nep-mac New Economics Papers
on Macroeconomics
Issue of 2011‒10‒15
forty-nine papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Incorporating Financial Stability in Inflation Targeting Frameworks By Burcu Aydin; Engin Volkan
  2. Bayesian Dynamic Factor Analysis of a Simple Monetary DSGE Model By Maxym Kryshko
  3. Price-Level Targeting and Inflation Expectations: Experimental Evidence By Robert Amano; Jim Engle-Warnick; Malik Shukayev
  4. Thomas J. Sargent and Christopher A. Sims: Empirical Macroeconomics By Committee, Nobel Prize
  5. Incorporating Financial Sector Risk into Monetary Policy Models: Application to Chile By Jorge Restrepo; Carlos Garcia; Leonardo Luna; Dale F. Gray
  6. The bank lending channel in Turkey: Has it changed after the low inflation regime? By Catik, A. Nazif; Karaçuka, Mehmet
  7. Macroeconomic Stability and Wage Inequality: A Model with Credit and Labor Market Frictions By Petra Marotzke
  8. Inflation Targeting and Monetary Policy Transmission Mechanisms in Emerging Market Economies By Sanchita Mukherjee; Rina Bhattacharya
  9. Data-Rich DSGE and Dynamic Factor Models By Maxym Kryshko
  10. Monetary Policy Communication Under Inflation Targeting : Do Words Speak Louder Than Actions? By Selva Demiralp; Hakan Kara; Pinar Ozlu
  11. Monetary policy indeterminacy in the U.S.: results from a classical test By Efrem Castelnuovo; Luca Fanelli
  12. The Stock Market Crash of 2008 Caused the Great Recession: Theory and Evidence By Roger Farmer
  13. Trend-cycle decomposition of output and euro area inflation forecasts: a real-time approach based on model combination By Pierre Guérin; Laurent Maurin; Matthias Mohr
  14. Financial Factors and Labour Market Fluctuations By Yahong Zhang
  15. Optimal Monetary Policy with Endogenous Entry and Product Variety By Florin O. Bilbiie; Ippei Fujiwara; Fabio Ghironi
  16. New Business Start-ups and the Business Cycle By Coles, Melvyn G; Kelishomi, Ali Moghaddasi
  17. Conceptualizing interdependences between regulatory and monetary policies. Some preliminary considerations By Lukasz Hardt
  18. Multi-product firms and business cycle dynamics By Antonio Minniti; Francesco Turino
  19. How Does Fiscal Policy React to Wealth Composition and Asset Prices? By Luca Agnello; Vitor Castro; Ricardo M. Sousa
  20. Productivity shocks and housing market inflations in new Keynesian models By Ko, Jun-Hyung
  21. Fiscal policy, eurobonds and economic recovery: some heterodox policy recipes against financial instability and sovereign debt crisis. By alberto, botta
  22. Macro-finance interactions in the US: A global perspective By Fabio C. Bagliano; Claudio Morana
  23. A Model of Inflation in Taiwan By Gregory C. Chow
  24. Understanding Chinese Bond Yields and their Role in Monetary Policy By Nathan Porter; Nuno Cassola
  25. Unconventional Monetary Policy in Theory and in Practice By Martina Cecioni; Giuseppe Ferrero; Alessandro Secchi
  26. Nonlinearity and Structural Breaks in Monetary Policy Rules with Stock Prices By Dong Jin Lee; Jong Chil Son
  27. Business Cycle Effects of Credit and Technology Shocks in a DSGE Model with Firm Defaults By Pesaran, M. H.; Xu, T.
  28. The wine maker’s business and the logical origin of interest By Kakarot-Handtke, Egmont
  29. History of monetary policy in India since independence By Ashima Goyal
  30. Free-riding on liquidity By Aleksander Berentsen; Samuel Huber; Alessandro Marchesiani
  31. Structual versus Matching Estimation: Transmission Mechanisms in Armenia By Poghosyan, K.; Boldea, O.
  32. Deriving CGE Baselines from Macro-economic Projections By Mueller, Marc; Ferrari, Emanuele
  33. Aggregate real wages: macro fluctuations and micro drivers By Mary C. Daly; Bart Hobijn; Theodore S. Wiles
  34. The role of macro-prudential policies in the boom and adjustment phase of the credit cycle in Estonia By Sutt, Andres; Korju, Helen; Siibak, Kadri
  35. Aggregate Implications of Innovation Policy By Andrew Atkeson; Ariel T. Burstein
  36. Economic Effects of Oil and Food Price Shocks in Asia and Pacific Countries: An Application of SVAR Model By Alom, Fardous
  37. Filtering Short Term Fluctuations in Inflation Analysis By H. Cagri Akkoyun; Oguz Atuk; N. Alpay Kocak; M. Utku Ozmen
  38. Decentralizing Spending More than Revenue: Does It Hurt Fiscal Performance? By Lusine Lusinyan; Luc Eyraud
  39. Bad banks choking good banks: simulating balance sheet contagion By Saed Khalil; Stephen Kinsella
  40. Taking Multi-Sector Dynamic General Equilibrium Models to the Data By Huw Dixon; Engin Kara
  41. A general equilibrium model of the oil market By Anton Nakov; Galo Nuño
  42. Macroprudential stress testing of credit risk: A practical approach for policy makers By Buncic, Daniel; Martin, Melecky
  43. Consumption, Wealth, Stock and Housing Returns: Evidence from Emerging Markets By Guglielmo Maria Caporale; Ricardo M. Souza
  44. Usefulness of Adaptive and Rational Expectations in Economics By Gregory C. Chow
  45. Autobiography By Siamond, Peter A.
  46. Family reunification or point-based immigration system? The case of the U.S. and Mexico By Joel López Real
  47. Causality and contagion in peripheral EMU public debt markets: A dynamic approach By Marta Gómez-Puig; Simón Sosvilla-Rivero
  48. Do Highly Educated Women Choose Smaller Families? By Hazan, Moshe; Zoabi, Hosny
  49. Unemployment and Labor Force Participation in Japan By Makoto Kakinaka; Hiroaki Miyamoto

  1. By: Burcu Aydin; Engin Volkan
    Abstract: The global financial crisis has exposed the limitations of a conventional inflation targeting (IT) framework in insulating an economy from shocks, and demonstrated that its rigid application may aggravate the effect of shocks on output and inflation. Accordingly, we investigate possible refinements to the IT framework by incorporating financial stability considerations. We propose a small open economy DSGE model, calibrated for Korea during the period of 2003 - 07, with real and financial frictions. The findings indicate that incorporating financial stability considerations can help smooth business cycle fluctuations more effectively than a conventional IT framework.
