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on Macroeconomics |
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Issue of 2012‒03‒14
37 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Giovanni Dosi; Giorgio Fagiolo; Mauro Napoletano; Andrea Roventini |
| Abstract: | This work studies the interactions between income distribution and monetary and fiscal policies in terms of ensuing dynamics of macro variables (GDP growth, unemployment, etc.) on the grounds of an agent-based Keynesian model. The direct ancestor of this work is the "Keynes meeting Schumpeter" formalism presented in Dosi et al. (2010). To that model, we add a banking sector and a monetary authority setting interest rates and credit lending conditions. The model combines Keynesian mechanisms of demand generation, a "Schumpeterian" innovation-fueled process of growth and Minskian credit dynamics. The robustness of the model is checked against its capability to jointly account for a large set of empirical regularities both at the micro level and at the macro one. The model is able to catch salient features underlying the current as well as previous recessions, the impact of financial factors and the role in them of income distribution. We find that different income distribution regimes heavily affect macroeconomic performance: more unequal economies are exposed to more severe business cycles fluctuations, higher unemployment rates, and higher probability of crises. On the policy side, fiscal policies do not only dampen business cycles, reduce unemployment and the likelihood of experiencing a huge crisis. In some circumstances they also affect positively long-term growth. Further, the more income distribution is skewed toward profits, the greater the effects of fiscal policies. About monetary policy, we find a strong non-linearity in the way interest rates affect macroeconomic dynamics: in one "regime" with low rates, changes in interest rates are ineffective up to a threshold beyond which increasing the interest rate implies smaller output growth rates and larger output volatility, unemployment and likelihood of crises. |
| Keywords: | agent-based Keynesian models, multiple equilibria, fiscal and monetary policies, income distribution, transmission mechanisms, credit constraints |
| JEL: | E32 E44 E51 E52 E62 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2012-5&r=mac |
| By: | Mayer, Eric; Rüth, Sebastian; Scharler, Johann |
| Abstract: | We analyze the influence of the fiscal position on the transmission of government spending shocks in a New Keynesian model. We find that once we allow for positive levels of government debt in the steady state, the sign and the size of the fiscal multiplier depend strongly on the horizon at which the multiplier is evaluated. While the long-run effect of a fiscal policy innovation is typically of a similar order of magnitude as in Gali et al. (2007), short-run multipliers differ substantially. The reason for this non-monotonic behavior is the interaction between the dynamics of the inflation rate and the debt level in real terms, which is absent in standard models in which government debt is restricted to be equal to zero in the steady state. -- |
| Keywords: | fiscal multiplier,New Keynesian model,government debt,inflation |
| JEL: | E31 E62 H63 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wuewep:87&r=mac |
| By: | Ziegler, Christina |
| Abstract: | Monetary policy in CEE is an important determinant in the wage bargaining process, because trade unions have to predict inflation as one component of future real wages. This paper scrutinizes whether countries in CEE that officially announce an inflation target are tempted to act time-inconsistently and switch from the announced inflation target to an exchange rate target in order to sustain higher output via surprise inflation. If market participants discover the time-inconsistency, they will adjust their inflation expectations, which result in higher average rates of price increases. The time-inconsistent behavior in central bank interest rate setting is modeled by several Taylor rules. An empirical application provides evidence that some monetary authorities in CEE such as the Czech Republic and Slovakia have acted timeinconsistent and have focused on the exchange rate in periods of official inflation targeting, which might have contributed to higher average rates of inflation and welfare losses. Furthermore, uncertainty in wage determination process has risen due to a harder predictability of productivity and inflation as components of future nominal wages. -- |
| Keywords: | monetary policy,Taylor rules,exchange rate regime,Central and Eastern Europe,inflation targeting |
| JEL: | E52 E58 F31 O52 P20 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:leiwps:104&r=mac |
| By: | Mavromatis, Konstantinos (Department of Economics, University of Warwick and Warwick Business School, Finance Group,) |
| Abstract: | In this paper I show, using both empirical and theoretical analysis, that changes in monetary policy in one country can have important e.ects on other economies. My ew empirical evidence shows that changes in the monetary policy behaviour of the Fed since the start of the Euro, well captured by a Markov-switching Taylor rule, have had significant e.ects on the behaviour of inflation and output in the Eurozone even though ECB’s monetary policy is found to be fairly stable. Using a two-country DSGE model, I examine this case theoretically; monetary policy in one of the countries (labelled foreign) switches regimes according to a Markov-switching process and this has nonnegligible e.ects in the other (home) country. Switching by the foreign central bank renders commitment to a time invariant interest rate rule suboptimal for the home central bank. This is because home agents expectations change as foreign monetary policy changes which a.ects the dynamics of home inflation and output. Optimal policy in the home country instead reacts to the regime of the foreign monetary policy and so implies a time-varying reaction of the home Central Bank. Following this time-varying optimal policy at home eliminates the e.ects in the home country of foreign regime shifts, and also reduces dramatically the e.ects in the foreign country. Therefore, changes in foreignmonetary regimes should not be neglected in considering monetary policy at home. Key words: Markov-switching DSGE ; Optimal monetary policy ; Dynamic programming ;SVAR ; real-time data. JEL Classification: E52 ; F41 ; F42. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:982&r=mac |
| By: | Bofinger, Peter |
