nep-mac New Economics Papers
on Macroeconomics
Issue of 2009‒11‒07
33 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. The European Central Bank, the Federal Reserve and the Bank of England: is the Taylor Rule an useful benchmark for the last decade? By Forte, Antonio
  2. Interest Rate Transmission Mechanism of Monetary Policy in the Selected EMU Candidate Countries By Rajmund Mirdala
  3. Price Volatility, Expectations and Monetary Policy in Nigeria By Ajimuda Olumide
  4. The Taylor Principle and (In-) Determinacy in a New Keynesian Model with hiring Frictions and Skill Loss By Ansgar Rannenberg
  5. Investment Shocks and the Comovement Problem By Hashmat Khan; John Tsoukalas
  6. Capital, Endogenous Separations, and the Business Cycle By Björn van Roye; Dennis Wesselbaum
  7. Determinacy in New Keynesian models: a role for money after all? By Minford, Patrick; Srinivasan, Naveen
  8. Learning and Heterogeneity in GDP and Inflation Forecasts By Kajal Lahiri; Xuguang Sheng
  9. The housing price boom of the late ’90s: did inflation targeting matter? By Frappa, S.; Mésonnier, J-S.
  10. Dual Wage Rigidities: Theory and Some Evidence By Kim , Insu
  11. Measuring the Natural Output Gap using Actual and Expected Output Data By Anthony Garratt; Kevin Lee; Kalvinder Shields
  12. Housing and Debt Over the Life Cycle and Over the Business Cycle By Matteo Iacoviello; Marina Pavan
  13. The dynamic effects of countercyclical fiscal stimulus on output in Tunisia By Diop, Ndiame; Ben Abdallah, Nizar
  14. Real-time Inflation Forecast Densities from Ensemble Phillips Curves By Anthony Garratt; James Mitchell; Shaun P. Vahey; Elizabeth C. Wakerly
  15. Fuzzy Capital Requirements, Risk-Shifting and the Risk Taking Channel of Monetary Policy By Dubecq, S.; Mojon, B.; Ragot, X.
  16. Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison By Carmen M. Reinhart; Kenneth S. Rogoff
  17. Asymmetry of the exchange rate pass-through: An exercise on the Polish data. By Przystupa, Jan; Wróbel, Ewa
  18. Measuring Output Gap Uncertainty By Anthony Garratt; James Mitchell; Shaun P. Vahey
  19. The role of macroeconomic variables in sovereign risk By Marcos S. Matsumura; José Valentim Vicente
  20. Political institutions and central bank independence revisited By Davide Ferrari; Barbara Pistoresi; Francesco Salsano
  21. Optimal monetary policy and firm entry By Vivien Lewis
  22. A unified framework for understanding and comparing dynamic wage and price setting models By Dixon, Huw
  23. Tariff and Equilibrium Indeterminacy - A Global Analysis By Zhang, Yan; Chen , Yan
  24. Understanding the World Trade Collapse By Calista Cheung; Stéphanie Guichard
  25. Macroeconomic Analysis on the Basis of Trade Theory: A Review Essay By GAO, XIANG
  26. A Pertinent Analytic Method to Correctly Measure Contributions to Growth in Gross Domestic Product By Antoine Brunet
  27. Sub Prime Crisis: Old and New Lessons By Natasa Spes; Sebastjan Strasek; Timotej Jagric
  28. Labor share dynamics: a survey of the theory By M. Magnani
  29. Indebtedness and Mercantilism By Jean-Paul Guichard
  30. The Impact of Population Ageing on the Czech Economy By Jan Babecky; Kamil Dybczak
  31. Kausalität in den Wirtschaftswissenschaften: Welche Ursachen hat die Finanzkrise? By Bernholz, Peter; Faber, Malte; Petersen, Thomas
  32. The Chart Romania-NATO-UE By Duduiala Popescu Lorena
  33. Considerations on Transactions of Foreign Trade By Paliu-Popa Lucia

  1. By: Forte, Antonio
    Abstract: The Taylor rule has been used in many studies in order to analyse the monetary policies. In my work I focus on the Euro era and compare the ECB with other two central banks, the Fed and the BoE. A very interesting result comes out from the analysis: it seems that these central banks do not observe the inflation course before deciding about the variation of the interest rates. This result can be linked to two ideas: firstly, the use of stationary time series drops out the significance of the inflation gap as regressor; secondly, a really forward looking central bank focuses on other macroeconomic leading indicators instead of examining the realized or expected inflation gap.
    Keywords: Taylor rule; monetary policy; European Central Bank; Federal Reserve; Bank of England; Euro; Exchange rates.
