nep-mac New Economics Papers
on Macroeconomics
Issue of 2013‒08‒31
48 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Limits of monetary policy autonomy and exchange rate flexibility by East Asian central banks By Loeffler, Axel; Schnabl, Gunther; Schobert, Franziska
  2. Announcements of Interest Rate Forecasts: Do Policymakers Stick to Them? By Mirkov, Nikola; Natvik, Gisle James
  3. A Note on Money and the Conduct of Monetary Policy By Jagjit S. Chadha; Luisa Corrado; Sean Holly
  4. Can Uncorrelated Shocks Generate Aggregate Autocorrelation?: Business Cycle Persistence in a Model with Endogenous Growth and Fluctuations By Chase Coleman; Kerk Phillips
  5. Announcements of ECB Unconventional Programs: Implications for the Sovereign Risk of Italy By Matteo Falagiarda; Stefan Reitz
  6. Non-uniform wage-staggering: European evidence and monetary policy implications By Juillard, Michel; Le Bihan, Herve; Millard, Stephen
  7. Capital over the business cycle: renting versus ownership By Gal, Peter; Pinter, Gabor
  8. The Great Recession and the Two Dimensions of European Central Bank Credibility By Timo Henckel; Gordon Menzies; Daniel J. Zizzo
  9. The Stabilizing Virtues of Fiscal vs. Monetary Policy on Endogenous Bubble Fluctuations By Lise Clain-Chamosset-Yvrard; Thomas Seegmuller
  10. Balanced-Budget Rules and Aggregate Instability: The Role of Consumption Taxes in a Monetary Economy By Jianpo Xue; Chong K. Yip
  11. Price indexation, habit formation, and the Generalized Taylor Principle By Saroj Bhattarai; Jae Won Lee; Woong Yong Park
  12. Monetary policy and financial stability in the long run By Jin Cao; Loran Chollete
  13. Financial factors and the international transmission mechanism By Haddow, Abigail; Mileva, Mariya
  14. Interaction-based Foundation of Aggregate Investment Shocks By Makoto Nirei
  15. Monetary policy in the liquidity trap and after: A reassessment of quantitative easing and critique of the Federal Reserve’s proposed exit strategy By Thomas I. Palley
  16. Not all international monetary shocks are alike for the Japanese economy By Vespignania, Joaquin L.; Ratti, Ronald A.
  17. Analyzing Fiscal Sustainability By Huixin Bi; Eric M. Leeper
  18. A Tale of Two Countries and Two Booms, Canada and the United States in the 1920s and the 2000s: The Roles of Monetary and Financial Stability Policies By Ehsan U. Choudhri; Lawrence L. Schembri
  19. ECB monetary policy surprises: identification through cojumps in interest rates By Lars winkelmann; Markus Bibinger; Tobias Linzert;
  20. Explaining the German Employment Miracle in the Great Recession – The Crucial Role of Temporary Working Time Reductions By Alexander Herzog-Stein; Fabian Lindner; Simon Sturn
  21. Financial Distress and Endogenous Uncertainty By Francois Gourio
  22. Interactions between eurozone and US booms and busts: A Bayesian panel Markov-switching VAR model By Monica Billio; Roberto Casarin; Francesco Ravazzolo; Herman K. van Dijk
  23. News Shocks, Real Exchange Rates and International Co-Movements By Kyriacos Lambrias
  24. Why crude oil prices are high when global activity is weak? By Ratti, Ronald A; Vespignani, Joaquin L.
  25. The long-run relationship between the Japanese credit and money multipliers By Mototsugu Fukushige
  26. The Great Recession: A Self-Fulfilling Global Panic By Philippe Bacchetta; Eric van Wincoop
  27. Commodity Prices and BRIC and G3 Liquidity: A SFAVEC Approach By Ratti, Ronald A.; Vespignani, Joaquin L.
  28. Stochastic Terms of Trade Volatility in Small Open Economies By Patricia Gómez-González; Daniel Rees
  29. Fiscal Adjustments and the Probability of Sovereign Default By Christoph A. Schaltegger; Martin Weder
  30. Achieving Amicable Settlements and Possible Reconciliations : The Role of Forensic Accountants in Equitable Distributions By Ojo, Marianne; DiGabriele, Jim
  31. Employment Insurance and the Business Cycle By Pollak, Andreas
  32. Booms and Busts with dispersed information By Kenza Benhima
  33. Europe’s Quest for Fiscal Discipline By Charles Wyplosz
  34. Time-Consistency Problem and the Behavior of US Inflation from 1970 to 2008 By Nima Nonejad
  35. Modelling italian potential output and the output gap By Antonio Bassanetti; Michele Caivano; Alberto Locarno
  36. Troubling taper talk from central banks By John H. Makin
  37. A Monetary Theory with Non-degenerate Distributions By Guido Menzio; Shouyong Shi; Hongfei Sun
  38. Macroeconomic Effects of Job Reallocations: A Survey By Giovanni Gallipoli; Gianluigi Pelloni
  39. Beyond the Labour Income Tax Wedge: The Unemployment-Reducing Effect of Tax Progressivity By Etienne LEHMANN; Claudio LUCIFORA; Simone MORICONI; Bruno VAN DER LINDEN
  40. Currency wars and the paradox of global thrift By John H. Makin
  41. Modelling the Behaviour of Unemployment Rates in the US over Time and across Space By Mark J. Holmes; Jesús Otero; Theodore Panagiotidis
  42. Discretionary tax measures: pattern and impact on tax elasticities By Savina Princen; Gilles Mourre; Dario Paternoster; George-Marian Isbasoiu
  43. Mismatch unemployment : evidence from Germany 2000-2010 By Bauer, Anja
  44. Liquidity Risk and the Credit Crunch of 2007-2009: Evidence from Micro-Level Data on Mortgage Loan Applications By Antoniades, Adonis
  45. Global Financial Governance: Towards a New Global Financial Architecture for Averting Deep Financial Crises By Khan, Haider
  46. Outplacement - Barriers and Challenges of Implementation by Small and Medium-Sized Enterprises in Poland By Klimczuk-Kochańska, Magdalena; Klimczuk, Andrzej
  47. An Asian Perspective on Global Financial Reforms By Morgan, Peter J.; Pontines, Victor
  48. Explicit Evidence of an Implicit Contract By Andrew T. Young; Daniel Levy

  1. By: Loeffler, Axel; Schnabl, Gunther; Schobert, Franziska
    Abstract: Given low interest rates in the large industrial countries and buoyant capital inflows into the emerging markets East Asian central banks have accumulated large stocks of foreign reserves. As the resulting easing of monetary conditions has become a threat to domestic price and financial stability, the East Asian central banks have embarked on substantial sterilization operations to absorb what we call surplus liquidity from the domestic banking systems. This has brought the East Asian central banks into debtor positions versus the domestic banking systems. We show based on a central bank loss function that given buoyant capital inflows and exchange rate stabilization the absorption of surplus liquidity leads either to financial repression, or rising inflation or both. Assuming that a debtor central bank moved towards a freely floating exchange rate to gain monetary policy independence, we show that monetary policy independence is undermined by sterilization costs and revaluation losses on foreign reserves. --
    Keywords: Debtor Central Banks,Monetary Policy Autonomy,Sterilization,Exchange Rate Regime,East Asia
    JEL: E52 E58 F31
    Date: 2013
  2. By: Mirkov, Nikola; Natvik, Gisle James
    Abstract: If central banks value the ex-post accuracy of their forecasts, previously announced interest rate paths might affect the current policy rate. We explore whether this “forecast adherence” has influenced the monetary policies of the Reserve Bank of New Zealand and the Norges Bank, the two central banks with the longest history of publishing interest rate paths. We derive and estimate a policy rule for a central bank that is reluctant to deviate from its forecasts. The rule can nest a variety of interest rate rules. We find that policymakers appear to be constrained by their most recently announced forecasts.
