nep-mac New Economics Papers
on Macroeconomics
Issue of 2010‒12‒23
twenty-one papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Reference-dependent preferences and the transmission of monetary policy By Edoardo GAFFEO; Ivan PETRELLA; Damjan PFAJFAR; Emiliano SANTORO
  2. The Effectiveness of Government Debt for Demand Management: Sensitivity to Monetary Policy Rules By Guido Ascari; Neil Rankin
  3. Household inflation expectations and inflation dynamics By Péter Gábriel
  4. An Estimated DSGE Model of the Indian Economy By Vasco J. Gabriel; Paul Levine; Joseph Pearlman; Bo Yang
  5. Macroeconomic Regimes, Policies, and Outcomes in the World By Klaus Schmidt-Hebbel
  6. Loose commitment in medium-scale macroeconomic models: Theory and an application By Davide Debortoli; Junior Maih; Ricardo Nunes
  7. Spatial propagation of macroeconomic shocks in Europe By Hans DEWACHTER; Romain HOUSSA; Priscilla TOFFANO
  8. A Floating versus Managed Exchange Rate Regime in a DSGE Model of India By Nicoletta Batini; Vasco J. Gabriel; Paul Levine; Joseph Pearlman
  9. "Quantitative Easing and Proposals for Reform of Monetary Policy Operations" By Scott Fullwiler; L. Randall Wray
  10. Which Parameters Drive Approximation Inaccuracies? By Sebastian Sienknecht
  11. Macroprudential policy - a literature review By Gabriele Galati; Richhild Moessner
  12. Business Cycle Synchronization and the Euro: a Wavelet Analysis By Luís Francisco Aguiar; Maria Joana Soares
  13. The Impact of Labor Market Entry Conditions on Initial Job Assignment, Human Capital Accumulation, and Wages By Brunner, Beatrice; Kuhn, Andreas
  14. The Impact of Structural Policies on Saving, Investment and Current Accounts By Clovis Kerdrain; Isabell Koske; Isabelle Wanner
  15. Why does the Interest Rate Decline Over the Day? Evidence from the Liquidity Crisis By Angelo Baglioni; Andrea Monticini
  16. Fiscal-Consolidation Strategies for Canadian Governments By Yvan Guillemette
  17. "On some issues of macro-economic statistics in Japan : seasonality, structural change and statistical smoothing" (in Japanese) By Naoto Kunitomo; Seisho Sato
  18. Revisiting Indicators of Public Debt Sustainability: Capital Expenditure, Growth and Public Debt in India By Bhatt, Antra
  19. How related are interbank and lending interest rates? Evidence on selected EU countries By Heryan, Tomas; Stavarek, Daniel
  20. Some preliminary but troubling evidence on group credits in microfinance programmes By Helke Waelde
  21. Financial Development: A Broader Perspective By Reid, Richard

  1. By: Edoardo GAFFEO; Ivan PETRELLA; Damjan PFAJFAR; Emiliano SANTORO
    Abstract: This paper proposes a novel explanation of the vast empirical evidence showing that output and prices react asymmetrically to monetary policy innovations over contractions and expansions in the business cycle. We use VAR techniques to show that monetary policy exerts stronger effects on the U.S. GDP during contractionary phases, as compared to expansionary ones. As to prices, their response is not statistically different across different cyclical stages. We show that these facts are consistent with a New Neoclassical Synthesis model based on the assumption that households. utility partly depends on deviations of their consumption from a reference level below which aversion to loss is displayed. In line with the theory developed by Kahneman and Tversky (1979), losses in consumption utility loom larger than gains. This implies state-dependent degrees of real rigidity and elasticity of intertemporal substitution in consumption that generate competing effects on the responses of output and inflation following a monetary innovation. The key predictions of the model are in line with the data. We then explore the state-dependent trade-o¤ between inflation and output stabilization that naturally arises in this context. Greater elasticity of inflation to real activity during expansionary stages of the cycle promotes a stronger degree of policy activism in the response to the expected rate of inflation under discretion, compared to what is otherwise prescribed during contractions.
