clear indication for the existence of wage leadership (i.e. asymmetries in reference norms). JEL Classification: E31, E32, E24, J51.
    Keywords: Inflation Persistence, Real Wage Rigidity, Staggered Contracts, Wage Leadership.
    Date: 2009–04
  4. By: Stefan Niemann
    Abstract: The present paper reassesses the role of monetary conservatism in a setting with nominal government debt and endogenous fiscal policy. We assume that macroeconomic policies are chosen by monetary and fiscal policy makers who interact repeatedly but cannot commit to future actions. The real level of public liabilities is an endogenous state variable, and policies are chosen in a non-cooperative fashion. We focus on Markovperfect equilibria and investigate the role of fiscal impatience and monetary conservatism as determinants of the economy’s steady state and the associated welfare implications. Fiscal impatience creates a tendency of accumulating debt, and monetary conservatism actually exacerbates such excessive debt accumulation. Increased conservatism implies that any given level of real liabilities can be sustained at a lower rate of inflation. However, since this is internalized by the fiscal authority, the Markov-perfect equilibrium generates a steady state with higher indebtedness. As a result, increased monetary conservatism has adverse welfare implications.
    Date: 2009–04–30
  5. By: Orlando Gomes (Instituto Politécnico de Lisboa - Escola Superior de Comunicação Social and UNIDE-ERC); Vivaldo M. Mendes (ISCTE - Department of Economics and UNIDE-ERC); Diana A. Mendes (ISCTE - Department of Quantitative Methods and UNIDE-StatMath)
    Abstract: We explore the dynamic behavior of a New Keynesian monetary policy problem with expectations formed, partially, under adaptive learning. We consider two alternative cases: on the first setting, the private economy has the ability to predict rationally real economic conditions (the output gap) but it needs to learn about the future values of the nominal variable (the inflation rate); on the second setup, private agents are fully aware of future inflation rates, however they lack the ability to predict instantly the correct values of the output gap (learning is attached to this variable). In both cases, we find a simple condition indicating the required learning quality that is needed to guarantee local stability. To achieve convergence to the steady-state, the economy does not need to attain full learning efficiency; it just has to secure a minimum learning quality in order to attain the desired long run result.
    Date: 2008–07
  6. By: Taylor, John B.; Wieland, Volker
    Abstract: In this paper we investigate the comparative properties of empirically-estimated monetary models of the U.S. economy. We make use of a new data base of models designed for such investigations. We focus on three representative models: the Christiano, Eichenbaum, Evans (2005) model, the Smets and Wouters (2007) model, and the Taylor (1993a) model. Although the three models differ in terms of structure, estimation method, sample period, and data vintage, we find surprisingly similar economic impacts of unanticipated changes in the federal funds rate. However, the optimal monetary policy responses to other sources of economic fluctuations are widely different in the different models. We show that simple optimal policy rules that respond to the growth rate of output and smooth the interest rate are not robust. In contrast, policy rules with no interest rate smoothing and no response to the growth rate, as distinct from the level, of output are more robust. Robustness can be improved further by optimizing rules with respect to the average loss across the three models.
    Keywords: Macroeconomic models; Model comparison; Monetary policy rules; Monetary policy shocks; Optimal policy; Robustness and model uncertainty
    JEL: C52 E30 E52
    Date: 2009–05
  7. By: Gabriel Fagan (Directorate General Research, European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Julián Messina (Universitat de Girona, Plaça Sant Domènec, 3, IT-17071 Girona, Italy; IZA and FEDEA.)
    Abstract: This paper examines the impact of downward wage rigidity (nominal and real) on optimal steady-state inflation. For this purpose, we extend the workhorse model of Erceg, Henderson and Levin (2000) by introducing asymmetric menu costs for wage setting. We estimate the key parameters by simulated method of moments, matching key features of the cross-sectional distribution of individual wage changes observed in the data. We look at five countries (the US, Germany, Portugal, Belgium and Finland). The calibrated heterogeneous agent models are then solved for different steady state rates of inflation to derive welfare implications. We find that, across the European countries considered, the optimal steady-state rate of inflation varies between zero and 2%. For the US, the results depend on the dataset used, with estimates of optimal inflation varying between 2% and 5%. JEL Classification: E31, E52, J4.
