nep-mac New Economics Papers
on Macroeconomics
Issue of 2010‒03‒13
thirty-one papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Analysis of Shocks Affecting Europe: EMU and some Central and Eastern Acceding Countries By Nabil Ben Arfa
  2. "Unfunded Liabilities" and Uncertain Fiscal Financing By Troy Davig; Eric M. Leeper; Todd B. Walker
  3. Correlated Disturbances and U.S. Business Cycles By Vasco Cúrdia; Ricardo Reis
  4. Correlated disturbances and U.S. business cycles By Vasco Cúrdia; Ricardo Reis
  5. Evaluating the Welfare Cost of Inflation in a Monetary Endogenous Growth General Equilibrium Model: The Case of South Africa By Rangan Gupta; Josine Uwilingiye
  6. Monetary and Exchange Rate Regimes Changes: The Cases of Poland, Czech Republic, Slovakia and Republic of Serbia By Kosta Josifidis; Jean-Pierre Allegret; Emilija Beker Pucar
  7. Monetary Policy Strategies in the Asia and Pacific Region: What Way Forward? By Filardo, Andrew; Genberg, Hans
  8. Examining the decoupling hypothesis for India. By Jayaram, Shruthi; Patnaik, Ila; Shah, Ajay
  9. The Properties of Survey-Based Inflation Expectations in Sweden By Jonsson, Thomas; Österholm, Pär
  10. Is There a Case for Formal Inflation Targeting in Sub-Saharan Africa? By James Heintz; Léonce Ndikumana
  11. Effects of Macroeconomic Variables on Stock Prices in Malaysia: An Approach of Error Correction Model By Asmy, Mohamed; Rohilina, Wisam; Hassama, Aris; Fouad, Md.
  12. The Sensitivity of South African Inflation Expectations to Surprises By Monique Reid
  13. Terms of Trade Shocks and Fiscal Cycles By Graciela L. Kaminsky
  14. On the ease of overstating the fiscal stimulus in the US, 2008-9 By Joshua Aizenman; Gurnain Kaur Pasricha
  15. GDP nowcasting with ragged-edge data: a semi-parametric modeling By Laurent Ferrara; Dominique Guegan; Patrick Rakotomarolahy
  16. Expectations traps and coordination failures: selecting among multiple discretionary equilibria By Richard Dennis; Tatiana Kirsanova
  17. A Large Factor Model for Forecasting Macroeconomic Variables in South Africa By Rangan Gupta; Alain Kabundi
  18. Forecasting Macroeconomic Variables Using Large Datasets: Dynamic Factor Model versus Large-Scale BVARs By Rangan Gupta; Alain Kabundi
  19. Financial amplification mechanisms and the Federal Reserve's supply of liquidity during the crisis By Asani Sarkar; Jeffrey Shrader
  20. The Effects of Electronic Money on Money Demand: Time Series Analysis By Yukinobu Kitamura; Mahito Oomori; Kenta Nishida
  21. Liberalization and Regulation of Capital Flows: Lessons for Emerging Market Economies By Mohan, Rakesh; Kapur, Muneesh
  22. Self-fulfilling liquidity dry-ups By Frédéric Malherbe
  23. Has the Non-oil Sector Decoupled from Oil Sector? A Case Study of Gulf Cooperation Council Countries By Basher, Syed, Abul
  24. The Macroeconomic Impact of Skilled Emigration from South Africa: A CGE Analysis By Heinrich R Bohlman
  25. How Much Is Employment Increased by Cutting Labor Costs? Estimating the Elasticity of Job Creation By Paul Beaudry; David A. Green; Benjamin M. Sand
  26. Unemployment and Labour Force Participation in Sweden By Österholm, Pär
  27. On the Consumption Insurance Effects of Long-term Care Insurance in Japan: Evidence from Micro-level Household Data By Yasushi Iwamoto; Miki Kohara; Makoto Saito
