|
on Macroeconomics |
|
Issue of 2009‒08‒02
fifty-four papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Nicolas Groshenny (Reserve Bank of New Zealand, Economics department) |
| Abstract: | This paper estimates a medium-scale DSGE model with search unemployment by matching model and data spectra. Price mark-up shocks emerge as the main source of business-cycle fluctuations in the euro area. Key factors in the propagation of these disturbances are a high degree of inflation indexation and a persistent response of monetary policy to deviations from the inflation target |
| Keywords: | DSGE models, business cycles, frequency-domain analysis |
| JEL: | E32 C51 C52 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:200907-27&r=mac |
| By: | Marika Karanassou (Queen Mary, University of London and IZA); Hector Sala (Universitat Autònoma de Barcelona and IZA) |
| Abstract: | This paper adresses the various methodological issues surrounding vector autoregressions, simultaneous equations, and chain reactions, and provides new evidence on the long-run inflation-unemployment tradeoff in the US. It is argued that money growth is a superior indicator of the monetary environment than the federal funds rate and, thus, the focus is on the inflation/unemployment responses to money growth shocks. SVAR (structural vector autoregression) and GMM (generalised method of moments) estimations confirm earlier findings in Karanassou, Sala and Snower (2005, 2008b) obtained from chain reaction structural models: the slope of the US Phillips curve is far from vertical, even in the long-run, which implies that the nominal and real sides of the economy are symbiotic. In the light of the significant and robust long-run inflation-unemployment tradeoffs, policy makers should reconsider the classical dichotomy thesis. |
| Keywords: | Inflation, Unemployment, Money growth, SVAR, GMM, Structural modelling, Chain reactions |
| JEL: | E24 E31 E51 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp647&r=mac |
| By: | Dufourt, Frédéric (BETA-CNRS); Lloyd-Braga, Teresa (Universidade Catolica Portuguesa, Lisbon); Modesto, Leonor (Universidade Catolica Portuguesa, Lisbon) |
| Abstract: | We propose and estimate a model where unemployment fluctuations result from self-fulfilling changes in expected inflation (sunspot shocks) affecting nominal wage bargaining. Since the estimated parameters fall near the locus of Hopf bifurcations, country-specific expected inflation shocks can replicate the strong persistence and heterogeneity observed in European unemployment rates. They also generate positive comovements in macroeconomic variables and a large relative volatility of consumption. All these features, hardly accounted for by standard sunspot-driven models, are explained here by the fact that liquidity constrained workers, facing earnings uncertainty in the context of imperfect unemployment insurance, choose to consume their current income. |
| Keywords: | unemployment fluctuations, sunspots equilibria, expected inflation, wage bargaining |
| JEL: | J60 E32 E37 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4302&r=mac |
| By: | Hume, Michael (Monetary Policy Committee Unit, Bank of England); Sentance, Andrew (Monetary Policy Committee Unit, Bank of England) |
| Abstract: | The recent financial crisis has put the spotlight on the rapid rise in credit which preceded it. In this paper, we provide an empirical and theoretical analysis of the credit boom and the macroeconomic context in which it developed. We find that the boom was unusually long and associated with neither particularly strong growth nor rising inflation in the economies in which it took place. We show that this type of credit and financial cycle is hard to reconcile with existing economic theory and argue that, while the 'global savings glut' may account for the cycle's initial phase, other factors - such as the conduct of monetary policy and perceptions of declining macroeconomic risk - were more important from the mid-2000s onwards. We conclude by identifying some of the challenges now facing macroeconomics and policy. |
| Keywords: | credit; business cycle; financial crisis; monetary policy; asset prices; boom and bust |
| JEL: | E30 E50 |
| Date: | 2009–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:mpc:wpaper:0027&r=mac |
| By: | Takashi Kano; James M. Nason |
| Abstract: | This paper studies the implications of internal consumption habit for propagation and monetary transmission in New Keynesian dynamic stochastic general equilibrium (NKDSGE) models. We use Bayesian methods to evaluate the role of internal consumption habit in NKDSGE model propagation and monetary transmission. Simulation experiments show that internal consumption habit often improves NKDSGE model fit to output and consumption growth spectra by dampening business cycle periodicity. Nonetheless, habit NKDSGE model fit is vulnerable to nominal rigidity, the choice of monetary policy rule, the frequencies used for evaluation, and spectra identified by permanent productivity shocks. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2009-16&r=mac |
| By: | Riccardo DiCecio; Edward Nelson |
| Abstract: | Developments in open-economy modeling, and the accumulation of experience with the monetary policy regimes prevailing in the United Kingdom and the euro area, have increased our ability to evaluate the effects that joining monetary union would have on the U.K. economy. This paper considers the debate on the United Kingdom's monetary policy options using a structural open-economy model. We use the Erceg, Gust, and Lopez-Salido (EGL) (2007) model to explore both the existing U.K. regime (CPI inflation targeting combined with a floating exchange rate), and adoption of the euro, as monetary policy options for the United Kingdom. Experiments with a baseline estimated version of the model suggest that there is improved stability for the U.K. economy with monetary union. Once large differences in the degree of nominal rigidity across economies are considered, the balance tilts toward the existing U.K. monetary policy regime. The improvement in U.K. economic stability under monetary union also diminishes if imports from the euro area are modeled as primarily intermediates instead of finished goods; or if we assume that the pressures reflected in foreign exchange market shocks, instead of vanishing with monetary union, are now manifested as an additional source of disturbances to domestic aggregate spending. |
| Keywords: | Monetary policy - European Union countries ; Monetary policy - Great Britain ; Great Britain |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-012&r=mac |
| By: | Soderlind, Paul (University of St. Gallen) |
| Abstract: | Nominal and real U.S. interest rates (1997Q1-2008Q2) are combined with inflation expectations from the Survey of Professional Forecasters to calculate time series of risk premia. It is shown that survey data on inflation and output growth uncertainty, as well as a proxy for liquidity premia can explain a large amount of the variation in these risk premia. |
| Keywords: | break-even inflation; liquidity premium; Survey of Professional Forecasters |
| JEL: | E27 E47 |
| Date: | 2009–01–28 |
| URL: | http://d.repec.org/n?u=RePEc:ris:snbwpa:2009_004&r=mac |