    Date: 2010–10
  2. By: Guido Ascari; Neil Rankin
    Abstract: We construct a staggered-price dynamic general equilibrium model with overlapping generations based on uncertain lifetimes. Price stickiness plus lack of Ricardian Equivalence could be expected to make an increase in government debt, with associated changes in lump-sum taxation, effective in raising short-run output. However we find this is very sensitive to the monetary policy rule. A permanent increase in debt under a basic Taylor Rule does not raise output. To make debt effective we need either a temporary nominal interest rate peg; or inertia in the rule; or an exogenous money supply policy; or to make the debt increase temporary.
    Keywords: staggered prices, overlapping generations, government debt, fiscal policy effectiveness, monetary policy rules
    JEL: E62 E63
    Date: 2010–12
  3. By: Péter Gábriel (Magyar Nemzeti Bank)
    Abstract: Although in modern monetary economics it is usually assumed that inflation expectations play a prominent role when economic agents set prices and wages, the empirical evidence for this link is scarce. This paper aims to identify the effect of changes in inflation expectations on prices and wages in an SVAR framework for three inflation targeting countries (Czech Republic, Hungary and United Kingdom). The results show that in all countries the effect is significant. In comparison with the United Kingdom and the Czech Republic, inflation expectations in Hungary are more volatile and less anchored, which can be an important source of the high volatility of the inflation rate.
    Keywords: inflation expectations, consumer survey
    JEL: D84 E31
    Date: 2010
  4. By: Vasco J. Gabriel (Department of Economics, University of Surrey and Universidade do Minho - NIPE); Paul Levine (University of Surrey); Joseph Pearlman (London Metropolitan University); Bo Yang (University of Surrey and London Metropolitan University)
    Abstract: We develop a closed-economy DSGE model of the Indian economy and estimate it by Bayesian Maximum Likelihood methods using Dynare. We build up in stages to a model with a number of features important for emerging economies in general and the Indian economy in particular: a large proportion of credit-constrained consumers, a financial accelerator facing domestic firms seeking to finance their investment, and an informal sector. The simulation properties of the estimated model are examined under a generalized inflation targeting Taylor-type interest rate rule with forward and backward-looking components. We find that, in terms of model posterior probabilities and standard moments criteria, inclusion of the above financial frictions and an informal sector significantly improves the model fit.
    Keywords: Indian economy, DSGE model, Bayesian estimation, monetary interest rate rules, financial frictions.
    JEL: E52 E37 E58
    Date: 2010
  5. By: Klaus Schmidt-Hebbel
    Abstract: This paper summarizes a research project focused on the empirical determinants of and interrelations between macroeconomic regimes, policies, and performance in the world. The project’s hypotheses are structured into three related themes. The first aim is analyzing the determinants of the likelihood of adoption of macroeconomic policy regimes. The second project theme focuses on cyclicality of macroeconomic policies and accuracy in attaining inflation targets. Finally, the project tests for the behavior of two key macroeconomic variables - economic growth and inflation – focusing on their sensitivity to different macroeconomic regimes and policies. A large world database was assembled for this project from both publicly available and private databases. Data coverage extends to more than 100 countries, with annual time series extending from 1970 to 2008. A wide spectrum of frontier estimation techniques is applied to the country panel data series, appropriate for discrete-choice and continuous variable estimation. The key research results are the following. Country choice of macroeconomic policy regimes (exchange-rate regimes, money-based targeting, inflation targeting, and rule-based fiscal regimes) is explained by countries’ structural and institutional features, macroeconomic performance, financial development, and international integration. The cyclical behavior of fiscal policy reflects the quality of country institutions, financial openness, and financial development. Central bank accuracy in meeting inflation targets is also a result of domestic institutional strength and macroeconomic credibility. Long-term growth is significantly shaped by the quality of policies, financial development, foreign aid, and exchange-rate misalignment, in addition to standard growth determinants. Growth volatility is a result of domestic macroeconomic policy volatility, external shocks, international integration, and financial development. Country inflation rates are determined by international factors and domestic determinants, including fiscal policy, institutional development, monetary and exchangerate regimes, and financial depth and integration.
    Keywords: Macroeconomic Regimes, Macroeconomic Policies, Inflation, Growth.
    JEL: E58 E62 O47
    Date: 2010
  6. By: Davide Debortoli (UC San Diego); Junior Maih (Norges Bank (Central Bank of Norway)); Ricardo Nunes (Federal Reserve Board)
    Abstract: This paper proposes a method and a toolkit for solving optimal policy with imperfect commitment in linear quadratic models. As opposed to the existing literature, our method can be employed in medium- and large-scale models typically used in monetary policy. We apply our method to the Smets and Wouters (2007) model, where we show that imperfect commitment has relevant implications for the interest rate setting, the sources of business cycle fluctuations, and welfare.