  28. Financial Crisis, Trade Finance, and SMEs: Case of Central Asia By Pasadilla, Gloria O.
  29. Can Remittances Spur Economic Growth and Development? Evidence from Latin American Countries (LACs). By Bichaka Fayissa; Christian Nsiah
  30. The Role of State Intervention in the Financial Sector: Crisis Prevention, Containment, and Resolution By Cho, Yoon Je
  31. Family Status Transitions, Latent Health, and the Post-Retirement Evolution of Assets By James M. Poterba; Steven F. Venti; David A. Wise

  1. By: Nabil Ben Arfa (University of Nice - Sophia Antipolis; Faculty of Law, Political Science, Economic and Management; C.E.M.A.F.I; Macroeconomics and International Finance Center)
    Abstract: This paper deals with the synchronization of business cycles and economic shocks between the euro area and acceding countries. We therefore extract the business cycle component of output by using Hodrick-Prescott filter. Supply and demand shocks are recovered from estimated structural VAR models of output growth and inflation using long run restriction (Blanchard and Quah). We then check the (A) symmetry of these shocks by calculating the correlation between euro area shocks and those of the different acceding countries. We find that several acceding countries have a quite high correlation of demand shocks with the euro area however supply shocks are asymmetric; the correlation between euro area and central and east European countries (CEECs) is negative. We therefore conclude that joining the European Monetary Union is not yet possible: central and east European countries have to make structural changes to join the European Monetary Union.
    Keywords: Central and East European countries, Euro area, SVAR models, Hodrick- Prescott filter, Symmetric-asymmetric shocks
    JEL: E32 F42
    Date: 2009–03
  2. By: Troy Davig; Eric M. Leeper; Todd B. Walker
    Abstract: We develop a rational expectations framework to study the consequences of alternative means to resolve the "unfunded liabilities'' problem---unsustainable exponential growth in federal Social Security, Medicare, and Medicaid spending with no plan to finance it. Resolution requires specifying a probability distribution for how and when monetary and fiscal policies will change as the economy evolves through the 21st century. Beliefs based on that distribution determine the existence of and the nature of equilibrium. We consider policies that in expectation combine reaching a fiscal limit, some distorting taxation, modest inflation, and some reneging on the government's promised transfers. In the equilibrium, inflation-targeting monetary policy cannot successfully anchor expected inflation. Expectational effects are always present, but need not have large impacts on inflation and interest rates in the short and medium runs.
    JEL: E31 E6 E63 H6
    Date: 2010–02
  3. By: Vasco Cúrdia; Ricardo Reis
    Abstract: The dynamic stochastic general equilibrium (DSGE) models that are used to study business cycles typically assume that exogenous disturbances are independent autoregressions of order one. This paper relaxes this tight and arbitrary restriction, by allowing for disturbances that have a rich contemporaneous and dynamic correlation structure. Our first contribution is a new Bayesian econometric method that uses conjugate conditionals to make the estimation of DSGE models with correlated disturbances feasible and quick. Our second contribution is a re-examination of U.S. business cycles. We find that allowing for correlated disturbances resolves some conflicts between estimates from DSGE models and those from vector autoregressions, and that a key missing ingredient in the models is countercyclical fiscal policy. According to our estimates, government spending and technology disturbances play a larger role in the business cycle than previously ascribed, while changes in markups are less important.
    JEL: E1 E3
    Date: 2010–02
  4. By: Vasco Cúrdia; Ricardo Reis
    Abstract: The dynamic stochastic general equilibrium (DSGE) models used to study business cycles typically assume that exogenous disturbances are independent first-order autoregressions. This paper relaxes this tight and arbitrary restriction by allowing for disturbances that have a rich contemporaneous and dynamic correlation structure. Our first contribution is a new Bayesian econometric method that uses conjugate conditionals to allow for feasible and quick estimation of DSGE models with correlated disturbances. Our second contribution is a reexamination of U.S. business cycles. We find that allowing for correlated disturbances resolves some conflicts between estimates from DSGE models and those from vector autoregressions and that a key missing ingredient in the models is countercyclical fiscal policy. According to our estimates, government spending and technology disturbances play a larger role in the business cycle than previously ascribed, while changes in markups are less important.