| By: | Manfred Gärtner; Florian Jung |
| Abstract: | The paper shows that structural models of the IS-LM and Mundell-Fleming variety have a lot to tell about the macroeconomics of the current global crisis. In addition to demonstrating how the emergence of risk premiums in money and capital markets may drive economies into recessions, it shows the following: (1) Liquidity traps may occur not only when interest rates approach zero but at positive and/or rising rates as well; (2) Fiscal policy works even in a small, open economy under flexible exchange rates when the country is stuck in a liquidity trap; (3) Near the fringe of liquidity traps, the risk arises of perfect traps, in which neither monetary nor fiscal policy works when used in isolation, but policy coordination is called for; and (4) Massive financial crises in the domestic money market may even destabilize the economy. |
| Keywords: | financial crisis, credit crunch, liquidity trap, zero lower bound, risk premiums, policy options, fiscal policy, monetary policy, open economy. |
| JEL: | E63 F01 F41 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:usg:dp2009:2009-15&r=mac |
| By: | Karanassou, Marika (University of London); Sala, Hector (Universitat Autònoma de Barcelona) |
| Abstract: | In this paper we analyse a new Phillips curve (NPC) model and demonstrate that (i) frictional growth, i.e. the interplay of wage-staggering and money growth, generates a nonvertical NPC in the long-run, and (ii) the Phillips curve (PC) shifts with productivity growth. On this basis we estimate a dynamic system of macrolabour equations to evaluate the slope of the PC and explain the evolution of inflation and unemployment in the US from 1970 to 2006. Since our empirical methodology relies heavily on impulse response functions, it represents a synthesis of the traditional structural modelling and (structural) vector autoregressions (VARs). We find that the PC is downward-sloping with a slope of -3.58 in the long-run. Furthermore, during the stagflating 70s, the productivity slowdown contributed substantially to the increases in both unemployment and inflation, while the monetary expansion was quite ineffective and led mainly to higher inflation. Finally, the monetary expansion and productivity speedup of the roaring 90s were both responsible for the significant lowering of the unemployment rate. |
| Keywords: | new Phillips curve, frictional growth, productivity growth, stagflating seventies, roaring nineties, impulse response functions |
| JEL: | E24 E31 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4299&r=mac |
| By: | Russell Cooper; Hubert Kempf; Dan Peled |
| Abstract: | This paper studies the effects of monetary policy rules in a monetary union. The focus of the analysis is on the interaction between the fiscal policy of member countries (regions) and the central monetary authority. When capital markets are integrated, the fiscal policy of one country will influence equilibrium wages and interest rates. Thus there are fiscal spillovers within a federation. The magnitude and direction of these spillovers, in particular the presence of a crowding out effect, can be influenced by the choice of monetary policy rules. We find that there does not exist a monetary policy rule which completely insulates agents in one region from fiscal policy in another. Some familiar policy rules, such as pegging an interest rate, can provide partial insulation. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:30&r=mac |
| By: | Nicolas L. Dromel (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | We analyze how investment subsidies can affect aggregate volatility and growth in economies subject to capital market imperfections. Within a model featuring both frictions on the credit market and unequal access to investment opportunities among individuals, we provide specific fiscal parameters able to reduce the probability of recessions, fuel the economy long-run growth rate and place it on a permanent-boom dynamic path. We analyze how conditions on the stabilizing fiscal parameters are modified when frictions in the economy evolve. Eventually, we show how this tax and transfer system can moderate persistence in the economy's response to temporary and permanent productivity shocks. |
| Keywords: | Endogenous business cycles, capital market imperfections, access to productive investment, fiscal policy, macroeconomic stabilization. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00389690_v1&r=mac |
| By: | Simone Elmer (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Thomas Maag (KOF Swiss Economic Institute, ETH Zurich, Switzerland) |
| Abstract: | This paper investigates persistence of Swiss consumer price inflation using aggregate and disaggregate inflation data covering 1983{2008. We document that persistence of sectoral inflation rates is below persistence of aggregate inflation. Our main finding is that inflation persistence significantly declines in the early 1990s. An estimated factor model reveals that inflation persistence stems from a persistent component that is common to inflation rates across sectors. Both the relevance and the persistence of the common component decline in the 1990s. Depending on the sample period and aggregation level, 70 to 90 percent of the variance in sectoral inflation rates is accounted for by short-lived sectoral factors. |
| Keywords: | inflation persistence, inflation dynamics, relative price variability, factor model |
| JEL: | E31 E52 C22 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:09-235&r=mac |
| By: | Riccardo DiCecio; Edward Nelson |
| Abstract: | We argue that the Great Inflation experienced by both the United Kingdom and the United States in the 1970s has an explanation valid for both countries. The explanation does not appeal to common shocks or to exchange rate linkages, but to the common doctrine underlying the systematic monetary policy choices in each country. The nonmonetary approach to inflation control that was already influential in the United Kingdom came to be adopted by the United States during the 1970s. We document our position by examining official policymaking doctrine in the United Kingdom and the United States in the 1970s, and by considering results from a structural macroeconomic model estimated using U.K. data. |
| Keywords: | Inflation (Finance) ; Great Britain |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-015&r=mac |
| By: | Pengfei Wang; Yi Wen |
| Abstract: | We develop a general-equilibrium model of inventories with explicit micro-foundations by embedding the production-cost-smoothing motive (e.g., Eichenbaum, AER 1989) into an otherwise standard DSGE model. We show that firms facing idiosyncratic cost shocks have incentives to bunch production and smooth sales by carrying inventories. The optimal inventory target of a firm is derived explicitly. The model is broadly consistent with many of the observed stylized facts of aggregate inventory fluctuations, such as the procyclical inventory investment and the countercyclical inventory-sales ratio. In addition, the model yields novel predictions for the role of inventories in macroeconomic stability: Inventories may not only greatly amplify but also propagate the business cycle. That is, the incentive to accumulate inventories under the cost-smoothing motive can give rise to hump-shaped output dynamics and significantly higher volatility of GDP. Such predictions are in sharp contrast to the implications of the recent general-equilibrium inventory literature (e.g., Khan and Thomas, 2007; and Wen, 2008), which shows that inventory investment induced by traditional mechanisms (e.g., the stockout-avoidance motive and the (S,s) rule) does not increase the variance of aggregate output. |