    Keywords: Commitment, Discretion, Linear-Quadratic
    JEL: E58 E61
    Date: 2010–12–06
  7. By: Hans DEWACHTER; Romain HOUSSA; Priscilla TOFFANO
    Abstract: This paper develops a Spatial Vector Auto-Regressive (SpVAR) model that takes into account both the time and the spatial dimensions of economic shocks. We apply this framework to analyze the propagation through space and time of macroeconomic (inflation, output gap and interest rate) shocks in Europe. The empirical analysis identifies an economically and statistically significant spatial component in the transmission of macroeconomic shocks in Europe.
    Keywords: Macroeconomics, Spatial Models, VAR
    JEL: E3 E43 E52 C51 C33
    Date: 2010–04
  8. By: Nicoletta Batini (IMF and University of Surrey); Vasco J. Gabriel (Department of Economics, University of Surrey and Universidade do Minho - NIPE); Paul Levine (University of Surrey); Joseph Pearlman (London Metropolitan University)
    Abstract: We first develop a two-bloc model of an emerging open economy interacting with the rest of the world calibrated using Indian and US data. The model features a financial accelerator and is suitable for examining the effects of financial stress on the real economy. Three variants of the model are highlighted with increasing degrees of financial frictions. The model is used to compare two monetary interest rate regimes: domestic Inflation targeting with a floating exchange rate (FLEX(D)) and a managed exchange rate (MEX). Both rules are characterized as a Taylor-type interest rate rules. MEX involves a nominal exchange rate target in the rule and a constraint on its volatility. We find that the imposition of a low exchange rate volatility is only achieved at a significant welfare loss if the policymaker is restricted to a simple domestic inflation plus exchange rate targeting rule. If on the other hand the policymaker can implement a complex optimal rule then an almost fixed exchange rate can be achieved at a relatively small welfare cost. This finding suggests that future research should examine alternative simple rules that mimic the fully optimal rule more closely.
    Keywords: DSGE model, Indian economy, monetary interest rate rules, floating versus managed exchange rate, financial frictions
    JEL: E52 E37 E58
    Date: 2010
  9. By: Scott Fullwiler; L. Randall Wray
    Abstract: Beyond its original mission to "furnish an elastic currency" as lender of last resort and manager of the payments system, the Federal Reserve has always been responsible (along with the Treasury) for regulating and supervising member banks. After World War II, Congress directed the Fed to pursue a dual mandate, long interpreted to mean full employment with reasonable price stability. The Fed has been left to decide how to achieve these objectives, and it has over time come to view price stability as the more important of the two. In our view, the Fed's focus on inflation fighting diverted its attention from its responsibility to regulate and supervise the financial sector, and its mandate to keep unemployment low. Its shift of priorities contributed to creation of the conditions that led to this crisis. Now in its third phase of responding to the crisis and the accompanying deep recession-so-called "quantitative easing 2," or "QE2'-the Fed is currently in the process of purchasing $600 billion in Treasuries. Like its predecessor, QE1, QE2 is unlikely to seriously impact either of the Fed's dual objectives, however, for the following reasons: (1) additional bank reserves do not enable greater bank lending; (2) the interest rate effects are likely to be small at best given the Fed's tactical approach to QE2, while the private sector is attempting to deleverage at any rate, not borrow more; (3) purchases of Treasuries are simply an asset swap that reduce the maturity and liquidity of private sector assets but do not raise incomes of the private sector; and (4) given the reduced maturity of private sector Treasury portfolios, reduced net interest income could actually be mildly deflationary. The most fundamental shortcoming of QE—or, in fact, of using monetary policy in general to combat the recession-is that it only "works" if it somehow induces the private sector to spend more out of current income. A much more direct approach, particularly given much-needed deleveraging by the private sector, is to target growth in after tax incomes and job creation through appropriate and sufficiently large fiscal actions. Unfortunately, stimulus efforts to date have not met these criteria, and so have mostly kept the recession from being far worse rather than enabling a significant economic recovery. Finally, while there is identical risk to the federal government whether a bailout, a loan, or an asset purchase is undertaken by the Fed or the Treasury, there have been enormous, fundamental differences in democratic accountability for the two institutions when such actions have been taken since the crisis began. Public debates surrounding the wisdom of bailouts for the auto industry, or even continuing to provide benefits to the unemployed, never took place when it came to the Fed committing trillions of dollars to the financial system—even though, again, the federal government is "on the hook" in every instance.