    Keywords: Interest rates, forecasts, Taylor rule, adherence.
    JEL: E43 E52 E58
    Date: 2013–04
  3. By: Jagjit S. Chadha; Luisa Corrado; Sean Holly
    Abstract: Prior to the financial crisis mainstream monetary policy practice had become disconnected from money. We outline the basic rationale for this development using a simple model of money and credit in which we explore the conditions under which money matters directly for the conduct of policy. Then, drawing on Goodfriend and McCallum’s (2007) DSGE model, we examine the circumstances under which money becomes more closely linked to inflation. We find that money matters when the variance of the supply of lending dominates productivity and the velocity of money demand. This is because amplifying the role of loans supply leads to an expansion in aggregate demand, via a compression of the external finance premium, which is inflationary. We consider a number of alternative monetary policy rules, and find that a rule which exploits the joint information from money and the external finance premium performs best.
    Keywords: money, DSGE, policy rules, external finance premium
    JEL: E31 E40 E51
    Date: 2013–08–28
  4. By: Chase Coleman (Stern School, New York University); Kerk Phillips (Department of Economics, Brigham Young University)
    Abstract: This paper considers a model which incorporates Schumpeterian type growth into an otherwise standard RBC model similar to the one in Phillips & Wrase (2006). We consider a model with three sources of shocks. The first is a standard productivity shock. The second is a set of Schumpeterian innovation shocks which are industry specific and correspond to the results of an applied R&D process. The final shock is an aggregate shock to the stock of basic knowledge and arrives as a Poisson process with an arrival rate influenced by economy-wide spending on R&D. We show that this model is capable of generating an observed TFP series that is autocorrelated, even when the standard productivity shock is pure white noise.
    Keywords: autocorrelation, dynamic stochastic general equilibrium, business cycles, technology persistence, Schumpeterian, economic growth, GDP, TFP
    JEL: C63 E32 E37
    Date: 2013–08
  5. By: Matteo Falagiarda; Stefan Reitz
    Abstract: This paper studies the effects of ECB communications about unconventional monetary policy operations on the perceived sovereign risk of Italy over the last five years. More than fifty events concerning non-standard operations are identified and classified with respect to the specific ECB program. The empirical results are derived from both an event-study analysis and a GARCH framework, which uses Italian long-term bond futures to disentangle expected from unexpected policy actions. We find that the ECB announcements about unconventional monetary policies substantially reduced Italian long-term government bond yield spread relative to German counterparts. Particularly, among the different types of measures, news about the Securities Markets Programme and the Outright Monetary Transactions are found to be effective in affecting the perceived sovereign risk of Italy
    Keywords: central bank communications, unconventional monetary policy, European sovereign debt crisis, event-study, GARCH models
    JEL: E43 E52 E58 G01 G12
    Date: 2013–08
  6. By: Juillard, Michel (Banque de France); Le Bihan, Herve (Banque de France); Millard, Stephen (Bank of England)
    Abstract: In many countries, wage changes tend to be clustered in the beginning of the year, with wages being set for fixed durations of typically one year. This has been, in particular, documented in recent years for European countries using microeconomic data. Motivated by this evidence we build a model of uneven wage staggering, embedded in a standard DSGE model of the euro area, and investigate the monetary policy consequences of non-synchronised wage-setting. The model has the potential to generate responses to monetary policy shocks that differ according to the timing of the shock. Using a realistic calibration of the seasonality in wage-setting, based on a wide survey of European firms, the quantitative difference across quarters turns out however to be moderate. Relatedly, we obtain that the optimal monetary policy rule does not vary much across quarters.
    Keywords: Wage-setting; wage-staggering; wage synchronisation; monetary policy shocks; optimal simple monetary policy rules
    JEL: E27 E52
    Date: 2013–08–16
  7. By: Gal, Peter (Tinbergen Institute and OECD); Pinter, Gabor (Bank of England)
    Abstract: We find that capital renting makes up one fifth of US capital expenditures, and it increases during downturns. Further, we present cross-country evidence that output losses after financial crises are smaller where renting is more prevalent. To understand these findings, we build a general equilibrium model with borrowing constraints and with the option to rent or buy capital. The countercyclicality of rentals occurs because their supply increases, as renting serves as an additional means of savings when credit markets malfunction. Moreover, demand also shifts towards rentals as they become relatively cheaper. By absorbing excess savings, renting mitigates financial crises.
    Keywords: Renting; capital; business cycle; financial shocks
    JEL: E22 E32 E44 G01 G32
    Date: 2013–08–16
  8. By: Timo Henckel (Centre for Applied Macroeconomic Analysis, Australian National University); Gordon Menzies (Economics Discipline Group, University of Technology, Sydney); Daniel J. Zizzo (School of Economics and CBESS, University of East Anglia)
    Abstract: A puzzle from the Great Recession is an apparent mismatch between a fall in the persistence of European inflation rates, and the increased variability of expert forecasts of inflation. We explain this puzzle and show how country specific beliefs about inflation are still quite close to the European Central Bank target of 2% (what we call official target credibility) but the degree of anchoring to this target has gone down, implying an erosion of what we call anchoring credibility. A decline in anchoring credibility can explain increased forecast variance independently of any changes in inflation persistence, contrary to standard time series models.
    Keywords: Central bank credibility; excess volatility; euro; inferential expectations; inflation
    JEL: C51 D84 E31 E52
    Date: 2013–08–01
  9. By: Lise Clain-Chamosset-Yvrard (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales [EHESS] - Ecole Centrale Marseille (ECM)); Thomas Seegmuller (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales [EHESS] - Ecole Centrale Marseille (ECM))
    Abstract: We explore the existence of endogenous fluctuations with a rational bubble and the stabilizing role of fiscal and monetary policies. Consumers' credit constraints, the role of collateral and a portfolio choice are the key ingredients of our analysis. We consider an overlapping generations model where households realize a portfolio choice between three assets with different returns (capital, money and bonds). Expectation-driven fluctuations and the multiplicity of steady states occur under a positive bubble on bonds, gross substitutability and large input substitution because of credit market imperfections. Focusing on the stabilizing role of policies, we show that a progressive taxation on capital income may rule out expectation-driven fluctuations and the multiplicity of steady states. In contrast, a monetary policy under a Taylor rule has a mitigated stabilizing role, depending on the reactiveness of the policy rule and the concavity of the utility function. When the monetary authority decides instead to fix the nominal interest rate regardless the inflation, decreasing the level of the nominal interest rate can rule out expectation-driven fluctuations, restore the uniqueness of steady states, but can damage the welfare at the steady state.
