nep-mac New Economics Papers
on Macroeconomics
Issue of 2009‒05‒23
53 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. When is Monetary Policy All We Need? By Fabian Eser; Campbell Leith; Simon Wren-Lewis
  2. When is monetary policy all we need? By Fabian Eser; Campbell Leith; Simon Wren-Lewis
  3. What Drives the Term Structure in the Euro Area? Evidence from a Model with Feedback By Zagaglia, Paolo
  4. Inflation models, optimal monetary policy and uncertain unemployment dynamics: Evidence from the US and the euro area By Carlo Altavilla; Matteo Ciccarelli
  5. Why Inflation Targeting? By Charles Freedman; Douglas Laxton
  6. Do Money Or Oil And Crop Productivity Shocks Lead To Inflation: The Case Of Pakistan By Syed, Kanwar Abbas
  7. Inflation Targeting Under Imperfect Policy Credibility By Turgut Kisinbay; Ondra Kamenik; Ali Alichi; Charles Freedman; M. Johnson; Kevin Clinton; Huigang Chen; Douglas Laxton
  8. The monetary policy rules and the inflation process in open emerging economies: evidence for 12 new EU members By Borek Vasicek
  9. Simple, Implementable Fiscal Policy Rules By Michael Kumhof; Douglas Laxton
  10. Chile's Structural Fiscal Surplus Rule: A Model-Based Evaluation By Michael Kumhof; Douglas Laxton
  11. A Coincident Indicator of the Gulf Cooperation Council (GCC) Business Cycle By Abdullah Al-Hassan
  12. IT Framework Design Parameters By Charles Freedman; Douglas Laxton
  13. Noisy Business Cycles By George-Marios Angeletos; Jennifer La'O
  14. Asset Markets and Monetary Policy By Eckhard Platen; Willi Semmler
  15. Fiscal Stimulus with spending reversals By Corsetti, Giancarlo; Meier, André; Müller, Gernot J.
  16. ECCU Business Cycles: Impact of the U.S. By Wendell A. Samuel; Yan Sun
  17. MEDEA: A DSGE Model for the Spanish Economy By Burriel, Pablo; Fernández-Villaverde, Jesús; Rubio-Ramirez, Juan Francisco
  18. MEDEA: A DSGE Model for the Spanish Economy By Pablo Burriel; Jesús Fernández-Villaverde; Juan F. Rubio-Ramírez
  19. Determinants of Inflation in GCC By Hanan Morsy; Magda E. Kandil
  20. Controllability and Persistence of Money Market Rates along the Yield Curve: Evidence from the Euro Area By Ulrike Busch; Dieter Nautz
  21. Monetary policy in Europe vs the US: what explains the difference? By Harald Uhlig
  22. Does FOMC Communication Help Predicting Federal Funds Target Rate Changes? By Bernd Hayo; Matthias Neuenkirch
  23. Understanding Inflation Inertia in Angola By Nir Klein; Alexander Kyei
  24. Inflation dynamics with labour market matching : assessing alternative specifications By Kai Christoffel; James Costain; Gregory de Walque; Keith Kuester; Tobias Linzert; Stephen Millard; Olivier Pierrard
  25. On the implementation of Markov-Perfect interest rate and money supply rules : global and local uniqueness By Michael Dotsey; Andreas Hornstein
  26. An efficiency wage - imperfect information model of the aggregate supply curve By Campbell, Carl M.
  27. Wage Bargaining Coordination and the Phillips Curve in Italy By Alessandra Del Boca; Michele Fratianni; Franco Spinelli; Carmine Trecroci
  28. Lumpy Investment and State-Dependent Pricing in General Equilibrium By Reiter, Michael; Sveen, Tommy; Weinke, Lutz
  29. Investigating Inflation Dynamics and Structural Change with an Adaptive ARFIMA Approach By Richard T. Baille; Claudio Morana
  30. "Stationary Monetary Equilibria with Strictly Increasing Value Functions and Non-Discrete Money Holdings Distributions: An Indeterminacy Result" By Kazuya Kamiya; Takashi Shimizu
  31. The Effect of Equity Market Integration on the Transmission Monetary Policy. Evidence from Australia By Cinzia Alcidi
  32. Wealth Effetcs on Consumption: Evidence from the euro area By Ricardo M. Sousa
  33. House prices and financial liberalisation in Australia By David M. Williams
  34. Automatic Fiscal Stabilizers in Sweden 1998-2009 By Floden, Martin
  35. Macroeconomic determinants of migrants' remittances : New evidence from a panel VAR. By Dramane Coulibaly
  36. Macroeconometric Policy Modeling for India: A Review of Some Analytical Issues By V. Pandit
  37. Monetary Policy and the Dollar By Peter L. Rousseau
  38. FOMC Communication and Emerging Equity Markets By Bernd Hayo; Ali M. Kutan; Matthias Neuenkirch
  39. Fiscal Storms: Public Spending and Revenues in the Aftermath of Natural Disasters By Ilan Noy; Aekkanush Nualsri
  40. Accrual Budgeting and Fiscal Policy By Marc Robinson
  41. Instability in a Market Economy and the Harrod Growth Model By Ghosh, Dipak
  42. Inflation Hedging for Long-Term Investors By Shaun K. Roache; Alexander P. Attie
  43. Labour Market Flexibility in Estonia: What more Can be Done? By Zuzana Brixiova
  44. Corporate Debt Maturity and the Real Effects of the 2007 Credit Crisis By Heitor Almeida; Murillo Campello; Bruno Laranjeira; Scott Weisbenner
  45. The possible macroeconomic impact on the UK of an influenza pandemic By Marcus Keogh-Brown; Simon Wren-Lewis; W. John Edmunds; Philippe Beutels; Richard D. Smith
  46. GDP vs EVA as an Economic Indicator By Cachanosky, Nicolas
  47. Estimating the Shape of Economic Crises under Heterogeneity By Jonas Dovern; Nils Jannsen
  48. Firm-oriented policies, tax cheating and perverse outcomes By Francesco Busato; Bruno Chiarini; Pasquale De Angelis; Elisabetta Marzano
  49. Global Aging and Fiscal Policy with International Labor Mobility: A Political Economy Perspective By Tosun, Mehmet S.
  50. Adolescent Alcohol-use and Economic Conditions: A Multilevel Analysis of Data from a Period with Big Economic Changes By Svensson, Mikael; Hagquist, Curt
  51. Coping with Rising Food Prices: Policy Dilemmas in the Developing World By Nora Lustig
  52. Competitiveness of the Polish economy compared with the Romanian one By Wioletta Wereda; Alina Hagiu
  53. Employment-Productivity Trade-off and Labour Composition By Hervé Boulhol; Laure Turner

  1. By: Fabian Eser; Campbell Leith; Simon Wren-Lewis
    Abstract: We consider optimal monetary and fiscal policies in a New Keynesian model of a small open economy with sticky prices and wages. In this benchmark setting monetary policy is all we need - analytical results demonstrate that variations in government spending should play no role in the stabilization of shocks. In extensions we show, firstly, that this is even true when allowing for inflation inertia through backward-looking rule-of-thumb price and wage-setting, as long as there in no discrepancy between the private and social evaluation of the marginal rate of substitution between consumption and leisure. Secondly, the optimal neutrality of government spending is robust to the issuance of public debt. In the presence of debt government spending will deviate from the optimal steady-state but only to the extent required to cover the deficit, not to provide any additional macroeconomic stabilization. However, unlike government spending variations in tax rates can play a complementary role to monetary policy, as they change relative prices rather than demand.