    Keywords: Quantitative Easing; Monetary Policy; Fiscal Policy; Macroeconomic Stabilization; Interest Rates; Central Bank Operations
    JEL: E42 E43 E62 E63
    Date: 2010–12
  10. By: Sebastian Sienknecht (Department of Economics, Friedrich-Schiller-University Jena)
    Abstract: This paper identifies parameters responsible for welfare reversals when the basic New Keynesian model is approximated. In our setting, a reversal occurs when the Ramsey policy under timeless perspective commitment ceases to be dominant against the Taylor rule after approximating the model. We find that the parameters involved are the degree of persistence in the autoregressive shock process and the labor elasticity of real output.
    Keywords: Optimal Monetary policy, Approximations, Welfare Analysis, Timeless Perspective
    JEL: E30 E52 E61
    Date: 2010–12–16
  11. By: Gabriele Galati; Richhild Moessner
    Abstract: The recent financial crisis has highlighted the need to go beyond a purely micro approach to financial regulation and supervision. In recent months, the number of policy speeches, research papers and conferences that discuss a macro perspective on financial regulation has grown considerably. The policy debate is focusing in particular on macroprudential tools and their usage, their relationship with monetary policy, their implementation and their effectiveness. Macroprudential policy has recently also attracted considerable attention among researchers. This paper provides an overview of research on this topic. We also identify important future research questions that emerge from both the literature and the current policy debate.
    Keywords: Macroprudential policy
    JEL: E58 G28
    Date: 2010–12
  12. By: Luís Francisco Aguiar (Universidade do Minho - NIPE); Maria Joana Soares (Universidade do Minho)
    Abstract: We use wavelet analysis to study cycle synchronization across the EU-15 and the Euro-12 countries. Based on the wavelet transform, we propose a metric to measure and test for business cycles synchronization. Several conclusions emerge. France and Germany form the core of the Euro land, being the most synchronized countries with the rest of Europe. Portugal, Greece, Ireland and Finland do not show statistically relevant degrees of synchronization with Europe. We also show that some countries (like Spain) have a French accent, while others have a German accent (e.g. Austria). Perhaps surprisingly, we find that the French business cycle has been leading the German business cycle as well as the rest of Europe. Among the countries that may, in the future, join the Euro, the Czech Republic seems the most promising candidate.
    Keywords: Business cycle synchronization, European Union integration, Continuous wavelet transform, Wavelet distance matrix, Multidimensional scaling
    JEL: E32 C22 F02 F15 F41
    Date: 2010
  13. By: Brunner, Beatrice (University of Zurich); Kuhn, Andreas (University of Zurich)
    Abstract: We estimate the effects of labor market entry conditions on wages for male individuals first entering the Austrian labor market between 1978 and 2000. We find a large negative effect of unfavorable entry conditions on starting wages as well as a sizeable negative long-run effect. Specifically, we estimate that a one percentage point increase in the initial local unemployment rate is associated with an approximate shortfall in lifetime earnings of 6.5%. We also show that bad entry conditions are associated with lower quality of a worker's first job and that initial wage shortfalls associated with bad entry conditions only partially evaporate upon involuntary job change. These and additional findings support the view that initial job assignment, in combination with accumulation of occupation or industry-specific human capital while on this first job, plays a key role in generating the observed wage persistencies.
