nep-mac New Economics Papers
on Macroeconomics
Issue of 2010‒03‒06
27 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. The Inflation-Output Trade-off with Downward Wage Rigidities By Pierpaolo Benigno; Luca Antonio Ricci
  2. Expectations-Driven Cycles in the Housing Market By Mendicino, Caterina; Lambertini, Luisa; Punzi , Maria Teresa
  3. Effects of Reserve Requirements in an Inflation Targeting Regime: The Case of Colombia By Hernando Vargas Herrera; Carlos Varela; Yanneth R. Betancourt; Norberto Rodríguez
  4. Optimal monetary policy in a small open economy with financial frictions By Merola, Rossana
  5. The Return of the Wage Phillips Curve By Jordi Galí
  6. Risk premium shocks, monetary policy and exchange rate pass-through in the Czech Republic, Hungary and Poland By Balázs Vonnák
  7. Money and Inflation: The Role of Persistent Velocity Movements By Makram El-Shagi; Sebastian Giesen
  8. How Soon? How Fast? Interest Rates and Other Monetary Policy Decisions in 2010 By Michael Parkin
  9. Loss avoidance in nominal frames and fairness in downward nominal wage rigidity and disinflation By Lunardelli, André
  10. The Effects of Fiscal Shocks in SVAR Models: A Graphical Modelling Approach By Matteo Fragetta; Giovanni Melina
  11. The Great Increase in Relative Volatility of Real Wages in the United States By Julien Champagne; André Kurmann
  12. Measuring What Employers Really Do about Entry Wages over the Business Cycle By Pedro S. Martins; Gary Solon; Jonathan Thomas
  13. Seasonality, Forecast Extensions and Business Cycle Uncertainty By Proietti, Tommaso
  14. The Great Recession versus the Great Depression: stylized facts on siblings that were given different foster parents By Aiginger, Karl
  15. Measuring What Employers Really Do about Entry Wages over the Business Cycle By Martins, Pedro S.; Solon, Gary; Thomas, Jonathan P.
  16. Time Variation in Okun's Law: A Canada and U.S. Comparison By Kimberly Beaton
  17. Industry Evidence on the Effects of Government Spending By Christopher J. Nekarda; Valerie A. Ramey
  18. The Role of Central Banks in Sustaining Economic Recovery and in Achieving Financial Stability By Siregar, Reza Yamora; Lim, CS Vincent
  19. Fiscal Regime Shifts in Portugal By António Afonso,; Peter Claeys; Ricardo M. Sousa
  20. Optimal Target Criteria for Stabilization Policy By Marc P. Giannoni; Michael Woodford
  21. Fiscal Policy Reforms and Dynamic Laffer Effects By Oudheusden, P. van
  22. Stabilization and growth under dictatorship: the experience of Franco's Spain By Leandro Prados de la Escosura; Joan R. Rosés; Isabel Sanz Villarroya
  23. Central Bank Dollar Swap Lines and Overseas Dollar Funding Costs By Linda S. Goldberg; Craig Kennedy; Jason Miu
  24. Globalization, Markups, and the U.S. Price Level By Robert C. Feenstra; David E. Weinstein
  25. Wie wirken die automatischen Stabilisatoren in der Wirtschaftskrise? Deutschland im Vergleich mit der EU und den USA By Dolls, Mathias; Fuest, Clemens; Peichl, Andreas
  26. Accounting for China's Growth By Brandt, Loren; Zhu, Xiaodong
  27. The Market for Bank Stocks and the Rise of Deposit Banking in New York City, 1866-1897 By Peter L. Rousseau

  1. By: Pierpaolo Benigno; Luca Antonio Ricci
    Abstract: In the presence of downward nominal wage rigidities, wage setters take into account the future consequences of their current wage choices, when facing both idiosyncratic and aggregate shocks. We derive a closed-form solution for a long-run Phillips curve which relates average output gap to average wage inflation: it is virtually vertical at high inflation and flattens at low inflation. Macroeconomic volatility shifts the curve outward and reduces output. The results imply that stabilization policies play an important role, and that optimal inflation may be positive and differ across countries with different macroeconomic volatility.