    Keywords: indeterminacy; rational bubble; cash-in-advance constraint; collateral; progressive taxation; monetary policy
    Date: 2013–08
  10. By: Jianpo Xue (Renmin University of China); Chong K. Yip (The Chinese University of Hong Kong and Hong Kong Institute for Monetary Research)
    Abstract: This paper examines the stabilizing property of consumption taxation in a balanced-budget setting of a neoclassical one-sector cash-in-advance economy. We find that saddle-path stability is not a necessary outcome even though the utility function is additively separable between consumption and leisure. Both the existence of a Laffer curve and the indeterminacy outcome of consumption taxation depend on the elasticities of intertemporal substitution in consumption and of labor supply. Numerical examples show that consumption tax may lead to aggregate instability for the OECD countries under the current over-easy monetary policies.
    Keywords: Balanced-Budget Rules, Consumption Tax, CIA Constraint, Indeterminacy
    JEL: E32 E63
    Date: 2013–08
  11. By: Saroj Bhattarai; Jae Won Lee; Woong Yong Park
    Abstract: We prove that the Generalized Taylor Principle, under which the nominal interest rate reacts more than one-for-one to inflation in the long run, is a necessary and (under some extra mild restrictions on parameters) sufficient condition for determinacy in a sticky price model with positive steady-state inflation, interest rate smoothing in monetary policy, partial dynamic price indexation, and habit formation in consumption.
    Keywords: Price levels ; Monetary policy ; Banks and banking, Central
    Date: 2013
  12. By: Jin Cao (Norges Bank (Central Bank of Norway), CESifo, Germany); Loran Chollete (UiS Business School, Norway)
    Abstract: Most theoretical central bank models use short horizons and focus on a single tradeoff. However, in reality, central banks play complex, long-horizon games and face more than one tradeoff. We account for these issues in a simple infinite-horizon game with a novel tradeoff: higher rates deter financial imbalances, but lower rates reduce the likelihood ofinsolvency. We term these factors discipline and stability effects, respectively. The centralbank's welfare decreases with dependence between real and financial shocks, so it may reduce costs with correlation-indexed securities. In our model, independent central banks cannot in general attain both low inflation and financial stability.
    Keywords: Central Bank, Correlation-indexed security, Discipline effect, Stability effect
    JEL: E50 G28
    Date: 2013–08–22
  13. By: Haddow, Abigail (Bank of England); Mileva, Mariya (Kiel Institute for the World Economy)
    Abstract: The aim of this paper is to investigate theoretically how financial factors affect the international transmission mechanism. We build a two-country dynamic stochastic general equilibrium model with sticky prices and financial frictions. To add to the literature we extend the model to include two types of credit spread shocks that are micro-founded; a mean preserving shock to the dispersion of firms idiosyncratic productivity (risk shock) and a shock to financial agents net worth (financial wealth shock). We find that the source of the shock to the credit spread matters; credit spread shocks of equivalent size, but driven by different innovations, have different consequences for output and inflation in the home and foreign economy. In general risk shocks generate more realistic spillovers to activity than a financial wealth shock.
    Keywords: International transmission mechanism; financial frictions; financial shocks; DSGE model
    JEL: E37 F41 F42 F44
    Date: 2013–08–16
  14. By: Makoto Nirei (Hitotsubashi University)
    Abstract: This paper demonstrates that the interactions of firm-level indivisible investments give rise to aggregate fluctuations without aggregate exogenous shocks. I develop a method to derive the distribution of aggregate capital growth rate by embedding a fictitious tatonnement in a branching process. This method shows that idiosyncratic shocks may lead to non-vanishing aggregate fluctuations when the number of firms tends to infinity. By incorporating this mechanism in a dynamic general equilibrium model with indivisible investment and sticky price, I provide the real business cycle theory with a driver of fluctuations: aggregate investment demand shocks that arise from idiosyncratic productivity shocks. Due to predetermined prices of goods, firms respond to investment shocks by adjusting labor and output, thereby causing the comovements of output and consumption with investment. Numerical simulations show that the model generates aggregate fluctuations comparable to the business cycles in magnitude and correlation structure under standard calibration.
    Date: 2013
  15. By: Thomas I. Palley
    Abstract: This paper provides a novel analysis of quantitative easing (QE) that focuses on its implicit fiscal dimension. The first segment examines the theory of the liquidity trap and introduces a distinction between a "weak" and "strong" liquidity trap. The second segment analyzes the impact of QE under conditions of a weak and strong liquidity trap. In a weak liquidity trap QE is expansionary but subject to diminishing returns. As QE involves purchasing assets from the public, it transfers the income streams associated with those assets to the fiscal authority. This transfer generates a form of fiscal drag that can theoretically eventually render QE contractionary. In an open economy, exchange rate effects of QE also need to be taken account of and those tend to be expansionary. The third segment explores how to exit QE. The current suggestion of raising the policy interest rate and paying interest on reserves to check inflationary pressures is contradicted because paying interest constitutes an implicit tax cut. Instead, the paper suggests adopting a system of asset based reserve requirements. Requiring banks to hold increased reserves would permanently deactivate liquidity created by QE without recourse to interest payments and the implicit tax cut they represent.
    Keywords: quantitative easing, fiscal drag, interest on reserves, exit strategy, asset based reserve requirements
    JEL: E43 E44 E50 E52 E58
    Date: 2013
  16. By: Vespignania, Joaquin L. (School of Economics and Finance, University of Tasmania); Ratti, Ronald A. (School of Business, University of Western Sydney)
    Abstract: It is found that over 1999:1-2012:12 China’s monetary expansion influences Japan through the effect of China’s growth on world commodity prices, increased demand for imports, and exchange rate policy. China’s monetary expansion is associated with significant increases in Japan’s industrial production, exports and inflation, and decreases in the trade-weighted yen. In contrast, U.S. monetary expansion results in contraction in Japan’s industrial production, exports and trade balance (expenditure-switching). Monetary expansion in the Euro area does not significantly affect Japan. Structural vector error correction models are estimated. Results are robust to various contemporaneous restrictions for the effect of international monetary variables, the interaction of foreign and domestic variables and to factor augmented VAR to identify monetary shocks
    Keywords: International Monetary shocks, Japanese economy, Oil/commodity prices, SVEC models
    JEL: E52 F41 F42 Q43
    Date: 2013–08–05
  17. By: Huixin Bi; Eric M. Leeper
    Abstract: The authors study the implications of fiscal policy behaviour for sovereign risk in a framework that determines a country’s fiscal limit, the point at which, for economic or political reasons, taxes and spending can no longer adjust to stabilize debt. A real business cycle model maps the economic environment - expected fiscal policy, the distribution of exogenous disturbances and private agents’ behaviour - into a distribution for the maximum sustainable debt-to-GDP ratio. Default is possible at any point on this fiscal limit distribution. Calibrations of the model to Greek and Swedish data illustrate how the framework can be used to study actual fiscal reforms undertaken by developed economies facing sovereign risk pressures.