    Keywords: initial labor market conditions, endogenous labor market entry, initial job assignment, specific human capital
    JEL: E3 J2 J3 J6 M5
    Date: 2010–12
  14. By: Clovis Kerdrain; Isabell Koske; Isabelle Wanner
    Abstract: This paper explores the impact of structural policies on saving, investment, and current accounts in OECD and non-OECD economies. Since the current account effects of structural reforms are often complex and ambiguous from a theoretical perspective, new OECD empirical analysis is carried out. Reduced-form equations are estimated for a panel of 30 OECD countries as well as for a panel/cross-section of 117 OECD and non-OECD countries that relate saving, investment and current accounts to policy indicators and a set of macroeconomic control variables. This work suggests that structural reforms may influence saving, investment and current accounts through their impact on macroeconomic conditions such as productivity growth or public revenues and expenditures, but also more directly: i) higher social spending (in particular on health care) is found to lower the saving rate and thereby to weaken the current account, most likely reflecting lower precautionary saving; ii) product market liberalisation temporarily boosts investment and thus also weakens the current account; iii) financial market deregulation may lower the saving rate, though only in less developed countries; iv) stricter employment protection may be associated with lower saving rates if unemployment benefits are low, as well as with higher investment rates possibly due to greater substitution of capital for labour. A scenario analysis indicates that fiscal consolidation and structural reforms in the main world economies could significantly reduce current global imbalances, possibly by about a third.<P>L’impact des politiques structurelles sur l’épargne, l’investissement, et la balance courante<BR>Cet article étudie l'impact des politiques structurelles sur l'épargne, l'investissement, et la balance courante de pays membres et non-membres de l'OCDE. Cette nouvelle étude de l'OCDE en présente une analyse empirique, l'impact des réformes structurelles sur la balance courante étant souvent complexe et ambigu d'un point de vue théorique. L'épargne, l'investissement et la balance courante sont reliés à un ensemble de variables de politiques structurelles par des équations de forme réduite, estimées en incluant des variables macroéconomiques de contr“le. Les régressions sont basées d'une part sur des données de 30 pays de l'OCDE disponibles sur une longue période, et d'autre part sur des séries plus courtes pour 117 pays membres et non-membres de l'OCDE. Cette étude suggère que les réformes structurelles peuvent influencer l'épargne, l'investissement et la balance courante via leur impact sur les conditions macroéconomiques telles que la croissance de la productivité, les recettes ou les dépenses publiques. Plus directement, elle indique également que : i) une augmentation des dépenses de protection sociale (en particulier des dépenses de santé) réduit le taux d'épargne, et donc affaiblit la balance courante, reflétant probablement une diminution de l'épargne de précaution ; ii) une libéralisation du marché des biens et services augmente temporairement l'investissement, ce qui affaiblit également la balance courante ; iii) une dérégulation des marchés financiers pourrait réduire le taux d'épargne dans les pays les moins développés ; iv) une protection plus stricte des emplois pourrait conduire à une réduction du taux d'épargne lorsque les allocations-ch“mage sont faibles, ainsi qu'à une élévation du taux d'investissement, peut-être due a une substitution de capital au travail. Les simulations indiquent qu'une consolidation budgetaire et des réformes structurelles dans les principales économies mondiales pourraient réduire significativement les déséquilibres macroéconomiques mondiaux actuels, peut-être d'environ un tiers.
    Keywords: taxation, product market regulation, investment, current account, saving, social welfare system, labour market regulation, financial market regulation, fiscalité, investissement, balance courante, système de protection sociale, épargne, régulation du marché du travail, régulation du marché des biens et services, régulation des marchés financiers
    JEL: E21 E22 F41 G18 H23 H55 K20 K31
    Date: 2010–12–02
  15. By: Angelo Baglioni; Andrea Monticini (Catholic University, Milan, Italy)
    Abstract: We provide a simple model, able to explain why the overnight (ON) rate follows a downward intraday pattern, implicitly creating a positive intraday interest rate. While this normally reflects only some frictions, a liquidity crisis introduces a new component: the chance of an upward jump of the ON rate, which must be compensated by an intraday decline of the ON rate. By analyzing real time data for the e-MID interbank market, we show that the intraday rate has increased from a negligible level to a significant one after the start of the liquidity crisis in August 2007, and even more so since September 2008. The intraday rate is affected by the likelihood of a dry-up of the ON market, proxied by the 3M Euribor - Eonia swap spread. This evidence supports our model and it shows that a liquidity crisis impairs the ability of central banks to curb the market price of intraday liquidity, even by providing free daylight overdrafts. Such results have implications for the efficiency of the money market and of payment systems, as well as for the operational framework of central banks.