    JEL: E58 E52
    Date: 2009–11
  2. By: Rajmund Mirdala (Faculty of Economics, Technical University of Košice, Slovakia)
    Abstract: The stable macroeconomic environment, as one of the primary objectives of the Visegrad countries in the 1990s, was partially supported by the exchange rate policy. Fixed exchange rate systems within gradually widen bands (Czech Republic, Slovak Republic) and crawling peg system (Hungary, Poland) were replaced by the managed floating in the Czech Republic (May 1997), Poland (April 2000), Slovak Republic (October 1998) and fixed exchange rate to euro in Hungary (January 2000) with broad band (October 2001). Higher macroeconomic and banking sector stability allowed countries from the Visegrad group to implement the monetary policy strategy based on the interest rate transmission mechanism. Continuous harmonization of the monetary policy framework (with the monetary policy of the ECB) and the increasing sensitivity of the economy agents to the interest rates changes allowed the central banks from the Visegrad countries to implement monetary policy strategy based on the key interest rates determination. In the paper we analyze the impact of the central banks’ monetary policy in the Visegrad countries on the selected macroeconomic variables in the period 1999-2008 implementing SVAR (structural vector autoregression) approach. We expect that higher sensitivity of domestic variables to interest rates shocks can be interpreted as a convergence of monetary policies in candidate countries towards the ECB’s monetary policy.
    Keywords: Monetary policy, Short-term interest rates, Structural vector autoregression, Variance decomposition, Impulse-response function
    JEL: C32 E52
    Date: 2009–03
  3. By: Ajimuda Olumide (Department of Economics and Statistics,University of Benin, Nigeria)
    Abstract: The study has as its objectives, to determine the influence of price volatility and price expectation in the rate of inflation as a measure of the price level. In addition, the study sought to evaluate ipso facto the extent to which monetary policy has influenced inflation by reducing price volatility and expectation towards zero. The study applied the maximum likelihood estimator in addition to the GARCH (p, q model) to estimate the steady state model of inflation. As a measure of volatility, the conditional standard deviation for inflation was obtained from the GARCH model. Inflation expectation was solved using the Gauss-Siedel algorithm for forward-looking expectations with actual inflation series as start values. The VAR model was estimated to determine the impulse response functions and the variance decomposition using Cholesky decomposition so as to determine the response to monetary policy of inflation, its volatility and expectations. The study found that inflation expectation and price volatility not only influence the contemporaneous inflation, it also results in persistence in interest rate differential and monetary growth, thus compromising the objective of monetary policy. The study recommends that explicit anchoring of expectations and volatility ensure that monetary policy is forward-looking and that a symmetric inflation target strengthens intertemporal sustainability in monetary policy management. In addition, the behaviour of inflation ex post and the speed of convergence of inflation expectations should provide the basis for determining the most appropriate pulse of nominal interest rate in the economy which will keep inflation trajectory consistent with the growth of the economy.
    Keywords: Price Volatility, Forward-looking Expectations, Persistence, Speed of Adjustment, Steady-State, Gauss-Siedel, GARCH, Impulse-Response functions
    JEL: C22 C32 D84 E31 E40 E5 E60
    Date: 2009–05
  4. By: Ansgar Rannenberg
    Abstract: We introduce duration dependent skill decay among the unemployed into a New-Keynesian model with hiring frictions developed by Blanchard/Gali (2008). If the central bank responds only to (current, lagged or expected future) inflation and quar¬terly skill decay is above a threshold level, determinacy requires a coefficient on infla¬tion smaller than one. The threshold level is plausible with little steady-state hiring and firing ("Continental European Calibration") but implausibly high in the oppo¬site case ("American calibration"). Neither interest rate smoothing nor responding to the output gap helps to restore determinacy if skill decay exceeds the threshold level. However, a modest response to unemployment guarantees determinacy. Moreover, under indeterminacy, both an adverse sunspot shock and an adverse technology shock increase unemployment extremely persistently.
    Keywords: monetary policy rules, Taylor principle, NAIRU, unemployment, hysteresis.
    JEL: E24 E31 E52 J64
    Date: 2009–09
  5. By: Hashmat Khan (Department of Economics, Carleton University); John Tsoukalas (Department of Economics, University of Nottingham)
    Abstract: Recent work based on sticky price-wage estimated dynamic stochastic general equilibrium (DSGE) models suggests investment shocks are the most important drivers of post-World War II US business cycles. Consumption, however, typically falls after an investment shock. This finding sits oddly with the observed business cycle comovement where consumption, along with hours-worked and investment, moves with economic activity. We show that this comovement problem is resolved in an estimated DSGE model when the cost of capital utilization is specified in terms of increased depreciation of capital, as originally proposed by Greenwood et al. (1988) in a neoclassical setting. Traditionally, the cost of utilization is specified in terms of forgone consumption following Christiano et al. (2005), who studied the effects of monetary policy shocks. The alternative specication we consider has two additional implications relative to the traditional one: (i) it has a substantially better fit with the data and (ii) the contribution of investment shocks to the variance of consumption is over three times larger. The contributions to output, investment, and hours, are also relatively higher, suggesting that these shocks may be quantitatively even more important than previous estimates based on the traditional specification.