    JEL: E24 E3 E30 E5 E50
    Date: 2010–02
  2. By: Mendicino, Caterina; Lambertini, Luisa; Punzi , Maria Teresa
    Abstract: This paper analyzes housing market boom-bust cycles driven by changes in households'expectations. We explore the role of expectations not only on productivity but on several other shocks that originate in the housing market, the credit market and the conduct of monetary policy. We find that, in the presence of nominal rigidities, expectations on both the conduct of monetary policy and future productivity can generate housing market boom-bust cycles in accordance with the empirical findings. Moreover, expectations of either a future reduction in the policy rate or a temporary increase in the central bank's inflation target that are not fulfilled generate a macroeconomic recession. Increased access to credit generates a boom-bust cycle in most variables only if it is expected to be reversed in the near future.
    Keywords: Credit Frictions; Boom-Bust Cycles; News Shocks; Housing Prices.
    JEL: E32 E52 E44
    Date: 2010
  3. By: Hernando Vargas Herrera; Carlos Varela; Yanneth R. Betancourt; Norberto Rodríguez
    Abstract: The Colombian economy and financial system have coped reasonably well with the effects of the global financial crisis. Hence, “unconventional” policy measures have not been at the center of the policy decisions and discussions. Nominal short term interest rates have remained the main monetary policy tool and “Quantitative easing” measures have not been central in the policy response. The one “unconventional” monetary instrument used by the Central Bank in Colombia has been changes in reserve requirements (RR) on financial system deposits. Interestingly, they were adopted before the global financial crisis, as a reaction to domestic credit conditions. The effects of RR on interest rate and interest rate pass-through in an inflation targeting regime are not as straightforward as those under a monetary targeting regime. Conceptually, those effects depend on the degree of substitution between deposits and central bank credit as sources of funds for banks and on the extent to which RR changes affect the risks facing banks. The empirical results for Colombia suggest that RR are important long run determinants of business loan interest rates and have been effective in strengthening the pass-through from policy to deposit and lending interest rates.
    Date: 2010–02–11
  4. By: Merola, Rossana
    Abstract: I analyze how the introduction of financial frictions can affect the trade-off between output stabilization and inflation stability and whether, in the presence of financial frictions, the optimal outcome can be realized or approached more closely if monetary policy is allowed to react to aggregate financial variables. Moreover, I explore the issue of whether an inflation targeting cum exchange rate stabilization and a price-level targeting are more suitable rules in minimizing distortions generated by the presence of liabilities defined in foreign currency and in nominal terms. I find that, when the financial accelerator mechanism is working, a price-level targeting rule dominates. One caveat is that the source of the shock plays an important role. Onee the financial shock is not operative, the gain fram a price-level targeting rule decreases significantly. --
    Keywords: Monetary policy,Taylor rule,financial accelerator,price-level targeting,asset prices
    JEL: E31 E44 E52 E58
    Date: 2010
  5. By: Jordi Galí
    Abstract: The standard New Keynesian model with staggered wage setting is shown to imply a simple dynamic relation between wage inflation and unemployment. Under some assumptions, that relation takes a form similar to that found in empirical applications–starting with the original Phillips (1958) curve–and may thus be viewed as providing some theoretical foundations to the latter. The structural wage equation derived here is shown to account reasonably well for the comovement of wage inflation and the unemployment rate in the U.S. economy, even under the strong assumption of a constant natural rate of unemployment.
    JEL: E31 E32
    Date: 2010–02
  6. By: Balázs Vonnák (Magyar Nemzeti Bank)
    Abstract: This paper investigates the role of monetary policy in a small open economy, where exchange rate shocks are important. VAR models are estimated for the Czech Republic, Hungary and Poland. Contemporaneous and sign restrictions are imposed in order to identify the effect of monetary policy and risk premium shocks. Estimates from the same model for Canada, Sweden and the UK are used as benchmark for developed economies with low inflation. The results suggest that the typical size a of risk premium shock renders it almost impossible for the interest rate policy to smooth the exchange rate with the aim of minimising inflationary consequences. On the other hand, low inflation may decrease the exchange rate pass-through, which helps the monetary policy ignore exchange rate shocks.
    Keywords: monetary policy, risk premium shocks, exchange rate pass-through, structural VAR, sign restriction.