| Abstract: | It is often said that after the crisis economic textbooks have to be rewritten. However, as surveys show, almost all professors continue using the standard IS-LM/AS-AD model as the workhorse for undergraduate training. This paper shows that the IS-LM/AS-AD model is not only full of obvious inconsistencies, e.g. using two aggregate demand and two aggregate supply curves, it also presents the economy as an inherently stable system which is only destabilized by wage rigidities and policy shocks. Thus, it cannot explain involuntary unemployment and it pretends that deflation is a self-stabilizing mechanism if an economy is affected by a negative demand shock. This paper shows that it is relatively easy to reinterpret the basic model in a way that inconsistencies can be avoided and the inherent instability of macroeconomic processes which underlies the Keynesian paradigm can be demonstrated. It also allows a discussion of monetary policy in a more topical way than the traditional LM-curve. -- |
| Keywords: | Keynesian economics,AS/AD model,economic crisis,cyclical unemployment |
| JEL: | A10 A11 A22 E12 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wuewep:86&r=mac |
| By: | Bianca De Paoli; Pawel Zabczyk |
| Abstract: | This paper analyzes the conduct of monetary policy in an environment in which cyclical swings in risk appetite affect households' propensity to save. It uses a New-Keynesian model featuring external habit formation to show that taking note of precautionary saving motives justifies an accommodative policy bias in the face of persistent, adverse disturbances. Equally, policy should be more restrictive - i.e. `lean against the wind' - following positive shocks. Since the size of these `risk-adjustments' is increasing in the degree of macroeconomic volatility, ignoring this channel could lead to larger policy errors in turbulent times - with good luck translating into good policy. |
| Keywords: | precautionary saving, monetary policy, cyclical risk aversion, macro-finance, non-linearities |
| JEL: | E32 G12 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1132&r=mac |
| By: | Slim Bridji |
| Abstract: | Using the business cycle accounting framework [Chari V., P. Kehoe and E. McGrattan 2007. Business Cycle Accounting. Econometrica 75, 781-836.], this paper sheds new light on the French Great Depression. Frictions that reduce the efficiency with which factor inputs are used (efficiency wedge) were the primary factor in the economic downturn. The decline in consumption can be attributed to distortions in the Euler equation (investment wedge). In addition, frictions creating a gap between the marginal rate of substitution and the marginal product of labor (labor wedge) contributed to the slowdown of the economy after 1936. This drop in the efficiency wedge might have resulted from financial frictions and tariff policies, whereas the investment wedge might have been caused by financial frictions due to agency costs. A potential explanation for the decline of the labor wedge after 1936 is institutionals changes in the labor market. |
| Keywords: | Business cycle accounting, French economy, Great Depression |
| JEL: | E32 N14 N44 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:065&r=mac |
| By: | Belliveau, Stefan |
| Abstract: | An analysis of the multiplier for the US federal government's consumption expenditures is presented. A simple approach to identify the influence of the federal government's consumption expenditures on economic activity using reduced-form equations is clearly presented and examined using annual US data from 1929-2011. The conclusion from this analysis is that estimates from reduced-form equations can inform fiscal-policy decision making. |
| Keywords: | Business cycles; fiscal policy |
| JEL: | E62 E32 |
| Date: | 2012–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37103&r=mac |
| By: | Reza Siregar (Asian Development Bank Institute (ADBI)) |
| Abstract: | New lessons, challenges, and debates have emerged from the subprime crisis in the United States. While the macroeconomic orientation is not new and has always been among the classic toolkits of central banks for ensuring financial stability, the current explicit articulation and specification of such a tool as a global standard is new. The objective of this study is to review and analyze the steps taken by the central banks and monetary authorities of select Asian countries to strengthen their prudential regulations, mainly the macro-prudential component of such regulations. |
| Keywords: | Banking Regulation, Macro-prudential approache, prudential regulations, Financial Stability, central banks, Asia |
| JEL: | E52 E58 G28 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:eab:financ:23211&r=mac |
| By: | Reza Siregar (Asian Development Bank Institute (ADBI)) |
| Abstract: | New lessons, challenges, and debates have emerged from the subprime crisis in the United States. While the macroeconomic orientation is not new and has always been among the classic toolkits of central banks for ensuring financial stability, the current explicit articulation and specification of such a tool as a global standard is new. The objective of this study is to review and analyze the steps taken by the central banks and monetary authorities of select Asian countries to strengthen their prudential regulations, mainly the macro-prudential component of such regulations. |
| Keywords: | Banking Regulation, Macro-prudential approache, prudential regulations, Financial Stability, central banks, Asia |
| JEL: | E52 E58 G28 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:eab:macroe:23211&r=mac |
| By: | Robert Amzallag |
| Abstract: | Once the 2009 financial meltdown was avoided through central banks’ decisive action and governments’ swift bailouts, the general consensus was that the usual recipes that took us back to prosperity and growth after each of the post war recessions should undoubtedly work again. The main tools selected by the authorities were fiscal stimulus, lowering of interest rates combined with monetary easing, politically motivated legislation and high profile chastising to keep the public satisfied that the authorities were extirpating the roots of the problem. These remedies were applied and, for a while, seemed to work: stock prices recovered, the US job market stabilized, bail out money started to be repaid and economic growth, although sluggish, appeared to be well into positive territory. <p> However, two years later, another serious financial crisis unexpectedly struck. There seemed to be no reason for it. Indeed, this had not been the first time we faced a real estate/financial crisis. For example, in 1990, real estate prices went down even more than they have had since 2008. The amounts dedicated to the stimulus packages and monetary easing were unprecedented and imposing pieces of legislation were quickly passed. So how could this have happened? The answer to this question requires a careful analysis of the nature of the 2008 crisis, the then prevailing economic conditions and the relevance of the measures taken. <P> |