    Keywords: Investment shocks, comovement, estimated DSGE models
    JEL: E2 E3
    Date: 2009–10–21
  6. By: Björn van Roye; Dennis Wesselbaum
    Abstract: We implement capital in an endogenous separations New Keynesian matching model. In contrast to the vintage capital theory, we suggest a more general approach, such that workers have unrestricted access to a proportional share of the capital stock. We find that the introduction of capital generates an important channel for the transmission of aggregate productivity shocks, using capital-labor trade-off. The model generates higher volatilities of key variables and therefore enhances the performance of the matching model to generate stylized facts in response to an aggregate productivity shock. However, there is almost no difference for monetary policy shocks
    Keywords: Capital, Endogenous Separations, Search and Matching
    JEL: E22 E32 J64
    Date: 2009–10
  7. By: Minford, Patrick (Cardiff Business School); Srinivasan, Naveen
    Abstract: The New-Keynesian Taylor-Rule model of inflation determination with no role for money is incomplete. As Cochrane (2007a) argues, it has no credible mechanism for ruling out bubbles and as a result fails to provide a reason for private agents to pick a unique stable path. We propose a way forward. Our proposal is in effect that the New-Keynesian model should be formulated with a money demand and money supply function. It should also embody a terminal condition for money supply behaviour. If an unstable path occurred the central bank would switch to a money supply Rule explicitly designed to stop it via the terminal condition. This would be therefore a 'threat/trigger strategy' complementing the Taylor Rule - only to be invoked if inflation misbehaved. Thus we answer the criticisms levelled at the Taylor Rule that it has no credible mechanism for ruling out bubbles. However it does imply that money cannot be avoided in the new Keynesian set-up, contrary to Woodford (2008).
    Keywords: New-Keynesian; Taylor Rule; Determinacy
    JEL: E31 E52 E58
    Date: 2009–10
  8. By: Kajal Lahiri; Xuguang Sheng
    Abstract: Using a Bayesian learning model with heterogeneity across agents, our study aims to identify the relative importance of alternative pathways through which professional forecasters disagree and reach consensus on the term structure of inflation and real GDP forecasts, resulting in different patterns of forecast accuracy. Forecast disagreement arises from two primary sources in our model: differences in the initial prior beliefs, and differences in the interpretation of new public information. Estimated model parameters, together with two separate case studies on (i) the dynamics of forecast disagreement in the aftermath of the 9/11 terrorist attack in the U.S. and (ii) the successful inflation targeting experience in Italy after 1997, firmly establish the importance of these two pathways to expert disagreement, and help to explain the relative forecasting accuracy of these two macroeconomic variables.
    Date: 2009
  9. By: Frappa, S.; Mésonnier, J-S.
    Abstract: The recent boom in housing markets of most developed economies has spurred criticism that inflation targeting central banks may have neglected the build-up of financial imbalances. This paper provides a formal empirical test of such claims, using a standard program evaluation methodology to correct for a possible bias due to self-selection into inflation targeting. We consider 17 industrial economies over 1980-2006, among which nine countries have targeted inflation a some dates. We find robust evidence of a significant positive effect of inflation targeting on real housing price growth and on the housing price to rent ratio.
    Keywords: Inflation targeting; Housing prices; Treatment effect; OECD countries.
    JEL: E4 E52 E58
    Date: 2009
  10. By: Kim , Insu
    Abstract: This paper investigates wage dynamics assuming the potential presence of dual wage stickiness: with respect to both the frequency as well as the size of wage adjustments. In particular, this paper proposes a structural model of wage inflation dynamics assuming that although workers adjust wage contracts at discrete time intervals, they are limited in their abilities to adjust wages as much as they might desire. The dual wage stickiness model nests the baseline model, based on Calvo-type wage stickiness, as a particular case. Empirical results favor the dual sticky wage model over the baseline model that assumes only one type of wage stickiness in several dimensions. In particular, it outperforms the baseline model in terms of goodness of fitness as well as in the ability to explain the observed dynamic correlation between wage inflation and the output gap - which the baseline model fails to capture.
    Keywords: Wage inflation; sticky wages; sticky prices; new Keynesian; hybrid.