    Keywords: Monetary policy, Fiscal policy, Macroeconomic stabilization, Dynamic general equilibrium, Sticky prices, Sticky wages, Rule-of-thumb behaviour, Debt, Countercyclical policy
    JEL: E5 E6 C62
    Date: 2009
  2. By: Fabian Eser; Campbell Leith; Simon Wren-Lewis
    Abstract: We consider optimal monetary and fiscal policies in a New Keynesian model of a small open economy with sticky prices and wages. In this benchmark setting monetary policy is all we need - analytical results demonstrate that variations in government spending should play no role in the stabilization of shocks. In extensions we show, firstly, that this is even when true when allowing for inflation inertia through backward-looking rule-of-thumb price and wage-setting, as long as there is no discrepancy between the private and social evaluation of the marginal rate of substitution between consumption and leisure. Secondly, the optimal neutrality of government spending is robust to the issuance of public debt. In the presence of debt government spending will deviate from the optimal steady-state but only to the extent required to cover the deficit, not to provide any additional macroeconomic stabilization. However, unlike government spending variations in tax rates can play a complementary role to monetary policy, as they change relative prices rather than demand.
    Keywords: Monetary Policy, Fiscal Policy, Macroeconomic Stabilization, Dynamic General Equilibrium, Sticky Prices, Sticky wages, Rule-of-Thumb Behaviour, Debt, Countercyclical Policy
    JEL: E5 E6 C62
    Date: 2009–05
  3. By: Zagaglia, Paolo (Dept. of Economics, Stockholm University)
    Abstract: I study a general-equilibrium model of the term structure where bond prices are an integral part of the monetary transmission mechanism. The model is estimated on quarterly Euro area data. I show that, besides shocks to the inflation target, also exogenous variations in money demand and bond supply can explain movements in long-term interest rates. I also find that taking into account the impact of bond yields on the macroeconomy generates superior in-sample and out-of-sample forecasts for output, inflation and for bond yields.
    Keywords: Monetary policy; yield curve; monetary transmission mechanism
    JEL: E43 E44 E52
    Date: 2009–05–13
  4. By: Carlo Altavilla; Matteo Ciccarelli (-; -)
    Abstract: This paper explores the role that model uncertainty plays in determining the effect of monetary policy shocks on unemployment dynamics in the euro area and the US. We specify a range of BVARs that differ in terms of variables, lag structure, and the way the inflation process is modelled. For each model the central bank sets the interest rate minimizing a loss function. Given this solution, we quantify the impact of a monetary policy shock on unemployment for each model, and measure the degree of uncertainty as represented by the dispersion of both the policy rule parameters and the impulse response functions between models. The comparative evidence from the US and the euro area data indicates that model uncertainty is indeed an important feature, and that a model combination strategy might be a valuable advise to policymakers.
    Keywords: Inflation models, Unemployment, Model uncertainty, Taylor rule, Impulse response analysis
    JEL: C53 E24 E37
    Date: 2008–06–30
  5. By: Charles Freedman; Douglas Laxton
    Abstract: This is the second chapter of a forthcoming monograph entitled "On Implementing Full-Fledged Inflation-Targeting Regimes: Saying What You Do and Doing What You Say." We begin by discussing the costs of inflation, including their role in generating boom-bust cycles. Following a general discussion of the need for a nominal anchor, we describe a specific type of monetary anchor, the inflation-targeting regime, and its two key intellectual roots-the absence of long-run trade-offs and the time-inconsistency problem. We conclude by providing a brief introduction to the way in which inflation targeting works.
    Keywords: Inflation targeting , Monetary policy , Inflation , Economic models ,
    Date: 2009–04–23
  6. By: Syed, Kanwar Abbas
    Abstract: The worst economic outcomes have been argued as a result of the mismanagement in money supply especially in 1929’s Great Depression, 1970’s Stagflation and 2008’s Economic depression in the global economy. However, economic recessions tend to appear after oil price phenomenon. In particular, the global inflationary pressures of 2008 became severe with the spikes up in oil prices as well as crop productivity shocks in the world economy including Pakistan. The object of the present paper is to discuss inflation in the framework of Monetary and external Oil Price Shocks, Crop Productivity Propositions, Inflation Inertia, and real GDP growth. The empirical studies broadly uphold the monetary explanation of inflation in the Pakistan’s economy. This paper offers the policy implication that the combination of monetary as well as productivity management is required to arrest inflationary pressures in the economy. In addition, we find the comprehensive evidence that food inflation is also a monetary phenomenon in the Pakistan’s economy. On the other hand, the continuous persistence in inflation inertia does not hold as a result of the absence of autocorrelation in money supply in AR (2) or higher process in the data. Oil prices in terms of domestic currency highlight the fact that the transmission channel of world shocks via exchange rate fluctuations leaves significant impacts upon domestic inflation in the economy.
    Keywords: Money; Inflation; Oil; Productivity
    JEL: B22
    Date: 2009–04–10
  7. By: Turgut Kisinbay; Ondra Kamenik; Ali Alichi; Charles Freedman; M. Johnson; Kevin Clinton; Huigang Chen; Douglas Laxton
    Abstract: This paper presents a model for Inflation Targeting under imperfect policy credibility. It modifies the conventional model in three ways: an endogenous policy credibility process, by which monetary policy can gain or lose credibility over time; non-linearities in the inflation equation and in the credibility generating process; and an explicit loss function. The model highlights problems associated with the practice of setting a series of rigid near-term inflation targets. Also, unfavorable supply shocks pose a difficult problem: an appropriate response involves an interest rate increase, some loss of output, and a period of increased inflation. A delayed response can result in a prolonged period of stagflation.
    Keywords: Inflation targeting , Emerging markets , Monetary policy , Disinflation , Demand , Price increases , Economic models ,
    Date: 2009–04–28
  8. By: Borek Vasicek (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: This paper has three objectives. First, it aims at revealing the logic of interest rate setting pursued by monetary authorities of 12 new EU members. Using estimation of an augmented Taylor rule, we find that this setting was not always consistent with the official monetary policy. Second, we seek to shed light on the inflation process of these countries. To this end, we carry out an estimation of an open economy Philips curve (PC). Our main finding is that inflation rates were not only driven by backward persistency but also held a forward-looking component. Finally, we assess the viability of existing monetary arrangements for price stability. The analysis of the conditional inflation variance obtained from GARCH estimation of PC is used for this purpose. We conclude that inflation targeting is preferable to an exchange rate peg because it allowed decreasing the inflation rate and anchored its volatility.