    Keywords: Downward wage rigidity, DSGE models, optimal inflation.
    Date: 2009–04
  8. By: Zsolt Darvas
    Abstract: This paper studies the transmission of monetary policy to macroeconomic variables in three new EU Member States in comparison with that in the euro area with structural time-varying coefficient vector autoregressions. In line with the Lucas Critique reduced-form models like standard VARs are not invariant to changes in policy regimes. The countries we study have experienced changes in monetary policy regimes and went through substantial structural changes, which call for the use of a time-varying parameter analysis. Our results indicate that in the euro area the impact on output of a monetary shock have decreased in time while in the new member states of the EU both decreases and increases can be observed. At the last observation of our sample, the second quarter of 2008, monetary policy was the most powerful in Poland and comparable in strength to that in the euro area, the least powerful responses were observed in Hungary while the Czech Republic lied in between. We explain these results by the credibility of monetary policy, openness and the share of foreign currency loans. 
    Keywords: monetary transmission; time-varying coefficient vector autoregressions; Kalmanfilter
    JEL: C32 E50
    Date: 2009–04
  9. By: Lucia Alessi (Directorate General Statistics, European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Carsten Detken (Directorate General Research, European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: We test the performance of a host of real and financial variables as early warning indicators for costly aggregate asset price boom/bust cycles, using data for 18 OECD countries between 1970 and 2007. A signalling approach is used to predict asset price booms that have relatively serious real economy consequences. We use a loss function to rank the tested indicators given policy makers’ relative preferences with respect to missed crises and false alarms. The paper analyzes the suitability of various indicators as well as the relative performance of financial versus real, global versus domestic and money versus credit based liquidity indicators. We find that global measures of liquidity are among the best performing indicators and display forecasting records,, which provide useful information for policy makers interested in timely reactions to growing financial imbalances, as long as aversion against type I and type II errors is not too unbalanced. Furthermore, we explore out-of-sample whether the most recent wave of asset price booms (2005-2007) would be predicted to be followed by a serious economic downturn. JEL Classification: E37, E44, E51.
    Keywords: Early Warning Indicators, Signalling Approach, Leaning Against the Wind, Asset Price Booms and Busts, Global Liquidity.
    Date: 2009–03
  10. By: Alexandre Janiak; Paulo Santos Monteiro
    Abstract: We analyze the welfare cost of inflation in a model with cash-in-advance constraints and an endogenous distribution of establishments' productivities. Inflation distorts aggregate productivity through firm entry dynamics. The model is calibrated to the United States economy and the long-run equilibrium properties are compared at low and high inflation. We find that increasing the annual inflation rate by 10 percentage points above the average rate in the U.S. would result in a fall in average productivity of roughly 1.3 percent. This decrease in productivity is not innocuous: it is responsible for about one half of the welfare cost of inflation.
    Date: 2009
  11. By: Rakesh Mohan
    Abstract: Presentation shows the global financial crisis, the difference between US, Europe and India, RBI’s policy response and impact, lessons from the crisis, medium-term issues and challenges. [Speech delivered at London Business School].
    Keywords: monetary policy, advanced economies, federal fund rate, china, commodity, asset prices, financial stability, policy, global financial crisis, US, Europe, India, RBI, sub-prime lending rate
    Date: 2009
  12. By: Söderberg, Jonas (Centre for Labour Market Policy Research (CAFO))
    Abstract: This paper evaluates 14 macroeconomic variables’ ability to forecast changes in monthly liquidity on the Scandinavian order-driven stock exchanges. Every macroeconomic variable is evaluated both out-of-sample and in-sample and against three different benchmark models of market variables and asymmetries concerning up and down markets. Policy rate on Copenhagen, broad money growth on Oslo, and short-term interest rate and flows from mutual funds on Stockholm significantly improve the out-of-sample forecasts of liquidity at these exchanges. However, most proposed macroeconomic variables can be rejected as forecasters of liquidity on the Scandinavian stock exchanges. There are many variables that predict in-sample liquidity that do not forecast out-of-sample. This stresses the importance of conducting out-of-sample tests when examining whether macroeconomic variables predict liquidity. In addition, this is the first paper confirming that stock market liquidity can be forecast out-of-sample.
