nep-mac New Economics Papers
on Macroeconomics
Issue of 2010‒02‒05
35 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. How Anchored Are Inflation Expectations in EMU Countries? By Carin van der Cruijsen; Carin van der Cruijsen
  2. A Multimarket Approach for Estimating a New Keynesian Phillips Curve By Juan de Dios Tena; Jorge Dresdner; Iván Araya
  3. Rational Partisan Theory, Uncertainty and Spatial Voting: Evidence for the Bank of England’s MPC By Bhattacharjee, A.; Holly, S.
  4. The recessive attitude of EMU policies: reflections on the italian experience, 1998–2008 By Canale, Rosaria Rita; Napolitano, Oreste
  5. The Taylor Rule and “Opportunistic” Monetary Policy By Helle Bunzel; Walter Enders
  6. The role of central bank transparency for guiding private sector forecasts By Michael Ehrmann; Sylvester Eijffinger; Marcel Fratzscher
  7. Central bank independence and conservatism under uncertainty: Substitutes or complements? By Carsten Hefeker; Blandine Zimmer
  8. Factor Demand Linkages, Technology Shocks and the Business Cycle By Holly, S.; Petrella, I.
  9. Bank capital regulation, the lending channel and business cycles By Zhang, Longmei
  10. A multi-sectoral approach to the U.S. Great Depression By Pedro S. Amaral; James C. MacGee
  11. Audit the Federal Reserve? By Barnett, William A.
  12. Size and composition of the central bank balance sheet: revisiting Japan's experience of the quantitative easing policy By Shigenori Shiratsuka
  13. Solving the paradox of monetary profits By Keen, Steve
  14. Is It a Puzzle to Estimate Econometric Models for The Turkish Economy? By Aysu Insel; Nedim Sualp
  15. Alternative Phillips Curves Models with Endogenous Real-Time Expectations By David Kiefer
  16. Credit money and macroeconomic instability in the agent-based model and simulator Eurace By Cincotti, Silvano; Raberto, Marco; Teglio, Andrea
  17. All is Quiet in the Fiscal Front: Fiscal Policy for the Global Economic Crisis By Matías Vernengo
  18. A Spectral Analysis of Business Cycle Patterns in UK Sectoral Output By Peijie Wang; Trefor Jones
  19. Efeitos da Globalização na Inflação Brasileira By Rafael Santos; Márcia S. Leon
  20. Volumes of Evidence - Examining Technical Change Last Century Through a New Lens By Michelle Alexopoulos; Jon Cohen
  21. CEPR Responds to the IMF’s Reply and Defense of Its Policies During the World Recession By Mark Weisbrot
  22. Interest rates and bank risk-taking By Delis, Manthos D; Kouretas, Georgios
  23. IMF-Supported Macroeconomic Policies and the World Recession: A Look at Forty-One Borrowing Countries By Mark Weisbrot; Rebecca Ray; Jake Johnston; Jose Antonio Cordero
  24. Read All About it!! What happens following a technology shock? By Michelle Alexopoulos
  25. Deciding to peg the exchange rate in developing countries: the role of private-sector debt By Harms, Philipp; Hoffmann, Mathias
  26. The Automobile Industry in and Beyond the Crisis By David Haugh; Annabelle Mourougane; Olivier Chatal
  27. Structural Interactions in Spatial Panels By Bhattacharjee, A.; Holly, S.
  28. The Decline of Investment in East Asia since the Asian Financial Crisis: An Overview and Empirical Examination By Park, Dong-hyun; Shin, Kwanho; Jongwanich, Juthathip
  29. Inequality as Policy: The United States Since 1979 By John Schmitt
  30. The $1 Trillion Wage Deficit By Dean Baker; John Schmitt
  31. Taming the Deficit: Saving Our Children from Themselves By Dean Baker; David Rosnick
  32. Resource Wealth, Innovation and Growth in the Global Economy By Pietro F. Peretto; simone Valente
  33. How Powerful is Demography? The Serendipity Theorem Revisited By David de la CROIX; Pierre PESTIEAU; Grefory PONTHIERE
  34. The crisis and beyond: thinking outside the box By Hillinger, Claude
  35. Two Chapters on early history of the Munich Reinsurance Company: The Foundation/ The San Francisco Earthquake By Spree, Reinhard

  1. By: Carin van der Cruijsen; Carin van der Cruijsen
    Abstract: Anchored inflation expectations help stabilize inflation. Previous results indicate that monetary policy has been effective in breaking the link between actual and expected inflation at the euro area level. In this paper we examine whether this is also true at the national level. We define the ‘disconnect' between inflation and inflation expectations and then proceed to examine the extent to which this disconnect exists for a number of euro area countries. Our findings suggest that country-specific inflation experiences still affect national inflation expectations, and certainly more by comparison to the aggregate euro area level. EMU has therefore not made this link disappear at the national level.