    Keywords: Business cycles ; Equilibrium (Economics) ; Bayesian statistical decision theory ; Vector autoregression ; Fiscal policy ; Government spending policy
    Date: 2010
  5. By: Rangan Gupta (Department of Economics, University of Pretoria); Josine Uwilingiye (Department of Economics, University of Pretoria)
    Abstract: This paper uses the general equilibrium monetary endogenous growth model of Dotsey and Ireland (1996), in which inflation distorts a variety of marginal decisions, to evaluate the welfare cost of inflation in South Africa – a country, where, since the February of 2000, the sole objective of the central bank has been to keep the inflation rate within the target band of 3 percent to 6 percent. Although individually none of the distortions is very large, they combine to yield substantial welfare cost estimates ranging between 0.70 percent of GDP to 1.33 percent of GDP for the lower and upper limits of the target band. More importantly, the welfare costs obtained here are at least three times more than those derived previously for the South African economy based on partial equilibrium approaches. These higher estimates, thus, tend to make a case for a possibly lower and narrower target band.
    Keywords: Inflation, Growth, Welfare
    JEL: E31
    Date: 2010–02
  6. By: Kosta Josifidis (University of Novi Sad, Serbia; Faculty of Economics in Subotica, Department of European Economics and Business, Novi Sad); Jean-Pierre Allegret (Universit 0064e Nice Sophia-Antipolis (France)); Emilija Beker Pucar (University of Novi Sad, Serbia; Faculty of Economics in Subotica, Department of European Economics and Business, Novi Sad)
    Abstract: The paper explores (former) transition economies, Poland, Czech Republic, Slovakia and the Republic of Serbia, concerning abandonment of the exchange rate targeting and fixed exchange rate regimes and movement toward explicit/implicit inflation targeting and flexible exchange rate regimes. The paper identifies different subperiods concerning crucial monetary and exchange rate regimes, and tracks the changes of specific monetary transmission channels i.e exchange rate channel, interest rate channel, indirect and direct influences to the exchange rate, with variance decomposition of VAR/VEC model. The empirical results indicate that Polish monetary strategy toward higher monetary and exchange rate flexibility has been performed smoothly, gradually and planned, compared to the Slovak and, especially, Czech case. The comparison of three former transition economies with the Serbian case indicate strong and persistent exchange rate pass-through, low interest rate pass-through, significant indirect and direct influence to the exchange rate as potential obstacles for successful inflation targeting in the Republic of Serbia.
    Keywords: Exchange rate targeting, Inflation targeting, Intermediate exchange rate regimes, Monetary transmission channels
    JEL: E42 E52 F41
    Date: 2009–03
  7. By: Filardo, Andrew (Asian Development Bank Institute); Genberg, Hans (Asian Development Bank Institute)
    Abstract: Monetary policy frameworks in the Asia and Pacific region have performed well in the past decade as judged by inflation outcomes. We argue that this is due to three principal factors: (i) central banks have focused on price stability as the primary objective of monetary policy, (ii) institutional setups have been put in place that are supportive of the central banks' abilities to carry out their objectives, and (iii) economic policies in general have been supportive of the pursuit of price stability, in particular the adoption of prudent fiscal policies that have reduced concerns of fiscal dominance. <p>The financial systems in the region have also held up well in the face of the current crisis, notwithstanding more adverse liquidity conditions in several markets and pressures on certain exchange rates that spilled over from the West. <p>It may nevertheless be useful to ask whether changes in monetary policy frameworks should be contemplated. This paper concludes that: (i) for economies with well developed financial markets, there may be little value in using unconventional monetary policies in the absence of financial crises, because in normal times such policies are not likely to be effective and may further reduce the efficiency of the financial market; (ii) a good case can be made for elevating the role of the misalignment of asset prices (including exchange rates) and financial imbalances in the conduct of monetary policy; and (iii) financial stability should take on greater importance as an objective for public policy. Whether and how much of the financial stability objective should be assigned to the central bank is still an open question.