    Keywords: open emerging economies, monetary policy rules, open economy Phillips curve, conditional inflation variance
    JEL: E31 E52 E58 P24
    Date: 2009–05
  9. By: Michael Kumhof; Douglas Laxton
    Abstract: This paper analyzes the scope for systematic rules-based fiscal activism in open economies. Relative to a balanced budget rule, automatic stabilizers significantly improve welfare. But they minimize fiscal instrument volatility rather than business cycle volatility. A more aggressively countercyclical tax revenue gap rule increases welfare gains by around 50 percent, with only modest increases in fiscal instrument volatility. For raw materials revenue gaps the government should let automatic stabilizers work. The best fiscal instruments are targeted transfers, consumption taxes and labor taxes, or, if it enters private utility, government spending. The welfare gains are significantly lower for more open economies.
    Keywords: Fiscal policy , Business cycles , Revenues , Monetary policy , External shocks , Commodity prices , Copper , Manufacturing , Economic stabilization , Economic models ,
    Date: 2009–04–22
  10. By: Michael Kumhof; Douglas Laxton
    Abstract: The paper analyzes Chile's structural balance fiscal rule in the face of copper price shocks originating in foreign copper demand. It uses a version of the IMF's Global Integrated Monetary and Fiscal Model (GIMF) that includes a copper sector. Two results are obtained. First, Chile's current fiscal rule performs well if the policymaker puts a small weight on output volatility (relative to inflation volatility) in his/her objective function. A more aggressive countercyclical fiscal rule can attain lower output volatility, but there is a trade-off with (somewhat) higher inflation volatility and (much) higher volatility of fiscal variables. Second, given its current stock of government assets, Chile's adoption of a 0.5% surplus target starting in 2008 is desirable from a business cycle perspective. This is because the earlier 1% target would have required significant further asset accumulation that could only have been accomplished at the expense of greater volatility in fiscal instruments and therefore in GDP.
    Keywords: Fiscal policy , Chile , Current account surpluses , Business cycles , Copper , Economic models ,
    Date: 2009–04–23
  11. By: Abdullah Al-Hassan
    Abstract: This paper constructs a coincident indicator for the Gulf Cooperation Council (GCC) area business cycle. The resulting coincident indicator provides a reliable measure of the GCC business cycle; over the last decade, the GCC coincident index and the real GDP growth have moved closely together. Since the indicator is constructed using a small number of common factors, the strong correlation between the indicator and real GDP growth points to a high degree of commonality across GCC economies. The timing and direction of movements in macroeconomic variables are characterized with respect to the coincident indicator. Finally, to obtain a meaningful economic interpretation of the latent factors, their behavior is compared to the observed economic variables.
    Keywords: Business cycles , Cooperation Council for the Arab States of the Gulf , Monetary unions , Monetary policy , Gross domestic product , Economic growth , Economic models , Cross country analysis ,
    Date: 2009–04–17
  12. By: Charles Freedman; Douglas Laxton
    Abstract: This is the third chapter of a forthcoming monograph entitled "On Implementing Full-Fledged Inflation-Targeting Regimes: Saying What You Do and Doing What You Say." It examines a number of elements in the design of an inflation-targeting framework. These include the definition of the target variable, the relevance of core measures of inflation, and the advantages and disadvantages of point targets, point targets with a band, and range targets. It then discusses the choice of a long-term inflation rate, the target horizon, and the policy horizon.
    Keywords: Information technology , Inflation targeting , Monetary policy , Inflation , Inflation rates , Central banks , Data collection , Data analysis ,
    Date: 2009–04–23
  13. By: George-Marios Angeletos; Jennifer La'O
    Abstract: This paper investigates a real-business-cycle economy that features dispersed information about the underlying aggregate productivity shocks, taste shocks, and, potentially, shocks to monopoly power. We show how the dispersion of information can (i) contribute to significant inertia in the response of macroeconomic outcomes to such shocks; (ii) induce a negative short-run response of employment to productivity shocks; (iii) imply that productivity shocks explain only a small fraction of high-frequency fluctuations; (iv) contribute to significant noise in the business cycle; (v) formalize a certain type of demand shocks within an RBC economy; and (vi) generate cyclical variation in observed Solow residuals and labor wedges. Importantly, none of these properties requires significant uncertainty about the underlying fundamentals: they rest on the heterogeneity of information and the strength of trade linkages in the economy, not the level of uncertainty. Finally, none of these properties are symptoms of inefficiency: apart from undoing monopoly distortions or providing the agents with more information, no policy intervention can improve upon the equilibrium allocations.
    JEL: C7 D6 D8
    Date: 2009–05
  14. By: Eckhard Platen (School of Finance and Economics, University of Technology, Sydney); Willi Semmler (Department of Economics, New School, New York and Center for Empirical Macroeconomics, Bielefeld University)
    Abstract: Monetary policy has pursued the concept of inflation targeting. This has been implemented in many countries. Here interest rates are supposed to respond to an inflation gap and output gap. Despite long term continuing growth of the world financial assets, recently, monetary policy, in particular in the U.S. after the subprime credit crisis, was challenged by severe disruptions and a meltdown of the financial market. Subsequently, academics have been in search of a type of monetary policy that does allow to in°uence in an appropriate manner the investor's behavior and, thus, the dynamics of the economy and its financial market. The paper suggests a dynamic portfolio approach. It allows one to study the interaction between investors` strategic behavior and monetary policy. The article derives rules that explain how monetary authorities should set the short term interest rate in interaction with inflation rate, economic growth, asset prices, risk aversion, asset price volatility, and consumption rates. Interesting is that the inflation rate needs to have a certain minimal level to allow the interest rate to be a viable control instrument. A particular target interest rate has been identified for the desirable optimal regime. If the proposed monetary policy rule is applied properly, then the consumption rate will remain stable and the inflation rate can be kept close to a minimal possible level. Empirical evidence is provided to support this view. Additionally, in the case of an economic crisis the proposed relationships indicate in which direction to act to bring the economy back on track.
    Keywords: risk aversion; interest rate; dynamic portfolio; consumption rate; inflation; monetary policy; benchmark approach
    JEL: G10 G13
    Date: 2009–04–01
  15. By: Corsetti, Giancarlo; Meier, André; Müller, Gernot J.
    Abstract: The impact of fiscal stimulus depends not only on short-term tax and spending policies, but also on expectations about offsetting measures in the future. This paper analyzes the effects of an increase in government spending under a plausible debt-stabilizing policy that systematically reduces spending below trend over time, in response to rising public liabilities. Accounting for such spending reversals brings an otherwise standard new Keynesian model in line with the stylized facts of fiscal transmission, including the crowding-in of consumption and the `puzzle' of real exchange rate depreciation. Time series evidence for the U.S. supports the empirical relevance of endogenous spending reversals.