    Keywords: Inflation expectations; monetary policy; EMU. J.E.L. codes : E52; E58.
    Date: 2010–01
  2. By: Juan de Dios Tena (Departamento de Estadística, Universidad Carlos III, Madrid, España.); Jorge Dresdner (Departamento de Economía, Universidad de Concepción); Iván Araya (Departamento de Economía, Universidad de Concepción)
    Abstract: We propose a new approach for estimating a “hybrid” New Keynesian Phillips Curve (NKPC)that includes demand pressures coming from disequilibrium relations in three differentmarkets: (1) monetary and financial, (2) international, and (3) labour. The results of theapplication of this approach show that all three markets contribute to the evolution of inflation. However, shocks on equilibrium in the labour market and short-run movements in cyclical output are relatively more important than other shocks. Econometric tests indicate that this specification is superior to the traditional NKPC, which includes a single variable to account for demand pressures.
    Keywords: New Keynesian Phillips Curve, Cointegration, Monetary Policy.
    Date: 2009
  3. By: Bhattacharjee, A.; Holly, S.
    Abstract: The transparency and openness of the monetary policymaking process at the Bank of England has provided very detailed information on both the decisions of individual members of the Monetary Policy Committee and the information on which they are based. In this paper we consider this decision making process in the context of a model in which inflation forecast targeting is used but there is heterogeneity among the members of the committee. We find that rational partisan theory can explain spatial voting behaviour under forecast uncertainty about the output gap. Internally generated forecasts of output and market generated expectations of medium term inflation provide the best description of discrete changes in interest rates, in combination with uncertainty in the macroeconomic environment. There is also a role for developments in asset housing and labour markets. Further, spatial voting patterns clearly differentiates between internal and externally appointed members of the Monetary Policy Committee. The results have important implications for committee design and the conduct of monetary policy.
    Keywords: Monetary policy, interest rates, Monetary Policy Committee, Committee decision making
    JEL: E42 E43 E50 E58
    Date: 2010–01–22
  4. By: Canale, Rosaria Rita; Napolitano, Oreste
    Abstract: The EMU assigns a very marginal role to economic policy and relies on the leading idea that, if prices are kept constant, there will be an automatic convergence towards long-run equilibrium income. These beliefs represent the theoretical underpinnings of fiscal and monetary policy strategies in Europe. In order to highlight the weakness of these foundations, the paper evaluates empirically the effects of public expenditure and interest rate setting on equilibrium income in Italy from 1998 to 2008. The analysis supports the conclusions that government spending has a positive impact on national income while inflation targeting has a negative impact. Moreover the empirical evidence shows that a high level of debt does not produce negative effects on GDP. Finally, at a time of financial crisis, these results appear to be reinforced for fiscal policy, but weakened for monetary policy. The paper draws the conclusion that the EMU’s rigid rules for both fiscal and monetary policy have recessive attitudes, and limit the use of instruments to deal with high levels of unemployment, definitely undermining the future existence of the single-currency area.
    Keywords: Fiscal policy; Monetary policy; EMU; Italy
    JEL: E62 E12 E52
    Date: 2009–12
  5. By: Helle Bunzel (Department of Economics, Iowa State University and CREATES); Walter Enders (Department of Economics, Finance & Legal Studies, University of Alabama)
    Abstract: We investigate the possibility that the Taylor rule should be formulated as a threshold process such that the Federal Reserve acts more aggressively in some circumstances than in others. It seems reasonable that the Federal Reserve would act more aggressively when inflation is high than when it is low. Similarly, it might be expected that the Federal Reserve responds more to a negative than a positive output gap. Although these specifications receive some empirical support, we find that a modified threshold model that is consistent with “opportunistic” monetary policy makes significant progress towards explaining Federal Reserve behavior.