    JEL: E32 E31 J30
    Date: 2009–10
  11. By: Anthony Garratt; Kevin Lee; Kalvinder Shields (School of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: An output gap measure is suggested based on the Beveridge-Nelson decomposition of output using a vector-autoregressive model that includes data on actual output and on expected output obtained from surveys. The paper explains the advantages of using survey data in business cycle analysis and the gap is provided economic meaning by relating it to the natural level of output defined in Dynamic Stochastic General Equilibrium models. The measure is applied to quarterly US data over the period 1970q1-2007q4 and the resultant gap estimates are shown to have sensible statistical properties and perform well in explaining inflation in estimates of New Keynesian Phillips curves.
    Date: 2009–10
  12. By: Matteo Iacoviello (Boston College); Marina Pavan (The Geary Institute, University College Dublin)
    Abstract: We present an equilibrium life-cycle model of housing where nonconvex adjustment costs lead households to adjust their housing choice infrequently and by large amounts when they do so. In the cross-sectional dimension, the model matches the wealth distribution, the age profiles of consumption, homeownership, and mortgage debt, and data on the frequency of housing adjustment. In the time-series dimension, the model accounts for the procyclicality and volatility of housing investment, and for the procyclical behavior of household debt. We use a calibrated version of our model to ask the following question: what are the consequences for aggregate volatility of an increase in household income risk and a decrease in downpayment requirements? We distinguish between an early period, the 1950s through the 1970s, when household income risk was relatively small and loan-to-value ratios were low, and a late period, the 1980s through today, with high household income risk and high loan-to-value ratios. In the early period, precautionary saving is small, wealth-poor people are close to their maximum borrowing limit, and housing investment, homeownership and household debt closely track aggregate productivity. In the late period, precautionary saving is larger, wealth-poor people borrow less than the maximum and become more cautious in response to aggregate shocks. As a consequence, the correlation between debt and economic activity on the one hand, and the sensitivity of housing investment to aggregate shocks on the other, are lower, as is found the data. Quantitatively, our model can explain: (one) 45 percent of the reduction in the volatility of household investment; (two) the decline in the correlation between household debt and economic activity; (three) about 10 percent of the reduction in the volatility of GDP.
    Keywords: Housing, Housing Investment, Household Debt, Life-cycle Models, Income Risk, Homeownership, Dynamic Stochastic General Equilibrium Models.
    JEL: E22 E32 E44 E51 D92 R21
    Date: 2009–11–02
  13. By: Diop, Ndiame; Ben Abdallah, Nizar
    Abstract: With the global financial crisis hitting many countries, policymakers around the world have been weighing different countercyclical policies to support aggregate demand and restore growth. The analysis in this paper estimates a Structural Vector Error Correction model for Tunisia in order to identify the impact of fiscal policy shocks on real output. The authors find that public investment has a small impact on output in the short run but is an important medium-term growth-enhancing countercyclical instrument that has a robust impact on growth. Raising public investment by 1 dinar yields 0.12 dinar the first year, 0.30 dinar the second year, half a dinar the third year, and 1.08 dinars the sixth year. An increase in recurrent expenditure has a smaller but positive and persistent impact on real output. For Tunisia to obtain a larger short-term impact of public spending on output, procurement processes should be made faster and simpler. Finally, the analysis finds a countercyclical pattern of real public investment vis-à-vis real output and a relative rigidity/inelasticity of recurrent expenditures to output fluctuations.
    Keywords: Debt Markets,Economic Stabilization,Economic Theory&Research,Emerging Markets,Investment and Investment Climate
    Date: 2009–10–01
  14. By: Anthony Garratt; James Mitchell; Shaun P. Vahey; Elizabeth C. Wakerly (School of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: We propose a methodology for producing density forecasts for the output gap in real time using a large number of vector autoregessions in inflation and output gap measures. Density combination utilizes a linear mixture of experts framework to produce potentially non-Gaussian ensemble densities for the unobserved output gap. In our application, we show that data revisions alter substantially our probabilistic assessments of the output gap using a variety of output gap measures derived from univariate detrending filters. The resulting ensemble produces well-calibrated forecast densities for US inflation in real time, in contrast to those from simple univariate autoregressions which ignore the contribution of the output gap. Combining evidence from both linear trends and more flexible univariate detrending filters induces strong multi-modality in the predictive densities for the unobserved output gap. The peaks associated with these two detrending methodologies indicate output gaps of opposite sign for some observations, reflecting the pervasive nature of model uncertainty in our US data.