    Keywords: Economic models; Fiscal Policy
    JEL: E62 E65 H63
    Date: 2013
  18. By: Ehsan U. Choudhri (Carleton University, Canada); Lawrence L. Schembri (Bank of Canada, Canada)
    Abstract: The paper examines the experience of Canada and the United States in the run-up to the two biggest financial crises in global history, in the 1920s and 2000s, and the roles of their monetary and financial stability policies. Comparing the Canadian and the U.S. experiences over the two periods is instructive because Canadian monetary policy was somewhat more conservative than U.S. monetary policy and there were important institutional differences in the two periods: Canada did not have a central bank in the 1920’s and followed different financial stability policies in the 2000’s. We present evidence that suggests two conclusions. Firstly, a more moderate Canadian monetary policy in the two booms affected Canada’s relative macroeconomic performance during the booms; in particular, the extent of the economic expansion was less. Secondly, this difference, however, by itself, does not explain why Canada fared better in the recent crisis, but not in the Great Depression. Indeed, the comparative evidence suggests that it was the difference in the effectiveness of financial stability policies, primarily financial regulation supervision with respect to banks and housing finance, that explains the better Canadian performance during the recent crisis. In contrast, in the 1920s, both countries lacked the financial policies to control excess credit growth and both suffered as a consequence. In addition, both countries made policy mistakes in aftermath of the stock market crash and credit collapses; in particular, Canada pursued inflexible interest and exchange rate policies that aggravated the economic downturn.
    Date: 2013–08
  19. By: Lars winkelmann; Markus Bibinger; Tobias Linzert;
    Abstract: This paper proposes a new econometric approach to disentangle two distinct response patterns of the yield curve to monetary policy announcements. Based on cojumps in intraday tick-data of a short and long term interest rate, we develop a day-wise test that detects the occurrence of a significant policy surprise and identifies the market perceived source of the surprise. The new test is applied to 133 policy announcements of the European Central Bank (ECB) in the period from 2001-2012. Our main findings indicate a good predictability of ECB policy decisions and remarkably stable perceptions about the ECB’s policy preferences.
    Keywords: Central bank communication; yield curve; spectral cojump estimator; high frequency tick-data
    JEL: E58 C14 C58
    Date: 2013–08
  20. By: Alexander Herzog-Stein; Fabian Lindner; Simon Sturn
    Abstract: This paper investigates the reasons for the exceptionally robust performance of the German labour market during the Great Recession. While GDP dropped by more than five per cent in 2009, employment remained constant and started to increase soon after. We compare this recession to other major recessions in Germany and analyse to what extent changes in hourly productivity and working time cushioned their impact on employment. We find that reductions in hourly productivity played a significant role in all recessions while working time reductions helped to safeguard jobs only occasionally. However, in the Great Recession, temporary working time reductions were amply used to stabilise employment. Using a time series model, we show that the reduction in hourly productivity during the Great Recession is predictable with historical data, while the reduction in working time was unexpectedly pronounced. Using detailed information on instruments for the adjustment of working hours, we show that new instruments which have been established in the decade before the Great Recession have been heavily used to reduce working time in the Great Recession. We argue that the development of these instruments was only possible within the framework of corporatist industrial relations.
    Keywords: Germany, Great Recession, employment miracle, working time reduction, labour hoarding, internal labour market flexibility, working time accounts, short time work
    JEL: E24 E32 E37 J20 J50
    Date: 2013
  21. By: Francois Gourio (Boston University)
    Abstract: A large amount of recent research in macroeconomics emphasizes the role of uncertainty as a driver of business cycles, but the majority of this work takes uncertainty as exogenous. This paper proposes a model where aggregate uncertainty is endogenously time-varying through financial distress costs. As firms become closer to default, their employment and investment demand is reduced by debt overhang. Moreover, firms' productivity may also be directly reduced by higher transaction costs. These two mechanisms make macroeconomic aggregates more volatile when a large number of firms have low equity value. The cross-sectional distribution of firms' equity values hence affects directly aggregate macroeconomic volatility. Empirical evidence consistent with the model is provided.
    Date: 2013
  22. By: Monica Billio (University of Venice, GRETA Association and School for Advanced Studies in Venice); Roberto Casarin (University of Venice, GRETA Association and School for Advanced Studies in Venice); Francesco Ravazzolo (Norges Bank (Central Bank of Norway) and BI Norwegian Business School); Herman K. van Dijk (Econometric Institute, Erasmus University Rotterdam, Econometrics Department VU University Amsterdam)
    Abstract: Interactions between the eurozone and US booms and busts and among major eurozone economies are analyzed by introducing a panel Markov-switching VAR model well suitable for a multi-country cyclical analysis. The model accommodates changes in low and high data frequencies and endogenous time-varying transition matrices of the country-specific Markov chains. The transition matrix of each Markov chain depends on its own past history and on the history of the other chains, thus allowing for modelling of the interactions between cycles. An endogenous common eurozone cycle is derived by aggregating country-specific cycles. The model is estimated using a simulation based Bayesian approach in which an efficient multi-move strategy algorithm is defined to draw common time-varying Markov-switching chains. Our results show that the US and eurozone cycles are not fully synchronized over the 1991-2013 sample period, with evidence of more recessions in the eurozone, in particular during the 90's when the monetary union was planned. Larger synchronization occurs at beginning of the Great Financial Crisis. Shocks affect the US 1-quarter in advance of the eurozone, but these spread very rapidly among economies. There exist reinforcement effects in the recession probabilities and in the probabilities of exiting recessions for both eurozone and US cycles, and substantial differences in the phase transitions within the eurozone. An increase in the number of eurozone countries in recession increases the probability of the US to stay within recession, while the US recession indicator has a negative impact on the probability to stay in recession for eurozone countries. Moreover, turning point analysis shows that the cycles of Germany, France and Italy are closer to the US cycle than other countries. Belgium, Spain, and Germany, provide more timely information on the aggregate recession than Netherlands and France.
    Keywords: Bayesian model, Panel VAR, Markov-switching, International business cycles, Interaction mechanisms
    Date: 2013–08–22
  23. By: Kyriacos Lambrias
    Abstract: We propose a fully flexible, complete-market model of the international business cycle that is consistent with two major empirical facts: positive cross-country co-movement of economic aggregates and a negative correlation between the real exchange rate and relative consumption (the Backus-Smith puzzle). The model features non-tradable goods, zero wealth effects on labour supply, imperfect substitutability of capital across sectors and variable capacity utilisation. The latter can generate strong Balassa-Samuelson effects that drive a low consumption-real exchange rate correlation. Cyclical movements across countries are also positively correlated. The novelty of our paper is to introduce changes in expectations (news-shocks) as an explanation to the Backus-Smith puzzle through the wealth effects of future changes in income, while being consistent with expectations-driven economic expansions.