    Keywords: Threshold regression, Nonlinear Taylor rule, Opportunistic Monetary Policy
    JEL: C22 E32 E52
    Date: 2009–12–06
  6. By: Michael Ehrmann (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Sylvester Eijffinger (Tilburg University, Koopmans building, Warandelaan 2, 5037 AB Tilburg, The Netherlands.); Marcel Fratzscher (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: There is a broad consensus in the literature that costs of information processing and acquisition may generate costly disagreements in expectations among economic agents, and that central banks may play a central role in reducing such dispersion in expectations. This paper analyses empirically whether enhanced central bank transparency lowers dispersion among professional forecasters of key economic variables, using a large set of proxies for central bank transparency in 12 advanced economies. It finds evidence for a significant and sizeable effect of central bank transparency on forecast dispersion, be it by means of announcing a quantified inflation objective, other forms of communication, or by publishing central banks’ inflation and output forecasts. However, there also appear to be limits to central bank transparency, with decreasing marginal returns to enhancing (economic) transparency, and given our findings that disagreement among inflation expectations in the general public is not affected by the various central bank transparency measures analyzed in this paper. JEL Classification: E37, E52, C53.
    Keywords: central banking; transparency; disagreement; survey expectations; monetary policy; inflation targeting; central bank communication; forecasting.
    Date: 2010–01
  7. By: Carsten Hefeker; Blandine Zimmer
    Abstract: This paper revisits the trade-off between central bank independence and conservatism using a New Keynesian model with uncertainty about the central banker's output gap target. It is shown that when this uncertainty is high, the trade-off no longer holds. In this case, the optimal combination between independence and conservatism is characterised by complementarity.
    Keywords: central bank independence, conservatism, transparency of monetary policy
    JEL: E52 E58
    Date: 2010
  8. By: Holly, S.; Petrella, I.
    Abstract: This paper argues that factor demand linkages are crucial in the transmission of both sectoral and aggregate shocks. We show this using a panel of highly disaggregated manufacturing sectors together with sectoral structural VARs. When sectoral interactions are explicitly accounted for, a contemporaneous technology shock to all manufacturing sectors implies a positive response in both output and hours at the aggregate level. Otherwise, there is a negative correlation as in much of the existing literature. Furthermore, we find that technology shocks are important drivers of business cycles.
    Keywords: Multisectors, Technology shocks, Business cycles, Long-run restrictions, Cross Sectional Dependence
    JEL: E20 E32 C31 C51
    Date: 2010–01–22
  9. By: Zhang, Longmei
    Abstract: This paper develops a Dynamic Stochastic General Equilibrium (DSGE) model to study how the instability of the banking sector can amplify and propagate business cycles. The model builds on Bernanke, Gertler and Gilchrist (BGG) (1999), who consider credit demand friction due to agency cost, but it deviates from BGG in that financial intermediaries have to share aggregate risk with entrepreneurs, and therefore bear uncertainty in their loan portfolios. Unexpected aggregate shocks will drive loan default rate away from expected, and have an impact on both firm and bank's balance sheet via the financial contract. Low bank capital position can create strong credit supply contraction, and have a significant effect on business cycle dynamics. --
    Keywords: Bank capital regulation,banking instability,financial friction,business cycle
    JEL: E32 E44 E52
    Date: 2009
  10. By: Pedro S. Amaral; James C. MacGee
    Abstract: We document sectoral differences in changes in output, hours worked, prices, and nominal wages in the United States during the Great Depression. We explore whether contractionary monetary shocks combined with different degrees of nominal wage frictions across sectors are consistent with both sectoral as well as aggregate facts. To do so, we construct a two-sector model where goods from each sector are used as intermediates to produce the sectoral goods that in turn produce final output. One sector is assumed to have flexible nominal wages, while nominal wages in the other sector are set using Taylor contracts. We calibrate the model to the U.S. economy in 1929, and then feed in monetary shocks estimated from the data. We find that while the model can qualitatively replicate the key sectoral facts, it can account for less than a third of the decline in aggregate output. This decline in output is roughly half as large as the one implied by a one-sector model. Alternatively, if wages are set using Calvo-type contracts, the decline in output is even smaller.
    Keywords: Depressions ; Wages ; Prices
    Date: 2009
  11. By: Barnett, William A.
    Abstract: An independent institute for monetary statistics is needed in the United States. Expanded Congressional audit would be a second best alternative, but would not fully address the needs and would carry risks.
