nep-mac New Economics Papers
on Macroeconomics
Issue of 2013‒12‒06
108 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Inflation's Role in Optimal Monetary-Fiscal Policy By Eric M. Leeper; Xuan Zhou
  2. Monetary Transmission via the Central Bank Balance Sheet By Stefan Behrendt
  3. Fiscal Limits and Monetary Policy: Default vs. Inflation By Anna Sokolova
  4. Expectations and Monetary Policy: Experimental Evidence By Oleksiy Kryvtsov; Luba Petersen
  5. Inflation Dynamics: The Role of Public Debt and Policy Regimes By Saroj Bhattarai; Jae Won Lee; Woong Yong Park
  6. A note on central bank transparency and credibility in Poland By Tomasz Łyziak
  7. Time variation in asset price responses to macro announcements By Linda S. Goldberg; Christian Grisse
  8. Distributional Effects of Macroeconomic Policy Choices in Emerging Market Economies By Prasad, Eswar
  9. Fiscal policy in a Real-Business-Cycle model with labor-intensive government services and endogenous public sector wages and hours By Aleksandar Vasilev
  10. High-Frequency Real Economic Activity Indicator for Canada By Gitanjali Kumar
  11. Jobless Recoveries During Financial Crises: Is Inflation the Way Out? By Guillermo Calvo; Fabrizio Coricelli; Pablo Ottonello
  12. Regional inflation and financial dollarisation By Martin Brown; Ralph De Haas; Vladimir Sokolov
  13. Fiscal Policy: Its Role in an Independent Scotland By Anthony J Laramie; Douglas Mair
  14. Perceived Inflation Persistence By Monica Jain
  15. Is the Friedman Rule Stabilizing? Some Unpleasant Results in a Heterogeneous Expectations Framework By Mattia Guerini
  16. Panel data evidence on the effects of fiscal impulses in the EU New Member States By Paweł Borys; Piotr Ciżkowicz; Andrzej Rzońca
  17. An Empirical Analysis of Inflation-Growth Nexus in Developing Countries: The Case of Sri Lanka By Nawalage S. Cooray
  18. The national and regional economy By William C. Dudley
  19. The Cyclicality of the Opportunity Cost of Employment By Gabriel Chodorow-Reich; Loukas Karabarbounis
  20. On the cost of rent-seeking by government bureaucrats in a Real-Business-Cycle framework By Aleksandar Vasilev
  21. Polarized business cycles By Marina Azzimonti
  22. Coordinating monetary and macroprudential policies By Bianca De Paoli; Matthias Paustian
  23. Factors Leading to Inflation Targeting – The Impact of Adoption By Jan-Egbert Sturm; Anna Samarina
  24. The Cyclical Volatility of Equilibrium Unemployment and Vacancies: Evidence from Italy By Cardullo, Gabriele; Guerrazzi, Marco
  25. The effects of capital requirements on real economy: a cointegrated VAR approach for US commercial banks By Maria Grazia Miele
  26. DGSE Model-Based Forecasting of Modeled and Non-Modeled Inflation Variables in South Africa By Rangan Gupta; Patrick Kanda; Mampho Modise; Alessia Paccagnini
  27. U.S. and regional economic conditions By William C. Dudley
  28. Imperfection Information, Optimal Monetary Policy and Informational Consistency By Levine, P.; Pearlman, J.; Yang, B.
  29. How Flexible are the Inflation Targets? A Bayesian MCMC Estimator of the Long Memory Parameter in a State Space Model By Andersson, Fredrik N.G.; Li, Yushu
  30. Don't Worry, Be Right! Survey Wording Effects on In flation Perceptions and Expectations By Lena Dräger; Ulrich Fritsche
  31. The German labour market reforms in a European context: A DSGE analysis By Busl, Claudia; Seymen, Atılım
  32. Fiscal stimulus and distortionary taxation By Thorsten Drautzburg; Harald Uhlig
  33. The inflation risk premium on government debt in an overlapping generations model By Michael Hatcher
  34. Assessing DSGE model nonlinearities By S. Boragan Aruoba; Luigi Bocola; Frank Schorfheide
  35. Even keel and the Great Inflation By Owen F. Humpage; Sanchita Mukherjee
  36. Behind the Great Recession: Job Search and Housing Decisions By Rendon, Silvio; Quella, Núria
  37. Analyzing Economic Growth From Structural Unobserved Component Modeling: The Case of Senegal By Ndiaye, Cheikh Tidiane; Bates, Samuel
  38. Price dynamics, financial fragility and aggregate volatility. By Antoine Mandel; Simone Landini; Mauro Gallegati; Herbert Gintis
  39. Central bank collateral, asset fire sales, regulation and liquidity By Bindseil, Ulrich
  40. A U.S. economic update and perspective on monetary policy (with reference to Leslie W. Fisher) By Richard W. Fisher
  41. Why Doesn't the Kuznets Curve on Income Distribution Hold in Ancient China? By Qichun He; Heng-fu Zou
  42. On the Causality between Domestic Credit Aggregates and Economic Growth in a Multivariate VAR Framework: Evidence from Nigeria By Evans, Olaniyi
  43. The analytics of technology news shocks By William Dupor; M. Saif Mehkari
  44. Surprise and uncertainty indexes: real-time aggregation of real-activity macro surprises By Chiara Scotti
  45. MIT and Money By Perry Mehrling
  46. Aggregation and Labor Supply Elasticities By Alois Kneip; Monika Merz; Lidia Storjohann
  47. Do unobserved components models forecast inflation in Russia? By Bulat Gafarov
  48. Elasticity of substitution between clean and dirty energy inputs: A macroeconomic perspective By Papageorgiou, Chris; Saam, Marianne; Schulte, Patrick
  49. The Balassa-Samuelson effect and the channels of its absorption in the Central and Eastern European Countries By Karolina Konopczak
  50. The Cyclical Behaviour of Employers' Monopsony Power and Workers' Wages By Hirsch, Boris; Jahn, Elke J.; Schnabel, Claus
  51. Some new evidence on the determinants of money demand in developing countries – A case study of Tunisia By Ben Salha, Ousama; Jaidi, Zied
  52. Monetary policy surprises, positions of traders, and changes in commodity futures prices By Nikolay Gospodinov; Ibrahim Jamali