    Keywords: consumption; Fiscal policy transmission; monetary policy; real exchange rate; real interest rates; sticky prices
    JEL: E62 E63 F41
    Date: 2009–05
  16. By: Wendell A. Samuel; Yan Sun
    Abstract: With a fixed peg to the U.S. dollar for more than three decades, the tourism-dependent Eastern Caribbean Currency Union (ECCU) countries share a close economic relationship with the U.S. This paper analyzes the impact of the United States on ECCU business cycles and identifies possible transmission channels. Using two different approaches (the common trends and common cycles approach of Vahid and Engle (1993) and the standard VAR analysis), it finds that the ECCU economies are very sensitive to both temporary and permanent movements in the U.S. economy and that such linkages have strengthened over time. There is, however, less clear-cut evidence on the transmission channels. United States monetary policy does not appear to be an important channel of influence, while tourism is important for only one ECCU country.
    Keywords: Business cycles , Eastern Caribbean Currency Union , United States , Spillovers , External shocks , Fiscal reforms , Fiscal consolidation , Debt reduction , Economic models ,
    Date: 2009–04–17
  17. By: Burriel, Pablo; Fernández-Villaverde, Jesús; Rubio-Ramirez, Juan Francisco
    Abstract: In this paper, we provide a brief introduction to a new macroeconometric model of the Spanish economy named MEDEA (Modelo de Equilibrio Dinámico de la Economía EspañA). MEDEA is a dynamic stochastic general equilibrium (DSGE) model that aims to describe the main features of the Spanish economy for policy analysis, counterfactual exercises, and forecasting. MEDEA is built in the tradition of New Keynesian models with real and nominal rigidities, but it also incorporates aspects such as a small open economy framework, an outside monetary authority such as the ECB, and population growth, factors that are important in accounting for aggregate fluctuations in Spain. The model is estimated with Bayesian techniques and data from the last two decades. Beyond describing the properties of the model, we perform different exercises to illustrate the potential of MEDEA, including historical decompositions, long-run and short-run simulations, and counterfactual experiments.
    Keywords: Bayesian Methods; DSGE Models; Likelihood Estimation
    JEL: C11 C13 E30
    Date: 2009–05
  18. By: Pablo Burriel; Jesús Fernández-Villaverde; Juan F. Rubio-Ramírez
    Abstract: In this paper, we provide a brief introduction to a new macroeconometric model of the Spanish economy named MEDEA (Modelo de Equilibrio Dinámico de la Economía EspañolA). MEDEA is a dynamic stochastic general equilibrium (DSGE) model that aims to describe the main features of the Spanish economy for policy analysis, counterfactual exercises, and forecasting. MEDEA is built in the tradition of New Keynesian models with real and nominal rigidities, but it also incorporates aspects such as a small open economy framework, an outside monetary authority such as the ECB, and population growth, factors that are important in accounting for aggregate fluctuations in Spain. The model is estimated with Bayesian techniques and data from the last two decades. Beyond describing the properties of the model, we perform different exercises to illustrate the potential of MEDEA, including historical decompositions, long-run and short-run simulations, and counterfactual experiments.
    Date: 2009–05
  19. By: Hanan Morsy; Magda E. Kandil
    Abstract: Inflationary pressures have heightened in the oil-rich Gulf Cooperation Council (GCC) since 2003. This paper studies determinants of inflation in GCC, using an empirical model that includes domestic and external factors. Inflation in major trading partners appears to be the most relevant foreign factor. In addition, oil revenues have reinforced inflationary pressures through growth of credit and aggregate spending. In the short-run, binding capacity constraints also explain higher inflation given increased government spending. Nonetheless, by targeting supply-side bottlenecks, the increase in government spending is easing capacity constraints and will ultimately help to moderate price inflation.
    Keywords: Inflation , Cooperation Council for the Arab States of the Gulf , External shocks , Domestic liquidity , Monetary policy , Currency pegs , Exchange rate depreciation , Economic models , Cross country analysis ,
    Date: 2009–04–22
  20. By: Ulrike Busch; Dieter Nautz
    Abstract: Controllability of longer-term interest rates requires that the persistence of their deviations from the central bank's policy rate (i.e. the policy spreads) remains suciently low. This paper applies fractional integration techniques to assess the persistence of policy spreads of euro area money market rates along the yield curve. Independently from anticipated policy rate changes, there is strong evidence for all maturities that policy spreads exhibit long memory. We show that recent changes in the operational framework and the communication strategy of the European Central Bank have significantly decreased the persistence of euro area policy spreads and, thus, have enhanced the central bank's influence on longer-term money market rates.
    Keywords: Long memory and fractional integration, controllability and persistence of interest rates, new operational framework of the ECB
    JEL: C22 E43 E52
    Date: 2009–05
  21. By: Harald Uhlig
    Abstract: This paper compares monetary policy in the US and EMU during the last decade, employing an estimated hybrid New Keynesian cash-in-advance model, driven by five shocks. It appears that the difference between the two monetary policies between 1998 and 2006 is due to both surprises in productivity as well as surprises in wage demands, moving interest rates in opposite directions in Europe and the US, but not due to a more sluggish response in Europe to the same shocks or to different monetary policy surprises.
    JEL: E32 E50 E52 E58 E63
    Date: 2009–05
  22. By: Bernd Hayo (Faculty of Business Administration and Economics, Philipps-University Marburg); Matthias Neuenkirch (Faculty of Business Administration and Economics, Philipps-University Marburg)
    Abstract: We explain changes in the federal funds target rate using macroeconomic variables and Federal Open Market Committee (FOMC) communication indicators. Econometrically, we employ an ordered probit model of a Taylor rule to predict 75 target rate decisions between 1998 and 2006. We find, first, that FOMC communication is forward-looking, with a horizon that goes beyond the next meeting. Second, our communication indicators significantly explain target rate changes and improve explanatory power in and out of sample. Third, speeches by members of the Board of Governors and regional presidents have a statistically significant and equal-sized effect, whereas the less-frequent monetary policy reports and testimonies are insignificant. Fourth, our findings are robust to variations in the specification, including changes in the communication strategy as well as a measure of unambiguous communication. Finally, our communication indicator based on FOMC speeches performs better in explaining rate changes than do newswire reports of Fed communications.