    Keywords: Federal Reserve; data institute; audit; GAO; monetary aggregation; index number theory
    JEL: C82 E01 E50 E41
    Date: 2010–02–26
  12. By: Shigenori Shiratsuka
    Abstract: This paper re-examines Japan's experience of the quantitative easing policy in light of the policy responses against the current financial and economic crisis. Central banks use various unconventional measures in the range of financial assets being purchased and in the scale of such purchases. As the scope of such unconventional measures expands, it is often emphasized that the U.S. Federal Reserve policy reactions focus more on the asset side of its balance sheet, the so-called credit easing. By contrast, the Bank of Japan's quantitative easing policy from 2001 to 2006 set a target for the current account balances, the liability side of its balance sheet. It is crucial to understand that central banks combine the two elements of their balance sheets, size and composition, to enhance the overall effects of unconventional policy measures, given constraints on policy implementation.
    Keywords: Financial markets ; Monetary policy ; Banks and banking, Central ; Financial crises
    Date: 2010
  13. By: Keen, Steve
    Abstract: Bruun and Heyn-Johnsen (2009) state the paradox that economics has failed to provide a satisfactory explanation of how monetary profits are generated, even though the generation of a physical surplus is an established aspect of non-neoclassical economics. They emphasise that our ability to explain phenomena like the Global Financial Crisis (GFC) will be limited while ever we are still unable to explain this fundamental aspect of capitalism. In fact this paradox can be solved very simply, using insights from what is known as Circuit Theory. In this paper the author shows how monetary profits are generated, and introduces a multisectoral dynamic disequilibrium monetary model of production. --
    Keywords: Endogenous money,circuit theory
    JEL: E12 E17 E20 E51
    Date: 2010
  14. By: Aysu Insel (Marmara University); Nedim Sualp (Marmara University)
    Abstract: This paper examines the roles and interrelationships among the main macroeconomic variables, namely the exchange rate, inflation rate, interest rate and real GDP in Turkey. It provides a descriptive data analysis in order to understand the behaviour of each variable and to explain the relationship between them. The data analysis has been performed considering the original and the decomposed variables over the five periods: 1987:01-2007:12; 1987:01-1994:03; 1994:04-2001:01; 2001:02-2007:12; and 2002:10-2007:12. Different lengths of the sample periods are selected for each variable covering the economic crises and different policy applications in order to compare the reasons and the consequences of different economic policy applications on these variables. It is concluded that the distribution of economic series is changing from one period to another. The contribution of this paper is to develop a base for econometric model construction for the Turkish economy all the way through their contemporaneous and causal relationship for different sub-sample periods.
    Keywords: Inflation rate, Exchange rate, Interest rate, Real GDP, Descriptive data analysis, Turkey
    Date: 2009
  15. By: David Kiefer
    Abstract: Originally presented as an empirical regularity, a variety of microeconomic derivations of the Phillips tradeoff between inflation and real output have been developed. Since these new Phillips curve models are expressed in terms of unobserved variables and expectations, we develop estimates of these unobservables using a state space characterization of the short-run political-economic equilibrium. This method is appropriate because it yields recursive forecasts based on contemporaneous information, and because we apply it to a real-time data set in order to accurately measure available information. Although none of the new Phillips curve tested are completely adequate, we find that Calvo’s sticky price formulation provides the best fit for US data. It is inadequate because the estimate coefficient for the driving variable (either the output gap or the marginal cost) is essentially zero
    Keywords: new Phillips curve, microfoundations, real-time data
    JEL: E3 E6
    Date: 2010–03
  16. By: Cincotti, Silvano; Raberto, Marco; Teglio, Andrea
    Abstract: The paper presented a study on the relationship between credit money and economic instability. The issue is of primary importance because, as it is generally stated, lower variability of output and inflation has numerous economic benefits. We address this problem by means of an agent-based model and simulator, called Eurace, which is characterized by a complete set of interrelated markets and different types of interacting agents, modelled according to a rigorous balance-sheet approach. The dynamics of credit money is endogenous and depends on the supply of credit from the banking system, which is constrained by its equity base, and the demand of credit from firms in order to finance their production activity. Alternative dynamic paths for credit money have been produced by setting different firms' dividend policies. Results show the emergence of endogenous business cycles which are mainly due to the interplay between the real economic activity and its financing through the credit market. In particular, the amplitude of the business cycles strongly raises when the fraction of earnings paid out by firms as dividends is higher, that is when firms are more constrained to borrow credit money to fund their activity. This interesting evidence can be explained by the fact that the level of firms leverage, defined as the debt-equity ratio, can be considered ad a proxy of the likelihood of bankruptcy, an event which causes mass layoffs and supply decrease. --
    Keywords: Macroconomic policy design,agent-based computational economics credit money,economic instability
    JEL: E42 E2 E32
    Date: 2010
  17. By: Matías Vernengo
    Abstract: The current economic global crisis has thrown fiscal policy onto the center stage. However, the current crisis episode has not produced any change regarding the standing role and function of fiscal policy in developed and developing market economies that has dominated the economics profession for decades. In fact, the uncertain prospects for recovery underscore the fact that free market economies lack the mechanisms to bring about and maintain full employment. Full employment requires designing and making operational institutions at the national and global levels that can manage aggregate demand. This paper reviews the evidence on current fiscal efforts around the world.