  53. The Bank of England and the British Economy 1890-1913 By N. H. Dimsdale
  54. Liquidity, moral hazard and bank crises By S.Chatterji; S.Ghosal
  55. Consumer Credit: Too Much or Too Little (or Just Right)? By Jonathan Zinman
  56. Identifying What is Tempting By Alexandrer Groves
  57. Relative Prices, Hysteresis, and the Decline of American Manufacturing By Campbell, Douglas L.
  58. Can structural reforms help Europe? By Gauti Eggertsson; Andrea Ferrero; Andrea Raffo
  59. The macroeconomics of microfinance By Francisco J. Buera; Joseph P. Kaboski; Yongseok Shin
  60. Sticky deposit rates By John C. Driscoll; Ruth A. Judson
  61. Unemployment Benefits in EU Member States By Palme, Joakim
  62. House price cycles in Europe By Corradin, Stefano; Fontana, Alessandro
  63. Informalidade e Desempenho Econômico: Uma Análise dos Impactos Micro e Macroeconômicos de Políticas Para a Formalização By Gabriel Ulyssea
  64. Heterogeneity, Selection and Labor Market Disparities By Alessandra Bonfiglioli; Gino Gancia
  65. Financial stability: the role of the Federal Reserve System By Thomas C. Baxter, Jr.
  66. International dispersion of retail diesel fuel prices and the estimation of normal price values By Vladimir Kossov; Elena Kossova
  67. The Centre Matters for the Periphery of Europe: The Predictive Ability of a GZ-Type Spread for Economic Activity in Europe By Alfred V Guender; Bernard Tolan
  68. Age structure and the current account By Gudmundur S. Gudmundsson; Gylfi Zoega
  69. Entrepreneurial tail risk: implications for employment dynamics By Thorsten Drautzburg
  70. Fiscal illusion and the shadow economy: Two sides of the same coin? By Andreas Buehn; Roberto Dell'Anno; Friedrich Schneider
  71. Are homeowners in denial about their house values? comparing owner perceptions with transaction-based indexes By Alice M. Henriques
  72. Public, Private or Both? Analysing Factors Influencing the Labour Supply of Medical Specialists By Cheng, Terence Chai; Kalb, Guyonne; Scott, Anthony
  73. Changes in household composition as a shock-mitigating strategy By Kseniya Abanokova; Michael Lokshin
  74. A Characterization of Ramsey Equilibrium in a Model with Limited Borrowing By Kirill Borissov; Ram Sewak Dubey
  75. Ending too big to fail By William C. Dudley
  76. Rebalancing the economy: a tale of two countries By John C. Williams
  77. Changements institutionnels et politiques publiques au Brésil\r\nAux sources de la réduction des inégalités sociales, de la pauvreté et des disparités régionales By Maria Cecilia J. LUSTOSA; Yves-André FAURE
  78. Health, Pension Benefits and Longevity How They Affect Household Savings? By Oliveira Martins, Joaquim; El Mekkaoui de Freitas, Najat
  79. Decentralization, Vertical Fiscal Imbalance, and Political Selection By Massimo Bordignon; Matteo Gamalerio; Gilberto Turati
  80. Financial architecture and corporate performance: evidence from Russia By Maria Kokoreva; Anastasia Stepanova
  81. Redistribution and the political support of free entry policy in the Schumpeterian model with heterogenous agents By Dmitry Veselov
  82. Sovereign Debt Markets in Turbulent Times: Creditor Discrimination and Crowding-Out Effects By Fernando Broner; Aitor Erce; Alberto Martin; Jaume Ventura
  83. Is a fiscal capacity really necessary to complete EMU? By Feld, Lars P.; Osterloh, Steffen
  84. Redistributive effects and labour market dynamics By Federico DI PACE; Stefania VILLA
  85. Fiscal Externalities and Optimal Unemployment Insurance By Nicholas Lawson
  86. Political institutions and income (re-)distribution: Evidence from developed economies By Feld, Lars P.; Schnellenbach, Jan
  87. Measuring Economic Growth from Outer Space: A Comment By Berliant, Marcus; Weiss, Adam
  88. Politiques de R&D, Taxe Carbone et Paradoxe Vert By Grimaud, André; Neubauer, Mauricio; Rougé, Luc
  90. Correlations between the Petroleum Industry and the Per Capita Income in Nigeria: Cointegration and Error Correction Model Approach by Olaniyi Evans By Evans, Olaniyi
  91. Bank reactions after capital shortfalls By Kok, Christoffer; Schepens, Glenn
  92. Does Homeownership Lead to Longer Unemployment Spells? The Role of Mortgage Payments By Baert, Stijn; Heylen, Freddy; Isebaert, Daan
  93. Does Apprenticeship Improve Job Opportunities? A Regression Discontinuity Approach By Matteo PICCHIO; Stefano STAFFOLANI
  94. The Dynamics of Consumption and Investment in the Victorian Economy By N. H. Dimsdale
  95. Guest Workers in the Underground Economy By Djajic, S.; Mesnard, A.
  96. South-North convergence from a new perspective By Hübler, Michael
  97. Results on the Stability of a Simple Wage Posting Model By Robert Jump
  98. Exchange Rates, Wages, and Export Price Dynamics By Fromlet, Pia
  99. Couples' Labour Supply Responses to Job Loss: Boom and Recession Compared By Bryan, Mark L.; Longhi, Simonetta
  100. Earnings inequality and informal Employment in Russia By Anna Lukiyanova
  101. Multisector monopolistic competition model By Igor Pospelov; Stanislav Radionov
  103. Relationship of Income Inequality and Labor Productivity on Fertility in the Philippines: 1985-2009. By Macan, Vaneza Jean; Deluna, Roperto Jr
  104. Gender dimensions of national employment policies : a 24-country study By Goulding, Kristine
  105. Minimum wages and labor market outcomes: evidence from the emerging economy of Russia By Alexander Muravyev; Aleksey Oshchepkov
  106. Using the new products margin to predict the industry-level impact of trade reform By Timothy J. Kehoe; Jack Rossbach; Kim J. Ruhl
  107. On the theory of capital in post-industrial societies By Cavalieri, Duccio
  108. Etre employé dans la grande distribution : candidater en personne ou en ligne ? By Géraldine Rieucau

  1. By: Eric M. Leeper; Xuan Zhou
    Abstract: We study how the maturity structure of nominal government debt affects optimal monetary and fiscal policy decisions and equilibrium outcomes in the presence of distortionary taxes and sticky prices. Key findings are: (1) there is always a role for current and future inflation innovations to revalue government debt, reducing reliance on distorting taxes; (2) the role of inflation in optimal fiscal financing increases with the average maturity of government debt; (3) as average maturity rises, it is optimal to tradeoff inflation for output stabilization; (4) inflation is relatively more important as a fiscal shock absorber in high-debt than in low-debt economies; (5) in some calibrations that are relevant to U.S. data, welfare under the fully optimal monetary and fiscal policies can be made equivalent to the welfare under the conventional optimal monetary policy with passively adjusting lump-sum taxes by extending the average maturity of bond.
    JEL: E31 E52 E62 E63
    Date: 2013–11
  2. By: Stefan Behrendt (Friedrich Schiller University Jena, School of Economics and Business Admistration)
    Abstract: This paper estimates the effects of unconventional monetary policies on consumer as well as asset price inflation, economic activity and bank lending at the hand of a VAR analysis, covering episodes of balance sheet policies of 9 countries over the last 20 years. While recent episodes of unconventional monetary policies have been extensively analysed, this paper reduces deficiencies about long-run implications following central bank balance sheet policies in Scandinavian countries, Australia in the 1990s and Japan in the early 2000s. Results of this study are that balance sheet policies, in response to a collapse of asset price bubbles, can ensure a short run stabilisation of economic activity but are not able to lift the economy out of the ensuing deflationary slump alone. Additionally, they do not pose severe problems associated with inflation, as laid out in several theories such as the static monetarist interpretation of the quantity theory of money, or towards newly created asset price bubbles.