    Date: 2009–10
  15. By: Dubecq, S.; Mojon, B.; Ragot, X.
    Abstract: We set up a model where asset price bubbles due to risk shifting can be moderated by capital requirements. However, imperfect information about the ratio of required capital, or, in the context of the sub-prime crisis, the extent of regulatory arbitrage, introduces uncertainty about the risk exposure of intermediaries. Underestimation of regulatory arbitrage may induce households to infer that higher asset prices are due to a decline of risk. First, this mechanism can explain why the risk premia paid by US financial intermediaries did not increase between 2000 and 2007 in spite of its increasing leverage. Second, we provide a theory of the risk taking channel of monetary policy: in the model, the underestimation of risk is larger the lower the level of the risk free interest rate.
    Keywords: Capital requirements, Imperfect Information, Risk-taking Channel of monetary policy.
    JEL: E5 G12 G18 G32
    Date: 2009
  16. By: Carmen M. Reinhart (University of Maryland and the NBER, USA); Kenneth S. Rogoff (Harvard University and the NBER, USA)
    Abstract: Is the 2007-2008 U.S. sub-prime mortgage financial crisis truly a new and different phenomena? Our examination of the longer historical record finds stunning qualitative and quantitative parallels to 18 earlier post-war banking crises in industrialized countries. Specifically, the run-up in U.S. equity and housing prices (which, for countries experiencing large capital inflows, stands out as the best leading indicator in the financial crisis literature) closely tracks the average of the earlier crises. Another important parallel is the inverted v-shape curve for output growth the U.S. experienced as its economy slowed in the eve of the crisis. Among other indicators, the run-up in U.S. public debt and is actually somewhat below the average of other episodes, and its pre-crisis inflation level is also lower. On the other hand, the United States current account deficit trajectory is worse than average. A critical question is whether the U.S. crisis will prove similar to the most severe industrialized-country crises, in which case growth may fall significantly below trend for an extended period. Or will it prove like one of the milder episodes, where the recovery is relatively fast? Much will depend on how large the shock to the financial system proves to be and, to a lesser extent, on the efficacy of the subsequent policy response.
    Keywords: Financial crises, Economic growth, Public debt
    JEL: E44 F30 N20
    Date: 2008–05
  17. By: Przystupa, Jan; Wróbel, Ewa
    Abstract: We propose a complex analysis of the exchange rate pass-through in an open economy. We assess the level, linearity and symmetry of exchange rate pass-through to import and consumer prices in Poland and discuss its implications for the monetary policy. We show that the pass-through is incomplete even in the long run. There is pricing to market behavior both in the long and short run. We do not find a strong evidence of non-linearity in import prices reaction to the exchange rate and reject the hypothesis of an asymmetric response to appreciations and depreciations. On the other hand, we find an asymmetry of CPI responses to the output gap, direction and size of the exchange rate changes and to the magnitude of the exchange rate volatility. The asymmetry is mostly visible after exogenous shocks. We reject the hypothesis of an asymmetric reaction of prices in a high and low inflation environment.
    Keywords: Exchange Rate Pass-through; Non-linear Model.
    JEL: E52 C22 F31
    Date: 2009–04–30
  18. By: Anthony Garratt; James Mitchell; Shaun P. Vahey (School of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: We propose a methodology for producing density forecasts for the output gap in real time using a large number of vector autoregessions in inflation and output gap measures. Density combination utilizes a linear mixture of experts framework to produce potentially non-Gaussian ensemble densities for the unobserved output gap. In our application, we show that data revisions alter substantially our probabilistic assessments of the output gap using a variety of output gap measures derived from univariate detrending filters. The resulting ensemble produces well-calibrated forecast densities for US inflation in real time, in contrast to those from simple univariate autoregressions which ignore the contribution of the output gap. Combining evidence from both linear trends and more flexible univariate detrending filters induces strong multi-modality in the predictive densities for the unobserved output gap. The peaks associated with these two detrending methodologies indicate output gaps of opposite sign for some observations, reflecting the pervasive nature of model uncertainty in our US data.
    Date: 2009–10
  19. By: Marcos S. Matsumura; José Valentim Vicente
    Abstract: We use a dynamic term structure model with default and observable factors to study the interaction between macro variables and the Brazilian sovereign yield curve. We also calculate the default probabilities implied from the estimated model and the impact of macro shocks on those probabilities. Our results indicate that the VIX is the most important macro factor affecting short-term bonds and default probabilities, while the American short-term rate is the most important factor affecting the long-term default probabilities. Regarding the domestic variables, only the slope of the local yield curve presents significant explanatory power for the sovereign rates and default probabilities.