| Keywords: | Equilibrium (Economics) ; Business cycles ; Inventories |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-010&r=mac |
| By: | Das, Rituparna Das |
| Abstract: | Against the backdrop of interest rate risk in the fixed income portfolios of the financial institutions in India that arose since the first quarter of the current financial year 2008-09 the influence of monetary policy on the term structure emerged as an important issue for research purposes. In this context the findings in this paper are (i) strongest sensitivity of the term structure at the short end compared to other parts to expected changes in monetary policy, (ii) existence of unutilized arbitraged opportunities in the case of short term securities in absence of stripping, (iii) a mitigating tendency in the fluctuations of Nelson-Siegel-Svensson short rate and the proxy monetary policy rate during the post sample period and (iv) existence of a fear among the market participants about the future liquidity conditions during the last quarter of 2007-08. |
| Keywords: | term structure; liquidity; monetary policy; Nelson-Siegel-Svensson; Vasicek; federal funds target rate; MIBOR |
| JEL: | E43 E52 |
| Date: | 2009–07–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16436&r=mac |
| By: | Haroon Mumtaz (Center for Central Banking Studies, Bank of England); Saverio Simonelli (Università di Napoli Federico II, EUI and CSEF); Paolo Surico (External MPC unit, Bank of England) |
| Abstract: | Using a dynamic factor model, we uncover four main empirical regularities on international comovements in a long-run panel of real and nominal variables. First, the contribution of world comovements to domestic output growth has decreased over the post-WWII period. The contribution of regional comovements, however, has increased significantly. Second, the share of inflation variation due to a global factor has become larger since 1985. Third, over most of the post-WWII period, international comovements within regions have accounted for the bulk of fluctuations in business cycle and inflation. Fourth, prices have become significantly less countercyclical during the post-1984 sample, with the largest contribution due to external developments. |
| Keywords: | output growth, in.ation, geographic identi.cation, dynamic factor model |
| JEL: | E30 F40 N10 |
| Date: | 2009–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:233&r=mac |
| By: | Jane M. Binner; Peter Tino; Jonathan Tepper; Richard G. Anderson; Barry Jones; Graham Kendall |
| Abstract: | This paper provides the most fully comprehensive evidence to date on whether or not monetary aggregates are valuable for forecasting US inflation in the early to mid 2000s. We explore a wide range of different definitions of money, including different methods of aggregation and different collections of included monetary assets. In our forecasting experiment we use two non-linear techniques, namely, recurrent neural networks and kernel recursive least squares regression - techniques that are new to macroeconomics. Recurrent neural networks operate with potentially unbounded input memory, while the kernel regression technique is a finite memory predictor. The two methodologies compete to find the best fitting US inflation forecasting models and are then compared to forecasts from a naive random walk model. The best models were non-linear autoregressive models based on kernel methods. Our findings do not provide much support for the usefulness of monetary aggregates in forecasting inflation. |
| Keywords: | Forecasting ; Inflation (Finance) ; Monetary theory |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-030&r=mac |
| By: | Andra C. Ghent; Michael T. Owyang |
| Abstract: | We analyze the relationship between housing and the business cycle in a set of 36 US cities. Most surprisingly, we find that falls in house prices are often not followed by declines in employment. We also find that the leading indicator property of residential investment is not consistent across cities and that, at the national level, the leading indicator property of residential investment is not robust to including financial factors as control variables. |
| Keywords: | Housing ; Housing - Prices ; Business cycles |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-007&r=mac |
| By: | Yi Wen |
| Abstract: | How do movements in the distribution of income affect the macroeconomy? Krusell and Smith (1998) analyzed this question in a neoclassical growth model, and their results show that the representative-agent assumption provides a good approximation for aggregate behaviors of heterogeneous agents. This paper extends their analysis to a cash-in-advance model with heterogeneous money demand. It is shown that movements in the distribution of monetary income can have significant impact on the macroeconomy. For example, the dynamic responses of aggregate output to monetary shocks behave very differently from those of a representative agent; the welfare costs of moderate inflation are much higher than previously thought, up to 20% of consumption when the inequality of cash distribution is sufficiently large. This is in sharp contrast to the findings of Cooley and Hansen (1989) and Lucas (2000) based on representative-agent models. |
| Keywords: | Liquidity (Economics) ; Money theory |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-024&r=mac |
| By: | Yi Wen |
| Abstract: | This paper reconsiders the welfare costs of inflation and the welfare gains from financial intermediation in a heterogeneous-agent economy where money is held as a store of value (as in Bewley, 1980). The dynamic stochastic general equilibrium model recaptures some essential features of the liquidity-preference theory of Keynes (1930, 1936). Because of heterogeneous liquidity demand, transitory lump-sum money injections can have persistent expansionary effects despite flexible prices, and such effects can be greatly amplified by the banking system through the credit channel. However, permanent money growth can be extremely costly: With log utility functions, consumers are willing to reduce consumption by 15% (or more) to avoid a 10% annual inflation. For the same reason, financial intermediation can significantly improve welfare: The welfare costs of a collapse of the banking system is estimated as about 10-68% of aggregate output. These welfare implications differ dramatically from those of the existing literature. |
| Keywords: | Liquidity (Economics) |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-019&r=mac |