    Keywords: News-Driven Cycles, Backus-Smith Puzzle, Real-Exchange Rates
    JEL: F41 F44
    Date: 2013–07
  24. By: Ratti, Ronald A (School of Business, University of Western Sydney); Vespignani, Joaquin L. (School of Economics and Finance, University of Tasmania)
    Abstract: There have been substantial increases in liquidity in recent years and real oil prices have almost returned to the high levels achieved before the Global financial crisis. Unanticipated increases in global real M2 lead to statistically significant increases in real oil prices. The cumulative impact of global real M2 on the real price of crude oil is important in the recovery of oil price during 2009 and 2010.
    Keywords: Oil Price, Global Liquidity
    JEL: E31 E32 Q41 Q43
    Date: 2013–03–20
  25. By: Mototsugu Fukushige (Graduate School of Economics, Osaka University)
    Abstract: The standard argument is that while money creation and credit creation have different channels, they provide the same theoretical size of multipliers. However, there is usually some difference in practice. Consequently, in this paper we investigate the long-run relationship between the credit and money multipliers in Japan.
    Keywords: Money Supply, Money Stock, Money Multiplier, Credit Multiplier
    JEL: E51 E41 E42
    Date: 2013–08
  26. By: Philippe Bacchetta (University of Lausanne, Swiss Finance Institute, Centre for Economic Policy Research and Hong Kong Institute for Monetary Research); Eric van Wincoop (University of Virginia, National Bureau of Economic Research, and Hong Kong Institute for Monetary Research)
    Abstract: While the 2008-2009 financial crisis originated in the United States, we witnessed steep declines in output, consumption and investment of similar magnitudes around the globe. This raises two questions. First, given the observed strong home bias in goods and financial markets, what can account for the remarkable global business cycle synchronicity during this period? Second, what can explain the difference relative to previous recessions, where we witnessed far weaker co-movement? To address these questions, we develop a two-country model that allows for self-fulfilling business cycle panics. We show that a business cycle panic will necessarily be synchronized across countries as long as there is a minimum level of economic integration. Moreover, we show that several factors generated particular vulnerability to such a global panic in 2008: tight credit, the zero lower bound, unresponsive fiscal policy and increased economic integration.
    Date: 2013–06
  27. By: Ratti, Ronald A.; Vespignani, Joaquin L.
    Abstract: This paper investigates the influence of liquidity in the major developed and major developing ‎economies on commodity prices. Unanticipated increases in the BRIC countries’ liquidity is ‎associated with significant and persistent increases in commodity prices that are much larger ‎than the effect of unanticipated increases in G3 liquidity, and the difference increases over ‎time. Over 1999-2012 BRIC liquidity is strongly linked with global energy prices and global ‎real activity whereas G3 liquidity is not. The impact of BRIC liquidity on mineral and metal ‎prices is twice as large as that of G3 liquidity. BRIC liquidity is significantly connected with ‎global tightening while G3 liquidity is not. Granger casualty goes from liquidity to ‎commodity prices. BRIC and G3 liquidity and commodity prices are cointegrated. BRIC and ‎G3 liquidity and global output and global prices are cointegrated. We constructed a structural ‎factor-augmented error correction (SFAVEC) model.‎
    Keywords: Commodity Prices, BRIC countries, G3, Global liquidity, SFAVEC
    JEL: E31 E32 E51 F1 Q43
    Date: 2013–08–24
  28. By: Patricia Gómez-González (Massachusetts Institute of Technology); Daniel Rees (Reserve Bank of Australia)
    Abstract: The terms of trade of commodity-producing small open economies are subject to large shocks that can be an important source of economic fluctuations. Alongside times of high volatility, however, these economies also experience periods in which their terms of trade are comparatively stable. We estimate the empirical process for the terms of trade for six small open economies and examine the responses of output, the current account and prices to changes in terms of trade volatility using a vector autoregression (VAR). We find that increased terms of trade volatility, by itself, is associated with a contraction in domestic demand and an increase in the current account. We then set up a small open economy real business cycle model and show that it can broadly replicate the responses to a volatility shock estimated in the VAR. We use this model to explore the sectoral implications of terms of trade volatility shocks and to quantify the importance of these shocks as a source of business cycle fluctuations. Our results suggest that the direct effects of terms of trade volatility shocks on output, consumption and investment are generally small. But, interacted with shocks to the level of the terms of trade, volatility shocks account for around one-quarter of the total impact of the terms of trade on macroeconomic outcomes.
    Keywords: terms of trade; small open economy; real business cycle; stochastic volatility
    JEL: C32 E32 F41 Q33
    Date: 2013–08
  29. By: Christoph A. Schaltegger; Martin Weder
    Abstract: Based on probit estimates, this paper analyzes the effects of fiscal consolidation on the prob- ability of sovereign defaults in the short run. Using a panel of 104 developing countries from 1980 to 2009 and controlling for various economic, fiscal and political fa ctors, we find that fiscal adjustments in general do not significantly reduce the probability of default even if they are large. Instead, the composition of budget consolidation is decisive in reducing default risk. In contrast to industrialized countries, expenditure based adjustments are not successful while revenue based adjustments lower the probability of default in the following year by 33 to 56 percent. This finding also holds when economic growth is low or government debt is high as well as when IMF lending is taken into account.
    Keywords: sovereign default; fiscal policy; fiscal adjustment; bailout
    JEL: E62 H62 H63
    Date: 2013–04
  30. By: Ojo, Marianne; DiGabriele, Jim
    Abstract: This book is focussed on investigating how a proper implementation of forensic accounting tools could serve as a means and channel whereby such techniques as valuations, equitable distribution and evidence could be employed in avoiding unnecessary break ups and emotional breakdowns. How can courts curb contingency costs of matrimonial litigation when a closely held company is involved? – particularly where such closely held companies' profits can be steered towards greater profits if these companies are encouraged to continue to run (as well as alleviate financial problems which may initially have contributed to financial and marital problems). Given recent statistics which indicate a 50:50 success rate in marriages, should courts not have a role in assisting to alleviate and reduce tax burdens which are peculiar to companies run by couples – where it can easily be proven that these were the sources of financial and eventually, marital tensions? What role could forensic accountants also play in providing financial, valuation and business advice to couples experiencing such business difficulties – and who lack the required access to funds or expertise aimed at restoring the viabililty of their businesses. Would such expertise and advice restore their businesses – and eventully their relationships? It is a well known fact that financial problems constitute the source of break-downs in many relationships. Whilst other factors may contribute to failures in relationships and whilst some couples may have finalised their intentions and require very little assistance in getting through such painstaking processes, others may have their decisions influenced by court procedures, counselling sessions and the proper application of equitable distribution procedures – such equitable distribution procedure being considered a preferred technique in resolving marital asset distributions than the community property concept. Further this book highlights factors which need to be taken into consideration – not only in averting unnecessary break-ups, but also in facilitating harmonious and amicable settlements which may eventually pave the way for reconciliation, as well as restoration of broken down relationships. Whilst planning of marital asset distribution should not constitute the focus of any marriage, planning when the need arises may serve not only as a channel whereby a relationship can be restored eventually, but as a temporary means of weathering the storms during the difficult times in the relationship.