    Keywords: Central Bank Communication, Federal Reserve Bank, Interest Rate Decision, Monetary Policy, Federal Funds Target Rate, Taylor Rule
    JEL: E43 E52 E58
    Date: 2009
  23. By: Nir Klein; Alexander Kyei
    Abstract: In recent years, the decline in inflation in Angola has stalled and further steps may be needed to attain the authorities' medium term goal of meeting the Southern African Development Community (SADC) convergence criteria of a low single digit inflation rate. A Vector Error Correction (VEC) model, which analyzes the factors that affect the inflationary process in Angola, suggests that the inflation path has been largely affected by exchange rate movements. This implies that greater exchange rate flexibility that facilitates a gradual appreciation would be instrumental to moderate price growth through reducing the price of imports and limiting liquidity injection by the National Bank of Angola (BNA). Additionally, the analysis shows that excess liquidity, which is measured by positive deviations of M2 from its equilibrium level, adds to demand pressures, and contributes to inflation with a lag. This underlines the importance of closely monitoring the growth of monetary aggregates as well as improving liquidity management.
    Keywords: Inflation , Angola , Inflation rates , Monetary aggregates , Oil exports , Commodity price fluctuations , Exchange rates , Excess liquidity , Liquidity management , Economic models , Data analysis ,
    Date: 2009–05–12
  24. By: Kai Christoffel (European Central Bank); James Costain (División de Investigación, Servicio de Estudios, Banco de España); Gregory de Walque (Research Department, National Bank of Belgium); Keith Kuester (Research Department, Federal Reserve Bank of Philadelphia); Tobias Linzert (European Central Bank); Stephen Millard (Bank of England); Olivier Pierrard (Banque Centrale du Luxembourg)
    Abstract: This paper reviews recent approaches to modeling the labour market, and assesses their implications for inflation dynamics through both their effect on marginal cost and on price-setting behavior. In a search and matching environment, we consider the following modeling setups: right-to-manage bargaining vs. efficient bargaining, wage stickiness in new and existing matches, interactions at the firm level between price and wage-setting, alternative forms of hiring frictions, search on-the-job and endogenous job separation. We find that most specifications imply too little real rigidity and, so, too volatile inflation. Models with wage stickiness and right-to-manage bargaining or with firm-specific labour emerge as the most promising candidates
    Keywords: Inflation Dynamics, Labour Market, Business Cycle, Real Rigidities
    JEL: E E E J
    Date: 2009–05
  25. By: Michael Dotsey; Andreas Hornstein
    Keywords: Monetary policy ; Interest rates
    Date: 2009
  26. By: Campbell, Carl M.
    Abstract: This study derives a reduced-form equation for the aggregate supply curve from a model in which firms pay efficiency wages and workers have imperfect information about average wages at other firms. If specific assumptions are made about workers’ expectations of average wages and about aggregate demand, the model predicts how the aggregate demand and supply curves shift and how output and prices adjust in response to demand shocks and supply shocks. The model also provides an alternative explanation for Lucas’ (1973) finding that the AS curve is steeper in countries with greater inflation variability.
    Keywords: Aggregate supply curve; efficiency wages; imperfect information
    JEL: E32 J41 E10
    Date: 2009–05–18
  27. By: Alessandra Del Boca; Michele Fratianni; Franco Spinelli; Carmine Trecroci
    Abstract: Was there a textbook-like Phillips curve in post-WWII Italy? We estimate a consensus model of the relationship between inflation and the level of economic activity over 1949-1998, finding no evidence of a significant and positive feedback from output to prices. We also estimate similar models for the UK and the US. We discuss the role of wage coordination and indexation mechanisms in generating what amounts to a significant departure of Italian data from what holds true for the US and UK. Likely, the rigid indexation mechanism that aimed at protecting wages from inflation ended up contributing to the persistent inflation bias that Italy experienced almost until its entry into EMU.
    Date: 2009
  28. By: Reiter, Michael (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria); Sveen, Tommy (Monetary Policy Department, Norges Bank, Oslo, Norway); Weinke, Lutz (Department of Economics, Duke University, Durham, NC, USA and Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)
    Abstract: The lumpy nature of plant-level investment is generally not taken into account in the context of monetary theory (see, e.g., Christiano et al. 2005 and Woodford 2005). We formulate a generalized (S,s) pricing and investment model which is empirically more plausible along that dimension. Surprisingly, our main result shows that the presence of lumpy investment casts doubt on the ability of sticky prices to imply a quantitatively relevant monetary transmission mechanism.
    Keywords: Lumpy investment, Sticky prices
    JEL: E22 E31 E32
    Date: 2009–05
  29. By: Richard T. Baille; Claudio Morana
    Abstract: Previous models of monthly CPI inflation time series have focused on possible regime shifts, non-linearities and the feature of long memory. This paper proposes a new time series model, named Adaptive ARFIMA; which appears well suited to describe inflation and potentially other economic time series data. The Adaptive ARFIMA model includes a time dependent intercept term which follows a Flexible Fourier Form. The model appears to be capable of succesfully dealing with various forms of breaks and discontinities in the conditional mean of a time series. Simulation evidence justifies estimation by approximate MLE and model specfication through robust inference based on QMLE. The Adaptive ARFIMA model when supplemented with conditional variance models is found to provide a good representation of the G7 monthly CPI inflation series.
    Keywords: ARFIMA; FIGARCH, long memory, structural change, inflation, G7.
    JEL: C15 C22
    Date: 2009–05
  30. By: Kazuya Kamiya (Faculty of Economics, University of Tokyo); Takashi Shimizu (Faculty of Economics, Kansai University)
    Abstract: In this paper, we present a search model with divisible money in which there exists a continuum of monetary equilibria with strictly increasing continuous value functions and with non-discrete money holdings distributions.
    Date: 2009–03
  31. By: Cinzia Alcidi (IUHEID, The Graduate Institute of International and Development Studies, Geneva)
    Abstract: This paper investigates the effects of equity market integration on the transmission of monetary policy shocks. Based on the assumption that financial market liberalization and integration lead to falling portfolio holding costs, we analyze its effect on a two-country DSGE model with staggered prices and endogenous portfolio choice under incomplete markets. The model predicts that the reaction of stock prices, output and RER becomes muted upon impact and less persistence with falling portfolio holding costs. To test for a similar pattern in the data, we estimate a VAR with rolling coefficients for Australia, which provides a good case study. We identify a monetary policy shock with the sign restriction approach. The impulse responses generated by the data are consistent with the prediction of the model and imply that equity market liberalization seems to weaken the impact of monetary policy, at least on stock prices.
    Keywords: Endogenous portfolio, Monetary policy, Financial liberalization, FAVAR
    JEL: E52 C32 F21 F36
    Date: 2009–03
  32. By: Ricardo M. Sousa (Universidade do Minho - NIPE)
    Abstract: This paper estimates the wealth effects on consumption in the euro area as a whole. I show that: (i) financial wealth effects are relatively large and statistically significant; (ii) housing wealth effects are virtually nil and not significant; (iii) consumption growth exhibits strong persistence and responds sluggishly to shocks; and (iv) the immediate response of consumption to wealth is substantially different from the long-run wealth effects. By disaggregating financial wealth into its major components, the estimates suggest that wealth effects are particularly large for currency and deposits, and shares and mutual funds. In addition, consumption seems to be very responsive to financial liabilities and mortage loans.