| By: | Nicolas L. Dromel (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | Firms devote significant resources to maintain and repair thei existing capital. Within a real business cycle model featuring arguably small aggregate increasing returns, this paper assesses the stabilizing effects of fiscal policies with a maintenance expenditure allowance. In this setup, firms are authorized to deduct their maintenance expenditures from revenues in calculating pre-tax profits, as in many prevailing tax codes. While flat-rate taxation does not prove useful to insulate the economy from self-fulfilling beliefs, a progressive tax can render the equilibrium unique. However, we show that the required progressivity to protect the economy against sunspot-driven fluctuations is increasing in the maintenance-to-GDP ratio. Taking into account the maintenance and repair activity of firms, and the tax deductibility of the related expenditures, would then weaken the expected stabilizing properties of progressive fiscal schedules. |
| Keywords: | Business cycles, maintenance and repair allowances, capital utilization, progressive income taxes, local indeterminacy and sunspots. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00389691_v1&r=mac |
| By: | David H. Romer |
| Abstract: | This paper describes a new data set of the forecasts of output growth, inflation, and unemployment prepared by individual members of the Federal Open Market Committee. The paper discusses the scope of the data set, possibilities for extending it, and some potential uses. It offers a preliminary examination of some of the cross-sectional features of the data. |
| JEL: | E52 E58 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15208&r=mac |
| By: | Juan Carlos Conesa; Carlos Garriga |
| Abstract: | In this paper we show that the generational accounting framework used in macroeconomics to measure tax incidence can, in some cases, yield inaccurate measurements of the tax burden across age cohorts. This result is very important for policy evaluation, because it shows that the selection of tax policies designed to change generational imbalances could be misleading. We illustrate this problem in the context of a Social Security reform where we show how fiscal policy can affect the intergenerational gap across cohorts without impacting the distribution of welfare. We provide a more accurate procedure that only measures changes in generational imbalances derived from policies with real effects. |
| Keywords: | Fiscal policy ; Taxation |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-003&r=mac |
| By: | Kim , Insu; Kim, Minsoo |
| Abstract: | This paper investigates the issue of rational expectations using inflation forecasts from the Survey of Professional Forecasters (SPF) and the Green Book. We provide an alternative test of rational expectations hypothesis by measuring the degree of persistence of potential systematic mistakes. The test is obtained by solving a signal extraction problem that distinguishes between systematic and non-systematic forecast errors. The findings indicate highly persistent systematic mistakes, which are driven by the inefficient use of available information, and reject the rational expectations hypothesis. The estimated time-varying bias can be used to improve the SPF and Green Book inflation forecast performance by at least 13.4%. This paper also documents evidence that the real interest rate plays a crucial role in explaining the level of bias that leads to under- and over predictions of actual inflation. |
| Keywords: | Inflation Expectations; Bias; Forecasts; Rational Expectations. |
| JEL: | D84 E31 E37 |
| Date: | 2009–07–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16447&r=mac |
| By: | Dramane Coulibaly (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I) |
| 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. |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00367704_v1&r=mac |
| By: | Simona Delle Chiaie (Oesterreichische Nationalbank, Economic Studies Division, P.O. Box 61, A-1010 Vienna,) |
| Abstract: | This paper aims to shed light on potential pitfalls of di¤erent data filtering and detrending procedures for the estimation of stationary DSGE models. For this purpose, a medium-sized New Keynesian model as the one developed by Smets and Wouters (2003) is used to assess the sensitivity of the structural estimates to preliminary data transformations. To examine the question, we focus on two widely used detrending and filtering methods, the HP filter and linear detrending. After comparing the properties of business cycle components, we estimate the model through Bayesian techniques using in turn the two different sets of transformed data. Empirical findings show that posterior distributions of structural parameters are rather sensitive to the choice of detrending. As a consequence, both the magnitude and the persistence of theoretical responses to shocks depend upon preliminary filtering. |
| Keywords: | DSGE models; Filters; Trends; Bayesian estimates |
| JEL: | E3 |
| Date: | 2009–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:onb:oenbwp:157&r=mac |
| By: | Edward Nelson |
| Abstract: | This paper analyzes the interaction of Milton Friedman and U.K. economic policy from 1938 to 1979. The period under study is separated into 1938-1946, 1946-1959, 1959-1970, and 1970-1979. For each of these subperiods, I consider Friedman's observations on and dealings with key events, issues, and personalities in U.K. monetary policy and in general U.K. economic policy. |
| Keywords: | Friedman, Milton ; Economic policy - Great Britain |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-017&r=mac |
| By: | Kimura, Fukunari |
| Abstract: | Japan was the first non-western country to accomplish successful industrialization, and the dominant perception of its .industrial policy. had over-emphasized specific characteristics of Japan. However, from the perspective of today.s development thinking, Japan.s economic history shared a wide range of common factors in usual economic development: macroeconomic stability, human resource development, and economic infrastructure. Industrial policy in Japan sometimes worked well and sometimes did not, depending on how effectively it counteracted market failure and took advantage of market dynamism. We must note, however, that the external conditions faced by Japan were widely different from what today.s |
| Keywords: | industrial policy, industrialization, trade liberalization, macroeconomic stability, economic infrastructure |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:rp2009-22&r=mac |
| By: | James D. Hamilton; Michael T. Owyang |
| Abstract: | This paper develops a framework for inferring common Markov-switching components in a panel data set with large cross-section and time-series dimensions. We apply the framework to studying similarities and differences across U.S. states in the timing of business cycles. We hypothesize that there exists a small number of cluster designations, with individual states in a given cluster sharing certain business cycle characteristics. We find that although oil-producing and agricultural states can sometimes experience a separate recession from the rest of the United States, for the most part, differences across states appear to be a matter of timing, with some states entering recession or recovering before others. |
| Keywords: | Business cycles ; Recessions |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-013&r=mac |
| By: | Thomas Maag (KOF Swiss Economic Institute, ETH Zurich, Switzerland) |