| Date: | 2012–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirtra:2012dt-01&r=mac |
| By: | Thomas A. Lubik; Wing Leong Teo |
| Abstract: | We derive and estimate a New Keynesian Phillips curve (NKPC) in a model where consumers are assumed to have deep habits. Habits are deep in the sense that they apply to individual consumption goods instead of aggregate consumption. This alters the NKPC in a fundamental manner as it introduces expected and contemporaneous consumption growth as well as the expected marginal value of future demand as additional driving forces for inflation dynamics. We construct the driving process in the deep habits NKPC by using the model’s optimality conditions to impute time series for unobservable variables. The resulting series is considerably more volatile than unit labor cost. General Methods of Moments (GMM) estimation of the NKPC shows an improved fit and a much lower degree of indexation than in the standard NKPC. Our analysis also reveals that the crucial parameters for the performance of the deep habit NKPC are the habit parameter and the substitution elasticity between differentiated products. The results are broadly robust to alternative specifications. |
| JEL: | E31 E32 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:acb:camaaa:2012-09&r=mac |
| By: | Deepankar Basu (Universty of Massachusetts); Ying Chen (University of Massachusetts-Amherst); Jong-seok Oh (University of Massachusetts-Amherst) |
| Abstract: | Building on Marx’s insights in Chapter 25, Volume I of Capital, an augmented version of the cyclical profit squeeze (CPS) theory offers a plausible explanation of macroeconomic fluctuations under capitalism. The pattern of dynamic interactions that emerges from a 3-variable (profit share, unemployment rate and nonresidential fixed investment) vector autoregression estimated with quarterly data for the postwar U.S. economy is consistent with the CPS theory for the regulated (1949Q1–1975Q1) as well as for the neoliberal periods (starting in 1980 or in 1985). Hence, the CPS mechanism seems to be in operation even under neoliberalism. JEL Categories: B51; C22 |
| Keywords: | cyclical profit squeeze, vector autoregression |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2012-02&r=mac |
| By: | Peter J. Morgan (Asian Development Bank Institute (ADBI)) |
| Abstract: | The adoption of quantitative easing (QE) policy by the United States (US) Federal Reserve Bank since early 2009 has aroused widespread concerns in Asia and elsewhere regarding its possible impact in terms of the weakening of the US dollar and stimulating capital outflows to emerging economies that might increase inflationary pressures in them. This report investigates possible impacts of US quantitative easing policy on Asian economies and financial markets. Our basic approach is to take the period of November 2009–October 2010, when no quantitative easing took place, as a baseline period against which we can compare the effects of quantitative easing on monetary flows during the “QE1†and “QE2†periods. We estimate that about 40% of the increase in the US monetary base in the QE1 period leaked out in the form of increased gross private capital outflows and about one-third leaked out during the first two quarters of the QE2 period. An excess private financial capital inflow to Emerging Asia of $9 billion per quarter was estimated for the first two quarters of the QE2 period, which was relatively consistent with the estimated amounts of the excess increases in foreign exchange reserves and the monetary base in the region during that period. However, this amount is small, and hence was unlikely to have a significant impact on financial markets, economic activity or inflation. We also investigate the impacts of QE policy on regional bond yields and exchange rates using event window analysis, and find that the greatest impacts were a stronger Korean won and lower bond yields in Indonesia. |
| Keywords: | financial markets, capital outflows, quantitative easing, the US, Emerging Asia |
| JEL: | E43 E52 E58 F31 F32 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:eab:financ:23215&r=mac |
| By: | Peter J. Morgan (Asian Development Bank Institute (ADBI)) |
| Abstract: | The adoption of quantitative easing (QE) policy by the United States (US) Federal Reserve Bank since early 2009 has aroused widespread concerns in Asia and elsewhere regarding its possible impact in terms of the weakening of the US dollar and stimulating capital outflows to emerging economies that might increase inflationary pressures in them. This report investigates possible impacts of US quantitative easing policy on Asian economies and financial markets. Our basic approach is to take the period of November 2009–October 2010, when no quantitative easing took place, as a baseline period against which we can compare the effects of quantitative easing on monetary flows during the “QE1†and “QE2†periods. We estimate that about 40% of the increase in the US monetary base in the QE1 period leaked out in the form of increased gross private capital outflows and about one-third leaked out during the first two quarters of the QE2 period. An excess private financial capital inflow to Emerging Asia of $9 billion per quarter was estimated for the first two quarters of the QE2 period, which was relatively consistent with the estimated amounts of the excess increases in foreign exchange reserves and the monetary base in the region during that period. However, this amount is small, and hence was unlikely to have a significant impact on financial markets, economic activity or inflation. We also investigate the impacts of QE policy on regional bond yields and exchange rates using event window analysis, and find that the greatest impacts were a stronger Korean won and lower bond yields in Indonesia. |
| Keywords: | financial markets, capital outflows, quantitative easing, the US, Emerging Asia |
| JEL: | E43 E52 E58 F31 F32 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:eab:macroe:23215&r=mac |
| By: | Liliana Rojas-Suarez and Carlos Montoro |