    Keywords: Fiscal Policy, Fiscal Deficit
    JEL: E62 H62
    Date: 2010–02
  18. By: Peijie Wang; Trefor Jones
    Abstract: This paper studies business cycle patterns in UK sectoral output. It analyzes the distinction between white noise processes and their non-white noise counterparts in the frequency domain and further examines the associated features and patterns for the process where white noise conditions are violated. The characteristics of these sectors, arising from their institutional features that may influence business cycles behavior and patterns, are discussed. The study then investigates the output of UK GDP sectors empirically, revealing their similarities and differences in their business cycle patterns.
    Date: 2010–01
  19. By: Rafael Santos; Márcia S. Leon
    Abstract: In this paper we present a dynamic stochastic general equilibrium (DSGE) model, which aims at evaluating the effects of trade globalization over inflation. The period of the inflation targeting regime (1999-2008) is employed to estimate the parameters for the Brazilian economy. The results show that trade globalization appreciates the terms of trade and reduces the inflation rate. Meanwhile to implement barriers to trade - for example, by increasing import and/or export taxes - affects positively the inflation rate. Under a secondary purpose of disseminating technical information, we derive in the appendix the model developed in the paper and we describe in the introduction the recent evolution of the Brazilian international trade.
    Date: 2010–01
  20. By: Michelle Alexopoulos; Jon Cohen
    Abstract: Although technical change is central in much of modern economics, traditional measures of it are, for a number of reasons, flawed. We discuss in this paper new indicators based on data drawn from the MARC records of the Library of Congress on the number of new technology titles in various fields published in the United States over the course of the last century. These indicators, we argue, overcome many of the shortcomings associated with patents, research and development expenditures, innovation counts, and productivity figures. We find, among other things, the following: the pattern and nature of technical change described by our indicators is, on the whole, consistent with that of other measures; they represent innovation not diffusion; a strong causal relationship between our indicators and changes in TFP and output per capita; innovations in some sub-groups have had a greater impact on output and productivity than others and, moreover, the key players have changed over time. Our indicators can be used to shed light on number of important issues including the empirical relationship between technology shocks and employment, the role of technology in cross-country productivity differences, and the part played by technological change in growing skills premia in the U.S. during the last few decades.
    Keywords: Business Cycles, Technical change, productivity, measurement
    JEL: E3 O3 O4
    Date: 2010–01–26
  21. By: Mark Weisbrot
    Abstract: This paper is part of a discussion between CEPR and the International Monetary Fund (IMF) regarding CEPR’s paper, “IMF-Supported Macroeconomic Policies and the World Recession: A Look at Forty-One Borrowing Countries.” An IMF representative presented a response to that paper at an October 15, 2009 event in Washington D.C., in remarks and a power point presentation. The earlier CEPR paper examined IMF agreements with 41 countries during the current global recession and found that 31 of the 41 countries had implemented pro-cyclical policies – for example cutting spending or tightening monetary policy -- that would be expected to exacerbate an economic downturn. This new discussion paper responds to the IMF's defense of its policies.