    Keywords: Consumption, Housing Wealth, Financial Wealth.
    JEL: E21 E44 D12
    Date: 2009
  33. By: David M. Williams
    Abstract: Financial liberalisation and innovation (FLIB) in Australia over the 1980s and 1990s provided the institutional backdrop for one of the most rapid increases in household balance sheets and house prices in the world. An equilibrium correction model of quarterly Australian house prices for 1972-2006 identifies the key long run drivers as real non-property income per house, the working age population proportion, the unemployment rate, two government policy changes, real and nominal interest rates and non-price credit conditions. All else equal, easing credit supply conditions attributable to FLIB directly raised the long run level of real house prices by around 51 per cent while higher real interest rates subtracted 29 per cent from long run prices. Real interest rates are shown to have a significant impact on real house prices after financial liberalisation but play no role before. These findings suggest that FLIB fundamentally relaxed binding credit constraints on households and enhanced opportunities for intertemporal smoothing. The model also explicitly captures short run overshooting dynamics in Australian house prices. Whenever lagged real house price growth is greater than about 4 per cent, for example during booms, house prices tend to display “frenzy” behaviour measured as a cubic of lagged house price changes.
    Keywords: House prices, Mortgage markets, Financial liberalisation
    JEL: E21 G21
    Date: 2009
  34. By: Floden, Martin (Dept. of Economics, Stockholm School of Economics)
    Abstract: In this note, I examine how the responsiveness of the Swedish public budget to business-cycle conditions has developed between 1998 and 2009. I document substantial changes in three components behind the budget elasticity: (i) the average level of personal income taxes has fallen substantially, (ii) the progressivity of personal income taxation has increased, and (iii) spending on unemployment compensation has fallen. The first two changes have opposing effects on the budget elasticity, and I find that the higher progressivity has had a marginally larger impact on the elasticity than the tax cuts. Also allowing for the lower unemployment compensations, the three effects add up to a small and non-substantial fall in the budget elasticity. Considering that most of the components behind the budget elasticity are imprecisely estimated, there is no clear evidence that the Swedish budget elasticity has changed during the last decade.
    Keywords: Automatic stabilizers; budget elasticity; fiscal policy; stabilization policy
    JEL: E62 H30 H60
    Date: 2009–05–11
  35. By: Dramane Coulibaly (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: This paper examines the macroeconomic determinants of migrants' remittances cycles. The study uses panel VAR methods in order to compensate for both data limitations and endogeneity among variables. The analysis considers annual data for 16 latin and Caribbean countries. By using these data I compute variance decompositions (VDCs) and impulse response functions (IRFs). The VDCs show that the forecast error variance of remittances is explained by host country GDP, home country GDP and the differential of interest rates between home and host countries. The IRFs analysis confirms these findings. First, the IRFs show that remittances respond positively to boom in host country. Second, for altruistic motivations, a recession in home country is accompanied by a increase in remittances inflows. The last result, related to self-interested motivations, is the increase in remittances inflows following a rise in the differential of interest rates between home and host countries.
    Keywords: International migration, remittances, business cycles.
    JEL: F22 F24 O15 O54
    Date: 2009–02
  36. By: V. Pandit
    Abstract: Macroeconomic modelling is generally motivated by two objectives: forecasting and more significantly, policy analysis. In pursuit of both these objectives, every model must ideally satisfy four criteria. First and foremost, it must fit into a theoretical framework. Second, the actual specification of the model must reflect a clear understanding of the contextual framework within which policies are formulated and executed along with an envisaged process of adjustment. Third, it is essential that the model is built on a firm and rich data base and, finally, the estimated structural model must adequately utilise the rigors and sophistications of econometric methodology.Unfortunately this is a tall order which can seldom be met.[CDE DSE WP NO 74]
    Keywords: Macroeconomic modelling; vector autoregression (VAR) modelling; econometric methodology; Cowles Commission Diebold; Price Behavior; Weintranb; monetary and fiscal policy; modus operandi; IEG-DSE model; World Project LINK system
    Date: 2009
  37. By: Peter L. Rousseau
    Abstract: In this essay I propose that the adoption of the U.S. dollar as a common currency shortly after the ratification of the Federal Constitution and the accompanying transition from a fiat to specie standard was a pivotal moment in the nation’s early history and marked an improvement over the monetary systems of colonial America and under the Articles of Confederation. This is because the dollar and all that came with it monetized the modern sector of the U.S. economy and tied the supply of money more closely to the capital market and the provision of credit―feats that were not possible in an era when colonial legislatures were unable to credibly commit to controlling paper money emissions. The switch to a specie standard was at the time necessary to promote domestic and international confidence in the nascent financial system, and paved the way for the long transition to the point when the standard was no longer required.
    JEL: E42 E44 N11 N21
    Date: 2009–05
  38. By: Bernd Hayo (Faculty of Business Administration and Economics, Philipps Universitaet Marburg); Ali M. Kutan (Southern Illinois University Edwardsville and the William Davidson Institute, Michigan); Matthias Neuenkirch (Faculty of Business Administration and Economics, Philipps Universitaet Marburg)
    Abstract: Using a GARCH model, we study the effects of Federal Funds target rate changes and FOMC communication on emerging equity market returns and volatility over the period 1998–2006. First, both types of news have a significant impact on market returns. Second, target rate changes are more important than informal communication. Third, the occurrence of monetary policy reports lowers price volatility. Finally, American emerging markets react more to U.S. news than non-American markets.
    Keywords: Central Bank Communication, Emerging Markets, Federal Reserve Bank, U.S. Monetary Policy
    JEL: E52 G14 G15
    Date: 2009
  39. By: Ilan Noy (Department of Economics, University of Hawaii at Manoa); Aekkanush Nualsri (Department of Economics, University of Hawaii at Manoa)
    Abstract: Recent research in both the social and natural sciences has been devoted to increasing our ability to predict disasters, prepare for them and mitigate their costs. Curiously, we appear to know very little about the fiscal consequences of disasters. The likely fiscal impact of a natural disaster has not been examined before in any comparable or comparative framework. We estimate and quantify the fiscal consequences of natural disasters using quarterly fiscal and disaster data for a large panel of countries. In our estimations, we employ a panel VAR framework that is similar to Burnside et al. (Journal of Economic Theory, 2004), that also controls for the business cycle. We find fiscal behavior in the aftermath of disasters in developed countries that can best be characterized as counter-cyclical. In contrast, we find pro-cyclical decreased spending and increasing revenues in developing countries following large natural disasters. We quantify these effects.
    Keywords: natural disasters, fiscal policy
    JEL: E62 O23 Q54
    Date: 2008–12–01
  40. By: Marc Robinson
    Abstract: Can an accrual budgeting system-a system in which budgetary spending authorizations to line ministries are formulated in accrual terms-serve the needs of good fiscal policy? If so, how must such a system be designed? What are the practical challenges which may arise in implementing sound fiscal policy under a budgeting system which is significantly more complex than traditional cash budgeting? These are the primary questions addressed in this paper. Because any budgeting system must support the control of key fiscal policy aggregates, the paper also considers the case for reformulating fiscal policy in terms of accrual rather than cash aggregates. The primary focus is on the potential fiscal policy role of net lending and net financial debt. However, the paper also considers whether net worth is an aggregate with major fiscal policy relevance.