    Date: 2009–10
  20. By: Davide Ferrari; Barbara Pistoresi; Francesco Salsano
    Abstract: We build on earlier studies regarding Central Bank independence (CBI) by relating it to political, institutional and economic variables. The data suggest that CBI is positively related to the presence of federalism, the features of the electoral system and parties, the correlation between the shocks to the level of economic activity in the countries included in the sample and, for a sub-sample of economies, the convergence criteria to join the European Monetary Union (EMU).
    Keywords: ICentral Bank independence; institutional systems; variable selection
    JEL: E5
    Date: 2009–07
  21. By: Vivien Lewis (National Bank of Belgium, Research Department; Ghent University, Department of Financial Economics)
    Abstract: This paper describes optimal monetary policy in an economy with monopolistic competition, endogenous firm entry, a cash-in-advance constraint and pre-set wages. Firms must make profits in order to cover entry costs; thus a mark-up on goods prices is necessary. Without this mark-up, profits would be zero and no firm would enter the market, resulting in zero production. Therefore, the mark-up should not be removed. In this economy with market entrants, goods are more expensive than in a competitive economy with marginal cost pricing. This leads to a misallocation of resources, because leisure is not sold at a mark-up. Goods and leisure are two sources of utility that households trade off against each other. Thus, they may buy too much leisure instead of consumption goods. The consequence is that labour supply and production are sub-optimally low. Due to the labour requirement at market entry stage, insufficient labour supply also implies too little entry and too few firms in equilibrium. In the absence of fiscal instruments such as labour income subsidies, the optimal monetary policy under sticky wages achieves higher welfare than under flexible wages. The policy-maker uses the money supply instrument to raise the real wage - the cost of leisure - above its flexible-wage level, in response to expansionary shocks. This induces a rise in labour supply, more production of goods and more new firms
    Keywords: entry, optimal policy
    JEL: E52 E63
    Date: 2009–10
  22. By: Dixon, Huw (Cardiff Business School)
    Abstract: This paper argues that the cross-sectional approach to durations is essential to understand nominal rigidity because this captures the fact that price-spells are generated by firms' price-setting behavior. Since the distribution of durations is dominated by a proliferation of short contracts, the cross-sectional measure corrects for this by length-biased sampling. Modelling the price-spell durations in this way enables us to see how Taylor, Calvo and their generalizations relate to each other, and enable us to compare price-setting behavior for a given distribution of durations. We also show how the micro-data can be directly related to the macroeconomic pricing models in this setting.
    Keywords: Price-spell; steady state; hazard rate; Calvo; Taylor
    JEL: E50
    Date: 2009–10
  23. By: Zhang, Yan; Chen , Yan
    Abstract: Zhang (2009) shows that endogenous tariffs and endogenous labor income taxes (Schmitt-Grohe and Uribe, 1997) are equivalent in generating local indeterminacy. Using the method developed by Stockman (2009), we extend Zhang's analysis to prove that they are also equivalent in generating global indeterminacy (chaotic equilibria) under a balanced-budget rule. We show that the existence of Euler equation branching in an arbitrarily small neighborhood of a steady state can imply topological chaos in the sense of Devaney. In addition, the Euler equation branching occurs regardless of the local uniqueness of the equilibrium around the steady state(s).
    Keywords: Endogenous Tariff Rate; Regime Switching; Chaos.
    JEL: E62 E32
    Date: 2009–11–01
  24. By: Calista Cheung; Stéphanie Guichard
    Abstract: The collapse in world trade volumes at the end of 2008 and beginning of 2009 was exceptional by historical standards. This paper shows that world demand (to which trade has become more responsive in recent decades) can explain most of the collapse in world trade, but that tight credit conditions have likely amplified the short-term trade response. Credit tightening likely accelerated the trade decline through trade finance constraints and its relatively larger impact on trade-intensive sectors. A portion of the trade decline remains unexplained, which may reflect a possible breakdown in global supply chains. Looking ahead, the pace of normalisation in financial conditions and the future evolution of global supply integration will affect the speed of recovery in trade and global output.<P>Comprendre l’effondrement du commerce mondial<BR>L’effondrement du volume des échanges mondiaux à la fin de 2008 et au début de 2009 est exceptionnel dans une perspective historique. Ce document montre que l’essentiel de cet effondrement peut s’expliquer par une baisse de la demande mondiale (à laquelle le commerce est devenu plus réactif au cours des dernières décennies), mais que le resserrement des conditions de crédit a probablement joué un rôle important. La raréfaction du crédit a vraisemblablement accéléré la chute du commerce via son impact sur le financement des échanges et son impact relativement plus prononcé sur les secteurs les plus intenses en commerce. Une partie de la chute du commerce demeure inexpliquée, et pourrait refléter une rupture de chaînes d'approvisionnement mondiales. Pour l'avenir, le rythme de la normalisation dans les conditions financières et de l’évolution future de l’intégration de la production mondiale affectera la vitesse de la reprise du commerce et de la production mondiale.