    Keywords: unconventional monetary policy, zero lower bound, money multiplier, VAR
    JEL: C32 E31 E44 E51 E52 E58
    Date: 2013–11–27
  3. By: Anna Sokolova (National Research University - Higher School of Economics, Myasnitskaya Street, 20, Moscow, Russia, 101000.)
    Abstract: In times of fiscal stress, governments fail to adjust fiscal policy in line with the requirements for debt sustainability. Under these circumstances, monetary policy impacts the probability of sovereign default alongside inflation dynamics. Uribe (2006) studies the relationship between inflation and sovereign defaults with a model in which the central bank controls a risky interest rate. He concludes that low inflation can only be maintained if the government sometimes defaults. This paper follows Uribe (2006) by examining monetary policy that controls a risky interest rate. However, it differs by the baseline assumption about the objectives of the central bank. In this paper, monetary policy is not pure inflation targeting: it is assumed that the central bank minimizes the probability of default under the upper restriction on inflation. An advantage of this framework is that it avoids the issue of zero risk premium, which exists in Uribe (2006), while at the same time allowing a study of the relationship between the constraints on monetary pol icy, the equilibrium default rate, and the risk premium. We show that monetary policy that controls the risky interest rate can mitigate default risks only when the upper limit on inflation is sufficiently high. The higher the agents believe the upper limit on inflation to be, the lower the equilibrium risk premium and probability of default are. Under a low default rate, constraints on inflation can only be fulfilled when fiscal shocks are either positive or small.
    Keywords: inflation, default, sovereign debt, monetary policy
    JEL: E61 E63 E52 F33
    Date: 2013
  4. By: Oleksiy Kryvtsov; Luba Petersen
    Abstract: The effectiveness of monetary policy depends, to a large extent, on market expectations of its future actions. In a standard New Keynesian business-cycle model with rational expectations, systematic monetary policy reduces the variance of inflation and the output gap by at least two-thirds. These stabilization benefits can be substantially smaller if expectations are non-rational. We design an economic experiment that identifies the contribution of expectations to macroeconomic stabilization achieved by systematic monetary policy. We find that, despite some non-rational component in expectations formed by experiment participants, monetary policy is quite potent in providing stabilization, reducing macroeconomic variance by roughly half.
    Keywords: Business fluctuations and cycles; Monetary policy implementation; Transmission of monetary policy
    JEL: C9 D84 E3 E52
    Date: 2013
  5. By: Saroj Bhattarai; Jae Won Lee; Woong Yong Park
    Abstract: We investigate the roles of a time-varying inflation target and monetary and fiscal policy stances on the dynamics of inflation in a DSGE model. Under an active monetary and passive fiscal policy regime, inflation closely follows the path of the inflation target and a stronger reaction of monetary policy to inflation decreases the response of inflation to non-policy shocks. In sharp contrast, under an active fiscal and passive monetary policy regime, inflation moves in an opposite direction from the inflation target and a stronger reaction of monetary policy to inflation increases the response of inflation to non-policy shocks. Moreover, a higher level of government debt leads to a greater response of inflation while a weaker response of fiscal policy to debt decreases the response of inflation to non-policy shocks. These results are due to variation in the value of public debt that leads to wealth effects on households. Finally, under a passive monetary and passive fiscal policy regime, both monetary and fiscal policy parameters matter for inflation dynamics, but because of equilibrium indeterminacy, theory provides no clear answer on the overall behavior of inflation. We characterize these results analytically in a simple model and numerically in a quantitative model.
    Keywords: Time-varying inflation target, Inflation response, Public debt, Monetary and fiscal policy regimes, Monetary and fiscal policy stances, DSGE model
    JEL: E31 E52 E63
    Date: 2013–11
  6. By: Tomasz Łyziak (Narodowy Bank Polski)
    Abstract: This note extends the study by Lyziak et al. (2007), providing up-to-date assessment of central bank transparency in Poland. We highlight the role of inflation projections prepared by the staff of the National Bank of Poland in building transparency of monetary policy. The results suggest that central bank inflation projections, published since 2004, have led to improvements in the predictability of interest rate decisions. The note updates also previous estimates of the degree of central bank credibility in Poland, using survey-based measures of inflation expectations formed by consumers, enterprises and financial sector analysts. It is confirmed that inflation expectations of enterprises and – especially – of financial sector analysts display a high degree of anchoring at the NBP inflation target, while consumer inflation expectations are driven mainly by developments in subjectively perceived inflation.
    Keywords: Transparency, Credibility, Expectations, Inflation Targeting, Poland.
    JEL: D84 E52 E58
    Date: 2013
  7. By: Linda S. Goldberg; Christian Grisse
    Abstract: Although the effects of economic news announcements on asset prices are well established, these relationships are unlikely to be stable. This paper documents the time variation in the responses of yield curves and exchange rates using high frequency data from January 2000 through August 2011. Significant time variation in news effects is present for those announcements that have the largest effects on asset prices. The time variation in effects is explained by economic conditions, including the level of policy rates at the time of the release, and risk conditions: government bond yields increase in response to "good news", but less so when risk is elevated. Risk conditions matter since they can capture the effects of uncertainty on the information content of news announcements, the interaction of monetary policy and financial stability objectives of central banks, and the effect of news announcements on the risk premium.
    Keywords: macroeconomic news announcements, high-frequency data, bond yields, exchange rates, monetary policy, risk
    JEL: E43 E44 E52 F31 G12 G14 G15
    Date: 2013
  8. By: Prasad, Eswar (Cornell University)
    Abstract: Distributional consequences typically receive limited attention in economic models that analyze the effects of monetary and financial sector policies. These consequences deserve more attention since financial markets are incomplete, imperfect, and economic agents' access to them is often limited. This limits households' ability to insure against household-specific (or sector-specific) shocks and magnifies the distributional effects of aggregate macroeconomic fluctuations and associated policy responses. These effects are likely to be even larger in emerging market and low-income economies beset by financial frictions. The political economy surrounding distributional consequences can sometimes lead to policy measures that reduce aggregate welfare. I argue that it is important to take better account of distributional rather than just aggregate consequences when evaluating specific policy interventions as well as the mix of different policies.