    Keywords: Liquidity; Scandinavian stock markets; Forecasting; Out-of-sample tests.
    JEL: G12 G18
    Date: 2008–12–01
  13. By: Wolfgang Lemke (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Thomas Werner (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
    Abstract: We estimate time-varying expected excess returns on the US stock market from 1983 to 2008 using a model that jointly captures the arbitrage-free dynamics of stock returns and nominal bond yields. The model nests the class of affine term structure (of interest rates) models. Stock returns and bond yields as well as risk premia are affine functions of the state variables: the dividend yield, two factors driving the one-period real interest rate and the rate of inflation. The model provides for each month the `term structure of equity premia', i.e. expected excess stock returns over various investment horizons. Model-implied equity premia decrease during the `dot-com' boom period, show an upward correction thereafter, and reach highest levels during the financial turmoil that started with the 2007 subprime crisis. Equity premia for longer-term investment horizons are less volatile than their short-term counterparts. JEL Classification: E43, G12.
    Keywords: Equity premium, affine term structure models, asset pricing.
    Date: 2009–04
  14. By: Kalemli-Ozcan, Sebnem; Papaioannou, Elias; Peydró-Alcalde, José Luis
    Abstract: Standard theory predicts that financial integration leads to a lower degree of business cycle synchronization. Surprisingly, cross-country studies find the opposite. Our contribution is to document the theoretically predicted negative effect of financial integration on business cycle synchronization as a robust regularity. We use a confidential dataset on banks' international bilateral exposure over the past three decades in a panel of twenty developed countries. The rich panel structure allows us to control for time-invariant country-pair factors and global trends that affect both financial integration and business cycle patterns. In contrast to previous empirical work we find that a higher degree of financial integration is associated with less synchronized output cycles. We also employ two distinct instrumental variable approaches to identify the one-way effect of integration on synchronization. These specifications reveal that the component of banking integration predicted by legislative-regulatory harmonization policies and the nature of the bilateral exchange rate regime has a negative effect on output synchronization.
    Keywords: Banks; Business Cycles; Co-movement; Financial Integration; Financial Regulation
    JEL: E32 F15 F36 G21 O16
    Date: 2009–05
  15. By: Beetsma, Roel; Giuliodori, Massimo; Wierts, Peter
    Abstract: Using real-time data from Europe's Stability and Convergence Programs, we explore how fiscal plans and their implementation in the EU are determined. We find that (1) implemented budgetary adjustment falls systematically short of planned adjustment and this shortfall increases with the projection horizon, (2) variability in the eventual fiscal outcomes is dominated by the implementation errors, (3) there is a limited role for "traditional" political variables, (4) stock-flow adjustments are more important when plans are more ambitious, and (5), most importantly, both the ambition in fiscal plans and their implementation benefit from stronger national fiscal institutions. We emphasise also the importance of credible plans for the eventual fiscal outcomes.
    Keywords: EU; Fiscal policy; fiscal rules; implementation; medium-term budgetary framework; planning; real-time data
    JEL: E62 H60
    Date: 2009–04
  16. By: Miao, Jianjun; Wang, Pengfei
    Abstract: We present an analytically tractable general equilibrium business cycle model that features micro-level investment lumpiness. We prove an exact irrelevance proposition which provides sufficient conditions on preferences, technology, and the fixed cost distribution such that any positive upper support of the fixed cost distribution yields identical equilibrium dynamics of the aggregate quantities normalized by their deterministic steady state values. We also give two conditions for the fixed cost distribution, under which lumpy investment can be important to a first-order approximation: (i) The steady-state elasticity of the adjustment rate is large so that the extensive margin effect is large. (ii) More mass is on low fixed costs so that the general equilibrium price feedback effect is small. Our theoretical results may reconcile some debate and some numerical findings in the literature.