    Keywords: Economic models , Financial crisis , Financial stability , Global Financial Crisis 2008-2009 , Inflation targeting , Korea, Republic of , Monetary policy ,
    Date: 2011–09–26
  2. By: Maxym Kryshko
    Abstract: When estimating DSGE models, the number of observable economic variables is usually kept small, and it is conveniently assumed that DSGE model variables are perfectly measured by a single data series. Building upon Boivin and Giannoni (2006), we relax these two assumptions and estimate a fairly simple monetary DSGE model on a richer data set. Using post-1983 on real output, inflation, nominal interest rates, measures of inverse money velocity, and a large panel of informational series, we compare the data-rich DSGE model with the regular - few observables, perfect measurement - DSGE model in terms of deep parameter estimates, propagation of monetary policy and technology shocks and sources of business cycle fluctuations. We document that the data-rich DSGE model generates a higher implied duration of Calvo price contracts and a lower slope of the New Keynesian Phillips curve. To reduce the computational costs of the likelihood-based estimation, we employed a novel speedup as in Jungbacker and Koopman (2008) and achieved the time savings of 60 percent.
    Keywords: Business cycles , Economic models , Monetary policy ,
    Date: 2011–09–19
  3. By: Robert Amano; Jim Engle-Warnick; Malik Shukayev
    Abstract: In this paper, we use an economics decision-making experiment to test a key assumption underpinning the efficacy of price-level targeting relative to inflation targeting for business cycle stabilization and mitigating the effects of the zero lower bound on nominal interest rates. In particular, we attempt to infer whether experimental participants understand the stationary nature of the price level under price-level targeting by observing their inflation forecasting behaviour in a laboratory setting. This is an important assumption since, without it, price-level targeting can lead to worse outcomes than inflation targeting. Our main result suggests that participants formulate inflation expectations consistent with the target-reverting nature of the price level but that they do not fully utilize it in their forecasts of future inflation.
    Keywords: Monetary policy framework
    JEL: E32 E52
    Date: 2011
  4. By: Committee, Nobel Prize (Nobel Prize Committee)
    Abstract: One of the main tasks for macroeconomists is to explain how macroeconomic aggregates -such as GDP, investment, unemployment, and inflation- behave over time. How are these variables affected by economic policy and by changes in the economic environment? A primary aspect in this analysis is the role of the central bank and its ability to influence the economy. How effective can monetary policy be in stabilizing unwanted fluctuations in macroeconomic aggregates? How effective has it been historically? Similar questions can be raised about fiscal policy. Thomas J. Sargent and Christopher A. Sims have developed empirical methods that can answer these kinds of questions. This year's prize recognizes these methods and their successful application to the interplay between monetary and fi scal policy and economic activity.
    Keywords: Causation; macroeconomics
    JEL: C32 E60
    Date: 2011–10–10
  5. By: Jorge Restrepo; Carlos Garcia; Leonardo Luna; Dale F. Gray
    Abstract: This paper builds a model of financial sector vulnerability and integrates it into a macroeconomic framework, typically used for monetary policy analysis. The main question to be answered with the integrated model is whether or not the central bank should include explicitly the financial stability indicator in its monetary policy (interest rate) reaction function. It is found in general, that including distance-to-default (dtd) of the banking system in the central bank reaction function reduces both inflation and output volatility. Moreover, the results are robust to different model calibrations: whenever exchange-rate pass-through is higher; financial vulnerability has a larger impact on the exchange rate, as well as on GDP (or the reverse, there is more effect of GDP on bank’s equity - i.e., what we call endogeneity), it is more efficient to include dtd in the reaction function.
    Keywords: Banking systems , Central banks , Chile , Economic models , Financial risk , Financial sector , Monetary policy ,
    Date: 2011–09–30
  6. By: Catik, A. Nazif; Karaçuka, Mehmet
    Abstract: In this paper we aim to analyze the role of credit channel in the monetary transmission mechanism under different inflationary environments in Turkey covering the period 1986:1 - 2009:10. Our results suggest that traditional interest rate channel is only valid for the postinflation targeting period. This variable is also more effective monetary policy tool in terms of its impacts on economic activity in the both regimes. Credit shocks itself have significant power on economic activity and prices. However, the effect of monetary shocks on credit volume is very limited especially in the low inflation regime. --
    Date: 2011
  7. By: Petra Marotzke (Department of Economics, University of Konstanz, Germany)
    Abstract: While macroeconomic volatility in the US economy decreased since the early 1980's, individual earnings volatility and wage inequality increased. This paper argues that increasing financial development can contribute to both changes. I develop a real business cycle model with sectoral productivity shocks and labor as well as credit market frictions. Credit market frictions take the form of collateral-based credit constraints. It is shown that there are interactions between the labor and the credit market that matter for the development of wages and output. When workers are not perfectly mobile between sectors, financial development comes along with an increase in the volatility of individual earnings and in wage inequality, although aggregate output volatility is lower.
    Keywords: Financial development, labor market frictions, sectoral shocks, volatility, wage inequality
    JEL: E32 E44 J60
    Date: 2011–09–30
  8. By: Sanchita Mukherjee; Rina Bhattacharya
    Abstract: In this paper we empirically examine the operation of the traditional Keynesian interest rate channel of the monetary policy transmission mechanism in five potential inflation targeting economies in the MENA region and compare it with fourteen inflation targeting (IT) emerging market economies (EMEs) using panel data analysis. Contrary to some existing studies, our empirical results suggest that private consumption and investment in both groups of countries are sensitive to movements in real interest rates. Moreover, we find that the adoption of IT did not significantly alter the operation of the interest rate channel in IT EMEs. Also, the interest rate elasticities of private consumption and private investment vary with the level of development of the domestic financial market. Finally, capital account liberalization have opposite effects on private consumption and private investment in the two groups of countries.