    Keywords: international trade, commerce international, financial crisis, crise financière, trade elasticity, élasticité du commerce, vertical supply, intégration verticale
    JEL: E0 F10 F17
    Date: 2009–10–30
  25. By: GAO, XIANG
    Abstract: This paper reviews the branch of literature that applies models developed in international trade theory (Microeconomics) to explain phenomena found in international finance (Macroeconomics). Among all international trade models, the New New Trade Theory with productivity heterogeneity across firms in the same industry has proved to be a powerful tool to bridge the gap between international trade and finance. As a result, this review focuses on several papers in this nascent field, where the behavior of macroeconomic indicators are generated from sound microeconomic foundation.
    Keywords: Heterogeneous firm; Price fluctuation; Innovation
    JEL: E31 F12 O31
    Date: 2009–08
  26. By: Antoine Brunet (University of Nice – Sophia Antipolis, CEMAFI, France)
    Abstract: In this paper, Antoine Brunet questions the OECD method in calculating contributions to GDP growth. He tries to show this method induces the users to seriously misjudge the contribution of external trade balance to GDP growth. He shows there is an alternative method, i.e. the AB method which is mathematically as correct as the OECD one. And this method is much more pertinent and allows the users to distinguish between two kinds of countries: on the one hand, the mercantilist countries and on the other hand, the non-mercantilist countries.
    Keywords: Growth contribution, External trade balance, Borrowing, Growth strategy, Mercantilism.
    JEL: E01 E29 F43 F53
    Date: 2009–07
  27. By: Natasa Spes; Sebastjan Strasek; Timotej Jagric (Faculty of Economic and Business, University of Maribor, Slovenia)
    Abstract: Using generation approach we examine the genesis and mechanisms in major financial crisis and focus on the recent sub – prime crisis. We believe that in the era of increased financial globalization a reliable approach has to consider besides fundamental factors multiple equilibriums and self – fulfilling character of financial crises. In recent global crisis again financial globalization implemented in periods of high international capital mobility have reputedly produced international banking crises. Progressing integration and increasing sophistication of the product and financial markets brought new forms and more global character of the crises events in the recent sub – prime crisis.
    Keywords: financial crisis, sub-prime crisis, financial globalization, international capital, financial market
    JEL: E2 E4 E6 O11 R11
    Date: 2009–05
  28. By: M. Magnani
    Abstract: The present paper presents a survey of the main works that analyze labor share dynamics from a theoretical point of view. It tries also to reconcile the different approaches to the issue into a unifying framework represented by the so called SK schedule.
    Keywords: Labor Share, Factor Shares
    JEL: E24 E25
    Date: 2009
  29. By: Jean-Paul Guichard (University of Nice – Sophia Antipolis, CEMAFI)
    Abstract: In a closed economy, the growth of the GDP is equal to the net indebtedness (the increase of indebtedness) of it agents from one period to another, which allows current demand to be greater than the income of the preceding quarter. In an open economy, we must add to that the net indebtedness of the totality of foreign agents in operation: the currencies corresponding to the foreign trade balance. Depending on the sign of these two kinds of net indebtedness, positive or negative, a classification of countries can be made: mainly mercantilist countries that enjoy a foreign surplus, on the one hand, and “Keynesian” countries running a deficit, whose growth is founded upon domestic demand, on the other hand.
    Keywords: Foreign trade, Mercantilism, Net indebtedness, Domestic demand
    JEL: E01 E29 F43 F53
    Date: 2009–07
  30. By: Jan Babecky; Kamil Dybczak
    Abstract: The Czech Republic is facing a population ageing phenomenon. In addition, its demographic structure is expected to change dramatically over the next 50 years. We apply a stylised overlapping generation model in order to analyse the potential effects of the expected demographic changes on aggregate economic performance taking into account alternative fiscal policy set-ups. We provide a rough estimate of the amendments necessary on the revenue and expenditure sides in order to keep the current system financially balanced. We also discuss the implications for the development of other economic variables. In particular, we separately simulate future developments in the cases of adjustment in either the contribution rate or the value of public benefit. In addition, we demonstrate that parametric changes, such as an increase in the statutory retirement age, cannot eliminate the impact of the deterioration in the demographic structure on the course of the economy.
    Keywords: Population ageing, public pension systems, social security.