| Abstract: | The financial systems in emerging market economies during the 2008–09 global financial crisis performed much better than in previous crisis episodes, albeit with significant differences across regions. For example, real credit growth in Asia and Latin America was less affected than in Central and Eastern Europe. This paper identifies the factors at both the country and the bank levels that contributed to the behavior of real credit growth in Latin America during the global financial crisis. The resilience of real credit during the crisis was highly related to policies, measures and reforms implemented in the pre-crisis period. In particular, we find that the best explanatory variables were those that gauged the economy’s capacity to withstand an external financial shock. Key were balance sheet measures such as the economy’s overall currency mismatches and external debt ratios (measuring either total debt or short-term debt). The quality of pre-crisis credit growth mattered as much as its rate of expansion. Credit expansions that preserved healthy balance sheet measures (the “quality” dimension) proved to be more sustainable. Variables signalling the capacity to set countercyclical monetary and fiscal policies during the crisis were also important determinants. Moreover, financial soundness characteristics of Latin American banks, such as capitalization, liquidity and bank efficiency, also played a role in explaining the dynamics of real credit during the crisis. We also found that foreign banks and banks which had expanded credit growth more before the crisis were also those that cut credit most. The methodology used in this paper includes the construction of indicators of resilience of real credit growth to adverse external shocks in a large number of emerging markets, not just in Latin America. As additional data become available, these indicators could be part of a set of analytical tools to assess how emerging market economies are preparing themselves to cope with the adverse effects of global financial turbulence on real credit growth. |
| Keywords: | Latin America, credit growth, global financial crisis, emerging markets, financial resilience, vulnerability indicators |
| JEL: | E65 G2 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:cgd:wpaper:289&r=mac |
| By: | Coen Teulings |
| Abstract: | <p>The authors analyze a general search model with on-the-job search and sorting of heterogeneous workers into heterogeneous jobs.</p><p>This model yields a simple relationship between (i) the unemployment rate, (ii) the value of non-market time, and (iii) the max-mean wage differential. The latter measure of wage dispersion is more robust than measures based on the reservation wage, due to the long left tail of the wage distribution. We estimate this wage differential using data on match quality and allow for measurement error. The estimated wage dispersion and mismatch for the US is consistent with an unemployment rate of 5%. Finally, we find that without search frictions, output would be 6.6% higher.</p> |
| JEL: | E24 J62 J63 J64 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:206&r=mac |
| By: | Markus K. Brunnermeier; Thomas M. Eisenbach; Yuliy Sannikov |
| Date: | 2012–02–29 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:786969000000000384&r=mac |
| By: | Adenutsi, Deodat E.; Aziakpono, Meshach J.; Ocran, Matthew K. |
| Abstract: | This paper identifies the core macroeconomic factors responsible for explaining the changing levels in international remittances received by SSA countries. A set of annual panel data on 36 SSA countries, covering 1980-2009, was used in a ‘system’ Generalised Method of Moments following Blundell and Bond (1998) dynamic panel-data estimation technique. In order to provide a more detailed insight into the possible dynamics of varying impact of macroeconomic variables that explain remittances received in SSA, decade-based (1980-89, 1990-99, and 2000-09), as well as an overall study period, 1980-2009, estimations were carried out. It was found that both migrant home-country and host-country macroeconomic environment impact on remittance inflows in SSA with a varying impact overtime. In absolute terms, generally, whilst the impact of real exchange rate, migrant income, and institutional quality has been increasing on remittances overtime, the effects of family income and the rate of inflation has be decreasing overtime |
| Keywords: | Migrant; Remittances; Macroeconomic Policy; system Dynamic GMM Panel Estimation |
| JEL: | F22 C23 J3 F24 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37067&r=mac |
| By: | Luis Araujo (Michigan State University and SÆo Paulo School of EconomicsV); Raoul Minetti (Michigan State University) |
| Abstract: | We investigate the effects of a credit crunch in an economy where firms can operate a mature technology or restructure their activity and adopt a new technology. We show that firms' collateral and credit relationships ease firms' access to credit and investment but can also inhibit firms' restructuring. When this occurs, negative collateral or productivity shocks and the resulting drop in the price of collateral assets squeeze collateral-poor firms out of the credit market but foster the restructuring of collateral-rich firms. We characterize conditions under which such an increase in firms' restructuring occurs within existing credit relationships or through their breakdown. The analysis reveals that the credit and asset market policies adopted during the recent credit crunch can promote investment but might also slow down a process of Shumpeterian restructuring in the credit market. |
| Keywords: | Aggregate Restructuring, Collateral, Credit Crunch, Credit Relationships |
| JEL: | E44 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wmofir:61&r=mac |
| By: | Matthias Morys |
| Abstract: | This paper asks why the Classical Gold Standard (1870s - 1914) emerged: Why did the vastmajority of countries tie their currencies to gold in the late 19th century, while there was onlyone country – the UK – on gold in 1850? The literature distinguishes a number of theories toexplain why gold won over bimetallism and silver. We will show the pitfalls of these theories(macroeconomic theory, ideological theory, political economy of choice between gold andsilver) and show that neither the early English lead in following gold nor the German shift togold in 1873 were as decisive as conventional accounts have it. Similarly, we argue that thesilver supply shock materializing in the early 1870s was only the nail in the coffin of silverand bimetallic standards. Instead, we focus on the impact of the 1850s gold supply shock (dueto the immense gold discoveries in California and Australia) on the European monetarysystem. Studying monetary commissions in 13 European countries between 1861 and 1874,we show that the pan-European movement in favour of gold monometallism was motivatedby three key factors: gold being available in sufficient quantities to actually contemplate thetransition to gold monometallism for a larger number of countries (while silver had becomeextremely scarce in the bimetallic bloc, which was the single most important currency area interms of GDP), widespread misgivings over the working of bimetallism and the fact that goldcould encapsulate substantially more value in the same volume than silver (i.e. coinconvenience). In our view, then, the emergence of the Classical Gold Standard was imminentin the late 1860s; which European country would move first – which is often erroneouslyattributed to Germany – is of secondary importance. |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:yor:cherry:12/01&r=mac |