    Keywords: asian monetary policy frameworks; pacific monetary policy frameworks; future changes; monetary policy strategies; asia monetary policy
    JEL: E52 E58
    Date: 2010–02–15
  8. By: Jayaram, Shruthi (National Institute of Public Finance and Policy); Patnaik, Ila (National Institute of Public Finance and Policy); Shah, Ajay (National Institute of Public Finance and Policy)
    Abstract: This paper examines the decoupling hypothesis for India. We analyse business cycle synchronisation between India and a set of industrial economies, particularly the United States, over the period 1992 to 2008. The evidence suggests that the Indian business cycle exhibits increasing co-movement with business cycles in industrial economies over this period. Indian business cycle synchronisation is stronger with industrial countries as a whole as opposed to the co-movement found with the US.
    Date: 2009–06
  9. By: Jonsson, Thomas (National Institute of Economic Research); Österholm, Pär (National Institute of Economic Research)
    Abstract: This paper assesses the properties of survey-based inflation expectations in Sweden. The survey is conducted by Prospera once every quarter and consists of respondents from businesses and labour-market organisa-tions. The paper shows that inflation expectations measured in this sur-vey tend to be biased and inefficient forecasts of future inflation. Results also indicate that long-run inflation expectations are overly adaptive with respect to actual inflation. Finally, evaluations of forecast accuracy show that these inflation expectations are worse predictors of inflation than those of a professional forecasting institution and also typically outper-formed by a simple autoregressive model. Overall, our results indicate that economic agents’ expectations formation process is suboptimal and/or the survey fails to capture the true inflation expectations.
    Keywords: Survey data; Inflation targeting
    JEL: E52
    Date: 2009–12–01
  10. By: James Heintz; Léonce Ndikumana
    Abstract: <p>This working paper examines the question of whether inflation targeting monetary policy is an appropriate framework for sub-Saharan African countries. The paper presents an overview of inflation targeting, reviews the justification for the regime, and summarizes some major critiques. </p><p>Monetary policy responses to inflation depend on the source of inflationary pressures. Therefore, the determinants of inflation in African countries are<br />investigated, using dynamic panel data, and the implications for inflation targeting are discussed. These issues are examined in greater detail for the two African countries which have formally adopted inflation targeting, South Africa and Ghana. </p><p>The analysis is placed in the context of the global economic crisis. The paper concludes with a discussion of alternative approaches to monetary policies and the institutional constraints that would need to be addressed to allow central banks to play a stronger developmental role in sub-Saharan African countries.</p>
    Keywords: Sub-Saharan Africa, inflation, development, monetary policy, finance
    JEL: E31 E52 O55 O11
    Date: 2010
  11. By: Asmy, Mohamed; Rohilina, Wisam; Hassama, Aris; Fouad, Md.
    Abstract: This paper attempts to examine the short-run and long-run causal relationship between Kuala Lumpur Composite Index (KLCI) and selected macroeconomic variables namely inflation, money supply and nominal effective exchange rate during the pre and post crisis period from 1987 until 1995 and from 1999 until 2007 by using monthly data. The methodology used in this study is time series econometric techniques i.e. the unit root test, cointegration test, error correction model (ECM), variance decomposition and impulse response function. The findings show that there is cointegration between stock prices and macroeconomic variables. The results suggest that inflation, money supply and exchange rate seem to significantly affect the KLCI. These variables considered to be emphasized as the policy instruments by the government in order to stabilize stock prices.