    JEL: E31 E52 F31
    Date: 2010
  7. By: Makram El-Shagi; Sebastian Giesen
    Abstract: While the long run relation between money and inflation is well established, empirical evidence on the adjustment to the long run equilibrium is very heterogeneous. In the present paper we use a multivariate state space framework, that substantially expands the traditional vector error correction approach, to analyze the short run impact of money on prices. We contribute to the literature in three ways: First, we distinguish changes in velocity of money that are due to institutional developments and thus do not induce inflationary pressure, and changes that reflect transitory movements in money demand. This is achieved with a newly developed multivariate unobserved components decomposition. Second, we analyze whether the high volatility of the transmission from monetary pressure to inflation follows some structure, i.e., if the parameter regime can assumed to be constant. Finally, we use our model to illustrate the consequences of the monetary policy of the Fed that has been employed to mitigate the impact of the financial crisis, simulating different exit strategy scenarios.
    Keywords: Velocity,multivariatestatespacemodel,in?ation,money
    JEL: E31 E52 C32
    Date: 2010–02
  8. By: Michael Parkin (University of Western Ontario)
    Abstract: With the economic recovery taking hold and the Bank of Canada’s conditional commitment to keep the overnight rate at 0.25 percent expiring soon, a number of questions about the conduct of monetary policy need to be considered. The author argues the Bank should keep its conditional commitment, but should thereafter raise the overnight rate sharply by 50 basis points at every announcement date until mid-2011. In addition, the Bank should publish conditional statements about the future path of the policy rate to help shape market expectations and avoid surprises that disrupt financial markets, output, and employment. Further, the Bank should withdraw its injection of excess reserves at a future preannounced date and should gradually wind down credit easing measures.
    Keywords: Monetary Policy, Bank of Canada, overnight interest rate
    JEL: E58 E52
    Date: 2010–02
  9. By: Lunardelli, André
    Abstract: This paper proposes a more general definition of loss avoidance, relates it to fairness and applies it to the labor market. By influencing judgments about what is a fair wage readjustment, it can lead to coordination failures, generating downward nominal wage rigidity (DNWR) and disinflation costs even with common knowledge of credible policies. This suggests that policies with good frames, including inflation targeting, can mitigate the sacrifice ratio.
    Keywords: loss avoidance; fair wage effort hypothesis; nominal frame; higher order beliefs; Keynesian beauty contest; Phillips curve; inflation inertia; disinflation; downward nominal wage rigidity.
    JEL: E32 E31 E42 E52 C72 J30
    Date: 2009–09–21
  10. By: Matteo Fragetta (University of Salerno); Giovanni Melina (Department of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: We apply graphical modelling theory to identify fiscal policy shocks in SVAR models of the US economy. Unlike other econometric approaches of which achieve identification by relying on potentially contentious a priori assumptions of graphical modelling is a data based tool. Our results are in line with Keynesian theoretical models, being also quantitatively similar to those obtained in the recent SVAR literature à la Blanchard and Perotti (2002), and contrast with neoclassical real business cycle predictions. Stability checks confirm that our findings are not driven by sample selection.
    Date: 2010–02
  11. By: Julien Champagne; André Kurmann
    Abstract: This paper documents that over the past 25 years, aggregate hourly real wages in the United States have become substantially more volatile relative to output. We use micro-data from the Current Population Survey (CPS) to show that this increase in relative volatility is predominantly due to increases in the relative volatility of hourly wages across different groups of workers. Compositional changes, by contrast, account for at most 12% of the increase in relative wage volatility. Using a Dynamic Stochastic General Equilibrium (DSGE) model, we show that the observed increase in relative wage volatility is unlikely to come from changes outside of the labor market (e.g. smaller exogenous shocks or more aggressive monetary policy). By contrast, increased flexibility in wage setting is capable of accounting for a large fraction of the observed increase in relative wage volatility. At the same time, increased wage flexibility generates a substantial decrease in the magnitude of business cycle fluctuations, which suggests a promising new explanation for the Great Moderation.