| By: | Matthias Morys |
| Abstract: | Drawing on a new data set of monthly observations, this paper investigates similarities and differences in discount rate policy of 12 European countries under the Classical Gold Standard; it asks, in particular, whether bank rate policy followed different patterns in core and peripheral countries. Based on OLS, ordered probit and pooled estimations of central bank discount rate behaviour, two main findings emerge: first, the discount rate decisions of core countries were motivated by keeping the exchange-rate within the gold points. In stark contrast, the discount rate decisions of peripheral countries reflected changes in the domestic cover ratio. The main reason for the different behaviour was the limited effectiveness of the discount rate tool for peripheral countries which resulted in more frequent gold point violations. Consequently, peripheral countries relied on high reserve levels and oriented their discount rate policy towards maintaining the reserve level. Second, interest rate decisions were influenced by Berlin and London to a similar degree, suggesting that the European branch of the Classical Gold Standard was less London-centered than hitherto assumed. In establishing general patterns of discount rate policy, this paper aims to contribute to the wider question of monetary policy under the gold standard and the core-periphery dichotomy. |
| Keywords: | gold standard, rules of the game, balance-of-payment adjustment, central banking |
| JEL: | E4 E5 E6 F3 N13 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:yor:cherry:12/02&r=mac |
| By: | Luo Ping (Asian Development Bank Institute (ADBI)) |
| Abstract: | Reform of financial regulation is a priority on the international agenda. At the call of the Group of Twenty Finance Ministers and Central Bank Governors (G-20), a number of new international standards have been issued, most notably Basel III. As a member of the G-20, the Financial Stability Board (FSB), and the Basel Committee on Banking Supervision, the People’s Republic of China (PRC) is now on a faster track in adopting international standards. However, the key issue for the PRC—as well as many other emerging markets—is to how to keep focused on the domestic policy agenda while adopting the new global standards. Fortunately, the PRC’s financial system has proved resilient to the recent financial crisis. As a result, banks in the PRC find it quite easy to meet the new Basel III capital and liquidity standards. Basel III is only part of an effective regulatory framework. While phasing in Basel III, the PRC needs other prudential tools such as a new provision ratio, in addition to the provision coverage ratio. Activity restriction will be another effective tool with the potential to prevent banks from becoming too complicated for bankers to manage and for the regulator to supervise. As we work hard to improve the effectiveness of the regulatory system at both the global and national level, we should remind ourselves of the importance of keeping the balance between enhanced regulation and promoting financial innovation—without the pendulum swinging too far. |
| Keywords: | financial regulation, China, financial sector, banking supervision, regulatory framework |
| JEL: | E44 E52 E58 G18 G28 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:eab:govern:23226&r=mac |
| By: | Luo Ping (Asian Development Bank Institute (ADBI)) |
| Abstract: | Reform of financial regulation is a priority on the international agenda. At the call of the Group of Twenty Finance Ministers and Central Bank Governors (G-20), a number of new international standards have been issued, most notably Basel III. As a member of the G-20, the Financial Stability Board (FSB), and the Basel Committee on Banking Supervision, the People’s Republic of China (PRC) is now on a faster track in adopting international standards. However, the key issue for the PRC—as well as many other emerging markets—is to how to keep focused on the domestic policy agenda while adopting the new global standards. Fortunately, the PRC’s financial system has proved resilient to the recent financial crisis. As a result, banks in the PRC find it quite easy to meet the new Basel III capital and liquidity standards. Basel III is only part of an effective regulatory framework. While phasing in Basel III, the PRC needs other prudential tools such as a new provision ratio, in addition to the provision coverage ratio. Activity restriction will be another effective tool with the potential to prevent banks from becoming too complicated for bankers to manage and for the regulator to supervise. As we work hard to improve the effectiveness of the regulatory system at both the global and national level, we should remind ourselves of the importance of keeping the balance between enhanced regulation and promoting financial innovation—without the pendulum swinging too far. |
| Keywords: | financial regulation, China, financial sector, banking supervision, regulatory framework |
| JEL: | E44 E52 E58 G18 G28 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:eab:financ:23226&r=mac |
| By: | Mara Gloria; François Vaillancourt |
| Abstract: | <P>Cette étude utilise les techniques de cointégration CCR, FM-MCO, MCOD, et le VECM de Johansen pour trouver les déterminants macroéconomiques de l’épargne canadienne et québécoise entre 1981 et 2010. Trois spécifications de l’épargne sont utilisées : l’épargne en millions $, l’épargne en log naturel et le taux d’épargne personnel. Les variables explicatives provenant de la théorie de la consommation et utilisées dans les estimations sont : la richesse nette, le revenu disponible, le crédit à la consommation, le crédit hypothécaire, les contributions des employés au REER et au RPA, le taux d’intérêt réel, l’inflation, la participation des femmes au marché du travail, et les proportions selon l’âge de la population. <p> Selon les tests de racine unitaire de Phillips-Perron, la majorité des variables sont soit I(0) soit I(1), mais l’ordre d’intégration des contributions aux régimes de pension privés et des proportions de la population selon l’âge oscille entre stationnaire autour d’une tendance I(1) et I(2). Les trois spécifications de l’épargne sont cointégrées selon le test de cointégration d’Engle-Granger. Le test de Johansen détecte même plusieurs relations de cointégration, c’est ce qui