    Keywords: equitable distribution; marital reconciliation; forensic accounting; valuations
    JEL: E3 E32 K2 M4
    Date: 2013–06–29
  31. By: Pollak, Andreas
    Abstract: This paper quantitatively investigates the scope for improving welfare by making aspects of the unemployment insurance (UI) system depend on the state of the business cycle. A particular focus is the Canadian system of "Employment Insurance" (EI), which is designed in such a way that the generosity of benefits depends on the state of the macroeconomy. Simulations of a life-cycle model with heterogeneous agents and search frictions confirm the expectation that optimal UI systems are characterized by a substantial increase in generosity during recessions, when adverse labour market conditions reduce the importance of moral hazard while increasing the need for consumption insurance. It turns out, however, that the welfare improvements resulting from this sort of temporal differentiation of benefits are extremely small. The insurance against business cycle effects inherent in the Canadian EI system is welfare enhancing when considered in isolation; this insurance effect is, however, dominated by the welfare implications of the inter-regional redistribution effected by the system.
    Keywords: unemployment insurance; job search; business cycle
    JEL: E3 J6
    Date: 2013–08–13
  32. By: Kenza Benhima
    Abstract: This paper lays down a model where dispersed information generates booms and busts in economic activity. Boom-and-bust dynamics start when firms are initially over-optimistic about demand due to an aggregate noise shock in their signals. Consequently, they over-produce, which generates a boom. This however also depresses their mark-ups, which, to firms, signals low demand and overturns their expectations, generating a bust. This emphasizes a novel role for imperfect common knowledge: dispersed information makes firms ignorant about their competitors' actions, which makes them confuse high noise-driven supply with low fundamental demand. Boom-and-bust episodes are more dramatic when the aggregate noise shocks are more unlikely and when congestion effects are stronger.
    Keywords: Imperfect Common Knowledge; Expectations; Recessions
    JEL: E32 D83 D52
    Date: 2013–08
  33. By: Charles Wyplosz
    Abstract: This paper argues that the sovereign debt crisis is the result of a lack of fiscal discipline broadly defined to include adequate banking supervision. The paper argues that Europe has inadvertently adopted the wrong model of collective discipline, because it is centralized while a decentralized model not only better fits the Euro Area makeup but also has a superior track record. It also notes the need for the ECB to accept its role of lender of last resort, which in turn requires the adoption of a full-blown banking union.
    JEL: E58 E61 G28 H53
    Date: 2013–04
  34. By: Nima Nonejad (Aarhus University and CREATES)
    Abstract: The restrictions implied by the theory of time-consistent monetary policy are imposed on empirical data. Model estimation is conducted using Bayesian Markov chain Monte Carlo techniques. We are able to identify two major regimes regarding the policy of the Federal Reserve from 1970 to 2008. Results show that the Federal Reserve places more weight on inflation stabilization throughout the bigger part of the 1980s and 1990s while on the other hand the Federal Reserve is pursuing a policy of placing more weight on its goals for unemployment reduction in the 1970s and from 2003 to 2008.
    Keywords: Time-consistency, Monetary policy, Gibbs sampling
    JEL: C11 C22 C51 E42 E52
    Date: 2013–08–13
  35. By: Antonio Bassanetti; Michele Caivano; Alberto Locarno
    Abstract: The aim of the paper is to estimate a reliable quarterly time-series of potential output for the Italian economy,exploiting four alternative approaches: a Bayesian unobserved component method, a univariate time-varying autoregressive model, a production function approach and a structural VAR. Based on a wide range of evaluation criteria, all methods generate output gaps that accurately describe the Italian business cycle over the past three decades. All output gap measures are subject to non-negligible revisions when new data become available. Nonetheless they still prove to be informative about the current cyclical phase and, unlike the evidence reported in most of the literature, helpful at predicting inflation compared with simple benchmarks. We assess also the performance of output gap estimates obtained by combining the four original indicators, using either equal weights or Bayesian averaging, showing that the resulting measures (i) are less sensitive to revisions; (ii) are at least as good as the originals at tracking business cycle fluctuations; (iii) are more accurate as inflation predictors.
    Keywords: Potential output, business cycle, Phillips curve, output gap
    JEL: E37 C52
    Date: 2013–08
  36. By: John H. Makin (American Enterprise Institute)
    Abstract: Central banks all over the world ought to leave well enough alone rather than raising already-elevated uncertainty with talk of phasing down (“tapering,” in US parlance) quantitative easing.
    Keywords: FOMC,Federal Reserve Chairman Ben Bernanke,federal reserve,economic recession,Economic policy outlook,economic outlook ,central banks,austerity measures
    JEL: A E
    Date: 2013–06
  37. By: Guido Menzio; Shouyong Shi; Hongfei Sun
    Abstract: We construct and analyze a tractable search model of money with a non-degenerate distribution of money holdings. Analytical tractability comes from modeling decentralized exchange as directed search, which makes the monetary steady state block recursive. By adapting lattice-theoretic techniques, we characterize individuals' policy and value functions, and show that these functions satisfy the standard conditions of optimization. We prove that a unique monetary steady state exists and provide conditions under which the steady-state distribution of buyers over money balances is non-degenerate. Moreover, we analyze the properties of this distribution.
    Keywords: Money; Distribution; Search; Lattice-Theoretic.
    JEL: E00 E4 C6
    Date: 2013–08–17
  38. By: Giovanni Gallipoli (University of British Columbia, Canada; Becker-Friedman Institute, University of Chicago, USA; The Rimini Centre for Economic Analysis, Italy); Gianluigi Pelloni (University of Bologna, Italy; Wilfrid Laurier University, Canada; The Johns Hopkins University, SAIS-Bologna, Italy; The Rimini Centre for Economic Analysis, Italy)
    Abstract: This paper critically appraises the approaches that have characterized the literature on the macroeconomic effects of job reallocations. Since Lilien's (1982) seminal contribution there has been a flourishing of empirical analysis but no unifying theoretical framework has obtained consensus in the scientific debate. We face a corpus of research which is heterogeneous in variables' selection and experimental design. This heterogeneity makes the evaluation of results a daunting task. As a guiding principle for our excursion we track down the methodological development of the solutions to the crucial problem of observational equivalence of aggregate and sectoral reallocation shocks. We draw two main conclusions from our analysis. The first is that the non-directional nature of reallocation shocks holds the key to the solution of the fundamental identification problem. In this sense the recent perspective on job creation and destruction shows much promise. The second conclusion is that sectoral reallocation of labor has been responsible for no less that 1/4 and no more that 2/3 of the variance of aggregate unemployment in postwar data. While this range may seem wide it is an indication that the importance of labor reallocation may have changed over time, being quite large at particular historical junctures.