    Keywords: Wage volatility, business cycles, great moderation, current population survey, dynamic stochastic general equilibrium models
    JEL: E24 E32
    Date: 2010
  12. By: Pedro S. Martins; Gary Solon; Jonathan Thomas
    Abstract: In models recently published by several influential macroeconomic theorists, rigidity in the real wages that firms pay newly hired workers plays a crucial role in generating realistically large cyclical fluctuations in unemployment. There is remarkably little evidence, however, on whether employers’ hiring wages really are invariant to business cycle conditions. We review the small empirical literature and show that the methods used thus far are poorly suited for identifying employers’ wage practices. We propose a simpler and more relevant approach – use matched employer/employee longitudinal data to identify entry jobs and then directly track the cyclical variation in the real wages paid to workers newly hired into those jobs. We illustrate the methodology by applying it to data from an annual census of employers in Portugal over the period 1982-2007. We find that real entry wages in Portugal over this period tend to be about 1.8 percent higher when the unemployment rate is one percentage point lower. Like most recent evidence on other aspects of wage cyclicality, our results suggest that the cyclical elasticity of wages is similar to that of employment
    JEL: E24 E32
    Date: 2010–02
  13. By: Proietti, Tommaso
    Abstract: Seasonality is one of the most important features of economic time series. The possibility to abstract from seasonality for the assessment of economic conditions is a widely debated issue. In this paper we propose a strategy for assessing the role of seasonal adjustment on business cycle measurement. In particular, we provide a method for quantifying the contribution to the unreliability of the estimated cycles extracted by popular filters, such as Baxter and King and Hodrick-Prescott. The main conclusion is that the contribution is larger around the turning points of the series and at the extremes of the sample period; moreover, it much more sizeable for highpass filters, like the Hodrick-Prescott filter, which retain to a great extent the high frequency fluctuations in a time series, the latter being the ones that are more affected by seasonal adjustment. If a bandpass component is considered, the effect has reduced size. Finally, we discuss the role of forecast extensions and the prediction of the cycle. For the time series of industrial production considered in the illustration, it is not possible to provide a reliable estimate of the cycle at the end of the sample.
    Keywords: Linear filters; Unobserved Components; Seasonal Adjustment; Reliability.
    JEL: E32 C22
    Date: 2010–02–21
  14. By: Aiginger, Karl
    Abstract: This paper compares the depth of the Recent Crisis and the Great Depression. We use a new data set to compare the drop in activity in the industrialized countries for seven activity indicators. This is done under the assumption that the Recent Crisis leveled off in mid-2009 for production and will do so for unemployment in 2010. Our data indicate that the Recent Crisis indeed had the potential to be another Great Depression, as shown by the speed and simultaneity of the decline in the first nine months. However, if we assume that a large second dip can be avoided, the drop in all indicators overall will have been smaller than during the Great Depression. This holds true specifically for GDP, employment and priced, and least for manufacturing output. The difference in the depth in the crises concurs with differences in policy reaction. This time monetary policy and fiscal policy were applied courageously, speedily and partly internationally coordinated. During the Great Depression for several years fiscal policy tried to stabilize budgets instead of aggregate demand, and either monetary policy was not applied or was rather ineffective insofar as deflation turned lower nominal interest rates into higher real rates. Only future research will be able to prove the exact impact of economic policy, but the current tentative conclusion is that economic policy prevented the Recent Crisis from developing into a second Great Depression. This is also a partial vindication for economists. The majority of them might not have been able to predict the crisis, but it shows that the science did learn its lesson from the Great Depression and was able to give decent policy advice to at least limit the depth of the Recent Crisis. --
    Keywords: Financial crisis,business cycle,stabilisation policy,resilience
    JEL: E20 E30 E32 E44 E60 G18 G28
    Date: 2010
  15. By: Martins, Pedro S. (Queen Mary, University of London); Solon, Gary (Michigan State University); Thomas, Jonathan P. (University of Edinburgh)
    Abstract: In models recently published by several influential macroeconomic theorists, rigidity in the real wages that firms pay newly hired workers plays a crucial role in generating realistically large cyclical fluctuations in unemployment. There is remarkably little evidence, however, on whether employers' hiring wages really are invariant to business cycle conditions. We review the small empirical literature and show that the methods used thus far are poorly suited for identifying employers’ wage practices. We propose a simpler and more relevant approach – use matched employer/employee longitudinal data to identify entry jobs and then directly track the cyclical variation in the real wages paid to workers newly hired into those jobs. We illustrate the methodology by applying it to data from an annual census of employers in Portugal over the period 1982-2007. We find that real entry wages in Portugal over this period tend to be about 1.8 percent higher when the unemployment rate is one percentage point lower. Like most recent evidence on other aspects of wage cyclicality, our results suggest that the cyclical elasticity of wages is similar to that of employment.