    Keywords: Banks , Cross country analysis , Demand , Emerging markets , Inflation targeting , Interest rates , Middle East , Monetary policy , North Africa , Private consumption , Private investment , Private sector ,
    Date: 2011–10–03
  9. By: Maxym Kryshko
    Abstract: Dynamic factor models and dynamic stochastic general equilibrium (DSGE) models are widely used for empirical research in macroeconomics. The empirical factor literature argues that the co-movement of large panels of macroeconomic and financial data can be captured by relatively few common unobserved factors. Similarly, the dynamics in DSGE models are often governed by a handful of state variables and exogenous processes such as preference and/or technology shocks. Boivin and Giannoni(2006) combine a DSGE and a factor model into a data-rich DSGE model, in which DSGE states are factors and factor dynamics are subject to DSGE model implied restrictions. We compare a data-richDSGE model with a standard New Keynesian core to an empirical dynamic factor model by estimating both on a rich panel of U.S. macroeconomic and financial data compiled by Stock and Watson (2008).We find that the spaces spanned by the empirical factors and by the data-rich DSGE model states are very close. This proximity allows us to propagate monetary policy and technology innovations in an otherwise non-structural dynamic factor model to obtain predictions for many more series than just a handful of traditional macro variables, including measures of real activity, price indices, labor market indicators, interest rate spreads, money and credit stocks, and exchange rates.
    Keywords: Economic models , Monetary policy ,
    Date: 2011–09–16
  10. By: Selva Demiralp; Hakan Kara; Pinar Ozlu
    Abstract: This paper assesses the effectiveness of monetary policy communication of the Central Bank of Turkey (CBT) by quantifying the information content of the policy statements released right after the monthly Monetary Policy Committee meetings. First, we quantify the signal regarding the next interest rate decision and ask whether communication improves predictability. Our findings suggest that the role of statements in predicting the next policy move have strengthened following the adoption of full-fledged inflation targeting (IT) regime. Second, we identify the surprise component of policy communication directly from market commentaries and assess its impact on the term structure of interest rates. We find that the response of the yield curve to policy statements have become highly significant for the unanticipated changes in the monetary policy communication, especially after the implementation of the IT. We also compare the yield curve impact of the surprise component of policy decisions (actions) with the surprises in policy communication (words). Our results suggest that the relative importance of communication in driving market yields have increased through time.
    Keywords: Central Bank Communication, Predictability, Transparency
    JEL: E52 E58
    Date: 2011
  11. By: Efrem Castelnuovo (Università di Padova); Luca Fanelli (Università di Bologna)
    Abstract: We work with a newly developed method to empirically assess whether a specified new-Keynesian business cycle monetary model estimated with U.S. quarterly data is consistent with a unique equilibrium or multiple equilibria under rational expectations. We conduct classical tests to verify if the structural model is correctly specified. Conditional on a positive answer, we formally assess if such model is either consistent with a unique equilibrium or with indeterminacy. Importantly, our full-system approach requires neither the use of prior distributions nor that of nonstandard inference. The case of an indeterminate equilibrium in the pre-1984 sample and of a determinate equilibrium in the post-1984 sample is favored by the data. The long-run coefficients on inflation and the output gap in the monetary policy rule are found to be weakly identified. However, our results are further supported by a proposed identification-robust indicator of indeterminacy
    Keywords: GMM, Indeterminatezza, Massima Verosimiglianza, Errata specificazione, modello neo-Keynesiano per il ciclo economico, VAR, Identificazione debole GMM, Indeterminacy, Maximum Likelihood, Misspecification, new-Keynesian business cycle model, VAR, Weak identification.
    Date: 2011
  12. By: Roger Farmer
    Abstract: This paper argues that the stock market crash of 2008, triggered by a collapse in house prices, caused the Great Recession. The paper has three parts. First, it provides evidence of a high correlation between the value of the stock market and the unemployment rate in U.S. data since 1929. Second, it compares a new model of the economy developed in recent papers and books by Farmer, with a classical model and with a textbook Keynesian approach. Third, it provides evidence that fiscal stimulus will not permanently restore full employment. In Farmer's model, as in the Keynesian model, employment is demand determined. But aggregate demand depends on wealth, not on income.
    JEL: E0 E2
    Date: 2011–10
  13. By: Pierre Guérin (International Economic Analysis Department, Bank of Canada, 234 Wellington Street, Ottawa, Canada, K1A 0G9 and European University Institute); Laurent Maurin (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt, Germany.); Matthias Mohr (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt, Germany.)
    Abstract: The paper focuses on the estimation of the euro area output gap. We construct model-averaged measures of the output gap in order to cope with both model uncertainty and parameter instability that are inherent to trend-cycle decomposition models of GDP. We first estimate nine models of trend-cycle decomposition of euro area GDP, both univariate and multivariate, some of them allowing for changes in the slope of trend GDP and/or its error variance using Markov-switching specifications, or including a Phillips curve. We then pool the estimates using three weighting schemes. We compute both ex-post and real-time estimates to check the stability of the estimates to GDP revisions. We finally run a forecasting experiment to evaluate the predictive power of the output gap for inflation in the euro area. We find evidence of changes in trend growth around the recessions. We also find support for model averaging techniques in order to improve the reliability of the potential output estimates in real time. Our measures help forecasting inflation over most of our evaluation sample (2001-2010) but fail dramatically over the last recession. JEL Classification: C53, E32, E37.
    Keywords: Trend-cycle decomposition, Phillips curve, unobserved components model, Kalman Filter, Markov-switching, auxiliary information, model averaging, inflation forecast, real-time analysis.
    Date: 2011–10
  14. By: Yahong Zhang
    Abstract: What are the effects of financial market imperfections on unemployment and vacancies? Since standard DSGE models do not typically model unemployment, they abstract from this issue. In this paper I augment a standard monetary DSGE model with explicit financial and labour market frictions and estimate the model using US data for the period 1964:Q1-2010:Q3. I find that the estimated degree of financial frictions is higher when financial data and shocks are included. The model matches the aggregate volatility in the data reasonably well. In particular, for the labour market, the model is able to generate highly volatile unemployment and vacancies, and a relatively rigid real wage. Further, I find that the financial accelerator mechanism plays an important role in amplifying the effects of financial shocks on unemployment and vacancies. Overall, financial shocks explain about 37 per cent of the fluctuations in unemployment and vacancies.