    Keywords: Accounting , Budgeting , Fiscal policy , Fiscal sustainability , Fiscal stability , Government expenditures , Asset management ,
    Date: 2009–04–22
  41. By: Ghosh, Dipak
    Abstract: What is very often overlooked in the literature is that the Harrod's Post- Keynesian growth model is more to do with the problem of instability in a market economy which is caused by the role of expectations of the investors. The neoclassical model of growth due to Solow achieves stability not due to its assumption of smooth twice differentiable production function but assuming away the role of uncertainty.
    Keywords: Open system; Uncertainty; Role of Expectation; Post-Keynesian Growth; Instability
    Date: 2009–05
  42. By: Shaun K. Roache; Alexander P. Attie
    Abstract: Long-term investors face a common problem-how to maintain the purchasing power of their assets over time and achieve a level of real returns consistent with their investment objectives. While inflation-linked bonds and derivatives have been developed to hedge the effects of inflation, their limited supply and liquidity lead many investors to continue to rely on the indirect hedging properties of traditional asset classes. In this paper, we assess these properties over different time horizons, in the context of a diversified portfolio. Using a vector error correction model, we find that effective short-run hedges, such as commodities, may not work over longer horizons and that tactical asset allocation could enhance investment returns following inflation surprises.
    Keywords: Inflation , Capital markets , Private investment , Financial instruments , Hedge funds , Commodities , Asset prices , Economic models ,
    Date: 2009–04–23
  43. By: Zuzana Brixiova
    Abstract: In mid-2008, high employment and low unemployment rates characterised the Estonian labour market in comparison with the average of the EU15 countries. While aggregate outcomes improved during 2000-07, large inequalities persisted across regions, ethnic groups, and workers with different skill levels. As Estonia entered recession in 2008, the unemployment rate almost doubled between the 2nd and the 4th quarter, and is expected to rise further in 2009 and 2010. More flexible labour markets will be a key adjustment mechanism during the recession as well as in the medium term if Estonia is to become a knowledge-based economy. Given the currency board arrangement and low synchronisation with the euro area, flexibility is also needed to cushion asymmetric shocks. In December 2008, parliament adopted the new Employment Contract Act, deregulating employment protection while increasing income security of the unemployed. This paper discusses options for removing the remaining barriers that impede worker reallocation across jobs, sectors, and regions into more productive activities.<P>La flexibilité du marché du travail en Estonie : comment l’améliorer ?<BR>Au milieu de 2008, le marché du travail estonien se caractérisait par un taux élevé d’emploi et un faible taux de chômage par comparaison avec la moyenne de l’UE15. De fortes inégalités persistaient entre régions, groupes ethniques et travailleurs de niveaux différents de qualification. Lorsque l’Estonie est entrée en récession en 2008, le taux de chômage a presque doublé entre le 2e et le 4e trimestre, et il devrait encore augmenter en 2009 et 2010. Une plus grande flexibilité du marché du travail constituera un mécanisme essentiel d’ajustement durant la récession et à moyen terme dans la perspective d’une économie fondée sur le savoir. En décembre 2008, le parlement a adopté la loi sur l’emploi, qui a déréglementé la protection de l’emploi tout en renforçant la sécurité du revenu pour les chômeurs. Ce document a pour thème l’élimination des obstacles résiduels au redéploiement des travailleurs entre emplois, secteurs et régions, au profit des activités plus productives.
    JEL: E24 J08 J64
    Date: 2009–05–11
  44. By: Heitor Almeida; Murillo Campello; Bruno Laranjeira; Scott Weisbenner
    Abstract: We use the 2007 credit crisis to assess the effect of financial contracting on real corporate behavior. We identify heterogeneity in financial contracting at the onset of the crisis by exploring ex-ante variation in long-term debt maturity. Our empirical methodology uses an experiment-like design in which we control for observed and unobserved firm heterogeneity via a differences-in-differences matching estimator. We study whether firms with large portions of their long-term debt maturing right at the time of the crisis observe more pronounced outcomes than otherwise similar firms that need not refinance their debt during the crisis. Firms whose long-term debt was largely maturing right after the third quarter of 2007 reduced investment by 2.5% more (on a quarterly basis) than otherwise similar firms whose debt was scheduled to mature well after 2008. This relative decline in investment is statistically significant and economically large, representing approximately one-third of pre-crisis investment levels. A number of falsification and placebo tests confirm our inferences about the effect of credit supply shocks on corporate policies. For example, in the absence of a credit shock ("normal times"), the maturity composition of long-term debt has no effect on investment outcomes. Likewise, maturity composition has no impact on investment when long-term debt is not a major source of funding for the firm.
    JEL: E22 E32 G31 G32
    Date: 2009–05
  45. By: Marcus Keogh-Brown; Simon Wren-Lewis; W. John Edmunds; Philippe Beutels; Richard D. Smith
    Abstract: Little is known about the possible impact of an influenza pandemic on a nation’s economy. We applied the UK macroeconomic model ‘COMPACT’ to epidemiological data on previous UK influenza pandemics, and extrapolated a sensitivity analysis to cover more extreme disease scenarios. Analysis suggests that the economic impact of a repeat of the 1957 or 1968 pandemics, allowing for school closures, would be short lived, constituting a loss of 3.35% and 0.58% of GDP in the first pandemic quarter and year respectively. A more severe scenario (with more than 1% of the population dying) could yield impacts of 21% and 4.5% respectively. The economic shockwave would be gravest when absenteeism (through school closures) increases beyond a few weeks, creating policy repercussions for influenza pandemic planning as the most severe economic impact is due to policies to contain the pandemic rather than the pandemic itself. Accounting for changes in consumption patterns made in an attempt to avoid infection worsens the potential impact. Our mild disease scenario then shows first quarter/first year reductions in GDP of 9.5%/2.5%, compared to our severe scenario reductions of 29.5%. These results clearly indicate the significance of behavioural change over disease parameters.