    Keywords: Kuala Lumpur Stock Exchange; Money Supply; Nominal Effective Exchange Rate; ECM
    JEL: A12 C22 A10
    Date: 2009–04–27
  12. By: Monique Reid
    Date: 2009
  13. By: Graciela L. Kaminsky
    Abstract: The latest boom in commodity prices fueled concerns about fiscal policies in commodity-exporting countries, with many claiming that it triggered loose fiscal policy and left no funds for a rainy day. This paper examines the links between fiscal policy and terms-of-trade fluctuations using a sample of 74 countries, both developed and developing. It finds evidence that booms in the terms of trade do not necessarily lead to larger government surpluses in developing countries, particularly in emerging markets and especially during capital flow bonanzas. This is not the case in OECD countries, where fiscal policy is of an acyclical nature.
    JEL: E3 E62 F41
    Date: 2010–02
  14. By: Joshua Aizenman; Gurnain Kaur Pasricha
    Abstract: This note shows that the aggregate fiscal expenditure stimulus in the United States, properly adjusted for the declining fiscal expenditure of the fifty states, was close to zero in 2009. While the Federal government stimulus prevented a net decline in aggregate fiscal expenditure, it did not stimulate the aggregate expenditure above its predicted mean. We discuss the implications of limitations on states' ability to run deficits for the design of fiscal stimulus at the federal level. We devote particular attention to intertemporal moral hazard concerns in a federal fiscal system, and ways to address these concerns.
    JEL: E62 F36 H5 H77
    Date: 2010–02
  15. By: Laurent Ferrara (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Banque de France - Business Conditions and Macroeconomic Forecasting Directorate); Dominique Guegan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Patrick Rakotomarolahy (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: This paper formalizes the process of forecasting unbalanced monthly datasets in order to obtain robust nowcasts and forecasts of quarterly gross domestic product (GDP) growth rate through a semi-parametric modeling. This innovative approach lies in the use of non-parametric methods, based on nearest neighbors and on radial basis function approaches, to forecast the monthly variables involved in the parametric modeling of GDP using bridge equations. A real-time experience is carried out on euro area vintage data in order to anticipate, with an advance ranging from 6 to 1 months, the GDP flash estimate for the whole zone.
    Keywords: euro area GDP • real-time nowcasting • forecasting • non-parametric methods
    Date: 2010
  16. By: Richard Dennis; Tatiana Kirsanova
    Abstract: Discretionary policymakers cannot manage private-sector expectations and cannot co- ordinate the actions of future policymakers. As a consequence, expectations traps and coordination failures can occur and multiple equilibria can arise. To utilize the explanatory power of models with multiple equilibria it is first necessary to understand how an economy arrives to a particular equilibrium. In this paper, we employ notions of robustness, learnability, and the potential for coalitions to motivate and develop a suite of equilibrium selection criteria. Central among these criteria are whether the equilibrium is learnable by private agents and jointly learnable by private agents and the policymaker. We use two New Keynesian policy models to identify the strategic interactions that give rise to multiple equilibria and to illustrate our equilibrium selection methods. Importantly, although the Pareto-preferred equilibrium is invariably an equilibrium identified by standard numerical iterative solution methods, unless it is learnable by private agents, we find little reason to expect coordination on that equilibrium.
    Keywords: Monetary policy ; Equilibrium (Economics)
    Date: 2010
  17. By: Rangan Gupta; Alain Kabundi
    Date: 2009–04
  18. By: Rangan Gupta; Alain Kabundi
    Date: 2009
  19. By: Asani Sarkar; Jeffrey Shrader
    Abstract: The small decline in the value of mortgage-related assets relative to the large total losses associated with the financial crisis suggests the presence of financial amplification mechanisms, which allow relatively small shocks to propagate through the financial system. We review the literature on financial amplification mechanisms and discuss the Federal Reserve's interventions during different stages of the crisis in light of this literature. We interpret the Fed's early-stage liquidity programs as working to dampen balance sheet amplifications arising from the positive feedback between financial constraints and asset prices. By comparison, the Fed's later-stage crisis programs take into account adverse-selection amplifications that operate via increases in credit risk and the externality imposed by risky borrowers on safe ones. Finally, we provide new empirical evidence that increases in the Federal Reserve's liquidity supply reduce interest rates during periods of high liquidity risk. Our analysis has implications for the impact on market prices of a potential withdrawal of liquidity supply by the Fed.