    Keywords: generalized (S;s) rule; lumpy investment; general equilibrium; business cycles; marginal Q; exact irrelevance proposition
    JEL: E32 E22
    Date: 2009–04–30
  17. By: Tyrowicz, Joanna
    Abstract: This paper reviews the literature on the labour market institutions in European Union Member States in the context of monetary integration. Traditionally, labour markets are a key concept in the optimal currency area theory, playing the role of the only accommodation mechanism of asymmetric shocks after the monetary unification. There are several theoretical frameworks linking the institutional design of the labour market to the potential effectiveness of monetary policy in the context of currency areas. Many empirical studies addressed these issues too, yielding important policy implications for labour market reforms in the process of monetary unification. However, there seem to be "white spots" in this patchwork, which may actually be particularly useful from the perspective of CEECs upon the accession to the euro zone. We suggest these research directions encompassing labour supply and theoretical frameworks of labour market flexibility benchmarking in the context of monetary integration.
    Keywords: labour market institutions; monetary integration; labour market reform; CEECs; EMU
    JEL: F16 F15 D02 J21
    Date: 2009
  18. By: Chauvet, Marcelle; Senyuz, Zeynep
    Abstract: This paper proposes an econometric model of the joint dynamic relationship between the yield curve and the economy to predict business cycles. We examine the predictive value of the yield curve to forecast both future economic growth as well as the beginning and end of economic recessions at the monthly frequency. The proposed multivariate dynamic factor model takes into account not only the popular term spread but also information extracted from the entire yield curve. The nonlinear model is used to investigate the interrelationship between the phases of the bond market and of the business cycle. The results indicate a strong interrelation between these two sectors. Although the popular term spread has a reasonable forecasting performance, the proposed factor model of the yield curve exhibits substantial incremental predictive value. This result holds in-sample and out-of-sample, using revised or real time unrevised data.
    Keywords: Forecasting; Business Cycles; Yield Curve; Dynamic Factor Models; Markov Switching.
    JEL: C32 E32 E44
    Date: 2008–12
  19. By: Holinski Nils; Vermeulen Robert (METEOR)
    Abstract: This paper analyzes the empirical link between asset prices, consumption and the trade balance using a global macroeconometric model developed by Pesaran, Schuermann, and Weiner (2004). The model is estimated for 29 countries with quarterly data over the period 1981Q1 - 2006Q4. Motivated by increasing international financial and real integration, and pronounced cycles in stock and housing prices, we employ generalized impulse response functions for a group of five of the world''s most industrialized countries and show that shocks to asset prices transmit into consumption decisions and subsequently into the trade balance. We refer to this transmission channel as the international wealth effect and find it to be present in the US, UK and, to a lesser extent, in France, but absent in Japan and Germany.
    Keywords: macroeconomics ;
    Date: 2009
  20. By: Ono, Masanori
    Abstract: This paper uses the structural VAR approach to examine the interactive responses between import prices and domestic prices in Japan before and after the 1990s. First, the estimation reveals that the Japanese domestic prices have become a little more vulnerable to foreign inflationary pressure through a rise in contract import prices. Second, Japan after the 1990s can pass along its domestic inflationary pressure to foreign countries with an increase in the pricing of its domestic products. Third, the results confirm that Japan’s exchange rate pass-through effect on its domestic prices has decreased, as suggested by other literature.
    Keywords: Structural VAR; globalization; Japanese economy
    JEL: C32 E31 F31
    Date: 2009–03
  21. By: Rao, B. Bhaskara; Tamazian, Artur; Singh, Prakash
    Abstract: A systems GMM method is used to estimate the demand for money (M1) for a panel of 11 Asian countries from 1970 to 2007. This method has advantages of which the most important one is its ability to minimise small sample bias with persistence in the variables. This system GMM method of Blundell and Bond (1998) simultaneously estimates specifications with the levels and first differences specifications of the variables. We test for structural stability of the estimated function with a recently developed test, for this approach, by Mancini-Griffoli and Pauwels (2006). Our results show that there is a well defined demand for money for these countries and there are no structural breaks.
    Keywords: Systems GMM; Blundell and Bond; Mancini-Griffoli and Pauwels; Asian Countries and Demand for Money and Structural Sta
    JEL: E41
    Date: 2009–05–05
  22. By: Ciumag, Marin
    Abstract: Tax dodging is a complex socio-economical phenomenon that persists in all the countries and in all times, despite the penalties. Today states unwillingly confront with this phenomenon, its stopping being quite impossible. The effects of tax dodging inflaence directly fiscal revenues had to distortions inside the market mechanism and can contribuie to the grown of social inequities. Presently in România there have been producea important prejudices to state budget by the economic agents that develop their activity in recycling wastage collecting area. This fact has determined the state to tax measures regarding the reduction of the phenomenon through "reverse taxation". The organs of control of the Ministry of Economy and Finances are working to discover the tax dodging from this area, and the residts prove that this phenomenon is more frequeni in certain areas of the country, Gorj county being in one of the first positions.