    Keywords: labor reallocation, unemployment, sectoral shifts, methodology, assessment
    JEL: E30 C10 J21
    Date: 2013–07
  39. By: Etienne LEHMANN (CRED (TEPP) University Panth eon-Assas Paris 2 and CREST, UCL-IRES, IDEP, IZA and CESifo); Claudio LUCIFORA (Università Cattolica del Sacro Cuore, Milano and IZA); Simone MORICONI (Università Cattolica del Sacro Cuore, Milano and Univerity of Luxembourg, CREA); Bruno VAN DER LINDEN (FNRS and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This paper argues that, for a given overall level of labour income taxation, a more progressive tax schedule reduces the unemployment rate and increases the employment rate. From a theoretical point of view, higher progressivity induces a wage-moderation effect and increases overall employment since employment of low-paid workers is more responsive. We test these theoretical predictions on a panel of 21 OECD countries over 1998-2008. Controlling for the burden of taxation at the average wage, we show that a more progressive taxation reduces the unemployment rate and increases the employment rate. These findings are confirmed when we account for the potential endogeneity of both average taxation and progressivity. Overall our results suggest that policy-makers should not only focus on the detrimental effects of tax progressivity on in-work effort.
    Keywords: Wage moderation, Employment, Taxation
    JEL: E24 H22 J68
    Date: 2013–07–15
  40. By: John H. Makin (American Enterprise Institute)
    Abstract: The majority of G20 countries have collectively pursued easy-money-tighter-fiscal policy to stimulate their economies, but this has led to weak currencies. To stimulate growth and avoid a currency war, G20 governments and central banks should reform tax systems and moderate the growth of government retirement and health benefits while employing quantitative easing as needed to avoid deflation.
    Keywords: Japanese economy,G20 summit,Fiscal austerity,economic outlook ,currency,central banks,FOMC,QE
    JEL: A F
    Date: 2013–02
  41. By: Mark J. Holmes (Department of Economics, Waikato University, New Zealand); Jesús Otero (Facultad de Economía, Universidad del Rosario, Colombia); Theodore Panagiotidis (Department of Economics, University of Macedonia, Greece)
    Abstract: This paper provides evidence that unemployment rates across US states are stationary and therefore behave according to the natural rate hypothesis. We provide new insights by considering the effect of key variables on the speed of adjustment associated with unemployment shocks. A highly-dimensional VAR analysis of the half-lives associated with shocks to unemployment rates in pairs of states suggests that distance between states and vacancy rates respectively exert a positive and negative influence. We find that higher homeownership rates do not lead to higher half-lives. When the symmetry assumption is relaxed through quantile regression, support for the Oswald hypothesis through a positive relationship between homeownership rates and half-lives is found at the higher quantiles.
    Keywords: Unemployment; market integration; speed of adjustment
    JEL: E24 J60 F15 R10
    Date: 2013–07
  42. By: Savina Princen; Gilles Mourre; Dario Paternoster; George-Marian Isbasoiu
    Abstract: This paper provides evidence on the size, composition and cyclicality of discretionary tax measures (DTM), using a new database developed by the Output Gap Working Group. While their average magnitude is fairly limited over a long period with discretionary tax cuts being offset by discretionary tax hikes, they can be non-negligible at any given point in time. The cyclical pattern of DTM appears irregular and depends on the policy regime. While small pro-cyclical discretionary tax cuts were seen during the pre-crisis period, larger counter-cyclical tax breaks were adopted at the start of the crisis period, followed by pro-cyclical tax hikes in a context of substantial public finance consolidation. The paper also examines the impact of DTM on tax elasticities in the EU for broad tax categories over the period 2001-12: DTM do not seem to explain the bulk of the large short-term fluctuation in gross elasticities of tax receipts to GDP. The availability of DTM also allows for an analytical illustrative exercise, computing variants of the cyclically adjusted balance (CAB) based on time-varying elasticities (net of discretionary measures) instead of on constant elasticities. However, the indicators turn out to be extremely erratic and plagued by statistical 'noise', which makes them difficult to interpret in practice. The fact that elasticities change sign frequently and that their strong movements offset each other over a number of years also suggests that the short-term variations may largely be driven by time lags between revenue collection and revenue bases. Therefore, the CAB variants cannot be seen as an adequate solution for addressing the issues faced by the CAB.
    JEL: E32 H2 H3 H6
    Date: 2013–06
  43. By: Bauer, Anja (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "This paper provides detailed empirical evidence on the scope of mismatch in Germany in the past decade, using a comprehensive administrative data set that allows for disaggregation at the levels of industry, occupation and region. The findings suggest that regional mismatch did not play an important role in explaining movements of aggregate unemployment. Across industries and occupations, there was a decrease in mismatch unemployment from over 5 percent to below 4 percent (on the highest disaggregation level), whereas the share of mismatch unemployment (across industries and occupations) within total unemployment remains almost unchanged between 2000 and 2010. The results provide no evidence that the Hartz reforms have substantially reduced mismatch, in line with the fact that reallocation across occupations appears not to have been eased." (Author's abstract, IAB-Doku) ((en))
    JEL: E24 J6
    Date: 2013–08–19
  44. By: Antoniades, Adonis
    Abstract: I test the hypothesis that the banks' exposure to liquidity risk contributed to the contraction of mortgage credit during the financial crisis of 2007-2009. I use micro-level data on mortgage loan applications to control for variation in demand conditions and find that lenders who relied less on core-deposit funding or who had larger off-balance sheet exposure to credit lines, exhibited a sharper decline in their propensity to approve loan applications. These two sources of liquidity risk jointly accounted for a $41.5 billion-$61.9 billion contraction of mortgage credit during 2007-2009, or 5.2%-7.8% of total mortgage originations during this period.