    JEL: E27 J11 H55
    Date: 2009–09
  31. By: Bernholz, Peter; Faber, Malte; Petersen, Thomas
    Abstract: Die Frage nach der Kausalität fällt in die Methodologie. Methodologie ist in den Wirtschaftswissenschaften ein Bereich, der sowohl bei Ökonomen als auch bei Philosophen kaum Beachtung findet. Ökonomik hat sich ursprünglich als eine kausal erklärende Wissenschaft verstanden. Sie wollte für die Wirtschaft zeigen, dass das scheinbar Zufällige dort einem notwendigen Gesetz gehorcht. Denn in moderner Auffassung meint Kausalität nicht, dass eine Ursache A eine Wirkung B herbeiführt; vielmehr liegt das Wesen der Kausalität in einer notwendigen Verknüpfung zeitlich getrennter Ereignisse oder Zustände der Welt miteinander durch universell geltende Gesetze. Wir wollen zur Klärung der Frage beitragen, welche Rolle kausale Erklärungen in den zeitgenössischen Wirtschaftswissenschaften spielen können. Wir untersuchen diese Frage am Beispiel der gegenwärtigen Finanzkrise. Nach einer kurzen Beschreibung der Entstehung der Finanzkrise (Abschnitt 2) und einer Klärung des Begriffes Krise“ (Abschnitt 3), erläutern wir ausführlich die Ursachen für die gegenwärtige Finanzkrise (Abschnitt 4), wobei auch kapitaltheoretische Überlegungen wie der Begriff des natürlichen Zinssatzes, unterschiedliche Fristigkeiten und Grade der Risikoscheuheit berücksichtigt werden. Da wir zeigen, dass die Krise sich nicht kausal erklären lässt, sprechen wir nicht von Ursachen, sondern von Gründen dieser Krise, von denen wir folgende nennen: die exzessive amerikanischen Geldpolitik, das Handelsbilanzungleichgewichtes zwischen USA und China, das amerikanische Haftungsrecht,die zunehmende Komplexität der Finanzinstrumente, systemischen Risiken, das mangelnde Wissen der Bankmanager um vergangene Krisen sowie ihr Entlohnungssystem. In Abschnitt 5 fragen wir, was Kausalität in den Wirtschaftswissenschaften und speziell in der gegenwärtigen Finanzkrise bedeuten kann? Wie wirken objektive Faktoren und subjektive Faktoren (wie Vertrauen) zusammen? Es zeigt sich, dass in den Wirtschaftswissenschaften nur unter ganz bestimmten Bedingungen kausale Gesetze abgeleitet werden können; es können dagegen sehr wohl Regeln abgeleitet werden, die im Allgemeinen gelten. Abschließend diskutieren wir in Abschnitt 6 die Frage, ob Finanzkrisen unvermeidlich sind.
    Keywords: methodology; causality; financial crises; confidence; Methodologie; Kausalität; Finanzkrise; Kapitaltheorie; Vertrauen
    JEL: E5 E4 B41 D53 D92 E22
    Date: 2009–09–21
  32. By: Duduiala Popescu Lorena (Constantin Brancusi University of Targu Jiu, Faculty of Economics, Romania)
    Abstract: Viewed in the context of geopolitical and geostrategic current and through the elements of distinction in terms of identity and cultural institutions, chart Romania - NATO / Israel - EU stands under the sign of the common interest channel, firstly, on common values and hence the collective interests of the partners involved in the two organizational structures. Noteworthy in this context is the extent of bilateral involvement of Romania in the bodies and the politico-military, represented by NATO (the North Atlantic Treaty Organization), which is primarily military values and the construction superstate permanent expansion and development - European Union, both generating as much for our country as obligations of a politico-military security, and economic, social, institutional, cultural.
    Keywords: current geopolitical and geostrategic context, identity, Romania – NATO - EU chart
    JEL: E2 E6 O11 R11
    Date: 2009–05
  33. By: Paliu-Popa Lucia (Constantin Brancusi University of Targu Jiu, Faculty of Economics, Romania)
    Abstract: In the complex connection process of national economies to global economy flows, an important role has the foreign trade, which in recent decades has become, in the market economy conditions, one of the factors determining for economic growth. Foreign trade, as a separate branch of the national economy is an important factor of economic growth, caused by the internationalization of business and determining for the process of globalization. For Romania, a country still in transition and recent member of the European Union is particularly important to enhance the participation to international trade in goods and services, but also attracting foreign investments in the economy as the main possibilities for the re-industry and restructuring the national economy in order to creation and maintenance of sustainable competitive advantages. Starting from these considerations, in this article I addressed/aproached the theoretical aspects of foreign trade, without omitting intracomunity purchases and deliveries of goods.
    Keywords: domestic economy, global economy, foreign trade, market economy, economic growth, globalisation, goods
    JEL: E0 E6 R11
    Date: 2009–05

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