complique beaucoup l’estimation d’un modèle à correction d’erreur. <p> Selon les élasticités des relations de long terme estimées par les différentes techniques de cointégration, la meilleure spécification pour étudier l’épargne canadienne et québécoise est le taux d’épargne. Un modèle à correction d’erreur de Johansen est alors implémenté pour cette spécification de l’épargne pour le Canada et le Québec. <p> Les résultats de l’analyse impulsionnelle tirée du modèle canadien indiquent qu’un choc sur la richesse nette ou sur le crédit hypothécaire ou sur le taux d’intérêt réel aurait un impact positif sur le taux d’épargne canadien tandis qu’un choc sur les contributions au REER ou sur la participation des femmes au marché du travail aurait un impact négatif et permanent. Le crédit à la consommation aurait un impact négatif pendant quatre trimestres; ensuite l’impact est positif mais il ne converge pas. L’impact de l’inflation est très petit. <p> Dans le cas de l’analyse impulsionnelle québécoise, un choc sur la richesse nette ou sur le crédit à la consommation ou sur le crédit hypothécaire ou sur le taux d’intérêt aurait un impact positif et permanent sur le taux d’épargne. Celui des contributions au REER est d’abord positif mais il décroit et devient négatif à partir du 4e trimestre sans converger vers une valeur. Un choc sur la participation des femmes au marché du travail a d’abord un impact négatif; ensuite l’impact converge vers une valeur positive. L’inflation aurait en grande partie un impact positif sur le taux d’épargne. <p> Il faut noter que les analyses impulsionnelles sont peut-être biaisées et ne sont pas robustes à cause de la difficulté à bien identifier les relations de cointégration dans le modèle à correction d’erreur du Canada et en particulier du Québec. |
| Date: | 2012–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirpro:2012rp-01&r=mac |
| By: | Leo Krippner |
| Abstract: | Yield curve models within the popular Nelson and Siegel (hereafter NS) class are shown to arise from a formal low-order Taylor approximation to the generic Gaussian affine term structure model. That theoretical foundation provides an assurance that NS models correspond to a well-accepted framework for yield curve modeling. It further suggests that any yield curve from the GATSM class should be parsimoniously representable by an two-factor arbitrage-free NS model, which should prove useful for macrofinance applications. Such a model is derived and applied to provide evidence for changes in United States yield curve dynamics pre- and post-1988. |
| JEL: | E43 G12 C58 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:acb:camaaa:2012-11&r=mac |
| By: | Andrew K. Rose (Asian Development Bank Institute (ADBI)) |
| Abstract: | This paper analyzes the causes of the 2008–2009 financial crisis together with its manifestations, using a Multiple Indicator Multiple Cause (MIMIC) model. The analysis is conducted on a cross-section of 85 economies; I focus on international financial linkages that may have both allowed the crisis to spread across economies, and/or provided insurance. The model of the cross-economy incidence of the crisis combines 2008–2009 changes in real gross domestic product (GDP), the stock market, economy credit ratings, and the exchange rate. The key domestic determinants of crisis incidence that I consider are taken from the literature, and are measured in 2006 : real GDP per capita; the degree of credit market regulation; and the current account, measured as a fraction of GDP. Above and beyond these three national sources of crisis vulnerability, I add a number of measures of both multilateral and bilateral financial linkages to investigate the effects of international financial integration on crisis incidence. I ask three questions, with a special focus on Asian economies. First, did the degree of an economy’s multilateral financial integration help explain its crisis? Second, what about the strength of its bilateral financial ties with the United States and the key Asian economics of the People’s Republic of China, Japan, and the Republic of Korea? Third, did the presence of a bilateral swap line with the Federal Reserve affect the intensity of an economy’s crisis? I find that neither multilateral financial integration nor the existence of a Fed swap line is correlated with the cross-economy incidence of the crisis. There is mild evidence that economies with stronger bilateral financial ties to the United States (but not the large Asian economies) experienced milder crises. That is, more financially integrated economies do not seem to have suffered more during the most serious macroeconomic crisis in decades. This strengthens the case for international financial integration; if the costs of international financial integration were not great during the Great Recession, when could we ever expect them to be larger? |
| Keywords: | financial integration, financial crisis, financial linkage, Asian economies |
| JEL: | E65 F30 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:eab:financ:23195&r=mac |
| By: | Lange, Kersten |
| Abstract: | Ein optimaler Mix von stabilisierenden Governanceelementen und solchen Faktoren, die die Anpassung an sich verändernde Rahmenbedingungen ermöglichen sind eine der wesentlichen Voraussetzungen für den Erfolg der Kooperation von Unternehmen. Faktoren, die die Kooperation zusammenhalten, setzen dabei vor allem an den Binnenstrukturen der Zusammenarbeit an. Es geht um die Zähmung der Verhaltensunsicherheit. Stabilisierende Faktoren dürfen jedoch nicht verabsolutiert werden, hemmen sie doch tendenziell die Anpassungsfähigkeit, die der Umweltunsicherheit entgegengesetzt werden muss. Es gilt also immer mit einem inhärenten trade-off fertig zu werden, der erstens bei der Ausgestaltung der Kooperation offensichtlich wird und zweitens bei der Entwicklung der Kooperation. Diese Herausforderung begleitet das Kooperationsmanagement in allen Phasen. Die wesentlichen Informationen über die Notwendigkeit konkreter Anpassungsmaßnahmen stammen aus der begleitenden Erfolgskontrolle des Kooperationsmanagement. Es gilt bei nicht optimal funktionierenden Kooperationen abzuwägen, welche Kosten die Beibehaltung der Kooperationsgovernance im Vergleich zu den Kosten ihrer Veränderung entstehen. Stabilität und Stabilisierung von Unternehmenskooperationen, die im Zentrum dieses IfG-Arbeitspapiers von Kersten Lange stehen, sind also nicht mit dem Erfolg von Kooperationen zu verwechseln, zu dem sie jedoch beitragen können. In diesem Arbeitspapier werden Definitionen und Indikatoren der Stabilität von Unternehmenskooperationen analysiert, die in theoretischen und empirischen Studien verwendet werden. Aus diesen werden stabilisierende Governanceelemente abgeleitet, die dem Kooperationsmanagement grundsätzlich zur Verfügung stehen. Es gilt nun sie einem empirischen Test zu unterziehen. Dieses Arbeitspapier entstammt dem IfG-Forschungscluster II: Unternehmenskooperationen. Kommentare und Anregungen sind herzlich willkommen. -- |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wwuifg:102&r=mac |