    Keywords: Economic models; Financial markets; Labour markets
    JEL: E32 E44 J6
    Date: 2011
  15. By: Florin O. Bilbiie; Ippei Fujiwara; Fabio Ghironi
    Abstract: We show that deviations from long-run stability of product prices are optimal in the presence of endogenous producer entry and product variety in a sticky-price model with monopolistic competition in which price stability would be optimal in the absence of entry. Specifically, a long-run positive (negative) rate of inflation is optimal when the benefit of variety to consumers falls short of (exceeds) the market incentives for creating that variety under flexible prices, governed by the desired markup. Plausible preference specifications and parameter values justify a long-run inflation rate of two percent or higher. Price indexation implies even larger deviations from long-run price stability. However, price stability (around this non-zero trend) is close to optimal in the short run, even in the presence of time-varying flexible-price markups that distort the allocation of resources across time and states. The central bank uses its leverage over real activity in the long run, but not in the short run. Our results point to the need for continued empirical research on the determinants of markups and investigation of the benefit of product variety to consumers.
    JEL: E31 E32 E52
    Date: 2011–10
  16. By: Coles, Melvyn G; Kelishomi, Ali Moghaddasi
    Abstract: This paper considers new business start-up activity within a stochastic equilibrium model of unemployment. The resulting job creation process is both natural and tractable, and generates equilibrium unemployment and vacancy dynamics which match the volatility and persistence observed in the data. The insight is that the standard Diamond/Mortensen/Pissarides matching framework works beautifully once the free entry of vacancies assumption is replaced by a model of business start-up activity. The approach is particularly important as it is demonstrated that a large part of net job creation in the U.S. economy can be attributed to new business start-ups.
    Keywords: aggregate dynamics; equilibrium unemployment; startups
    JEL: E24 E32 J63 J64
    Date: 2011–10
  17. By: Lukasz Hardt (University of Warsaw, Faculty of Economics)
    Abstract: In this paper we investigate the interplay between regulatory and monetary policies. We analyze how changes in institutional settings modify the functioning of various channels of monetary transmission. The paper begins with a brief presentation of the main channels of monetary transmission, including credit channel, exchange rate channel, Tobin q theory, and the credit channel. After that we define a positive institutional change and we check how such adjustments can be put into the logic of monetary transmission. We show that the most profound way institutions impact the monetary transmission is via its effect on the elasticity of investments to changes in interest rates.
    Keywords: monetary transmission channels, monetary policy, regulatory policy, institutional change, financial globalization
    JEL: E44 E52 F41 O43
    Date: 2011
  18. By: Antonio Minniti (Facoltà di Economia); Francesco Turino (Universidad de Alicante)
    Abstract: Recent empirical evidence provided by Bernard et al. (2010) and Broda and Weinstein (2010) shows that a significant share of product creation and destruction in U.S. industries occurs within existing firms and accounts for a relevant share of aggregate output. In the present paper, and consistently with this evidence, we relax the standard assumption of mono-product firms that is typically made in dynamic general equilibrium models. Building on the work of Jaimovich and Floetotto (2008), we develop an RBC model with multi-product firms and endogenous markups to assess the implications of the intra-firm extensive margin on business cycle fluctuations. In this environment, the procyclicality of product creation emerges as a consequence of strategic interactions among firms. Because of the proliferation effect induced by changes in product scope, our model embodies a quantitatively important magnification mechanism of technology shocks.
    Keywords: Multi-product Firms, Business Cycles, Firm Dynamics.
    JEL: E32 L11
    Date: 2011–09
  19. By: Luca Agnello (Banque de France and University of Palermo); Vitor Castro (University of Coimbra and NIPE); Ricardo M. Sousa (University of Minho, NIPE, London School of Economics and FMG)
    Abstract: We assess the response of fiscal policy to developments in asset markets in the US and the UK. We estimate fiscal policy rules augmented with aggregate wealth, wealth composition (i.e. financial and housing wealth) and asset prices (i.e. stock and housing prices) using: (i) a linear framework based on a fully simultaneous system approach; and (ii) two nonlinear specifications that rely on a smooth transition regression (STR) and a Markov-switching (MS) model. The linear framework suggests that, while primary spending does not seem to react to wealth composition or asset prices, taxes and primary surplus are significantly: (i) cut when financial wealth or stock prices rise; and (ii) raised when housing wealth or housing prices increase. The smooth transition regression model shows that primary spending and fiscal balance are adjusted in a nonlinear fashion to both wealth and price effects, while the Markov-switching framework highlights the importance of tax cuts (in the US) and spending hikes (in the UK) to offset the decline in wealth during major recessions and financial crises. Overall, our results provide evidence of a non-stabilizing effect of government debt, a countercyclical policy and a vigilant track of wealth developments by fiscal authorities.
    Keywords: fiscal policy, wealth composition, asset prices.
    JEL: E37 E52
    Date: 2011–09
  20. By: Ko, Jun-Hyung
    Abstract: Econometric evidence suggests the existence of two dynamics in the postwar U.S. housing market: (i) housing rental and purchase prices co-move positively in response to productivity shocks, and (ii) the purchase price exhibits much larger volatile movements than the rental price in response to the shocks. A standard New Keynesian model with nominal rigidity in the production sector is inconsistent with these facts. We incorporate a rental market into an otherwise standard New Keynesian model with durables and show that nominal rigidity in the rental market contributes to our empirical findings.
    Keywords: Productivity shock; price-rent ratio; housing prices
    JEL: E32 E31 R21 E37 R31
    Date: 2011–09
  21. By: alberto, botta
    Abstract: In this paper, we propose a simple post-Keynesian model on the linkages between the financial and real side of an economy. We show how, according to the Minskyan instability hypothesis, financial variables, credit availability and asset prices in particular, may feedback each other and affect economic activity, possibly giving rise to intrinsically unstable economic processes. Through these destabilizing mechanisms, we also explain why governments intervention in the aftermath of the 2007 financial meltdown has been largely useless to restore financial tranquility and economic growth, but transformed a private debt crisis into a sovereign debt one. The paper ends up by looking at the long-run and to the interaction between long-term growth potential and public debt sustainability. We explicitly consider the Euro-zone economic context and the difficulties several EU members currently face to simultaneously support economic recovery and consolidate fiscal imbalances. We stress that: (i) financial turbulences may trigger permanent reductions in long-term growth potential and unsustainable public debt dynamics; (ii) strong institutional discontinuity such as Eurobond issuances may prove to be the only way to restore growth and ensure long-run public debt sustainability.