    Keywords: IMF
    JEL: E E3 E32 E5 E52 F F3 F33 F34 F35 F37 O O1 O2 O3 O4 O5
    Date: 2009–10
  22. By: Delis, Manthos D; Kouretas, Georgios
    Abstract: In a recent line of research the low interest-rate environment of the early to mid 2000s is viewed as an element that triggered increased risk-taking appetite of banks in search for yield. This paper uses approximately 18,000 annual observations on euro area banks over the period 2001-2008 and presents strong empirical evidence that low interest rates indeed increase bank risk-taking substantially. This result is robust across a number of different specifications that account, inter alia, for the potential endogeneity of interest rates and/or the dynamics of bank risk. Notably, among the banks of the large euro area countries this effect is less pronounced for French institutions, which held on average a relatively low level of risk assets. Finally, the distributional effects of interest rates on bank risk-taking due to individual bank characteristics reveal that the impact of interest rates on risk assets is diminished for banks with higher equity capital and is amplified for banks with higher off-balance sheet items.
    Keywords: Interest rates; bank risk-taking; panel data; euro area banks
    JEL: E43 E52 G21
    Date: 2010–01–01
  23. By: Mark Weisbrot; Rebecca Ray; Jake Johnston; Jose Antonio Cordero
    Abstract: This paper finds that 31 of 41 of countries with current International Monetary Fund (IMF) agreements have been subjected to pro-cyclical macroeconomic policies that, during the current global recession, would be expected to have exacerbated economic slowdowns.
    Keywords: IMF
    JEL: E E3 E32 E5 E52 F F3 F33 F34 F35 F37 O O1 O2 O3 O4 O5
    Date: 2009–10
  24. By: Michelle Alexopoulos
    Abstract: Existing indicators of technical change are plagued by shortcomings. I present here new measures based on books published in the field of technology that resolve many of these problems and use them to identify the impact of technology shocks on economic activity. They are positively linked to changes in R&D and scientific knowledge and capture the new technologies’ commercialization dates. Changes in information technology are found to be important sources of economic fluctuations in the post-WWII period and total factor productivity, investment and, to a lesser extent, labor are all shown to increase following a positive technology shock.
    Keywords: business cycles, technical change, information technologies
    JEL: E32 O3
    Date: 2010–01–26
  25. By: Harms, Philipp; Hoffmann, Mathias
    Abstract: We argue that a higher share of the private sector in a country's external debt raises the incentive to stabilize the exchange rate. We present a simple model in which exchange rate volatility does not affect agents' welfare if all the debt is incurred by the government. Once we introduce private banks who borrow in foreign currency and lend to domestic firms, the monetary authority has an incentive to dampen the distributional consequences of exchange rate fluctuations. Our empirical results support the hypothesis that not only the level, but also the composition of foreign debt matters for exchange-rate policy. --
    Keywords: Exchange rate regimes,foreign debt,monetary policy
    JEL: E52 F31 F41
    Date: 2009
  26. By: David Haugh; Annabelle Mourougane; Olivier Chatal
    Abstract: This paper considers the role of the automobile industry in the current cycle. It shows that the industry is economically important and its cycle is intertwined with business cycles. After casting some light on the sources of the collapse in car sales at the start of the crisis, the policy measures, in particular car scrapping programmes, put in place to support the automobile industry are discussed. The paper also derives short and medium term projections of car sales. While a rebound in car sales is likely in North America, Japan and the United Kingdom, car sales in Germany have been pushed significantly above trend and may weaken going forward. Over the medium term, in mature markets such as Europe and North America, trend sales are likely to remain stagnant. By contrast, rapid increases are foreseen in China and to a lesser extent in India. Medium-term projections suggest that capacity exceeds trend sales by around 20% in the five largest Western European markets considered as a whole. Without an adjustment in capacity, these countries would need to ensure an ongoing strong export performance. By contrast, automakers in the NAFTA area would need to halt their decline in domestic market share or to rely increasingly on exports in order to avoid excess capacity. In order to maintain their high levels of capacity utilisation, Korean and Japanese manufacturers will need to keep up their strong export performance.<P>L’industrie automobile dans et après la crise<BR>Ce document examine le rôle de l’industrie automobile dans le cycle économique en cours. Il montre que l’industrie a une importance économique certaine et est interconnectée avec le cycle économique. Après avoir quelque peu détaillé l’origine de l’effondrement des ventes automobiles en début de crise, les mesures publiques mises en œuvre pour soutenir l’industrie automobile, et notamment celles concernant les dispositifs de prime à la casse sont détaillées. Ce document présente également des perspectives à court et moyen terme pour les ventes de voitures. Alors que l’on peut s’attendre à un rebond en Amérique du Nord, au Japon et au Royaume-Uni, les ventes d’automobiles en Allemagne sont nettement supérieures à la tendance, et pourraient de ce fait marquer un fléchissement à l’avenir. À moyen terme sur les marchés parvenus à maturité tels que l’Europe et l’Amérique du Nord, les ventes tendancielles devraient rester étales. À l’inverse, des hausses rapides sont attendues en Chine et dans une moindre mesure en Inde. Selon les projections à moyen terme, les capacités productives du bloc dépassent les ventes tendancielles de quelque 20 % sur l’ensemble des cinq plus grands marchés d’Europe occidentale. À défaut d’ajustement des capacités, il faudrait que ces pays affichent de solides performances continues à l’exportation. À l’opposé, pour éviter les surcapacités, les constructeurs de la zone ALENA devraient mettre un terme au recul qu’ils connaissent sur leur marché intérieur ou s’appuyer de plus en plus sur les exportations. Dans la mesure où les constructeurs coréens et japonais exportent une large part de leur production, leur destin est étroitement lié aux marchés mondiaux. Conserver des taux d’utilisation élevés en Corée et au Japon nécessitera que ces pays continuent de bénéficier de fortes performances à l’exportation.