    Keywords: real wage cyclicality, entry wages, matched employer-employee data
    JEL: E24 J31 E32
    Date: 2010–02
  16. By: Kimberly Beaton
    Abstract: TThis article investigates the stability of Okun's law for Canada and the United States using a time varying parameter approach. Time variation is modeled as driftless random walks and is estimated using the median unbiased estimator approach developed by Stock and Watson (1998). Okun's law exhibits structural instability in both countries, with the sensitivity of the unemployment rate to movements in output growth increasing recently over time in both Canada and the United States.
    Keywords: Business fluctuations and cycles; Labour markets
    JEL: E24 J00
    Date: 2010
  17. By: Christopher J. Nekarda; Valerie A. Ramey
    Abstract: This paper investigates industry-level effects of government purchases in order to shed light on the transmission mechanism for government spending on the aggregate economy. We begin by highlighting the different theoretical predictions concerning the effects of government spending on industry labor market equilibrium. We then create a panel data set that matches output and labor variables to shifts in industry-specific government demand. The empirical results indicate that increases in government demand raise output and hours, but lower real product wages and productivity. Markups do not change as a result of government demand increases. The results are consistent with the neoclassical model of government spending, but they are not consistent with the New Keynesian model of the effects of government spending.
    JEL: E24 E31 E62
    Date: 2010–02
  18. By: Siregar, Reza Yamora; Lim, CS Vincent
    Abstract: Whenever a financial crisis occurs, threatening a possible financial meltdown, central banks have to be at the forefront in combating, neutralizing the crisis and restoring financial stability and economic growth. In this regards, the present sub-prime crisis which originated from the US highlights a few key issues for the Southeast Asian Central banks (SEACEN). This paper reviews the policy responses to the crisis which include exit policy strategies from stimulus monetary packages. To strengthen the soundness of the financial system, going forward, the paper also highlights counter-cyclical and macro-prudential regulations that central banks may want to actively look into. These include cross-border policy cooperation and coordination, particularly in the form of the college of supervisors.
    Keywords: - SEACEN; -Central Banks; - Financial Stability; - Prudential Regulation; -Supervision.
    JEL: E58 E44 E41
    Date: 2010–02–15
  19. By: António Afonso,; Peter Claeys; Ricardo M. Sousa
    Abstract: We estimate changes in fiscal policy regimes in Portugal with a Markov Switching regression of fiscal policy rules for the period 1978-2007, using a new dataset of fiscal quarterly series. We find evidence of a deficit bias, while repeated reversals of taxes making the budget procyclical. Economic booms have typically been used to relax tax pressure, especially during elections. One-off measures have been preferred over structural ones to contain the deficit during economic crises. The EU fiscal rules prompted temporary consolidation, but did not permanently change the budgeting process. Key words: fiscal regimes, Markov Switching, Portugal
    JEL: E62 E65 H11 H62
    Date: 2009–10
  20. By: Marc P. Giannoni; Michael Woodford
    Abstract: This paper considers a general class of nonlinear rational-expectations models in which policymakers seek to maximize an objective function that may be household expected utility. We show how to derive a target criterion that is: (i) consistent with the model's structural equations, (ii) strong enough to imply a unique equilibrium, and (iii) optimal, in the sense that a commitment to adjust the policy instrument at all dates so as to satisfy the target criterion maximizes the objective function. The proposed optimal target criterion is a linear equation that must be satisfied by the projected paths of certain economically relevant "target variables". It takes the same form at all times and generally involves only a small number of target variables, regardless of the size and complexity of the model. While the projected path of the economy requires information about the current state, the target criterion itself can be stated without reference to a complete description of the state of the world. We illustrate the application of the method to a nonlinear DSGE model with staggered price-setting, in which the objective of policy is to maximize household expected utility.