    Keywords: post-Keynesian models; financial instability; debt sustainability; Eurobonds
    JEL: E12 E44 H63
    Date: 2011–09
  22. By: Fabio C. Bagliano (Department of Economics and Public Finance "G. Prato", University of Torino); Claudio Morana (Department of Economics, University of Milan-Bicocca)
    Abstract: The paper aims at understanding the main channels of macro-finance interaction that have featured in the US recent “Great Recession” episode. Domestic interactions of macro and financial shocks are investigated within a global framework, allowing for spillover effects of the US crisis to other OECD countries, as well as to major emerging economies, and controlling for further feedback effects on the US economy. A total of 50 countries is investigated by means of a large-scale open economy macroeconometric model, set in the factor vector autoregressive (F-VAR) framework, over the period 1980:1-2009:1. The overall picture appears to be consistent with a boom-bust credit cycle mechanism, whereby financial factors are the triggering force of the downturn in real activity and worsened economic conditions feed back to asset prices, starting a cumulative process.
    Keywords: Macro-finance interactions, financial crisis, economic crisis, international business cycles, factor vector autoregressive models
    JEL: C22 E32 F36
    Date: 2011–10
  23. By: Gregory C. Chow (Princeton University & Academia Sinica, Taiwan)
    Abstract: The model of Chow (1987) for inflation in China is applied to explain inflation in Taiwan. A cointegration relation linear in the log of a price index and the log of the ratio of money supply to output is estimated. Inflation is explained by the change in this log ratio, lagged inflation and the lagged residual of the cointegration relation as an error correction. The model explains Taiwan’s inflation well except during the oil crises of 1973 and 1979-80.
    Keywords: inflation, Taiwan, error correction
    JEL: E31
    Date: 2011–09
  24. By: Nathan Porter; Nuno Cassola
    Abstract: China’s financial prices are informative enough for the PBC to introduce a monetary policy framework centered around interest rates. While bond yields are not fully efficient—reflecting regulation, liquidity, and segmentation—we find they contain considerable information about the state of the economy as well as evidence of an emerging transmission channel: changes in PBC rates influence the structure of Treasury, financial, and corporate bond yield curves, which are then associated with changes in growth and inflation. Coporate spreads are also a leading indicator of growth and inflation. While further liberalization will strengthen both efficiency and transmission, several necessary elements to move towards indirect monetary policy are already in place.
    Keywords: Bond markets , Bonds , China , Interest rate structures , Monetary policy ,
    Date: 2011–09–28
  25. By: Martina Cecioni (Banca d'Italia); Giuseppe Ferrero (Banca d'Italia); Alessandro Secchi (Banca d'Italia)
    Abstract: In this paper, after discussing the theoretical underpinnings of unconventional monetary policy measures, we review the existing empirical evidence on their effectiveness, focusing on those adopted by the European Central Bank and by the Federal Reserve. These measures operate in two ways: through the signalling channel and through the portfolio-balance channel. In the former, the central bank can use communication to steer interest rates and to restore confidence in the financial markets; the latter hinges on the hypothesis of imperfect substitutability of assets and liabilities in the balance sheet of the private sector and postulates that the central bank’s asset purchases and liquidity provision lower financial yields and improve funding conditions. The review of the empirical literature suggests that the unconventional measures were effective and that their impact on the economy was sizeable. However, a very large degree of uncertainty surrounds the precise quantification of these effects.
    Keywords: Central bank, unconventional monetary policy, financial crisis, signalling channel, portfolio balance channel
    JEL: E52 E58
    Date: 2011–09
  26. By: Dong Jin Lee (University of Connecticut); Jong Chil Son (The Bank of Korea)
    Abstract: This paper empirically examines how the Fed responds to stock prices and inflation movements, using the forward-looking Taylor rule augmented with the stock price gap. The typical linear policy reaction function has a substantial change after 1991, but lacks the robustness in that the estimation result is sensitive to a minor change of the sample period. To alleviate the problem, we allow for temporary and permanent variations of the reaction coefficients by introducing nonlinearity and a structural break. The time variation of the inflation coefficient shows that the Fed is more aggressive in periods of inflationary pressure. However, unlike the linear model case, we find little evidence of a significant change in the Fed's active response to inflationary pressure after the structural break at 1991:I. We also find a positive response to the stock price change after 1991:I. But the time varying pattern of the response is counter-cyclical to stock price change, which does not support the view that the Fed actively reacts to a stock price bubble.
    Keywords: Monetary policy rule, nonlinear model, stock market, structural break, and time varying coefficient
    JEL: E31 E44 E52
    Date: 2011–10
  27. By: Pesaran, M. H.; Xu, T.
    Abstract: This paper proposes a theoretical framework to analyze the impacts of credit and technology shocks on business cycle dynamics, where firms rely on banks and households for capital financing. Firms are identical ex ante but differ ex post due to different realizations of firm specific technology shocks, possibly leading to default by some firms. The paper advances a new modelling approach for the analysis of financial intermediation and firm defaults that takes account of the financial implications of such defaults for both households and banks. Results from a calibrated version of the model highlights the role of financial institutions in the transmission of credit and technology shocks to the real economy. A positive credit shock, defined as a rise in the loan to deposit ratio, increases output, consumption, hours and productivity, and reduces the spread between loan and deposit rates. The effects of the credit shock tend to be highly persistent even without price rigidities and habit persistence in consumption behaviour.
    JEL: E32 E44 G21
    Date: 2011–10–07
  28. By: Kakarot-Handtke, Egmont
    Abstract: Any serious alternative to the standard approach requires a distinct axiomatic foundation. The crucial point is not axiomatization per se but the real world content of axioms. The purpose of the present paper is to make the implications of the objective structural axiom set concerning the relation of profit, money, the nominal/real rate of interest, and the time structure of production explicit and to contrast them with the familiar conceptions.
    Keywords: New framework of concepts; Structure-centric; Axiom set; Income categories; Factor income; Profit and rate of interest; Classical capitalist
    JEL: E40 B41
    Date: 2011–10–06
  29. By: Ashima Goyal (Indira Gandhi Institute of Development Research)
    Abstract: An SIIO paradigm, based on structure and ideas that become engraved in institutions and affect outcomes, is developed to examine and assesses monetary policy in India after independence. Narrative history, data analysis, and reporting of research demonstrate the dialectic between ideas and structure. Exogenous supply shocks are used to identify policy shocks and isolate their effects. It turns out policy was sometimes exceedingly tight when the common understanding was of a large monetary overhang. Fiscal dominance made policy procyclical. But the three factors that cause a loss of monetary autonomy-governments, markets and openness-are moderating each other. Markets moderate fiscal profligacy and global crises moderate markets and openness. Greater current congruence between ideas and structure is improving institutions and contributing to India's better performance.