    Keywords: liquidity risk, bank lending channel, lines of credit, core deposits, real estate, mortgage lending
    JEL: E51 G01 G11 G21
    Date: 2013–07–01
  45. By: Khan, Haider
    Abstract: This paper analyzes the problems of creating and expanding national macroeconomic policy space and economic governance for the developing countries in particular within a framework of overall global and regional financial architectures. It develops a critical constructivist evolutionary theory of international financial institutions and arrangements within a framework of dynamic complex adaptive economic systems(DCAES), and applies this particularly to the current problems of developing countries. More specifically, the paper analyzes the following aspects: • Proposed BASEL III reforms for more stringent capital requirements and their implications for the developing world in particular. • BIS proposals for better regulation of financial derivatives, including commodities futures, by moving away from OTC transactions towards organized exchanges. • The IMF’s response to recent and emerging global economic and challenges, and the evolving nature of its role. • The most appropriate role of regional arrangements in financial stabilization, based on experiences with such arrangements in this and prior episodes of crisis. The Basel reforms and the BIS proposals for regulating the derivatives markets have many positive features. However, they have not been designed with the needs of DCs and LDCs in mind. The consequences of Basel I and II and proposed Basel III are analyzed from the perspective of the developing countries. It turns out that specific concerns of developing countries have not received adequate attention within the Basel Reform Initiatives and more can be and needs to be done. Most importantly, the role of IMF under the present globalization arrangements and repeated financial crises is studied by following such a critical constructivist evolutionary theory of international financial institutions within a rigorous DCAES framework. Here, too, the key finding is that much more can be done to help the developing countries than has been done so far. Furthermore, the potential for such global reforms in the wake of the global financial crisis and the great recession is analyzed from a dialectical social constructivist viewpoint that combines the power of --sometimes conflicting-- norms and ideas with the underlying structural contradictions to produce a “critical-constructivist” analysis of the potential for change. It is shown that IMF must and can change in a direction which allows for greater national policy autonomy. It is also shown that the IMF needs complementary regional institutions of cooperation in order to create a stabilizing hybrid global financial architecture that will be more democratic and pro-development in terms of its governance structure and behavior. Thus regional financial architectures will need to be integral parts of any new global financial architecture (GFA).The tentative steps taken towards regional cooperation in Asia since Asian financial crisis are discussed to illustrate the opportunities and challenges posed by the need to evolve towards a hybrid GFA. The opportunities and challenges arising from the current global crisis are also analyzed in this context.
    Keywords: dynamic complex adaptive economic systems; financial crises; global financial architecture; regional financial architectures; a hybrid GFA; regional cooperation; BASEL III reforms; the BIS proposals; the IMF
    JEL: E5 F3
    Date: 2013–08
  46. By: Klimczuk-Kochańska, Magdalena; Klimczuk, Andrzej
    Abstract: Under the conditions of the global financial and economic crisis restructuring undertaken by companies often is associated with the optimization of operating costs in the dimension of human capital. Relatively little popular technique is responsible outplacement, which can reduce the risk of long-term unemployment and maintains the key competencies by the employees and organizations. At the same time public and private employment services usually have no experience in implementing outplacement programs. Small and medium-sized enterprises have difficulties in availability of those services. Paper is based on a critical analysis of the literature and a study conducted in Podlaskie Voivodship in 2012 in the under the project "Innovations in the corner - testing and implementation of new methods of outplacement." Study included a series of in-depth interviews, focus groups and quantitative CATI research among entrepreneurs and employees. Main conclusions lead to claim that outplacement should be popularized as good practice of corporate social responsibility. The implementation of such programs can be done by increasing the role of social economy actors - in particular non-governmental organizations that carry out tasks in the field of labor market policy. ** W warunkach globalnego kryzysu finansowego i gospodarczego podejmowana przez przedsiębiorstwa restrukturyzacja wiąże się często z optymalizacją kosztów działalności w wymiarze kapitału ludzkiego. Relatywnie mało popularną jest technika odpowiedzialnych zwolnień monitorowanych, która umożliwia ograniczenie ryzyka długotrwałego bezrobocia oraz pozwala na zachowanie kompetencji kluczowych tak przez pracowników, jak i organizacje. Jednocześnie publiczne i niepubliczne służby zatrudnienia przeważnie nie mają doświadczenia w realizacji programów outplacement. Programy te są też trudno dostępne dla małych i średnich przedsiębiorstw. Referat opiera się na krytycznej analizie literatury przedmiotu oraz badaniach przeprowadzonych w województwie podlaskim w 2012 roku w ramach projektu "Innowacje na zakręcie - testowanie i wdrażanie nowych metod outplacementu". Badania obejmowały serię indywidualnych wywiadów pogłębionych, zogniskowanych wywiadów grupowych oraz badanie ilościowe CATI wśród przedsiębiorców i pracowników. Główne wnioski prowadzą do twierdzenia, iż outplacement powinien być upowszechniany jako dobra praktyka społecznej odpowiedzialności biznesu. Realizacja programów może odbywać się poprzez zwiększenie roli podmiotów gospodarki społecznej - w szczególności organizacji pozarządowych realizujących zadania z zakresu polityki rynku pracy.
    Keywords: polityka aktywizacji, antycypacja restrukturyzacji, bezrobocie, interesariusze outplacementu, partnerstwa i pakty lokalne, rozwój regionalny i lokalny, współpraca międzysektorowa, zwolnienia monitorowane, activation policy, restructuring anticipation, unemployment, outplacement stakeholders, local partnerships and pacts, regional and local development, cross-sectoral cooperation, outplacement
    JEL: E24 G34 M54 R58
    Date: 2013
  47. By: Morgan, Peter J. (Asian Development Bank Institute); Pontines, Victor (Asian Development Bank Institute)
    Abstract: The purpose of this study is to better understand the likely impact on Asian economies and financial institutions of various recent global financial reforms, including Basel III capital adequacy and liquidity rules. Overall, the authors find that the Basel III capital adequacy rules are likely to have limited impacts on economic growth in Asia, but other financial regulations, including liquidity standards and rules for over-the-counter (OTC) derivatives, could have stunting effects on financial development in the region.
    Keywords: asian economies; financial institutions; global financial reforms; basel iii; capital adequacy rules; liquidity rules; otc derivatives
    JEL: E17 G01 G18 G21
    Date: 2013–08–22
  48. By: Andrew T. Young (College of Business and Economics, Department of Economics, West Virginia University, USA); Daniel Levy (Department of Economics, Bar-Ilan University, Israel; Department of Economics, Emory University, USA; The Rimini Centre for Economic Analysis, Italy)
    Abstract: We offer the first direct evidence of an implicit contract in a goods market. The evidence comes from the market for Coca-Cola. We demonstrate that the Coca-Cola Company left a written evidence of its implicit contract with its consumers—a very explicit form of an implicit contract. The contract promised a 5¢ price and adherence to the “Secret Formula.” Because implicit contracts are unobservable, we adopt a narrative approach. Analyzing a large number of historical documents, we offer evidence of the Company both acknowledging and acting on this implicit contract. We explore quality as a margin of adjustment available to Coca-Cola. The implicit contract included a promise not only of a constant price but also a constant quality (the “real thing”). During a period of over 70 years, we find evidence of only a single case of true quality change. We demonstrate that the perceived costs of breaking the implicit contract were large.
    Keywords: Implicit Contract, Explicit Contract, Invisible Handshake, Customer Market, Long-Term Relationship, Price Rigidity, Sticky Prices, Price Adjustment, Quality Rigidity, Quality Adjustment, Nickel Coke, Coca-Cola, Secret Formula, Real Thing
    JEL: E12 E31 K00 K12 K22 K23 L14 L16 L66 M21 M31 N80 A14
    Date: 2013–08

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