    Keywords: Pandemic, Influenza, Simulation, COMPACT
    JEL: E17 I18 Q54
    Date: 2009
  46. By: Cachanosky, Nicolas
    Abstract: This article discusses the limits and charactristics of GDP as economic indicator and suggests that an Economic Value Added (EVA®) approach would be more accurate and appropriate to measure macroeconomic performance. The main difference is that EVA® takes into consideration the invested capital cost of opportunity, while GDP is focused on quantity of production; an EVA® approach will be focused on the economic result of production activities. A final comment is made on the characteristics and limits of a GDP calculated using the EVA®
    Keywords: GDP; Growth; Economic Value Added; EVA
    JEL: E30 E01
    Date: 2009–03–06
  47. By: Jonas Dovern; Nils Jannsen
    Abstract: During the ongoing financial crisis the analysis of similar historical crises has gained more and more attention among economic researchers and forecasters. Existing studies, however, do not tackle the immense heterogeneity that is present in cross-country samples in a formal and consistent way. In this paper, we propose a standardization approach to estimate the typical impact of economic crises. We show that our approach leads to estimates that are much less dependent on the sample used to estimate the typical shape and, hence, should give more reliable information about the typical macroeconomic impact of economic crises
    Keywords: Economic Crisis, Financial Crisis, Banking Crisis, Economic History, United States
    JEL: E17 E32 E44 E66
    Date: 2009–05
  48. By: Francesco Busato; Bruno Chiarini; Pasquale De Angelis; Elisabetta Marzano (-; -; -; -)
    Abstract: This paper examines the implications of firm-oriented fiscal policies, namely investment subsidies and tax allowances, in an economy where producers may potentially avoid taxes. Among our results we stress the following. First, although investment subsidies induce increased capital accumulation (a level effect), they promote tax evasion; these subsidies induce firms to increase actual capital accumulation (a level effect), but also produce a reduction in the share of aggregate capital stock deployed in taxed, "official" production (a composition effect). Second, parameters characterizing the tax enforcement system play a major role in explaining tax evasion and firm size. Third, the technology structure matters for determining how to allocate resources between official and unofficial production.
    Keywords: State aid, tax exemptions, investment subsidies, tax evasion, unofficial underground production, investment
    JEL: E26 E22 H25 H26
    Date: 2008–08–31
  49. By: Tosun, Mehmet S. (University of Nevada, Reno)
    Abstract: This paper uses an overlapping generations model with international labor mobility and a politically responsive fiscal policy to examine aging in developed and developing regions. Migrant workers change the political structure composed of young and elderly voters in both labor-receiving and labor-sending countries. Numerical simulations show that the developed region benefits more from international labor mobility through the contribution of migrant workers as laborers, savers, and voters. The developing region experiences significant growth in all specifications but benefit more under international capital mobility. Restricting political participation of migrant workers in the developed region produces inferior growth results.
    Keywords: population aging, overlapping generations, endogenous fiscal policy, international labor mobility, international capital mobility
    JEL: E62 F21 F22 F43 H30 J10
    Date: 2009–05
  50. By: Svensson, Mikael (Department of Business, Economics, Statistics and Informatics); Hagquist, Curt (Karlstad University)
    Abstract: This paper examines how the unemployment rate is related to adolescent alcohol use during a time period characterized by big societal changes using repeated cross-sectional adolescent survey data from a Swedish region, collected in 1988, 1991, 1995, 1998, 2002 and 2005. Individual level alcohol use is connected to local level unemployment rate to estimate the relationship using multilevel modeling. The results show that the unemployment rate is negatively associated with adolescents alcohol use. When the unemployment rate increases, more adolescents, mainly girls, do not drink at all. Regular drinking (2/month or more) is, on the other hand, unrelated to the unemployment rate. This implies that we may se decreases in adolescent alcohol use in the now expected real economic crisis with increasing unemployment.
    Keywords: alcohol use; unemployment rate; multilevel methods; Sweden.
    JEL: E32 I12
    Date: 2009–05–13
  51. By: Nora Lustig (Department of Economics, Tulane University)
    Abstract: Rising food prices cause considerable policy dilemmas for developing country governments. Letting domestic prices adjust to reflect the full change in international prices generates inflationary pressures and causes severe hardship for poor households lacking access to social safety nets. Alternatively, governments can use food subsidies or export restrictions to stabilize domestic prices, yet this exacerbates global food price increases and undermines a rules-based trading system. The recent episode shows that many countries chose to shift the burden of adjustment back to international markets. Corn and oilseeds use for biofuels' production will result in a recurrence of such episodes in the foreseeable future.
    Keywords: food prices, inflation, poverty, Africa, Asia, Latin America and the Caribbean
    JEL: E31 I38 Q18 O24
    Date: 2009–05
  52. By: Wioletta Wereda (University of Poldasie); Alina Hagiu (Faculty of Economics of the University of Pitesti)
    Abstract: Generally, competitiveness of the economy defines importance of the national economy in the world market. It is a very complex notion assessed by various institutions using different indicators which actually reflect only selected aspects, such as prospects for economic development, technological progress, quality of public institutions, quality of the national business environment, quality of business legislation, level of prices as well as technical infrastructure.
    Keywords: competitiveness, performance, development, ranking.
    JEL: E00 G18 O5
    Date: 2009–05
  53. By: Hervé Boulhol; Laure Turner
    Abstract: This paper formalises the analysis of the employment-productivity trade-off by extending the framework developed by Gordon (1997) to account for labour heterogeneity. The extent of the trade-off is determined by the extent of the adjustment of capital to effective labour and by the changes in aggregate labour quality. The main experiment reported in the paper consists of assessing the labour utilisation and productivity impacts in OECD countries of aligning group-specific employment rates to the US levels. Matching the US employment performance defined in that sense would enable low-employment OECD countries to reduce only half of the aggregate employment-rate gap vis-à-vis the United States, the other half being mechanically due to differences in the population structure by age and educational attainment. In this experiment, a 1% gain in employment is associated with a decrease of 0.24% in labour productivity on average across countries, and of 0.35% in low-employment countries.<P>Compromis emploi - productivité et effets de composition<BR>Cette étude formalise l’analyse du compromis entre emploi et productivité en étendant le cadre développé par Gordon (1997) pour prendre en compte l’hétérogénéité de la main-d’oeuvre. L’ampleur de ce compromis est déterminée par l’étendue de l’ajustement du capital à la main-d’oeuvre effective et par les changements dans la qualité de la main-d’oeuvre. La principale expérience rapportée dans l’étude consiste en l’évaluation de l’impact sur l’utilisation de la main-d’oeuvre et sur la productivité du travail de l’alignement, pour chaque pays de l’OCDE, des taux d’emplois par groupe de population sur ceux des États-Unis. Répliquant la performance des États-Unis ainsi définie permettrait aux pays de l’OCDE ayant un faible niveau d’emplois de réduire seulement la moitié de l’écart de taux d’emploi agrégé vis-à-vis des États-Unis, l’autre moitié étant due mécaniquement à la structure de la population par âge et niveau d’éducation. Dans cette expérience, des gains de 1% en termes d’emplois sont associés à une baisse de 0.24% de la productivité du travail en moyenne pour les pays de l’OCDE et de 0.35% pour les pays ayant les niveaux d’emplois les plus bas.
    Keywords: démographie, aggregate employment, emploi agrégé, qualité de l'emploi, quality of labour, labour productivity, productivité du travail, demographics
    JEL: E24 J10 J21 J31
    Date: 2009–05–14

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