    Keywords: Assets (Accounting) ; Bank assets ; Interest rates ; Bank liquidity ; Financial crises ; Federal Reserve System
    Date: 2010
  20. By: Yukinobu Kitamura; Mahito Oomori; Kenta Nishida
    JEL: E41 E42
    Date: 2010–02
  21. By: Mohan, Rakesh (Asian Development Bank Institute); Kapur, Muneesh (Asian Development Bank Institute)
    Abstract: Capital flows to emerging market economies (EMEs) have been characterized by high volatility since the 1980s. In recent years (especially since 2003), although gross as well as net capital flows to the EMEs have increased, they could not be absorbed domestically. Overall, savings have flowed uphill from EMEs to advanced economies, challenging the conventional view that capital flows to EMEs are always beneficial through augmentation of their resources leading to greater investment. Full capital account liberalization can impart avoidable volatility and have an adverse impact on growth prospects of EMEs. Available evidence is strongly in favor of a calibrated and well-sequenced approach to opening up the capital account and its active management, along with complementary reforms in other sectors. Greater caution is needed in the liberalization of debt flows. <p>Despite much advice to the contrary, most EMEs manage their capital accounts actively to cushion their economies from undue volatility, including interventions in the foreign exchange markets accompanied by sterilization. Sound macroeconomic and financial policies-accompanied by prudent capital account management, greater exchange rate flexibility, purposive use of prudential regulation, and continued financial market development practiced by most Asian EMEs over the past decade-have cushioned their economies from the current global financial crisis that started in 2007. They have successfully achieved a virtuous circle of continuing growth, low and stable inflation, and financial stability. How these elements can be best combined will depend on the country and on the period: There is no "one size fits all." <p>Such a discretionary approach does put a great premium on the skill of policymakers and can run the risk of markets perceiving central bank actions becoming uncomfortably unpredictable. Such risk is mitigated by a record of successful management.
    Keywords: capital flows emerging markets; liberalization regulation capital flows; emerging markets capital account management; capital flows; emerging market economies
    JEL: E42 E44 E52 E58 F30 F40 G15
    Date: 2010–01–14
  22. By: Frédéric Malherbe (National Bank of Belgium, Research Department; Université Libre de Bruxelles, ECARES)
    Abstract: Secondary markets for long-term assets might be illiquid due to adverse selection. In a model in which moral hazard is confined to project initiation, I find that: (1) when agents expect a liquidity dry-up on such markets, they optimally choose to self-insure through the hoarding of non-productive but liquid assets; (2) such a response has negative externalities as it reduces ex-post market participation, which worsens adverse selection and dries up market liquidity; (3) liquidity dry-ups are Pareto inefficient equilibria; (4) the Government can rule them out. Additionally, when agents face idiosyncratic, privately known, illiquidity shocks, I show that: (5) it increases market liquidity; (6) illiquid agents are better-off when they can credibly disclose their liquidity position, but transparency has an ambiguous effect on risk-sharing possibilities.