    Keywords: : interbank market, intraday interest rate, financial crisis, liquidity risk
    JEL: E4 E5 G21
    Date: 2010–11
  16. By: Yvan Guillemette
    Abstract: Although Canada remains in an advantageous fiscal position relative to many other OECD countries as the global economy recovers from the 2008/09 recession, the deterioration in the country’s public finances has been substantial. Years of spending increases above trend economic growth have led to high structural levels of expenditure, and some Canadian governments are now on unsustainable fiscal paths, a diagnosis made starker when taking an even longer-term view that considers the fiscal implications of demographic change. Evidence shows that successful fiscal consolidations tend to rely on spending restraint rather than tax increases. When focused on restraining less productive expenditure, they can also boost economic growth. Fiscal rules can be useful tools in achieving budgetary consolidation, but also as part of the general fiscal framework to limit deficit bias and counteract the tendency shown by some Canadian governments over the past two decades to run pro-cyclical fiscal policies. Canadian governments with large deficits should announce deficit targets on the way to fiscal balance and should consider supporting these targets with spending growth limits. Other governments should also limit spending growth and target reductions in debt-to-GDP ratios, perhaps supported by budget surplus targets. Temporary fiscal stimulus measures should be allowed to expire as planned. To date, the federal and almost all provincial/territorial governments have committed to return to budget balance over the medium term and outlined plans to do so that focus primarily on expenditure restraint. These plans are broadly in line with the recommendations set forth in this paper and should allow Canada to return to budget balance over the medium term. Of crucial importance for the long-term success of fiscal-consolidation and debt-reduction strategies are public backing and transparency. The federal government should continue to support the Parliamentary Budget Office, and provinces should consider establishing similar independent fiscal agencies that can assess compliance relative to objectives and reinforce accountability. This Working Paper relates to the 2010 OECD Economic Review of Canada (<P>Stratégies d’assainissement budgétaire pour les administrations canadiennes<BR>Bien que la situation budgétaire du Canada demeure plus favorable que celle de beaucoup d’autres pays de l’OCDE au moment où l’économie mondiale se remet de la récession de 2008/09, ses finances publiques se sont sérieusement détériorées. Les dépenses ayant progressé pendant des années à un rythme supérieur à la croissance économique tendancielle, les dépenses structurelles atteignent aujourd’hui un niveau élevé et la trajectoire budgétaire prévisible de certaines administrations canadiennes n’est pas viable, en particulier si l’on se place dans une perspective à long terme tenant compte des conséquences budgétaires de l’évolution démographique. L’expérience nous apprend que les stratégies d’assainissement budgétaire les plus efficaces reposent sur des restrictions de dépenses plutôt que sur des augmentations d’impôts. Lorsqu’elles visent à restreindre les dépenses les moins productives, ces stratégies peuvent aussi stimuler la croissance économique. Des règles budgétaires peuvent non seulement être utiles pour assainir les finances publiques, mais aussi se révéler précieuses dans le cadre des mécanismes budgétaires généraux conçus pour limiter la dérive des déficits et contrecarrer la tendance à mener une politique budgétaire procyclique, observée dans certaines administrations canadiennes au cours des deux dernières décennies. Les administrations dont les finances sont très déficitaires devraient annoncer des objectifs de réduction du déficit dans la perspective d’un retour à l’équilibre budgétaire et envisager parallèlement de plafonner les augmentations de dépenses. Les autres administrations devraient aussi limiter l’augmentation de leurs dépenses et s’efforcer de réduire leur endettement en proportion du PIB, éventuellement en se fixant des objectifs d’excédent budgétaire. Les mesures temporaires de relance budgétaire devront venir à expiration dans les délais prévus. À ce jour, l’administration fédérale et presque toutes les administrations provinciales/territoriales se sont engagées à rétablir l’équilibre budgétaire à moyen terme, et pour ce faire elles ont défini des plans qui mettent l’accent sur le freinage des dépenses. Ces programmes s’accordent globalement avec les recommandations formulées dans la présente étude et devraient permettre au Canada de revenir à l’équilibre budgétaire dans le moyen terme. La mobilisation de l’opinion publique et la transparence revêtent une importance primordiale pour le succès des stratégies d’assainissement des finances publiques et de désendettement. L’administration fédérale devrait continuer d’appuyer l’action du Bureau du Directeur parlementaire du budget, tandis que les provinces devraient envisager de mettre en place des organismes budgétaires indépendants du même type pour jauger le degré de réalisation des objectifs et assurer une plus grande transparence. Ce Document de travail se rapporte à l’Étude économique de l’OCDE du Canada 2010 (
    Keywords: budgets, Canada, deficit, debt, consolidation, federal, provincial, fiscal, budget, Canada, déficit, dette, consolidation, fédéral, provincial, fiscal
    JEL: E62 H68 H77
    Date: 2010–12–06
  17. By: Naoto Kunitomo (Faculty of Economics, University of Tokyo); Seisho Sato (The Institute of Statistical Mathematics)
    Abstract: We investigate some issues of macro-economic statistics in Japan including the housing investment, the private non-residential investment and the quarterly (preliminary) GDP estimates. We illustrate the problems associated with the seasonality and structural break in recent Japanese macro-economy. We use the statistical smoothing method and DECOMP (developed by Kitagawa and Sato at ISM) and discuss the possible problems with the use of X-12-ARIMA program by the statistical offices in the Japanese central government. We propose several ways to improve the quality of macro-economic statistics in Japan.