| By: | Andrew K. Rose (Asian Development Bank Institute (ADBI)) |
| Abstract: | This paper analyzes the causes of the 2008–2009 financial crisis together with its manifestations, using a Multiple Indicator Multiple Cause (MIMIC) model. The analysis is conducted on a cross-section of 85 economies; I focus on international financial linkages that may have both allowed the crisis to spread across economies, and/or provided insurance. The model of the cross-economy incidence of the crisis combines 2008–2009 changes in real gross domestic product (GDP), the stock market, economy credit ratings, and the exchange rate. The key domestic determinants of crisis incidence that I consider are taken from the literature, and are measured in 2006 : real GDP per capita; the degree of credit market regulation; and the current account, measured as a fraction of GDP. Above and beyond these three national sources of crisis vulnerability, I add a number of measures of both multilateral and bilateral financial linkages to investigate the effects of international financial integration on crisis incidence. I ask three questions, with a special focus on Asian economies. First, did the degree of an economy’s multilateral financial integration help explain its crisis? Second, what about the strength of its bilateral financial ties with the United States and the key Asian economics of the People’s Republic of China, Japan, and the Republic of Korea? Third, did the presence of a bilateral swap line with the Federal Reserve affect the intensity of an economy’s crisis? I find that neither multilateral financial integration nor the existence of a Fed swap line is correlated with the cross-economy incidence of the crisis. There is mild evidence that economies with stronger bilateral financial ties to the United States (but not the large Asian economies) experienced milder crises. That is, more financially integrated economies do not seem to have suffered more during the most serious macroeconomic crisis in decades. This strengthens the case for international financial integration; if the costs of international financial integration were not great during the Great Recession, when could we ever expect them to be larger? |
| Keywords: | financial integration, financial crisis, financial linkage, Asian economies |
| JEL: | E65 F30 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:eab:macroe:23195&r=mac |
| By: | Estrada, Fernando |
| Abstract: | The paper aims to describe the evolution part of the economy and power to tax in Colombia. It also explains the failure of the government and the problems that have expanded public sector expenditures. Furthermore, we identify the aspects of political economy have influenced the evolution of the state. Describes why fiscal conditions in Colombia have affected distributive justice and social rights. |
| Keywords: | Power tax; fiscal policy; Colombia; state; Justice Fairness |
| JEL: | E62 D63 D6 H2 E63 E6 H23 E64 D71 D61 D72 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37080&r=mac |
| By: | Diego Restuccia; Guillaume Vandenbroucke |
| Abstract: | Between 1940 and 2000 there has been a substantial increase of educational attainment in the United States. What caused this trend? We develop a model of human capital accumulation that features a non-degenerate distribution of educational attainment in the population. We use this framework to assess the quantitative contribution of technological progress and changes in life expectancy in explaining the evolution of educational attainment. The model implies an increase in average years of schooling of 24 percent which is the increase observed in the data. We find that technological variables and in particular skill-biased technical change represent the most important factors in accounting for the increase in educational attainment. The strong response of schooling to changes in income is informative about the potential role of educational policy and the impact of other trends affecting lifetime income. |
| Keywords: | educational attainment, schooling, skill-biased technical progress, human capital |
| JEL: | E1 O3 O4 |
| Date: | 2012–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-446&r=mac |
| By: | Natasha Hamilton-Hart (Asian Development Bank Institute (ADBI)) |
| Abstract: | Since the financial crises of 1997, East Asia has made modest but nonetheless significant steps towards greater regional integration and cooperation in the areas of finance and trade, accompanied by progress on institution-building at the regional level. Monetary cooperation, however, has not proceeded to anything like even the modest levels registered for other functional areas of cooperation. This paper investigates this discrepancy. It asks whether monetary cooperation is simply an unattractive proposition because it promises fewer net gains than cooperation on other issues, or whether there are other explanations for the absence of monetary cooperation in the region. Based on a review of estimates of the aggregate economic gains and losses arising from monetary cooperation, the paper argues that there is a prima facie puzzle to be explained : monetary cooperation does hold out the prospect of real gains and, although these gains are not cost-free, neither is the status quo. The paper then turns to the domestic level of the major East Asian countries, in order to assess the relative strength of the domestic economic interests that are likely to be either advocates or opponents of monetary cooperation. It shows that domestic distributional politics—the processes by which gains and losses within countries are distributed—are a plausible reason for the low priority placed on regional monetary cooperation to date. International-level political concerns and the potential supply of institutional solutions to collective action problems are additional reasons for the lack of monetary cooperation, but the domestic demand for such cooperation is analytically prior to these more conventional explanations for the lack of cooperation in East Asia. |
| Keywords: | Regional Integration, regional cooperation, Monetary cooperation |
| JEL: | E5 F3 F5 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:eab:govern:23204&r=mac |
| By: | Natasha Hamilton-Hart (Asian Development Bank Institute (ADBI)) |