    Keywords: income and wealth distribution, inequality, emerging markets, financial frictions, monetary policy, macroeconomic policies
    JEL: E5 E6 F4
    Date: 2013–11
  9. By: Aleksandar Vasilev
    Abstract: Motivated by the high public employment, and the public wage premia observed in Europe, a Real-Business-Cycle model, calibrated to German data (1970-2007), is set up with a richer government spending side, and an endogenous private-public sector labor choice. To illustrate the effects of fiscal policy, two regimes are compared and contrasted to one another - exogenous vs. optimal (Ramsey) policy case. The main findings from the computational experiments performed in this paper are: (i) The op- timal steady-state capital tax rate is zero; (ii) A higher labor tax rate is needed in the Ramsey case to compensate for the loss in capital tax revenue; (iii) Under the optimal policy regime, public sector employment is lower, but government employees receive higher wages; (iv) The benevolent Ramsey planner provides the optimal amount of the public good, substitutes labor for capital in the input mix for public services produc- tion, and private output; (v) Government wage bill is smaller, while public investment is three times higher than in the exogenous policy case.
    Keywords: optimal policy, government spending, public employment and wages
    JEL: E69 E62 E32 H40
    Date: 2013–05
  10. By: Gitanjali Kumar
    Abstract: I construct a weekly measure of real economic activity in Canada. Based on the work of Aruoba et al. (2009), the indicator is extracted as an unobserved component underlying the co-movement of four monthly observed real macroeconomic variables - employment, manufacturing sales, retail sales and GDP. The indicator has a number of applications in macroeconomics and finance - it can be used to measure macroeconomic news, to quantify the impact of news on financial asset prices, to study exchange rate movements and as an input in nowcasting and forecasting exercises.
    Keywords: Business fluctuations and cycles; Econometric and statistical methods
    JEL: C38 E32
    Date: 2013
  11. By: Guillermo Calvo; Fabrizio Coricelli; Pablo Ottonello
    Abstract: This paper discusses three policy tools to mitigate jobless recoveries during financial crises: inflation, real currency depreciation, and credit-recovery policies. Using a sample of financial crises in Emerging Market economies, we document that large inflationary spikes appear to help unemployment to get back to pre-crisis levels. However, the counterpart of inflation is sizably lower real wages. Hence, inflation does not prevent wage earners as a whole from getting hit by financial crises. Interestingly, neither the change in the real exchange rate nor the change in output composition (tradables/nontradables), from output peak to recovery point, displays a statistically significant relationship with inflation or jobless recovery. This suggests that currency depreciation can help reduce unemployment only insofar as it is associated with inflation, and that jobless recovery is likely due to nominal wage rigidity. The paper also shows that measures to reactivate credit flows could be beneficial to wage earners as a whole, as measured by the real wage bill.
    JEL: E44 E52
    Date: 2013–11
  12. By: Martin Brown (Swiss Institute of Banking and Finance, University of St.Gallen); Ralph De Haas (EBRD); Vladimir Sokolov (Higher School of Economics)
    Abstract: In this paper, we exploit variation in consumer price inflation across 71 Russian regions to examine the relationship between the perceived stability of the local currency and financial dollarisation. Our results show that regions with higher inflation experience an increase in the dollarisation of household deposits and a decrease in the dollarisation of (long-term) household credit. The negative impact of inflation on credit dollarisation is weaker in regions with less integrated banking markets, suggesting that the asset-liability management of banks constrains the currency-portfolio choices of households.
    Keywords: Financial dollarisation, financial integration, regional inflation
    JEL: E31 E42 E44 F36 G21 P22 P24
    Date: 2013–11
  13. By: Anthony J Laramie (Merrimack College, MA); Douglas Mair (Heriot-Watt University, Edinburgh)
    Abstract: In this paper we consider the implications for macroeconomic fiscal policy in Scotland if the Scottish electorate votes in favour of independence in the referendum on 18 September, 2014. We offer the paper in the spirit of the new thinking that the Scottish government's Fiscal Commission has argued will be required if the potential benefits from the exercise of independently determined macroeconomic policy instruments are to be achieved.
    Keywords: Scotland, fiscal policy, secession
    JEL: E62 F52 H77 R11
    Date: 2013–11
  14. By: Monica Jain
    Abstract: The Survey of Professional Forecasters (SPF) has had vast influence on research related to better understanding expectation formation and the behaviour of macroeconomic agents. Inflation expectations, in particular, have received a great deal of attention, since they play a crucial role in determining real interest rates, the expectations-augmented Phillips curve and monetary policy. One feature of the SPF that has surprisingly not been explored is the natural way in which it can be used to extract useful measures of inflation persistence. This paper presents a new measure of U.S. inflation persistence from the point of view of a professional forecaster, referred to as perceived inflation persistence. It is built via the implied autocorrelation function that follows from the estimates obtained using a forecaster-specific state-space model. Findings indicate that perceived inflation persistence has changed over time and that forecasters are more likely to view unexpected shocks to inflation as transitory, particularly since the mid-1990s. When compared to the autocorrelation function for actual inflation, forecasters react less to shocks than the actual inflation data would suggest, since they may engage in forecast smoothing.
    Keywords: Inflation and prices; Econometric and statistical methods
    JEL: E31 E37
    Date: 2013
  15. By: Mattia Guerini (Sant'Anna School of Advanced Studies, Pisa)
    Abstract: The recent economic crisis gave proof of the fact that the Taylor rule is no more that good instrument as it was thought to be just ten years ago; this might be due to the fact that agents acting in the economy hold Heterogeneous Expectations (HE). In a recent paper Anufriev et al. (2013) suggest that a way to force stability on the economic system is to adopt a more aggressive Taylor rule. In the present paper a standard NK-DSGE is considered in order to investigate whether a Friedman k-percent monetary policy rule may be a valid instrument to counteract the instability created by the presence of HE in a framework à la Brock and Hommes (1997). The model here presented suggests that when such a money supply rule is adopted by the Central Bank, stability strongly depends on the intensity of choice, which represents the ability of the agents to switch toward the best available predictor.
    Keywords: Heterogeneous Expectations, Friedman Monetary Policy Rule, Macroeconomic Stability
    JEL: E37 E52 E58
    Date: 2013–11
  16. By: Paweł Borys (Warsaw School of Economics); Piotr Ciżkowicz (Warsaw School of Economics); Andrzej Rzońca (Warsaw School of Economics and Monetary Policy Council in Narodowy Bank Polski)
    Abstract: We identify fiscal impulses in the EU New Member States using four different methods and apply econometric panel data techniques to determine what is the response of the output and its components to those impulses. We also directly test the effects of fiscal impulses on labour costs and housholds’ expectations. The results confirm that the composition of impulses matters for output and its components’ response. Notably, we find evidence that investment and export growth accelerates after fiscal adjustment and decelerates after fiscal stimulus when the impulses are expenditure-based. In turn, private consumption seems not to respond to fiscal impulses regardless of their size. The analysis confirms that expenditure-based fiscal adjustments enhance wage moderation and thereby competitiveness of domestic enterprises, while expenditure-based fiscal stimuli weaken it. By contrast, we do not find evidence that fiscal impulses have an effect on households’ confidence.