    JEL: E52 E61
    Date: 2010–02
  21. By: Oudheusden, P. van (Tilburg University, Center for Economic Research)
    Abstract: We examine the impact of fiscal policy reforms on the long-run government budget balance in a one-sector model of endogenous growth with factor income taxes, a tax on consumption, non-productive public goods expenditures, and a labour-leisure trade-off. In addition, we allow for different structures of government expenditures and public debt. We analytically show that, when performing a dynamic Laffer effect analysis, there exists a set of conditions that hold for a number of endogenous growth models. We find that for the euro area an improvement in the long-run government budget balance is always obtained for a lower tax rate on capital income but is only obtained for a substantial lower tax rate on labour income. Moreover, we show that when lower taxes on factor income are financed by higher taxes on consumption, there exists a wide array of combinations for which there is an improvement in both the long-run government budget balance and lifetime welfare. These combinations, however, differ in their implications for labour supply and immediate welfare effects.
    Keywords: Dynamic Scoring;Laffer Effect;Factor Income Taxation;Endogenous Growth
    JEL: E62 H30 J22 O41
    Date: 2010
  22. By: Leandro Prados de la Escosura; Joan R. Rosés; Isabel Sanz Villarroya
    Abstract: Stabilizing and liberalizing policies are key elements of the Washington Consensus. This paper adds a historical dimension to the ongoing debate by assessing the economic impact of market-oriented reforms undertaken during General Franco’s dictatorship, the 1959 Stabilization and Liberalization Plan. Using an index of macroeconomic distortions (IMD) the relationship between economic policies and the growth record is examined. Although a gradual reduction in macroeconomic distortions was already in motion during the 1950s, the 1959 Plan opened the way to a new institutional design that favoured a free-market allocation of resources and allowed Spain to accelerating growth and catching up with Western Europe. Without the 1959 Plan, per capita GDP would have been significantly lower in 1975.
    Keywords: Macroeconomic policy, Stabilization, Liberalization, Growth, Dictatorship, Anti-market policies, Spain
    JEL: E65 F43 N14 N44 O43
    Date: 2010–02
  23. By: Linda S. Goldberg; Craig Kennedy; Jason Miu
    Abstract: Following a scarcity of dollar funding available internationally to banks and financial institutions, starting in December 2007 the Federal Reserve established or expanded Temporary Reciprocal Currency Arrangements with fourteen foreign central banks. These central banks had the capacity to use these swap facilities to provide dollar liquidity to institutions in their jurisdictions. This paper presents the developments in the dollar swap facilities through the end of 2009. The facilities were a response to dollar funding shortages outside the United States during a period of market dysfunction. Formal research, as well as more descriptive accounts, suggests that the dollar swap lines among central banks were effective at reducing the dollar funding pressures abroad and stresses in money markets. The central bank dollar swap facilities are an important part of a toolbox for dealing with systemic liquidity disruptions.
    JEL: E44 F36 G32
    Date: 2010–02
  24. By: Robert C. Feenstra; David E. Weinstein
    Abstract: This paper is the first attempt to structurally estimate the impact of globalization on markups and welfare in a monopolistic competition model. To achieve this, we work with a class of preferences that allow for endogenous markups and firm entry and exit that are especially convenient for empirical work – the translog preferences, with symmetry in substitution imposed across products. Between 1992 and 2005 we find the U.S. market experienced a series of changes that confirm the predictions of Melitz and Ottaviano (2008): import shares rose and U.S. firms exited, leading to a fall in markups, while product variety and welfare went up. We estimate the impacts of these effects on a national level, and find a cumulative drop of 5.4 percent in merchandise prices and of 1.0 percent in overall consumer prices between 1992 and 2005. Although the magnitude of the welfare gains in our translog setup is similar to that obtained by assuming CES preferences, the sources of these gains are quite different. Variety gains under translog are at least one-third smaller than in the CES case, but there is a substantial reduction in U.S. markups, resulting in a comparable welfare gain overall.