| Abstract: | This paper assesses the probability method for quantifying EU consumer survey data on perceived and expected inflation. Based on micro-data from the Swedish consumer survey that asks for both qualitative and quantitative responses, I find that the theoretical assumptions of the method do not hold. In particular, estimated models of response behavior indicate that qualitative inflation expectations are not ordered. Nevertheless, the probability method generates series that are highly correlated with the mean of actual quantitative beliefs. For quantifying the cross-sectional dispersion of beliefs, however, an index of qualitative variation outperforms the probability method. |
| Keywords: | quantification, inflation expectations, inflation perceptions, qualitative response data, belief formation |
| JEL: | C53 D84 E31 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:09-230&r=mac |
| By: | Stefano Bosi (EQUIPPE - Université de Lille I, EPEE - Université d'Evry-Val d'Essonne); Thomas Seegmuller (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | In his seminal contribution, Tirole (1985) shows that an overlapping generations economy may monotonically converges to a steady state with a positive rational bubble, characterized by the dynamically efficient golden rule. The issue we address is whether this monotonic convergence to an efficient long-run equilibrium may fail, while the economy experiences persistent endogenous fluctuations around the golden rule. Our explanation leads on the features of the credit market. We consider a simple overlapping generations model with three assets : money, capital and a pure bubble (bonds). Collateral matters because increasing his portfolio in capital and bubble, the household reduces the share of his consumption paid by cash. From a positive point of view, we show that the bubbly steady state can be locally indeterminate under arbitrarily small credit market imperfections and, thereby, persistent expectation-driven fluctuations of equilibria with (rational) bubbles can arise. From a normative point of view, monetary policies that are not too expansive, are recommended in order to rule out the occurence of sunspot fluctuations and enhance the welfare evaluated at the steady state. |
| Keywords: | Bubbles, collaterals, indeterminacy, cash-in-advance constraint, overlapping generations. |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00367689_v1&r=mac |
| By: | Dramane Coulibaly (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I) |
| Abstract: | This paper studies empirically the link between remittances and growth volatility by examining the impact of remittances on the propagation of real and monetary shocks. This study is conducted by employing dynamic panel generalized method of moment (GMM) technique for a sample of 63 countries over the 1980-2004 period. The volatility of terms of trade and inflation is used to proxy for real and monetary volatility, respectively. The results show that the impact of remittances on the propagation of shocks depends on the nature of shock. Precisely, the results show that remittances dampen the effect of terms of trade volatility, but, magnify the effect of inflation volatility. The results also suggest that the dampening effect of remittances on propagation of terms of trade volatility is greater in country with high level of financial development. |
| Keywords: | Remittances, financing constraints, volatility. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00384483_v1&r=mac |
| By: | David Haugh; Patrice Ollivaud; David Turner |
| Abstract: | This paper analyses recent large movements in the yield spread for sovereign bonds as between Germany and other euro area countries. While the general increase in risk aversion that has characterised the financial crisis is an important factor on its own, it is found that this has also magnified the importance of fiscal performance, in particular as measured by the ratio of debt service to tax receipts and expected fiscal deficits. Moreover, there is evidence to suggest that such effects are non-linear, so that incremental deteriorations in fiscal performance lead to ever larger increases in the spread. These findings imply that financial market reaction could become an increasingly important constraint on fiscal policy for some countries, a feature which was much less apparent in the years prior to the financial crisis when general risk aversion was abnormally low.<P>Quels sont les déterminants des primes de risque des États ? : Une analyse récente de la zone euro<BR>Cet article analyse les récents mouvements importants des écarts de taux des obligations d’État des pays de la zone euro avec l’Allemagne. L’augmentation généralisée de l’aversion au risque qui a accompagné la crise financière est un facteur important en soi. L’article montre en outre que ce phénomène a amplifié l’impact des performances budgétaires, en particulier quand elles sont mesurées par le ratio du service de la dette aux recettes fiscales et par les déficits budgétaires anticipés. De plus, ces effets se révèlent non linéaires, ce qui se traduit par le fait que les détériorations supplémentaires des performances budgétaires amènent à des augmentations toujours plus importantes des écarts de taux. Ces résultats suggèrent que les réactions des marchés financiers pourraient devenir une contrainte de plus en plus importante à la politique budgétaire de certains pays, une caractéristique qui était beaucoup moins visible durant les années antérieures à la crise où l’aversion générale au risque était anormalement basse. |
| Keywords: | fiscal policy, politique budgétaire, déficit budgétaire, interest rate, taux d'intérêt, deficit, debt, dette, bond market, marché obligataire, government bonds, obligations d’État |
| JEL: | E43 E63 G12 |
| Date: | 2009–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:718-en&r=mac |
| By: | David Büttner (Faculty of Business Administration and Economics, Philipps Universitaet Marburg); Bernd Hayo (Faculty of Business Administration and Economics, Philipps Universitaet Marburg) |
| Abstract: | We analyse the determinants of stock market integration among EU member states for the period 1999–2007. First, we apply bivariate DCC-MGARCH models to extract dynamic conditional correlations between European stock markets, which are then explained by interest rate spreads, exchange rate risk, market capitalisation, and business cycle synchronisation in a pooled OLS model. By grouping the countries into euro area countries, “old” EU member states outside the euro area, and new EU member states, we also evaluate the impact of euro introduction and the European unification process on stock market integration. We find a significant trend toward more stock market integration, which is enhanced by the size of relative and absolute market capitalisation and hindered by foreign exchange risk between old member states and the euro area. Interest rate spreads and business cycle synchronisation do not appear to play an important role in explaining equity market integration. |
| Keywords: | Stock Market Integration, European Unification, DCC-MGARCH model |
| JEL: | E44 F3 F36 G15 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:200932&r=mac |
| By: | Prasad, Eswar (Cornell University) |