    Keywords: Monetary policy history, Structure, Ideas, Institutions, Outcomes, India
    JEL: E42 E5 E58 E63
    Date: 2011–09
  30. By: Aleksander Berentsen; Samuel Huber; Alessandro Marchesiani
    Abstract: Do financial market participants free-ride on liquidity? To address this question, we construct a dynamic general equilibrium model where agents face idiosyncratic preference and technology shocks. A secondary financial market allows agents to adjust their portfolio of liquid and illiquid assets in response to these shocks. The opportunity to do so reduces the demand for the liquid asset and, hence, its value. The optimal policy response is to restrict (but not eliminate) access to the secondary financial market. The reason for this result is that the portfolio choice exhibits a pecuniary externality: An agent does not take into account that by holding more of the liquid asset, he not only acquires additional insurance but also marginally increases the value of the liquid asset which improves insurance to other market participants.
    Keywords: Monetary policy, liquidity, financial markets
    JEL: E52 E58 E59
    Date: 2011–09
  31. By: Poghosyan, K.; Boldea, O. (Tilburg University, Center for Economic Research)
    Abstract: Opting for structural or reduced form estimation is often hard to justify if one wants to both learn about the structure of the economy and obtain accurate predictions. In this paper, we show that using both structural and reduced form estimates simultaneously can lead to more accurate policy predictions. Our findings are based on using new information criteria whose econometric properties allow us to pick for both methods the impulse responses that are valid and relevant for prediction. We illustrate our findings in the context of analyzing the monetary transmission mechanism for Armenia. Based on picking valid and relevant information from both structural and reduced form matching estimation, our findings suggest that the interest rate targeting and the exchange rate channel are well specified and strongly reinforce each other in promoting the recent double-digit growth Armenia experienced before the crisis.
    Keywords: Armenia;monetary policy;structural model;GMM and MDE estimation;information criteria;valid and relevant IRFs.
    JEL: E52 E58 C52 C53
    Date: 2011
  32. By: Mueller, Marc; Ferrari, Emanuele
    Abstract: Quantitative policy analysts are usually confronted with the problem to derive a base-line scenario that reflects the most likely state of an economy in a future year. The methods used in practice to derive such a base-line scenarios are heterogeneous and range from the usage of the last observable year to complete and consistent estimation procedures. In the case of general equilibrium (CGE) analyses, the Scenar2020 project (European Commission 2006a) is one example how projections of macro-economic indicators (exogenous drivers) are used to construct the base-line as a model scenario: Starting from a calibrated version, exogenous variables are modified until macro-economic projections are met. However, numerous projections refer to economic indicators which are endogenous variables within the CGE framework, such as gross domestic product (GDP), market prices, or produced quantities. To investigate methods that allow integrating projections for endogenous CGE variables is the main topic of this study. Our starting point is the work by Arndt et al (2002), where entropy-based (Golan et al 1996) techniques are employed for the estimation of behavioural parameters by fitting a CGE model to time series on endogenous variables. Following this concept, we investigate a method to fit a CGE´s parameters and endogenous variables to market- and macro-economic projections from major research institutes.
    Keywords: general equilibrium model, baseline construction, parameter estimation, macro-economic projections, Research Methods/ Statistical Methods,
    Date: 2011–09–02
  33. By: Mary C. Daly; Bart Hobijn; Theodore S. Wiles
    Abstract: Using data from the Current Population Survey from 1980 through 2010 we examine what drives variation and cyclicality in the growth rate of real wages over time. We employ a novel decomposition technique that allows us to divide the time series for median weekly earnings growth into the part associated with the wage growth of persons employed at the beginning and end of the period (the wage growth effect) and the part associated with changes in the composition of earners (the composition effect). The relative importance of these two effects varies widely over the business cycle. When the labor market is tight job switchers get high wage increases, making them account for half of the variation in median weekly earnings growth over our sample. Their wage growth, as well as that of job-stayers, is procyclical. During labor market downturns, this procyclicality is largely offset by the change in the composition of the workforce, leading aggregate real wages to be almost noncyclical. Most of this composition effect works through the part-time employment margin. Remarkably, the unemployment margin neither accounts for much of the variation nor for much of the cyclicality of median weekly earnings growth.
    Keywords: Wages ; Labor market
    Date: 2011
  34. By: Sutt, Andres; Korju, Helen; Siibak, Kadri
    Abstract: The Estonian economy experienced an unusually long business and credit cycle during the first decade of the 21st century. The magnitude of the cycle tested what can be achieved by traditional policy tools and the limits of macro-prudential policies. The country's financial sector, almost fully consisting of foreign banks, displayed the complexities of cross-border regulation and supervision. Capital and liquidity requirements that were stricter than international minimums, as well as the build-up of fiscal buffers, were instrumental to engineering an orderly adjustment. Openness and integration, including well-advanced cross-border cooperation, were equally important in maintaining financial stability throughout the global financial crisis.
    Keywords: Banks&Banking Reform,Access to Finance,Debt Markets,Emerging Markets,Bankruptcy and Resolution of Financial Distress
    Date: 2011–10–01
  35. By: Andrew Atkeson; Ariel T. Burstein
    Abstract: We present a tractable model of innovating firms and the aggregate economy that we use to assess the link between the responses of firms to changes in innovation policy and the impact of those policy changes on aggregate output and welfare. We argue that the key theoretical determinant of the relative long-run aggregate impact of alternative policies is their impact on the expected profitability of entering firms. We show that, to a first-order approximation, a wide range of policy changes have a long-run aggregate impact in direct proportion to the fiscal expenditures on those policies, and that to evaluate the aggregate impact of such policy changes, there is no need to calculate changes in firms' decisions in response to these policy changes. We use these results to compare the relative magnitudes of the impact on aggregates in the long run of three innovation policies in the United States: the Research and Experimentation Tax Credit, federal expenditure on R&D, and the corporate profits tax. We argue that the corporate profits tax is a relatively important policy through its negative effects on innovation and physical capital accumulation that may well undo the benefits of federal support for R&D. We also use a calibrated version of our model to examine the absolute magnitude of the impact of these policies on aggregates. We show that, depending on the magnitude of spillovers, it is possible for changes in innovation policies to have a very large impact on aggregates in the long run. However, over a 15-year horizon, the impact of changes in innovation policies on aggregate output is not very sensitive to the magnitude of spillovers. On the basis of these results we conclude that, while it is possible to make comparisons about the relative importance of different policies and sharp predictions about their aggregate impact in the medium term, it is very difficult to shed much light on the implications of innovation policies for long-run aggregate outcomes and welfare without accurate estimates as to the magnitude of innovation spillovers.