    JEL: E31 F12 F4
    Date: 2010–02
  25. By: Dolls, Mathias (University of Cologne); Fuest, Clemens (University of Oxford); Peichl, Andreas (IZA)
    Abstract: Dieser Beitrag vergleicht die automatischen Stabilisierungswirkungen der Steuer- und Transfersysteme in der Europäischen Union und in den USA in der aktuellen Wirtschaftskrise. Dazu werden zwei Szenarien simuliert: erstens ein proportionaler Einkommensschock, in dem alle Bruttoeinkommen um 5 Prozent sinken, sowie zweitens eine Erhöhung der Arbeitslosenquote um 5 Prozentpunkte. Unsere Berechnungen ergeben, dass in der EU 38 % des proportionalen Einkommensschocks vom Staat absorbiert werden, verglichen mit 32 % in den USA. Im Fall des Beschäftigungsschocks ist der Unterschied zwischen Europa und den USA deutlich größer: 48 % in der EU und lediglich 34 % in den USA. Unter der Annahme, dass nur die Nachfrage kreditrationierter Haushalte auf Schwankungen des laufenden verfügbaren Einkommens reagiert, führt die Glättung des verfügbaren Einkommens zu einer Nachfragestabilisierung, die in der EU von 23 bis 32 % des Einkommensschocks reicht und in den USA 19 % beträgt. Unsere Ergebnisse zeigen eine große Heterogenität innerhalb der EU. Die automatischen Stabilisatoren sind in ost- und südeuropäischen Ländern bedeutend geringer als in Mittel- und Nordeuropa. Deutschland liegt bei der Einkommensstabilisierung in beiden Szenarien im oberen Bereich, bei der Nachfragestabilisierung dagegen im mittleren Bereich der europäischen Länder, da Kreditbeschränkungen in wohlhabenden Ländern wie Deutschland keine so große Rolle spielen.
    Keywords: Automatische Stabilisatoren, Wirtschaftskrise, Kreditbeschränkungen, Fiskalischer Stimulus
    JEL: E32 E63 H2 H31
    Date: 2009–09
  26. By: Brandt, Loren (University of Toronto); Zhu, Xiaodong (University of Toronto)
    Abstract: China has achieved impressive growth over the last three decades. However, there has been debate over the sources of the growth, and the role of the intensive versus extensive margin. Growth accounting exercises at the aggregate level (Rawski and Perkins, 2008; Bosworth and Collins, 2008) suggest an equal role for both. For the non-agricultural sector, there have been doubts about the contribution of TFP improvements to growth. For the period between 1978 and 1998, Young (2003) stresses the role of labor deepening, including the reallocation from agriculture, while more recent analysis points to the role of rising rates of investment. Because labor reallocation across sectors, TFP growth at the sector level and investment are all inter-related, simple growth decompositions that are often used in the literature are not appropriate for quantifying their contributions to growth. In this paper, we develop a three-sector dynamic model to quantify the sources of China's growth. The sectors include agriculture, and within non-agriculture, the state and non-state components. We find only a modest role for labor reallocation from agriculture and capital deepening, and identify rising TFP in the non-state non-agricultural sector as the key driver of growth. We also find significant misallocation of capital: The less efficient state sector continues to absorb more than half of all fixed investment. If capital had been allocated efficiently, China could have achieved the same growth performance without any increase in the rate of aggregate investment. This has important implications for China as it tries to re-balance its growth. Finally, in light of important concerns over data, we examine the robustness of our key results to alternative data sets.
    Keywords: China, investment, growth, productivity, capital market distortions
    JEL: E2 O4
    Date: 2010–02
  27. By: Peter L. Rousseau
    Abstract: The rapid growth of deposits in New York City over the three decades following the Civil War is often attributed to the release of pent-up demand for the services that transactions accounts could provide. I advance a complementary explanation that centers on the existence of an increasingly efficient market for bank shares. The stock market was important because it generated price and dividend quotations that signaled depositors about the soundness of individual banks, thereby directing the expansion. At the same time, innovations within the city’s banks created conditions under which stock prices became more informative, reducing asymmetries between banks and depositors to a point where confidence in banks could grow. Using a new database of stock prices, dividends, and balance sheet items for traded New York City banks from 1866 to 1897, a series of dynamic panel data models supports the proposed mechanism.
    JEL: E44 N11 N21
    Date: 2010–02

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