    Keywords: fiscal consolidation, non-Keynesian effects, New Member States, panel data
    JEL: C23 D22 D81 E23 E32 E44 E62
    Date: 2013
  17. By: Nawalage S. Cooray (International University of University)
    Abstract: The maintenance of price stability is regarded as a key economic policy goal, as inflation is costly and hinders economic growth. There is a vast literature on the relationship between inflation and growth across time, regions, and inflation ranges. The conventional neoclassical view postulates a linear negative relationship between inflation and economic growth. The Keynesian and Neo]Keynesian frameworks, however, have established a linear positive relationship between inflation and growth in the short]run. Some researchers maintain that neither positive nor negative associations exist between inflation and growth. Although there seems to be an obvious positive relationship between inflation and growth in Sri Lanka in the long]run, it is difficult to establish a clear link between the two without a thorough investigation. Moreover, the high and volatile inflation rates have sparked a confusing debate within policy circles over the nexus of growth and inflation in the country. Given this background, this paper develops an econometric model to identify the real nature of the growth]inflation link in Sri Lanka and to determine the optimum or threshold rate of inflation that would minimise the economic cost of inflation in terms of economic growth. To the best of the authorfs knowledge, there has been no attempt previously to find such a threshold level of inflation for Sri Lanka. The proposed model uses long time series data to establish the plausible link between growth and inflation and also to estimate the inflation threshold.The current study finds a non]linear relationship between inflation and growth in Sri Lanka, contradicting the general belief about the linear relationship between inflation and growth. Growth increases with inflation, showing a positive relationship between the two variables up to 11 per cent of inflation, and then, growth becomes negative if inflation increases beyond that level. This finding implies that in Sri Lanka, there is a significant structural break of inflation at the 12 per cent level. The paper also finds that GDP growth and per capita GDP maximising inflation rate for the country falls between 7.4]9.6 per cent.
    Keywords: Inflation, Sri Lanka, Nexus of inflation and growth, Threshold level of inflation
    JEL: E31 E32 C01 C22 O40
    Date: 2013–11
  18. By: William C. Dudley
    Abstract: Remarks at Queens College, Flushing, New York.
    Keywords: New York (N.Y.) ; Economic conditions ; Employment ; Airports ; Education - Economic aspects ; College graduates ; Gross domestic product ; Inflation (Finance) ; Fiscal policy
    Date: 2013
  19. By: Gabriel Chodorow-Reich; Loukas Karabarbounis
    Abstract: The flow opportunity cost of moving from unemployment to employment consists of foregone public benefits and foregone utility from non-working time relative to consumption. Using detailed microdata, administrative data, and the structure of the search and matching model with concave and non-separable preferences, we document that the opportunity cost of employment is as procyclical as, and more volatile than, the marginal product of employment. The empirically-observed cyclicality of the opportunity cost implies that unemployment volatility in search and matching models of the labor market is far smaller than that observed in the data. This result holds irrespective of the level of the opportunity cost or whether wages are set by Nash bargaining or by an alternating-offer bargaining process. We conclude that appealing to aspects of labor supply does not help search and matching models explain aggregate employment fluctuations.
    JEL: E24 E32 J22 J64
    Date: 2013–11
  20. By: Aleksandar Vasilev
    Abstract: This paper studies the wasteful effect of bureaucracy on the economy by addressing the link between rent-seeking behavior of government bureaucrats and the public sector wage bill, which is taken to represent the rent component. In particular, public officials are modeled as individuals competing for a larger share of those public funds. The rent-seeking extraction technology in the government administration is modeled as in Murphy et al. (1991) and incorporated in an otherwise standard Real-Business-Cycle (RBC) framework with public sector. The model is calibrated to German data for the period 1970-2007. The main findings are: (i) Due to the existence of a significant pub- lic sector wage premium and the high public sector employment, a substantial amount of working time is spent rent-seeking, which in turn leads to significant losses in terms of output; (ii) The measures for the rent-seeking cost obtained from the model for the major EU countries are highly-correlated to indices of bureaucratic inefficiency; (iii) Under the optimal fiscal policy regime,steady-state rent-seeking is smaller relative to the exogenous policy case, as the government chooses a higher public wage premium, but sets a much lower public employment, thus achieving a decrease in rent-seeking.
    Keywords: Rent-seeking, bureaucracy, public employment, government wages
    JEL: E69 E62 E32 J45
    Date: 2013–09
  21. By: Marina Azzimonti
    Abstract: We are motivated by four stylized facts computed for emerging and developed economies: (i) business cycle movements are wider in emerging countries; (ii) economies in emerging countries experience greater economic policy uncertainty; (iii) emerging economies are more polarized and less politically stable; and (iv) economic policy uncertainty is positively related to political polarization. We show that a standard real business cycle (RBC) model augmented to incorporate political polarization, a `polarized business cycle' (PBC) model, is consistent with these facts. Our main hypothesis is that fluctuations in economic variables are not only caused by innovations to productivity, as traditionally assumed in macroeconomic models, but also by shifts in political ideology. Switches between left-wing and right-wing governments generate uncertainty about the returns to private investment, and this affects real economic outcomes. Since emerging economies are more polarized than developed ones, the effects of political turnover are more pronounced. This translates into higher economic policy uncertainty and amplifies business cycles. We derive our results analytically by fully characterizing the long-run distribution of economic and fiscal variables. We then analyze the effect of a permanent increase in polarization on PBCs.
    Keywords: Business cycles ; Economic policy ; Uncertainty
    Date: 2013
  22. By: Bianca De Paoli; Matthias Paustian
    Abstract: The financial crisis has prompted macroeconomists to think of new policy instruments that could help ensure financial stability. Policymakers are interested in understanding how these should be set in conjunction with monetary policy. We contribute to this debate by analyzing how monetary and macroprudential policy should be conducted to reduce the costs of macroeconomic fluctuations. We do so in a model in which such costs are driven by nominal rigidities and credit constraints. We find that, if faced with cost-push shocks, policy authorities should cooperate and commit to a given course of action. In a world in which monetary and macroprudential tools are set independently and under discretion, our findings suggest that assigning conservative mandates (á la Rogoff [1985]) and having one of the authorities act as a leader can mitigate coordination problems. At the same time, choosing monetary and macroprudential tools that work in a similar fashion can increase such problems.
    Keywords: Monetary policy ; Financial stability ; Macroeconomics ; Financial market regulatory reform
    Date: 2013
  23. By: Jan-Egbert Sturm (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Anna Samarina (University of Groningen, Netherlands)
    Abstract: This paper examines how the analysis of inflation targeting (IT) adoption is affected by allowing for a structural change after adoption, using panel probit models for 60 countries over the period 1985-2008. Our findings suggest that there is a structural change after IT adoption. Including the post-adoption period when estimating the factors of IT adoption leads to biased results when interested in the question as of what drives countries’ decision to adopt IT.