    JEL: E6 O11 O3
    Date: 2011–10
  36. By: Alom, Fardous
    Abstract: This study investigates the economic effects of external oil and food price shocks in the context of selected Asia and Pacific countries including Australia, New Zealand, South Korea, Singapore, Hong Kong, Taiwan, India and Thailand. The study is conducted within the framework of SVAR model using quarterly data over the period 1980 to 2010 although start date varies based on availability of data. The study reveals that resource poor countries that specialize in heavy manufacturing industries like Korea and Taiwan are highly affected by international oil price shocks. Oil price shocks negatively affect industrial output growth and exchange rate and positively affect inflation and interest rates. On the other hand, oil poor nations such as Australia and New Zealand with diverse mineral resources other than oil are not affected by oil price shocks. Only exchange rates are affected by oil price shocks in these countries. Furthermore, countries that are oil poor but specialized in international financial services are also not affected by oil price increase. Similarly, developing country Like India with limited reserve of oil is not affected by oil price shock. However, Thailand possessing a number of natural resources other than oil is not accommodative of oil price shocks. Limited impact of food prices can be recorded for India, Korea and Thailand in terms of industrial output, inflation and interest rate. The major impact of food prices is that it helps depreciating real effective exchange rate for almost all countries except Singapore. As a whole, the effects of external oil and food prices depend on the economic characteristics of the countries. The empirical results of this study suggest that oil and food prices should be considered for policy and forecasting purposes especially for Korea, Taiwan and Thailand.
    Keywords: oil price, food price, shocks, economic effects, Asia, Pacific, SVAR, Agricultural and Food Policy, Demand and Price Analysis, Livestock Production/Industries,
    Date: 2011
  37. By: H. Cagri Akkoyun; Oguz Atuk; N. Alpay Kocak; M. Utku Ozmen
    Abstract: Many economic time series, specifically inflation, are inherently subject to seasonal fluctuations which obscure the real changes of the series. In this respect, seasonal adjustment is a powerful tool when removing such fluctuations. On the other hand, seasonal adjustment may provide highly volatile series, making it still difficult to interpret the movements of the series. The reason is that seasonal adjustment deals with certain type of movements that are completed on specific seasonal frequencies. However, it is possible that there may be other short term fluctuations occurring at non seasonal frequencies. From this observation and in the context of inflation, an improved methodology aiming to deal with all short term fluctuations that are completed within a year is proposed in this study. The two-step approach combines wavelet filters and band pass filters. This method yields much smoother time series than seasonal adjustment does. Moreover, the filtered series capture the dynamics of the inflation in sub groups well. Hence, this two-step procedure provides a useful tool for improved short term inflation analysis.
    Keywords: Consumer prices, inflation, seasonal adjustment, wavelet filter, band pass filter
    JEL: E31
    Date: 2011
  38. By: Lusine Lusinyan; Luc Eyraud
    Abstract: In many countries the decentralization of spending responsibilities has outpaced the decentralization of revenue powers. Sub-national governments have then to rely on transfers from the center and borrowing to finance their spending. When this occurs, we find that the overall fiscal deficit tends to increase. This result is based on cross-country econometric evidence from OECD countries, and is particularly strong in the presence of regional disparities. Fiscal discipline can be strengthened by ensuring that sub-national taxing powers are adequate to meet spending obligations.
    Keywords: Cross country analysis , Economic models , Fiscal policy , Fiscal reforms , Governance , Government expenditures , OECD , Revenues ,
    Date: 2011–09–29
  39. By: Saed Khalil (Palestine Monetary Authority & Birzeit University); Stephen Kinsella (Kemmy Business School, University of Limerick)
    Abstract: We investigate the propogation of contagion through banks' balance sheets in a two-country model. We simulate an increase in non-performing loans in one bank, and study the effects on other banks and the macro economy of each country. We show that credit crunches destabilize each economy in the short run and in the long run reduce potential output. We quantify this loss.
    Keywords: credit crunch, contagion, stock flow consistent models
    JEL: E32 E37 E51 G33
    Date: 2011–10–06
  40. By: Huw Dixon (Cardiff Business School); Engin Kara (University of Bristol, Economics Department)
    Abstract: We estimate and compare two models, the Generalized Taylor Economy (GTE) and the Multiple Calvo model (MC); that have been built to model the distributions of contract lengths observed in the data. We compare the performances of these models to those of the standard models such as the Calvo and its popular variant, using the ad hoc device of indexation. The estimations are made with Bayesian techniques for the US data. The results indicate that the data strongly favour the GTE.
    Keywords: DSGE models, Calvo, Taylor, price-setting.
    JEL: E32 E52 E58
    Date: 2011–10
  41. By: Anton Nakov (Banco Central Europeo); Galo Nuño (Banco de España)
    Abstract: We present a general equilibrium model of the global oil market, in which the oil price, oil production, and consumption, are jointly determined as outcomes of the optimizing decisions of oil importers and oil exporters. On the supply side the oil market is modelled as a dominant firm – Saudi Aramco – with competitive fringe. We establish that a dominant firm may exist as long as it enjoys a cost advantage over the fringe. We provide an expression for the optimal markup and compute the spare capacity maintained by such a firm. The model produces plausible dynamics in response to oil supply and oil demand shocks. In particular, it reproduces successfully the jump in oil output of Saudi Aramco following the output collapse of Iraq and Kuwait during the first Gulf War, explaining it as the profit-maximizing response of the dominant firm. Oil taxes and subsidies affect the oil price and welfare through their effect on the trade-off between oil production efficiency and oil market competition.