    Date: 2010–12
  18. By: Bhatt, Antra
    Abstract: The paper tests whether productive expenditures share a long run re- lationship with debt to GDP ratio by using a multivariate time series framework. The theoretical model is based on dynamic optimization of utility and productive expenditure with respect to capital and debt. Literature on growth theory has suggested that all less productive expenditures can have a negative effect on the growth rate of real GDP per capita until the optimal level of productive expenditure is reached. This would indeed lead to higher level of debt as growth rate will be reduced. Aggregate yearly data for India covering the period 1980-2009 have been used. The CAPRATIO and Debt to GDP ratio are cointegrated. VAR modeling with error correction reveals that the model can be used for forecasts. The regression coecient between the two variables is negative, signifying the inverse relationship. Having proved the hypothesis of an inverse long run relationship between the two variables, a new indicator based on the Government Inter-temporal budget constraint is suggested, revolving around capital expenditure.
    Keywords: Public Debt sustainability indicators; Capital Expenditure; Growth.
    JEL: E62 C22
    Date: 2010–12–09
  19. By: Heryan, Tomas; Stavarek, Daniel
    Abstract: This paper investigates the nature of the causal relationships among interbank market interest rates and corporate loans interest rates in four countries from the euro area (Austria, Belgium, France and Italy), and in the Czech Republic. The paper also estimates a development of bank credit margin in banking industries of these countries in period from January 2004 to March 2010. Using Johansen cointegration and Granger causality tests on monthly data we investigate long-term as well as short-term causalities between the interest rates. The results suggest that interest rate relationships differ in all selected countries, and also that foreign majority owners of the Czech banks could affect interest rate policy of the subsidiaries to offset losses realized by the parent banks.
    Keywords: Cointegration; Granger Causality; Interbank Interest Rates; Lending Interest Rates; European Union
    JEL: E43 C32 E40 F36
    Date: 2010–11–19
  20. By: Helke Waelde (Department of Economics, Johannes Gutenberg-Universitaet Mainz, Germany)
    Abstract: Group lending programs are said to be the key factor of success of microÂ…nance. They are said to reduce information asymmetries in credit contracts and to increase repayment rates. Despite that, in recent years more and more individual credits without collateral are given, even if there is no mutual monitoring of the borrowers. We use basic descriptive statistics on individual- and group panel data, which we construct out of a World Bank data set. We provide Â…rst evidence that individuals that are not participating in group credits accumulate wealth more quickly than participants of group credit programs.
    JEL: E43 E52 E58 D44
    Date: 2010–12–07
  21. By: Reid, Richard (Asian Development Bank Institute)
    Abstract: This paper seeks to add to the current debate about financial development and growth in the emerging world by looking at how different financial systems evolve: how and why financial structures change during various stages of development, how best to measure them, and seeing what practical policy lessons can be drawn from historical experience. Some financial structures may be better suited to growth at certain stages of development but they may be less well suited in other circumstances. In the search for optimal financial structure, rather than attempt to adopt another country’s particular structure it may be more fruitful for today’s emerging world to concentrate more on addressing the needs of savers and borrowers in each individual system. A major lesson for the emerging world from past financial development is that there are risks involved in transitioning from one framework to another. Too fast a change increases the danger that all the necessary regulatory, supervisory and educational changes may not keep pace with the financial changes. This can increase the susceptibility to instability and reduce resilience to shocks.
    Keywords: financial system development; history; measurement; policies; lessons
    JEL: E44 F00 F01 F02 G00 G15 G18 G20 G38 N00 N01 N20 N30 N40 O10 O16
    Date: 2010–12–16

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