    Keywords: inflation targeting, panel probit
    JEL: E42 E52
    Date: 2013–11
  24. By: Cardullo, Gabriele; Guerrazzi, Marco
    Abstract: In this paper, we explore the fluctuations of unemployment and vacancies in the Italian labour market over the last twenty years. For reasons of data availability on unfilled job openings, this period is split in two parts. The former is covered by a help-wanted time series, while the latter is analyzed by means of a harmonized vacancy rate. In both periods, in line with previous findings on the unemployment volatility puzzle, we find that the labour market tightness indicator is much more volatile than productivity. Moreover, we show that a matching model with segmented labour markets and on-the-job search has the potential to provide a rationale for this pattern.
    Keywords: Macroeconomic fluctuations; Italian labour market; Shimer puzzle; Market segmentation; On-the-job search.
    JEL: E12 E24 J63 J64
    Date: 2013–11–26
  25. By: Maria Grazia Miele
    Abstract: This paper addresses the following questions: which was the contribution of banks’ assets to the US’ expansion in the period until the financial crisis? Did commercial banks respect capital requirements? The two questions are strictly interrelated as, according to a recent literature, business cycle is directly related to banks’ capital requirements for market and credit risk. The analysis highlight that US commercial banks actually respected capital requirements but these were not relevant in the explanation of US growth; it confirms that most of the growth can instead be explained by the rise in productivity. Nevertheless, the analysis does not consider the role of the non banking intermediation (investment banks, broker dealers, mutual funds, etc.) that steadily increased until the crisis. Its effects over real economy could be investigated in further work.
    Keywords: commercial banks, crisis, capital requirements, business cycle
    JEL: E44 E32 G21 G01
    Date: 2013–11
  26. By: Rangan Gupta; Patrick Kanda; Mampho Modise; Alessia Paccagnini
    Abstract: Inflation forecasts are a key ingredient for monetary policymaking - especially in an inflation targeting country such as South Africa. Generally, a typical Dynamic Stochastic General Equilibrium (DSGE) only includes a core set of variables. As such, other variables, e.g. such as alternative measures of inflation that might be of interest to policymakers, do not feature in the model. Given this, we implement a closed-economy New Keynesian DSGE model-based procedure which includes variables that do not explicitly appear in the model. We estimate such a model using an in-sample covering 1971Q2 to 1999Q4, and generate recursive forecasts over 2000Q1-2011Q4. The hybrid DSGE performs extremely well in forecasting inflation variables (both core and non-modeled) in comparison with forecasts reported by other models such as AR(1).
    Keywords: DSGE model, in ation, core variables, non-core variables
    JEL: C11 C32 C53 E27 E47
    Date: 2013–11
  27. By: William C. Dudley
    Abstract: Remarks at the Economic Press Briefing on Private For-Profit Institutions in Higher Education, New York City.
    Keywords: Economic conditions ; Financial markets ; Gross domestic product ; Labor market ; Inflation (Finance) ; Fiscal policy ; Housing - Prices ; Federal Reserve District, 2nd ; Private schools ; Student loans
    Date: 2013
  28. By: Levine, P.; Pearlman, J.; Yang, B.
    Abstract: This paper examines the implications of imperfect information (II) for optimal monetary policy with a consistent set of informational assumptions for the modeller and the private sector an assumption we term the informational consistency. We use an estimated simple NK model from Levine et al. (2012), where the assumption of symmetric II significantly improves the fit of the model to US data to assess the welfare costs of II under commitment, discretion and simple Taylor-type rules. Our main results are: first, common to all information sets we find significant welfare gains from commitment only with a zero-lower bound constraint on the interest rate. Second, optimized rules take the form of a price level rule, or something very close across all information cases. Third, the combination of limited information and a lack of commitment can be particularly serious for welfare. At the same time we find that II with lags introduces a ‘tying ones hands’ effect on the policymaker that may improve welfare under discretion. Finally, the impulse response functions under our most extreme imperfect information assumption (output and inflation observed with a two-quarter delay) exhibit hump-shaped behaviour and the fiscal multiplier is significantly enhanced in this case.
    Keywords: Imperfect Information; DSGE Model; Optimal Monetary Policy; Bayesian Estimation
    Date: 2013
  29. By: Andersson, Fredrik N.G. (Department of Economics, Lund University); Li, Yushu (Department of Business and Management Science, Norwegian School of Economics)
    Abstract: Several central banks have adopted inflation targets. The implementation of these targets is flexible; the central banks aim to meet the target over the long term but allow inflation to deviate from the target in the short-term in order to avoid unnecessary volatility in the real economy. In this paper, we propose modeling the degree of flexibility using an AFRIMA model. Under the assumption that the central bankers control the long-run inflation rates, the fractional integration order captures the flexibility of the inflation targets. A higher integration order is associated with a more flexible target. Several estimators of the fractional integration order have been proposed in the literature. Grassi and Magistris (2011) show that a state-based maximum likelihood estimator is superior to other estimators, but our simulations show that their finding is over-biased for a nearly non-stationary time series. We resolve this issue by using a Bayesian Monte Carlo Markov Chain (MCMC) estimator. Applying this estimator to inflation from six inflation-targeting countries for the period 1999M1 to 2013M3, we find that inflation is integrated of order 0.8 to 0.9 depending on the country. The inflation targets are thus implemented with a high degree of flexibility.
    Keywords: fractional integration; inflation-targeting; state space model
    JEL: C32 E52
    Date: 2013–11–28
  30. By: Lena Dräger (University of Hamburg); Ulrich Fritsche (University of Hamburg)
    Abstract: We compare the formation of quantitative infl ation perceptions and expectations from questions asked either in terms of price changes or in terms of the in flation rate in a new socio-economic household survey established at the University of Hamburg. In addition to socio-demographic characteristics, we evaluate effects of happiness, trust in people and the central bank, risk attitudes as well as news heard on monetary policy or in flation. We find that the upwards bias of reported perceptions and expectations is higher under the price wording and responses are more heterogeneous, but non-response rates are higher in the infl ation wording. Generally, consumers have lower perceptions or expectations with a higher level of education, which also significantly lowers the probability of non-response. Consumers that perceived positive news on monetary policy or infl ation also tend to give lower infl ation estimates and vice versa. Additionally, our results suggest that happier individuals have significantly lower perceptions and expectations under the price wording, while more risk-averse consumers give significantly higher in flation estimates under the inflation wording.