| Abstract: | Rebalancing growth patterns of Asian economies is an important component of the overall rebalancing effort that will be required in the world economy. In this paper, I provide an empirical characterization of the composition of GDP levels and growth rates for the key emerging markets and other developing economies in Asia. China has by far the lowest share of private consumption to GDP in Asia and, during this decade, has recorded the lowest rate of employment growth relative to GDP growth. Investment growth has dominated GDP growth in China during this decade but is also important in the cases of India and Vietnam. To examine the global implications of domestic growth patterns in Asia, I analyze saving-investment balances, the composition of national savings, and the determinants of the evolution of household saving rates. During 2000-08, household saving rates (relative to household income) have risen gradually in China and India but fallen sharply in Korea. Corporate savings have surged across Asia during this period, becoming the main component of gross national savings in the region. In terms of sheer magnitudes, China's national savings and current account surpluses dominate the region's saving-investment balances. China accounts for just under half of GDP in Asia ex-Japan, but accounts for 60 percent of total gross national savings and nearly 90 percent of the current account surplus of the region. Finally, I discuss some policy implications that come out of the analysis on how to shift the patterns of growth, especially in China, from a welfare-enhancing perspective. |
| Keywords: | growth contributions, national savings and investment, current account balance, welfare consequences of growth |
| JEL: | E2 F3 F4 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4298&r=mac |
| By: | Dailami, Mansoor; Masson, Paul |
| Abstract: | The current financial crisis has highlighted the danger that declines in confidence can have a self-fulfilling effect on economic activity. In this paper, the authors consider ways of measuring investor and consumer confidence, and try to explain the evolution of confidence using measures of financial volatility, investment performance, macroeconomic outcomes, and policy actions. They identify a link between investor and consumer confidence. Finally, they show that liquidity provision and easing of interest rates had only a limited effect on financial market spreads during the crisis, arguing for additional measures to address the loss of confidence. The paper focuses on the need for financial regulatory reform, and shows how the incentives to cooperate in this area are stimulated by a common shock to confidence. |
| Keywords: | Debt Markets,Emerging Markets,,Currencies and Exchange Rates,Banks&Banking Reform |
| Date: | 2009–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5007&r=mac |
| By: | Guillermo L. Ordoñez |
| Abstract: | It is well known that movements in lending rates are asymmetric; they rise quickly and sharply, but fall slowly and gradually. Not known is the fact that the asymmetry is stronger the less developed a country's financial system is. This new fact is here documented and explained in a model with an endogenous flow of information about economic conditions. The stronger asymmetry in less developed countries stems from their greater financial system frictions, such as monitoring and bankruptcy costs, which first magnify jumps of lending rates and then delay their recoveries by restricting the generation of information after the crisis. A quantitative exploration of the model shows the data are consistent with this explanation. |
| Keywords: | Financial crises ; Developing countries |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmsr:429&r=mac |
| By: | Barnett, William A. |
| Abstract: | I have been invited to write an essay for The American Economist on my experiences as founder and editor of the Cambridge University Press journal, Macroeconomic Dynamics. I have decided to focus the essay on my experiences in starting up the journal. Few economists, who have not themselves started up a new journal, are aware of the nature of the process and its sometimes very complicated academic politics. |
| Keywords: | journal editing; essay; academic politics; interviews; macroeconomics; dynamics |
| JEL: | E0 A20 B00 A10 |
| Date: | 2009–07–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16459&r=mac |
| By: | Pengfei Wang; Yi Wen |
| Abstract: | Empirical studies showed that firm-level volatility has been increasing but the aggregate volatility has been decreasing in the US for the post-war period. This paper proposes a unified explanation for these diverging trends. Our explanation is based on a story of financial development - measured by the reduction of borrowing constraints because of greater access to external financing and options for risk sharing. By constructing a dynamic stochastic general-equilibrium model of heterogenous firms facing borrowing constraints and investment irreversibility, it is shown that financial liberalization increases the lumpiness of firm-level investment but decreases the variance of aggregate output. Hence, the model predicts that financial development leads to a larger firm-level volatility but a lower aggregate volatility. In addition, our model is also consistent with the observed decline in volatility of private held firms which do not have (or have only limited) access to external funds. |
| Keywords: | Financial institutions ; Business cycles |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-022&r=mac |
| By: | Saten Kumar (Department of Business Economics, Auckland University of Technology); Scott Fargher (Department of Business Economics, Auckland University of Technology); Don J. Webber (Department of Business Economics, Auckland University of Technology and Department of Economics, UWE, Bristol) |
| Abstract: | This paper presents an investigation into the relationship between investment and savings in Australia over the period 1960-2007. Using four time series techniques our results reveal that the Feldstein-Horioka puzzle exists in a weak form with a lower saving retention coefficient. Granger Causality tests illustrate that savings Granger cause investment both in the short and long runs. Our results suggest Australia could effectively adopt policies that focus on increasing investment through increasing domestic savings |
| Keywords: | Savings; investment; capital mobility |
| JEL: | C22 F21 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:uwe:wpaper:0911&r=mac |
| By: | Yi Wen |
| Abstract: | The profession has been longing for closed-form solutions to consumption functions under uncertainty and borrowing constraints. This paper proposes an analytical approach to solving buffer-stock saving models with both idiosyncratic and aggregate uncertainties. It is shown analytically that an individual’s optimal consumption plan under uncertainty follows the rule of thumb: Consumption is proportional to a target wealth with the marginal propensity to consume depending on the state of the macroeconomy. The method is applied to addressing two long- standing puzzles: the "excess smoothness" and "excess sensitivity" of consumption with respect to income changes. Some of my findings sharply contradict the conventional wisdom. |