    Keywords: automobile crisis, car scrapping schemes, car sales, crise de l'automobile, prime à la casse, ventes de voitures
    JEL: E3 H2 L62
    Date: 2010–01–26
  27. By: Bhattacharjee, A.; Holly, S.
    Abstract: Traditionally, research has been devoted almost exclusively to estimation of underlying structural models without adequate attention to the drivers of diffusion and interaction across cross section and spatial units. We review some new methodologies in this emerging area and demonstrate their use in measurement and inferences on cross section and spatial interactions. Limitations and potential enhancements of the existing methods are discussed, and several directions for new research are highlighted.
    Keywords: Cross Sectional and Spatial Dependence; SpatialWeights Matrix; Interactions and Di¤usion; Monetary Policy Committee; Generalised Method of Moments.
    JEL: E42 E43 E50 E58
    Date: 2010–01–22
  28. By: Park, Dong-hyun (Asian Development Bank); Shin, Kwanho (Korea University); Jongwanich, Juthathip (Asian Development Bank)
    Abstract: A key legacy of the Asian financial crisis of 1997–1998 is a sustained drop-off in the investment rates of East Asian countries that were hardest hit by the crisis. We first review the stylized facts of investment in those countries, and then explore and evaluate the various possible explanations for the decline in investment. In our empirical analysis, which expands upon Park and Shin (2009) by updating the data to include 2005–2008, we investigate the extent to which the investment rates of Asian countries can be explained by the underlying fundamental determinants of investment such as gross domestic product (GDP) growth and demographic variables. We also empirically revisit the various hypotheses put forth to explain the investment drop-off, in particular competitive pressures from the People's Republic of China and heightened risk and uncertainty. Our analysis yields two main findings: (i) some evidence of overinvestment in the precrisis period but (ii) very little evidence of underinvestment in the postcrisis period. The results suggest that investment rates are currently more or less at appropriate levels despite their postcrisis decline. The salient policy implication is that quantitatively boosting investment may be less important for future growth than enhancing the investment climate.
    Keywords: Investment; capital accumulation; growth slowdown; East Asia; Asian crisis
    JEL: E22
    Date: 2009–12
  29. By: John Schmitt
    Abstract: Since the end of the 1970s, the United States has seen a dramatic increase in economic inequality. While the United States has long been among the most unequal of the world’s rich economies, the economic and social upheaval that began in the 1970s was a striking departure from the movement toward greater equality that began in the Great Depression, continued through World War II, and was a central feature of the first 30 years of the postwar period. This is not due to chance circumstances but is the direct result of a set of policies designed first and foremost to increase inequality.
    Keywords: inequality
    JEL: E E6 E61 E62 E64 E65 E66 H I I3 I38 J J5 J8 J88
    Date: 2009–10
  30. By: Dean Baker; John Schmitt
    Abstract: The strong rise in the U.S. stock market since the spring and the return to positive economic growth in the third quarter of this year have created a consensus among economists that the Great Recession is very likely over. Unfortunately, the end of the official recession will have little visible impact on U.S. labor markets until almost 2012. Within that time, this paper estimates that U.S. workers will have lost over $1 trillion in wages and salaries, $150 billion more than the 10-year costs of proposed health care reform legislation.