    Keywords: in flation perceptions, in flation expectations, survey design; mental representations, economic beliefs
    JEL: E31 D84 C83
    Date: 2013–12
  31. By: Busl, Claudia; Seymen, Atılım
    Abstract: While a widespread consensus exists among macroeconomists that the German labour market reforms in 2003-2005 have successfully contributed to the decline of the unemployment rate, critics claim that the reforms led to wage restraint and consequently consumption dampening accompanied by beggar-thy-neighbour effects, harming Germany's trade partners. We check up on the validity of these arguments by means of a two-country DSGE model featuring intra-industry trade and labour market frictions. Our results suggest that the disproportional growth of GDP (labour productivity) in comparison to consumption (wages) are only partially driven by the reforms. However, we do not find that the reforms contribute to Germany's trade surplus and cause negative spillovers to trading partners in terms of output and employment. --
    Keywords: labour market reforms,search and matching,spillover,dynamic stochastic general equilibrium models
    JEL: E24 E61 E65 F42 J38 J63
    Date: 2013
  32. By: Thorsten Drautzburg; Harald Uhlig
    Abstract: We quantify the fiscal multipliers in response to the American Recovery and Reinvestment Act (ARRA) of 2009. We extend the benchmark Smets-Wouters (2007) New Keynesian model, allowing for credit-constrained households, the zero lower bound, government capital, and distortionary taxation. The posterior yields modestly positive short-run multipliers around 0.53 and modestly negative long-run multipliers around -0.36. We explain the central empirical findings with the help of a simple three equation New Keynesian model with sticky wages and credit-constrained households.
    Keywords: Keynesian economics
    Date: 2013
  33. By: Michael Hatcher
    Abstract: This paper presents a general equilibrium model in which nominal government debt pays an inflation risk premium. The model predicts that the inflation risk premium will be higher in economies which are exposed to unanticipated inflation through nominal asset holdings. In particular, the inflation risk premium is higher when government debt is primarily nominal, steady-state inflation is low, and when cash and nominal debt account for a large fraction of consumers’ retirement portfolios. These channels do not appear to have been highlighted in previous models or tested empirically. Numerical results suggest that the inflation risk premium is comparable in magnitude to standard representative agent models. These findings have implications for management of government debt, since the inflation risk premium makes it more costly for governments to borrow using nominal rather than indexed debt. Simulations of an extended model with Epstein-Zin preferences suggest that increasing the share of indexed debt would enable governments to permanently lower taxes by an amount that is quantitatively non-trivial.
    Keywords: government debt; inflation risk premium; overlapping generations
    Date: 2013–10
  34. By: S. Boragan Aruoba; Luigi Bocola; Frank Schorfheide
    Abstract: We develop a new class of nonlinear time-series models to identify nonlinearities in the data and to evaluate nonlinear DSGE models. U.S. output growth and the federal funds rate display nonlinear conditional mean dynamics, while inflation and nominal wage growth feature conditional heteroskedasticity. We estimate a DSGE model with asymmetric wage/price adjustment costs and use predictive checks to assess its ability to account for nonlinearities. While it is able to match the nonlinear inflation and wage dynamics, thanks to the estimated downward wage/price rigidities, these do not spill over to output growth or the interest rate.
    Keywords: Wages ; Prices ; Inflation (Finance) ; Nonlinear theories ; Time-series analysis
    Date: 2013
  35. By: Owen F. Humpage; Sanchita Mukherjee
    Abstract: Using IV-GMM techniques and real-time data, we estimate a forward looking, Taylor-type reaction function incorporating dummy variables for even-keel operations and a variable for foreign official pressures on the U.S. gold stock during the Great Inflation.We show that when the Federal Reserve undertook even-keel operations to assist U.S. Treasury security sales, the FOMC tended to delay monetary-policy adjustments and to inject small amounts of reserves into the banking system.The operations, however, did not contribute significantly to the Great Inflation, because they occurred during periods of both monetary ease and monetary tightness, at least in the FOMC’s view.Consequently, the average federal funds rate during months containing even-keel events was no different than the average federal funds rate in other months, suggesting that even keel had no effect on the thrust of monetary policy.We also show that prospective gold losses had no effect on the FOMC’s monetary-policy decisions in the 1960s and early 1970s.
    Keywords: Inflation (Finance)
    Date: 2013
  36. By: Rendon, Silvio (Stony Brook University); Quella, Núria (Stony Brook University)
    Abstract: In this paper we analyze a mechanism that is particularly relevant to the workings of the Great Recession: we explain how easier home financing and higher homeownership rates increase unemployment rates. To this purpose we build a model of job search with liquid wealth accumulation and consumption of housing that can be rented, bought on credit, or sold. In our model, more relaxed house credit conditions increase workers' reservation wages, making them more selective in their job search. More selective job searches deteriorate employment transitions: job finding and job-to-job transitions rates decline while job loss rates increase, causing the overall unemployment rate to rise. We estimate this model structurally using NLSY data from 1978 until 2005. We find that more relaxed housing lending conditions, particularly lower downpayment requirements, increase unemployment rates by 6 percent points. We also find that declining labor demand decreases homeownership rates by 14 percent points.
    Keywords: job search, housing, savings, structural estimation
    JEL: J64 E21 E24 R21
    Date: 2013–11
  37. By: Ndiaye, Cheikh Tidiane; Bates, Samuel
    Abstract: Using the structural unobserved component (UC) modeling, this study will analyze the Senegalese economic growth path after 5 decades of independence by focusing on the potential output, the GDP cycle, and the type of shocks on the GDP. Empirical evidence suggests that an inventory cycle mainly drives the GDP short-term component with a time-varying extent of fluctuations. The main sources of shocks result from external determining factors. However, their persistent effects have been mitigated particularly since the devaluation of 1994. International institutions have motivated the relative successful GDP growth path of Senegal. Nevertheless, some structural internal improvements are needed to balance the financial and productive flaws in order to consolidate both the resilience to shocks as well as the macroeconomic stabilization.
    Keywords: Economic growth; Unobserved component modeling; Senegal;
    JEL: C32 E32
    Date: 2013–07
  38. By: Antoine Mandel (Centre d'Economie de la Sorbonne - Paris School of Economics); Simone Landini (Socioeconomic Research Institute of Piedmont); Mauro Gallegati (Università Politecnica delle Marche); Herbert Gintis (European Central University and Santa-Fe Institute)
    Abstract: Within a standard framework à la Arrow-Debreu, we investigate the dynamics emerging from the interactions of heterogeneous households and firms that are adaptive price setters and financially constrained. We show that depending on the stringency of the financial constraints the model can settle in two very different regimes: one characterized by equilibrium, the other by disequilibrium and financial fragility. We then investigate how the structure of the production network affects the emergence of aggregate volatility from micro-level price and financial shocks, hence providing a dynamical counterpart to recent results of Acemoglu and al (2012).