| Keywords: | Saving and investment ; Income |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2009-026&r=mac |
| By: | Aikaterini Karadimitropoulou; Miguel A. León-Ledesma |
| Abstract: | We analyze the sources of current account fluctuations for the G6 economies. Based on Bergin and Sheffrin’s (2000) two-goods inter-temporal framework, we build a SVAR model including the world real interest rate, net output, real exchange rate, and the current account. The theory model allows for the identification of structural shocks in the SVAR using longrun restrictions. Our results suggest three main conclusions: i) we find evidence in favour of the present-value model of the CA for all countries except France; ii) there is substantial support for the two-good intertemporal model, since both external supply and preferences shocks account for an important proportion of CA fluctuations; iii) temporary domestic shocks account for a large proportion of CA fluctuations, but the excess response of the CA is less pronounced than in previous studies. |
| Keywords: | Current account; real exchange rate; two-good intertemporal model; SVAR |
| JEL: | F32 F41 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:ukc:ukcedp:0910&r=mac |
| By: | Takao Kobayashi (Faculty of Economics, University of Tokyo); Risa Sai (Graduate School of Economics, University of Tokyo) |
| Abstract: | Bertola/Caballero (1994) and Abel/Eberly (1996) extended Jorgenson's classical model of firms' optimal investment. By introducing investment frictions, they were able to capture the role of future anticipations in investment decisions as well as the lumpy and intermittent nature of investment dynamics. We extend Jorgenson's model to the other direction of financing frictions. We construct a model of an equity-only firm, who must pay a linear financing cost for issuing new shares. We show that the firm's optimal investment-financing is a two-trigger policy in which the firm finances investment by issuing new shares (supplementing internal funds) when the shadow price of capital hits the upper trigger value. When the shadow price hits the lower trigger value, she sells a portion of her capital stock and buys back shares (or pays dividends). Values of the shadow price of capital between the two trigger values define a range of "inaction", in which the firm does neither issue nor buy back shares and invests all of her internal funds for expansion. |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2009cf627&r=mac |
| By: | Dolls, Mathias (IZA); Fuest, Clemens (University of Oxford); Peichl, Andreas (IZA) |
| Abstract: | This paper analyzes the effectiveness of the tax and transfer systems in the European Union and the US to act as an automatic stabilizer in the current economic crisis. We find that automatic stabilizers absorb 38 per cent of a proportional income shock in the EU, compared to 32 per cent in the US. In the case of an unemployment shock 48 per cent of the shock are absorbed in the EU, compared to 34 per cent in the US. This cushioning of disposable income leads to a demand stabilization of 23 to 32 per cent in the EU and 19 per cent in the US. There is large heterogeneity within the EU. Automatic stabilizers in Eastern and Southern Europe are much lower than in Central and Northern European countries. We also investigate whether countries with weak automatic stabilizers have enacted larger fiscal stimulus programs. We find no evidence supporting this view. |
| Keywords: | automatic stabilization, economic crisis, liquidity constraints, fiscal stimulus |
| JEL: | E32 E63 H2 H31 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4310&r=mac |
| By: | Peroni, Chiara |
| Abstract: | Recent empirical studies suggests that affine models, a popular framework to analyse term structures of interest rates, are misspecified. This evidence is mainly based on time series properties of the data. This article re-examines this controversy, by investigating both cross-sectional and dynamic properties of affine models. To do so, it applies robust non-parametric techniques to two different sets of financial data, which contain information on the UK and US yield curve. The analysis shows the strong non-linearity in the relationship of yields to the US and UK short rate. The non-linear pattern is concave in the state variable, and increasing with respect to the maturity, for both countries. Linear and non-linear specifications are then compared by means of a formal statistical criterion, the Generalised Likelihood-Ratio test statistics, which confirms evidence against the linear specification. |
| Keywords: | interest rates; term structure; affine models; non-linearity; non-parametric regression. |
| JEL: | E43 G12 C14 |
| Date: | 2009–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16471&r=mac |
| By: | Fosu, Augustin Kwasi; Naude, Wim |
| Abstract: | This paper outlines the impact of the global economic crisis on Africa. Recovery requires coordinated and consistent efforts to assist individual countries in mitigating (reducing) the risk, coping with the impact, and reducing risk over the longer term. Care should be exercised to maintain and improve good governance, which is essential for African countries to avoid introducing various .anti-growth policy syndromes. into their economies. These could arise if responses to the crisis result in (i) further boom-bust cycles and flaming the historically high volatility of African growth, including inflation, (ii) another debt crisis, (iii) household engaging in adverse coping strategies with lasting impacts; (iv) reversal of gains made in opening up African economies and re-introducing crippling state controls; and (v) entrenchment of inequities and inefficiencies in the global financial and aid architecture. |
| Keywords: | Africa, least developed countries, global economic crisis, financial crisis, governance |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:dp2009&r=mac |
| By: | Douglas W. Diamond; Raghuram G. Rajan |
| Abstract: | The cheapest way for banks to finance long term illiquid projects is typically to borrow short term from households. But when household needs for funds are high, interest rates will rise sharply, debtors will have to shut down illiquid projects, and in extremis, will face more damaging runs. Authorities may want to push down interest rates to maintain economic activity in the face of such illiquidity, but intervention may not always be feasible, and when feasible, could encourage banks to increase leverage or fund even more illiquid projects up front. This could make all parties worse off. Authorities may want to commit to a specific policy of interest rate intervention to restore appropriate incentives. For instance, to offset incentives for banks to make more illiquid loans, authorities may have to commit to raising rates when low, to counter the distortions created by lowering them when high. We draw implications for interest rate policy to combat illiquidity. |
| JEL: | E4 E44 E5 E52 E58 G21 G38 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15197&r=mac |
| By: | Thomas M. Trimbur |