| Abstract: | Since the financial crises of 1997, East Asia has made modest but nonetheless significant steps towards greater regional integration and cooperation in the areas of finance and trade, accompanied by progress on institution-building at the regional level. Monetary cooperation, however, has not proceeded to anything like even the modest levels registered for other functional areas of cooperation. This paper investigates this discrepancy. It asks whether monetary cooperation is simply an unattractive proposition because it promises fewer net gains than cooperation on other issues, or whether there are other explanations for the absence of monetary cooperation in the region. Based on a review of estimates of the aggregate economic gains and losses arising from monetary cooperation, the paper argues that there is a prima facie puzzle to be explained : monetary cooperation does hold out the prospect of real gains and, although these gains are not cost-free, neither is the status quo. The paper then turns to the domestic level of the major East Asian countries, in order to assess the relative strength of the domestic economic interests that are likely to be either advocates or opponents of monetary cooperation. It shows that domestic distributional politics—the processes by which gains and losses within countries are distributed—are a plausible reason for the low priority placed on regional monetary cooperation to date. International-level political concerns and the potential supply of institutional solutions to collective action problems are additional reasons for the lack of monetary cooperation, but the domestic demand for such cooperation is analytically prior to these more conventional explanations for the lack of cooperation in East Asia. |
| Keywords: | Regional Integration, regional cooperation, Monetary cooperation |
| JEL: | E5 F3 F5 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:eab:financ:23204&r=mac |
| By: | Natasha Hamilton-Hart (Asian Development Bank Institute (ADBI)) |
| Abstract: | Since the financial crises of 1997, East Asia has made modest but nonetheless significant steps towards greater regional integration and cooperation in the areas of finance and trade, accompanied by progress on institution-building at the regional level. Monetary cooperation, however, has not proceeded to anything like even the modest levels registered for other functional areas of cooperation. This paper investigates this discrepancy. It asks whether monetary cooperation is simply an unattractive proposition because it promises fewer net gains than cooperation on other issues, or whether there are other explanations for the absence of monetary cooperation in the region. Based on a review of estimates of the aggregate economic gains and losses arising from monetary cooperation, the paper argues that there is a prima facie puzzle to be explained : monetary cooperation does hold out the prospect of real gains and, although these gains are not cost-free, neither is the status quo. The paper then turns to the domestic level of the major East Asian countries, in order to assess the relative strength of the domestic economic interests that are likely to be either advocates or opponents of monetary cooperation. It shows that domestic distributional politics—the processes by which gains and losses within countries are distributed—are a plausible reason for the low priority placed on regional monetary cooperation to date. International-level political concerns and the potential supply of institutional solutions to collective action problems are additional reasons for the lack of monetary cooperation, but the domestic demand for such cooperation is analytically prior to these more conventional explanations for the lack of cooperation in East Asia. |
| Keywords: | Regional Integration, regional cooperation, Monetary cooperation |
| JEL: | E5 F3 F5 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:eab:macroe:23204&r=mac |
| By: | Mangal Goswami (Asian Development Bank Institute (ADBI)); Sunil Sharma |
| Abstract: | The paper gives an assessment of the progress made in developing local debt markets in emerging Asia. Market development has been limited by hurdles confronting borrowers and lenders, current and potential liquidity providers, and insufficient support from government policies and regulations. Besides fostering a credit culture to deepen local debt markets, the issue of critical size can be addressed through an integrated regional market for local currency bonds that provides greater scale, efficiency, and access. With rapid economic growth in Asia, a key challenge is to generate financial assets that can provide the underlying collateral for expanding fixed-income markets, and hence domestic and regional investment opportunities. |
| Keywords: | Debt markets, Asia, financial markets |
| JEL: | E44 F36 G18 H63 O16 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:eab:govern:23210&r=mac |
| By: | Mangal Goswami (Asian Development Bank Institute (ADBI)); Sunil Sharma |
| Abstract: | The paper gives an assessment of the progress made in developing local debt markets in emerging Asia. Market development has been limited by hurdles confronting borrowers and lenders, current and potential liquidity providers, and insufficient support from government policies and regulations. Besides fostering a credit culture to deepen local debt markets, the issue of critical size can be addressed through an integrated regional market for local currency bonds that provides greater scale, efficiency, and access. With rapid economic growth in Asia, a key challenge is to generate financial assets that can provide the underlying collateral for expanding fixed-income markets, and hence domestic and regional investment opportunities. |
| Keywords: | Debt markets, Asia, financial markets |
| JEL: | E44 F36 G18 H63 O16 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:eab:financ:23210&r=mac |
| By: | Mangal Goswami (Asian Development Bank Institute (ADBI)); Sunil Sharma |
| Abstract: | The paper gives an assessment of the progress made in developing local debt markets in emerging Asia. Market development has been limited by hurdles confronting borrowers and lenders, current and potential liquidity providers, and insufficient support from government policies and regulations. Besides fostering a credit culture to deepen local debt markets, the issue of critical size can be addressed through an integrated regional market for local currency bonds that provides greater scale, efficiency, and access. With rapid economic growth in Asia, a key challenge is to generate financial assets that can provide the underlying collateral for expanding fixed-income markets, and hence domestic and regional investment opportunities. |
| Keywords: | Debt markets, Asia, financial markets |
| JEL: | E44 F36 G18 H63 O16 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:eab:macroe:23210&r=mac |