    Keywords: oil price, oil production, dominant firm, Saudi Aramco, oil tax
    JEL: E32 Q43
    Date: 2011–10
  42. By: Buncic, Daniel; Martin, Melecky
    Abstract: Drawing on the lessons from the global financial crisis and especially from its impact on the banking systems of Eastern Europe, the paper proposes a new practical approach to macroprudential stress testing. The proposed approach incorporates: (i) macroeconomic stress scenarios generated from both a country specific statistical model and historical cross-country crises experience; (ii) indirect credit risk due to foreign currency exposures of unhedged borrowers; (iii) varying underwriting practices across banks and their asset classes based on their relative aggressiveness of lending; (iv) higher correlations between the probability of default and the loss given default during stress periods; (v) a negative effect of lending concentration and residual loan maturity on unexpected losses; and (vi) the use of an economic risk weighted capital adequacy ratio as the relevant outcome indicator to measure the resilience of banks to materialising credit risk. We apply the proposed approach to a set of Eastern European banks and discuss the results.
    Keywords: Macroprudential Supervision; Stress Test; Individual Bank Data; Eastern Europe
    JEL: E58 G28 G21
    Date: 2011–09–28
  43. By: Guglielmo Maria Caporale; Ricardo M. Souza
    Abstract: In this paper, we show, using the consumer's budget constraint, that the residuals of the trend relationship among consumption, aggregate wealth, and labour income should predict both stock returns and housing returns. We use quarterly data for a panel of 31 emerging economies and find that, when agents expect future stock returns to be higher, they will temporarily allow consumption to rise. Regarding housing returns, if housing assets are complementary to stocks, then investors react in the same way. If, however, the increase in the exposure through risky assets is achieved by lowering the share of wealth held in the form of housing (i.e., when stock and housing assets are substitutes), then they will temporarily reduce their consumption.
    Keywords: consumption, wealth, stock returns, housing returns, emerging markets
    JEL: E21 E44 D12
    Date: 2011
  44. By: Gregory C. Chow (Princeton University)
    Abstract: This paper provides a statistical reason and strong econometric evidence for supporting the adaptive expectations hypothesis in economics. It points out why the rational expectations hypothesis was embraced by the economics profession without sufficient evidence. Finally it will summarize the conditions under which these two competing hypotheses can be used effectively.
    Keywords: macroeconomics, adaptive expectations, rational expectations
    JEL: E00
    Date: 2011–09
  45. By: Siamond, Peter A. (Massachusetts Institute of Technology)
    Abstract: My grandparents immigrated to the U.S. around the turn of the last century. My mother’s parents and six older siblings came from Poland. My father’s parents met in New York, she having come from Russia and he from Romania. My parents, both born in 1908, grew up in New York and never lived outside the metropolitan area. Both finished high school and went to work, my father studying at Brooklyn Law School at night while selling shoes during the day. When they married in 1929, my mother was earning $15 a week as a bookkeeper and my father, $5 a week as a novice lawyer.
    Keywords: Search frictions;
    JEL: E24 J64
    Date: 2011
  46. By: Joel López Real (Universitat Autónoma de Barcelona)
    Abstract: While the immigration policy in the U.S. is mainly oriented to family reunification, in Australia, Canada and the U.K. it is a points-based immigration system which main objective is to attract high skilled immigrants. This paper compares both immigration policies through the transition for the U.S. and Mexico. I find that: (i) The point system increases the average years of the immigrants by 3.5 years. (ii) The Mexican immigrants suffer a 10% reduction in their effective hours of labor when they move to the U.S. (iii) Migration reduces inequality, more significantly if the immigration policy is the point system and increases output per capita differences between both countries. (iv) The offspring of the immigrants invest more in human capital than the U.S. natives. (v) The earnings ratio immigrants to the U.S. natives is lower under the quota system than under the point system but along the transition it reverses converging at the steady state.
    Keywords: Migration, self-selection, human capital, immigration policies
    JEL: E20 F22 J61 O11
    Date: 2011
  47. By: Marta Gómez-Puig (University of Barcelona & RFA-IREA); Simón Sosvilla-Rivero (Universidad Complutense de Madrid)
    Abstract: Our research aims to analyze the causal relationships in the behavior of public debt issued by peripheral member countries of the European Economic and Monetary Union (EMU), with special emphasis on the recent episodes of crisis triggered in the eurozone sovereign debt markets since 2009. With this goal in mind, we make use of a database of daily frequency of yields on 10-year government bonds issued by five EMU countries (Greece, Ireland, Italy, Portugal and Spain), covering the entire history of the EMU from its inception on 1 January 1999 until 31 December 2010. In the first step, we explore the pair-wise causal relationship between yields, both for the whole sample and for changing subsamples of the data, in order to capture the possible timevarying causal relationship. This approach allows us to detect episodes of contagion between yields on bonds issued by different countries. In the second step, we study the determinants of these contagion episodes, analyzing the role played by different factors, paying special attention to instruments that capture the total national debt (domestic and foreign) in each country.
    Keywords: Sovereign bond yields, causality, time-varying contagion, euro area, peripheral EMU countries
    JEL: E44 F36 G15
    Date: 2011–10
  48. By: Hazan, Moshe; Zoabi, Hosny
    Abstract: Conventional wisdom suggests that in developed countries income and fertility are negatively correlated. We present new evidence that between 2001 and 2009 the cross-sectional relationship between fertility and women's education in the U.S. is U-shaped. At the same time, average hours worked increase monotonically with women's education. This pattern is true for all women and mothers to newborns regardless of marital status. In this paper, we advance the marketization hypothesis for explaining the positive correlation between fertility and female labor supply along the educational gradient. In our model, raising children and home-making require parents' time, which could be substituted by services bought in the market such as baby-sitting and housekeeping. Highly educated women substitute a significant part of their own time for market services to raise children and run their households, which enables them to have more children and work longer hours. Finally, we use our model to shed light on differences between the U.S. and Western Europe in fertility and women's time allocated to labor supply and home production. We argue that higher inequality in the U.S. lowers the cost of baby-sitting and housekeeping services and enables U.S. women to have more children, spend less time on home production and work more than their European counterparts.
    Keywords: fertility; U.S. - Europe differences; Women's education
    JEL: E24 J13 J22
    Date: 2011–10
  49. By: Makoto Kakinaka (International University of Japan); Hiroaki Miyamoto (International University of Japan)
    Abstract: This paper studies a long-run relationship between the labor force participation rate and the unemployment rate in Japan. By using cointegration analysis, we demonstrate that there exists a long-run relationship between the two variables for male workers but not for female workers. Furthermore, using labor force data by age group, we find the added-worker effect for young males and the discouraged worker effect for middle-aged and old male groups.
    JEL: E24 J60
    Date: 2011–03

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