    Keywords: recession, wages, labor, unemployment
    JEL: E E3 E32 E6 E61 E62 E63 E64 E65 E66 H J J3 J38
    Date: 2009–12
  31. By: Dean Baker; David Rosnick
    Abstract: Many proponents of conservative fiscal policies talk of the budget deficit as being a matter of intergenerational equality. However, this paper shows the younger generations (and those yet to be born) will contribute more to the deficit than older generations. This analysis uses data from the CBO Long-Term Budget Outlook and the authors' calculations to show that the driving force behind the deficit is our broken health care system and that this should be the focus of the debate.
    Keywords: budget deficit, deficit, healthcare, health care, fiscal responsibility
    JEL: E E6 E60 E61 E62 E63 E64 E65 E66 H H2 H5 H6 H60 H61 H62 H63 H68 I I1 I11 I18
    Date: 2009–12
  32. By: Pietro F. Peretto (Duke University); simone Valente (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: We analyze the relative growth performance of open economies in a two-country model where different endowments of labor and a natural resource generate asymmetric trade. A resource-rich economy trades resource-based intermediates for final manufacturing goods produced by a resource-poor economy. Productivity growth in both countries is driven by endogenous innovations. The effects of a sudden increase in the resource endowment depend crucially on the elasticity of substitution between resources and labor in interme- diates' production. Under substitution (complementarity), the resource boom generates higher (lower) resource income, lower (higher) employment in the resource-intensive sector, higher (lower) knowledge creation and faster (slower) growth in the resource-rich economy. The resource-poor economy adjusts to the shock by raising (reducing) the relative wage, and experiences a positive (negative) growth effect that is exclusively due to trade.
    Keywords: Endogenous Growth, Endogenous Technological Change, Natural Resources, International Trade.
    JEL: E10 F43 L16 O31 O40
    Date: 2010–01
  33. By: David de la CROIX (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques etSsociales (IRES) and Center for Operations Research and Econometrics (CORE)); Pierre PESTIEAU (University of Liege, CORE, Paris School of Economics and CEPR); Grefory PONTHIERE (Paris School of Economics and Ecole Normale Superieure, Paris)
    Abstract: Introduced by Samuelson (1975), the Serendipity Theorem states that the competitive economy will converge towards the optimum steady-state provided the optimum population growth rate is imposed. This paper aims at exploring whether the Serendipity Theorem still holds in an economy with risky lifetime. We show that, under general conditions, including a perfect annuity market with actuarially fair return, imposing the optimum fertility rate and the optimum survival rate leads the competitive economy to the optimum steady-state. That Extended Serendipity Theorem is also shown to hold in economies where old adults work some fraction of the old-age, whatever the retirement age is fixed or chosen by the agents.
    Keywords: Serendipity Theorem, fertility, mortality, overlapping generations, retirement
    JEL: E13 E21 I18 J10
    Date: 2009–12–11
  34. By: Hillinger, Claude
    Abstract: In this paper the author attempts an analysis of the current financial/economic crisis that is wider ranging and more fundamental than he has been able to find. For this purpose he reviews some social science literature that views the current crisis as an episode in the secular decline of the United States and more generally of the Western Democracies. The timidity of current reforms, which is striking when compared to those that followed the excesses of the Gilded Age and the Great Depression, can be understood in this framework. The author discusses alternatives to the financial bailouts and shows how the crisis could have been dealt with more efficiently and at little cost to taxpayers. Finally, he discusses fundamental reforms that would greatly reduce the volatility of financial markets and increase their efficiency. --
    Keywords: Deficit financing,financial crisis,financial instability,full reserve banking,toxic assets
    JEL: E31 E42 E58
    Date: 2010
  35. By: Spree, Reinhard
    Abstract: The Munich Re was founded in 1880 and is from the very start till this day one of the leading insurance companies in the world. Despite its long and successfull existance the company’s history has not been reported yet in a way that fulfilled scientific criteria. This paper can be seen as a first step in this direction. Following a biographical approach the focus will be set on the co-founder and first general director, Carl Thieme, who chaired the company for several decades. The first chapter will outline the foundation of the Munich Re while the second chapter will give an examination of the way the Munich Re dealt with the challenge of the San Francisco earthquake of 1906.
    Keywords: insurance; reinsurance; institutions; globalization; global players; economic success; earthquake; San Francisco; Munich
    JEL: E22 E51 F23 F53 G22 N21 N23
    Date: 2010–01

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