    Keywords: tax dodging; recycling wastage collecting area; tax
    JEL: E62 H8 E63 H3
    Date: 2007–06–02
  23. By: Kitov, Ivan; Kitov, Oleg
    Abstract: In the United States, there exist robust linear trends in the differences between headline (or core) CPI and price indices for individual subcategories of goods and services such as energy, food, housing, etc. Chiefly these differences can be represented by a piece-wise straight line. The periods of the transition from one trend to another are characterized by an elevated volatility. The difference between the core CPI and the price index for motor fuel can be also accurately approximated by several straight lines. In 2008, the negative trend was replaced with a positive one, and thus, a very high volatility in motor fuel price was observed, with an extension into 2009. The change in the trend was accompanied by an “overshoot” in the price for motor oil, which dropped much lower than that expected from the new trend. Therefore, the difference has to return to the new positive trend in 2009. During the recovery period, the index for motor fuel will grow by 90 units or 50%. The price for motor fuel in the US will also grow by 50% by the end of 2009. Oil price is expected to rise by ~50% as well, from its current value of ~$50 per barrel. Therefore, the fair price is not a fixed value but a linear function of time.
    Keywords: CPI; motor fuel price; prediction; US
    JEL: E31 E37
    Date: 2009–05–05
  24. By: Istvan Gabor R. (Department of Human Resources, Corvinus University of Budapest)
    Abstract: Drawing on data from 11 successive waves of yearly wage surveys carried out by the Public Employment Service in Hungary from 1992 to 2003, the paper examines, with the use of elementary statistical tools, whether or not earnings fluctuations differ in size across groups of employees with different degrees of schooling and labour market experience, and if they do, whether the observed differentials might be related to differences in the experienceearnings profiles of those groups. Although preliminary, our findings suggest that earnings fluctuations do differ in magnitude across those groups, and that, moreover, their magnitudes vary in positive association with group-specific global and local slopes of the relevant experience-earnings profiles. Assuming that (1) differences in the observed magnitudes of earnings fluctuations are at least partly due to differences in the flexibility/rigidity of the market rates of earnings, and that (2) flexibility/rigidity of those rates is a determinant of unemployment, it seems reasonable to expect that long-discovered systemic differences in unemployment across groups of employees with different degrees of schooling and experience (and, perhaps, across countries as well) might also be related in part to differences in experience-earnings profiles.
    Keywords: experience-earnings profile, earnings fluctuation, wage flexibility/rigidity, unemployment
    JEL: E24 E32 J31
    Date: 2009–04
  25. By: Onour, Ibrahim
    Abstract: This paper investigates long-term relationship that links stock prices of three major North African stock markets: Egypt, Morocco, and Tunisia . The paper shows, there is strong evidence of multivariate and bivariate nonlinear long-term relationship between stock prices of these markets. Nonlinear cointegration between stock prices imply portfolios in these markets are inefficient (systematic risk cannot be diversified away), as movement in the price of one market influence the movement in another market in a predictable direction and disproportionately.
    Keywords: cointegration; portfolio; diversification; nonparametric
    JEL: E44 C01
    Date: 2009–04–10
  26. By: Claudia M. Buch; Paola Monti; Farid Toubal
    Abstract: Has the labor share declined? And what is the impact of international trade? These questions are not only relevant in an international context they also matter for understanding the regional distribution of incomes in a given country. In this paper, we study two regions with trade exposures that differ from the rest of the country, and which display distinct changes in the labor share. East German and Southern Italian regions have a degree of international openness which is below the countries’ averages. At the same time, there has been a more pronounced decline in the labor share in East Germany than in West Germany. In Southern Italy, the labor share has increased in recent years. We show that increased trade openness is not the main culprit behind changing labor shares.
    Keywords: labor share, trade, regions
    JEL: E25 F10 R10
    Date: 2008–11

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