    Keywords: Liquidity, Liquidity Dry-ups, Financial Crises, Hoarding, Adverse Selection, Self-insurance
    JEL: E44 G11
    Date: 2010–03
  23. By: Basher, Syed, Abul
    Abstract: As oil and gas are exhaustible resources, the need for economic diversification has gained momentum in the Gulf Cooperation Council (GCC) countries immediately after the end of the first oil boom in 1973-74. Economic diversification, in the context of GCC countries, implies development of the non-oil sector and reduction of the proportion of government revenue and export proceeds from the oil and gas sector. Applying newly developed measures of business cycle synchronicity between oil and non-oil sectors in three GCC economies (Kuwait, Qatar and Saudi Arabia), we show both the degree of diversification achieved so far and the direction of diversification in terms of individual non-oil sectors. Overall, Kuwait and Saudi Arabia appear to be moderately ahead than Qatar in reducing their dependence on oil. Nevertheless, by developing large production capacities of natural gas, Qatar has recently reduced its dependence on oil in favor of natural gas. A quantitative assessment of the determinants of business cycle synchronization is also provided.
    Keywords: Business cycle; Synchronization; Oil price; Fiscal policy; GCC countries.
    JEL: E62 Q32 E32 H30
    Date: 2010–03–02
  24. By: Heinrich R Bohlman
    Date: 2010
  25. By: Paul Beaudry; David A. Green; Benjamin M. Sand
    Abstract: In search and bargaining models, the effect of higher wages on employment is determined by the elasticity of the job creation curve. In this paper, we use U.S. data over the 1970-2007 period to explore whether labor market outcomes abide by the restrictions implied by such models and to evaluate the elasticity of the job creation curve. The main difference between a job creation curve and a standard demand curve is that the former represents a relationship between wages and employment rates, while the latter represents a relationship between wages and employment levels. Although this distinction is quite simple, it has substantive implications for the identification of the effect of higher wages on employment. The main finding of the paper is that U.S. labor market outcomes observed at the city-industry level appear to conform well to the restrictions implied by search and bargaining theory and, using 10-year differences, we estimate the elasticity of the job creation curve with respect to wages to be -0.3. We interpret this relatively low elasticity as reflecting a low propensity for individuals to become more entrepreneurial and create more jobs when labor costs are lower and variable profits are higher.
    JEL: E24 J21 J23 J3
    Date: 2010–02
  26. By: Österholm, Pär (National Institute of Economic Research)
    Abstract: This paper investigates the relationship between Swedish unemployment and labour-force participation. Cointegration analysis supports a robust long-run relationship between the two variables, regardless of whether aggregate or gender-specific rates are used. This finding puts the empiri-cal relevance of the unemployment invariance hypothesis into question.
    Keywords: Cointegration; Discouraged worker
    JEL: E24
    Date: 2009–11–30
  27. By: Yasushi Iwamoto; Miki Kohara; Makoto Saito
    Abstract: Using micro-level household data in the 2001 Comprehensive Survey of the Living Conditions of the People on Health and Welfare compiled by the Japanese Ministry of Health, Labor and Welfare, this paper examines how having a household member in need of long-term nursing care can result in welfare losses measured in terms of consumption. In so doing, this study evaluates the role of the public long-term care insurance scheme implemented in Japan in April 2000. The results indicate that when households include a disabled family member, household consumption net of long-term care costs do not decrease as much as before the introduction of long-term care insurance. Further, when compared with the surveys conducted in 1998, theadverse effects on consumption net of long-term care costs have become much weaker. These findings suggest that the introduction of social insurance in 2000 helped Japanese households to reduce the welfare losses associated with a disabled family member.
    Keywords: social insurance, consumption insurance, long-term care insurance
    JEL: E21 I18
    Date: 2009–12
  28. By: Pasadilla, Gloria O. (Asian Development Bank Institute)
    Abstract: This paper surveys studies of the importance of Central Asian small- and medium-sized enterprises (SME) in the economy and their experience during the Russian financial crisis. It also uses survey data from the European Bank for Reconstruction and Development’s Business Environment and Enterprise Performance Surveys to infer noteworthy characteristics, features, and dependencies on financing of Central Asian SMEs and, consequently, derive the potential impact of the crisis on the sector. The paper also assesses government support for SMEs and the necessary market reforms that will give a boost to the sector’s development in the region.