| Abstract: | This paper investigates strategies for real-time estimation of the output gap. First, I examine estimates from univariate models with stochastic cycles. This corresponds to the use of model-based band-pass filters in real-time, and I find that the turning points in real-time and final output gap series match more closely for higher order models and that the revisions properties and real-time accuracy are more favorable. Second, I investigate the use of capacity utilization as an auxiliary indicator to improve on output gap estimates in real-time. I find that this bivariate approach leads to significant gains in the accuracy of real-time estimates and in the quality of revisions. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2009-32&r=mac |
| By: | John Knight; Sai Ding |
| Abstract: | China has had a remarkably high ratio of investment to output throughout the period of economic reform, surpassing almost all other economies, whether developed or developing. The high investment rate is in turn an important proximate determinant of China’s high rate of economic growth. This survey paper gathers together the available evidence to explain why investment is so high. It considers factors both on the demand and on the supply side, and in the latter case the availability both of resources and of funds. It analyses the rate of return on capital and its movement over time, and the factors which have kept it up. It draws on the literature to explain the high saving rate, and considers why the imperfect capital market and institutional deficiencies have not constrained investment. The state-owned and the private sectors are treated separately on account of their different objectives and behaviour and their differential access to funds. |
| Keywords: | China, Financial market, Credit constraint, Investment, Rate of profit, Saving |
| JEL: | E2 F1 O5 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:441&r=mac |
| By: | Kris James Mitchener; Masato Shizume; Marc D. Weidenmier |
| Abstract: | Why did policymakers adopt the gold standard? Although previous research has identified ex post effects of gold standard adoption on trade and bond yields, few studies have sought to understand whether these were the actual outcomes of interest to policymakers at the time of adoption. We examine the political economy of Japan’s adoption of the gold standard in 1897 by exploring the ex ante motives of policymakers as well as how the legislative decision to adopt gold won approval. We then link the beliefs of contemporaneous policymakers to data so that we can test the economic effects of adoption. In contrast to previous studies examining bond yields, we find little evidence that joining the gold standard reduced Japan’s country risk or investors anticipated a dramatic decline in borrowing rates for the government. Moreover, we find no evidence of a domestic investment boom or that investors anticipated one and bid it into stock prices. However, as some policymakers suggested, we find that membership in the gold standard increased Japan’s exports by lowering transactions costs and because the price of gold fell relative to silver, making exports to silver standard countries more competitive. While Japan also received a boost in exports to its regional trading partners when it switched from paper to silver, going onto gold allowed Japan to tap into the growing share of global trade that was centered on the gold standard: by the late 1890s nearly 60 percent of Japanese exports and total trade were with members of the gold club. |
| JEL: | E58 F33 N15 N25 N75 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15195&r=mac |
| By: | Sandra Schaffner |
| Abstract: | Although the cyclical aspects of worker reallocation are investigated in numerous studies, only scarce empirical evidence exists for Germany. Kluve, Schaffner, and Schmidt (2009) emphasize the heterogeneity of cyclical influences for different subgroups of workers, defined by age, gender and skills. This paper contributes to this literature by extending this analysis to job-to-job flows. In fact, job-to-job transitions are found to be the largest flows in the German labor market. The findings suggest that job-finding rates and job-to-job transitions are procyclical while separation rates are acyclical or even countercyclical. The empirical framework employed here allows demographic groups to vary in their cyclical sensitivity. In Germany, young workers have the highest transition rates into and out of employment and between different jobs. Additionally, these transitions are more volatile than those of medium- aged or old workers. By contrast, old workers experience low transition rates and less pronounced swings than the core group of medium-aged, medium- skilled men. |
| Keywords: | Labor force, employment dynamics, worker flows, business cycle, worker heterogeneity, job-to-job |
| JEL: | E32 J63 J64 E24 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0118&r=mac |
| By: | Cristina Arellano; Yan Bai; Jing Zhang |
| Abstract: | This paper studies the impact of cross-country variation in financial market development on firms' financing choices and growth rates using comprehensive firm-level datasets. We document that in less financially developed economies, small firms grow faster and have lower debt to asset ratios than large firms. We then develop a quantitative model where financial frictions drive firm growth and debt financing through the availability of credit and default risk. We parameterize the model to the firms' financial structure in the data and show that financial restrictions can account for the majority of the difference in growth rates between firms of different sizes across countries. |
| JEL: | E22 F2 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15193&r=mac |
| By: | Peter Blair Henry; Diego Sasson |
| Abstract: | For three years after the typical developing country opens its stock market to inflows of foreign capital, the average annual growth rate of the real wage in the manufacturing sector increases by a factor of seven. No such increase occurs in a control group of developing countries. The temporary increase in the growth rate of the real wage drives up the level of average annual compensation for each worker in the sample by 609 US dollars—an increase equal to 25 percent of their annual pre-liberalization salary. The increase in the growth rate of labor productivity in the aftermath of liberalization exceeds the increase in the growth rate of the real wage so that the increase in workers’ incomes actually coincides with a rise in manufacturing sector profitability. Overall, the results suggest that trade in capital may have a larger impact on wages than trade in goods. |
| JEL: | E2 F15 F3 F41 F43 O4 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15204&r=mac |
| By: | Pradhan, Jaya Prakash |
| Abstract: | Indian outward FDI flows have declined in 2008 and the first half of 2009. The global financial and economic crisis appears to have seriously dented overseas investment plans of emerging Indian multinationals. This paper looks at the trends and patterns of Indian OFDI flows in the current crisis period, what led to its slowdown, how Indian multinationals have fared, and what is their revival prospect. |
| Keywords: | India; Outward FDI; Multinationals; Economic Crisis |
| JEL: | E32 O53 F23 G34 F21 |
| Date: | 2009–07–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:12324&r=mac |