    Keywords: smes; central asia; financial policies; financial development; small- and medium-sized enterprises
    JEL: E44 G18 G28 G38
    Date: 2010–01–25
  29. By: Bichaka Fayissa; Christian Nsiah
    Abstract: For the last five decades, there have been heated debates on the sources of economic growth in developing economies. The perceived factors of economic growth have ranged from surplus labor to investment in human and physical capital, transfer of technological change, overseas development assistance, flow of private capital, increasing returns from investment in new ideas and research and development. The impacts of the above listed traditional sources of economic growth have been well documented in literature. Researchers have also considered the importance of institutional factors such as the role of political freedom, political instability, voice and accountability on economic growth and development. Despite the increased size of remittances in the total international capital flows, however, the relationship between remittances and economic growth has not been adequately studied. This study explores the aggregate impact of remittances on the economic growth of 18 Latin American Countries within the conventional neoclassical growth framework using an unbalanced panel data spanning from 1980 to 2005. We find that remittances have a positive and significant effect on the growth of Latin American Countries where the financial systems are less developed by providing an alternative way to finance investment and helping overcome liquidity constraints.
    Keywords: Workers’ Remittances, Economic Growth, Panel Data, Arellano-Bond, Latin American Countries
    JEL: E21 F21 G22 J61 O16
    Date: 2010–03
  30. By: Cho, Yoon Je (Asian Development Bank Institute)
    Abstract: This paper discusses the role of state intervention for prevention, containment, and resolution of financial crises based mainly on the Korean experience during the 1997 Asian financial crisis. Crises in emerging market and developing economies tend to be more complicated than those faced by advanced economies because they are twin crises: financial and currency crises. Such crises require the development of a comprehensive strategy covering the stabilization of the domestic financial market and the foreign exchange market, closely coordinated responses by different government bodies, an extraordinary effort for financial restructuring, and the introduction of a new regulatory framework. This effort should be based on an effective crisis management team of experts given a clear mandate with well defined power; strong political support; effective communication with the market players, both domestic and foreign; and sufficient mobilization of public funds. In this regard, this paper emphasizes the importance of building a reliable information base, prompt actions, orchestrating political consensus, and a balanced approach to restructuring and regulation among different types of financial institutions. The paper also highlights the need for a new international financial architecture matching the rapid integration into the global market of the financial markets of emerging and developing economies while their currency remains non-convertible.
    Keywords: state intervention financial crises; korea asian financial crisis; crisis prevention containment resolution; financial sector
    JEL: E58 F34 F36 G18 G21 G28 N20 O16
    Date: 2010–02–18
  31. By: James M. Poterba; Steven F. Venti; David A. Wise
    Abstract: We consider the evolution of assets after retirement. We ask whether total assets--including housing equity, personal retirement accounts, and other financial assets--tend to be husbanded for a rainy day and drawn down primarily at the time of precipitating shocks, or whether they are drawn down throughout the retirement period. We focus on the relationships between family status transitions, “latent” health status, and the evolution of assets. Our analysis is based primarily on longitudinal data from the HRS and AHEAD cohorts of the Health and Retirement Study. We find that the evolution of assets is strongly related to family status transitions. For both single individuals and married couples who do not experience a death or divorce, total assets increase well into old age. In contrast, individuals in married couples that experience a family status transition, either a death or a divorce, exhibit much slower asset growth and often experience a large decline in asset values at the time of the transition. In addition, the level and evolution of assets is very strongly related to health, measured by a latent health index. For example, for continuing two-person HRS households between the ages of 56 and 61 in 1992 the ratio of assets of households in the top health quintile to the assets of those in the bottom quintile was 1.7 in 1992. It had increased to 2.2 by the end of 2006.
    JEL: E21 J14
    Date: 2010–02

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