    Keywords: Agent-based modeling, financial fragility, price dynamics, general equilibrium, production networks
    JEL: C62 C63
    Date: 2013–11
  39. By: Bindseil, Ulrich
    Abstract: This paper analyses the potential roles of bank asset fire sales and recourse to central bank credit to ensure banks' funding liquidity and solvency. Both asset liquidity and central bank haircuts are modelled as power functions within the unit interval. Funding stability is captured as strategic bank run game in pure strategies between depositors. Asset liquidity, the central bank collateral framework and regulation determine jointly the ability of the banking system to deliver maturity transformation and financial stability. The model also explains why banks tend to use the least liquid eligible assets as central bank collateral and why a sudden non-anticipated reduction of asset liquidity, or a tightening of the collateral framework, can destabilize short term liabilities of banks. Finally, the model allows discussing how the collateral framework can be understood, beyond its essential aim to protect the central bank, as financial stability and non-conventional monetary policy instrument. JEL Classification: E42, G21
    Keywords: asset liquidity, bank run, central bank collateral framework, liquidity regulation, Unconventional monetary policy
    Date: 2013–11
  40. By: Richard W. Fisher
    Abstract: Remarks before the Australian Business Economists, Sydney, Australia, November 4, 2013 ; "Under these circumstances, it is no small wonder American businesses are not expanding and growing jobs at the pace we at the Fed would like to see. It is no small wonder that our economy is growing at a substandard pace compared to previous recoveries. It is no small wonder that the most expansive monetary policy the FOMC has ever engineered has been hampered from accomplishing what it set out to do. In short, while the Fed has been moving at the speed of a boomer in full run, the federal government of the United States has at best exhibited the adaptive alacrity of a koala (without being anywhere near as cute)."
    Date: 2013
  41. By: Qichun He (Central University of Finance and Economics); Heng-fu Zou (Development Research Group, Work Bank; Central University of Finance and Economics)
    Abstract: We find robust evidence that in ancient China that consists of many consecutive dynasties, within each dynasty, the inequality demonstrates a "U" shape (or a "spoon" shape to be more precise). Therefore, as inequality hits an upper bound, war happens and a new dynasty replaces the old one. The cycle repeats itself. A simple explanation has been offered. Policy implications have also been presented.
    Keywords: Kuznets Curve, Income inequality, U shape, Ancient China
    JEL: C21 E65 N95 O11 O43
    Date: 2013–11
  42. By: Evans, Olaniyi
    Abstract: The major objective of this paper is to empirically investigate the relationship between domestic credit and economic growth in Nigeria, using annual time series data from 1970 to 2012. In order to do this, the study employs KPSS unit root test, Johansen cointegration test, VAR modeling, impulse response function, variance decomposition and granger causality. Firstly, the findings reveal that there is a bi-directional causality and positive relationship between domestic credit and the economic growth in Nigeria. That is, domestic credit does not only contribute positively to economic growth in Nigeria, but the impact is strong and statistically significant. The findings have a strong implication on financial policy in Nigeria. The major implication is that an efficient financial system is one of the foundations for building sustained economic growth. Considering regulations, institutional constraints and other macro-economic factors militating against domestic credit in the economy, government should make the environment conducive and supportive so that performance is enhanced and good lending behaviour guaranteed.
    Keywords: Domestic Credit, Economic growth, Johansen cointegration test, VAR modeling, impulse response function, variance decomposition and granger causality, financial system and Nigeria
    JEL: E5 E51 G21 O1 O42
    Date: 2013–11
  43. By: William Dupor; M. Saif Mehkari
    Abstract: This paper constructs several models in which, unlike the standard neoclassical growth model, positive news about future technology generates an increase in current consumption, hours and investment. These models are said to exhibit procyclical news shocks. We find that all models that exhibit procyclical news shocks in our paper have two commonalities. There are mechanisms to ensure that: (I) consumption does not crowd out investment, or vice versa; (II) the benefit of forgoing leisure in response to news shocks outweighs the cost. Among the models we consider, we believe, one model holds the greatest potential for explaining procyclical news shocks. Its critical assumption is that news of the future technology also illuminates the nature of this technology. This illumination in turn permits economic actors to invest in capital that is forward-compatible, i.e. adapted to the new technology. On the technical side, our paper reintroduces the Laplace transform as a tool for studying dynamic economies analytically. Using Laplace transforms we are able to study and prove results about the full dynamics of the model in response to news shocks.
    Keywords: Business cycles ; Economic growth ; Technology
    Date: 2013
  44. By: Chiara Scotti
    Abstract: I construct two real-time, real activity indexes: (i) a surprise index that summarizes recent economic data surprises and measures optimism/pessimism about the state of the economy, and (ii) an uncertainty index that measures uncertainty related to the state of the economy. The indexes, on a given day, are weighted averages of the surprises or squared surprises from a set of macro releases, where the weights depend on the contribution of the associated real activity indicator to a business condition index a la Aruoba, Diebold, and Scotti (2009). I construct indexes for the United States, Euro Area, the United Kingdom, Canada, Japan. I show that the surprise index preserves the properties of the underlying series in affecting asset prices, with the advantage of being a parsimonious summary measure of real-activity surprises. For the United States, I present the real-activity uncertainty index in relation to other proxies commonly used to measure uncertainty and compare their macroeconomic impact. I find evidence that when uncertainty is strictly related to real activity it has a potentially milder impact on economic activity than when it also relates to the financial sector.
    Date: 2013
  45. By: Perry Mehrling (Barnard College, Columbia University)
    Abstract: The Treasury-Fed Accord of 1951 and the subsequent rebuilding of private capital markets, first domestically and then globally, provided the shifting institutional background against which thinking about money and monetary policy evolved within the MIT economics department. Throughout that evolution, a constant, and a constraint, was the conception of monetary economics that Paul Samuelson had himself developed as early as 1937, a conception that informed the decision to bring in Modigliani in 1962, as well as Foley and Sidrauski in 1965.
    Keywords: MIT, monetary economics, Paul Samuelson
    JEL: B22 E50
    Date: 2013–10
  46. By: Alois Kneip; Monika Merz; Lidia Storjohann
    Abstract: The aggregate Frisch elasticity of labor supply has played a key role in business cycle analysis. This paper develops a statistical aggregation procedure which allows for worker heterogeneity in observables and unobservables and is applicable to an individual labor supply function with non-employment as a possible outcome. Performing a thought experiment in which all offered or paid wages are subject to an unanticipated temporary change, we can derive an analytical expression for the aggregate Frisch elasticity and illustrate its main components: (i) the intensive and extensive adjustment of hours worked, (ii) the extensive adjustment of wages, and (iii) the aggregate employment rate. We use individual-specific data from the German Socio-Economic Panel (SOEP) for males at working-age in order to quantify each component. This data base provides indirect evidence on non-employed workers’ reservation wages. We use this variable in conjunction with a twostep conditional density estimator to retrieve the extensive adjustment of hours worked and wages paid. The intensive hours’ adjustment follows from estimating a conventional panel data model of individual hours worked. Our estimated aggregate Frisch elasticity varies between .63 and .70. These results are sensitive to the assumed nature of wage changes.
    Keywords: aggregation, reservation wage distribution, labor supply, extensive and intensive margin of adjustment, time-varying Frisch elasticities
    JEL: C51 E10 J22
    Date: 2013
  47. By: Bulat Gafarov (Higher School of Economics (Moscow, Russia). Laboratory for Inflation Problems and Economic Growth Research.)
    Abstract: I apply the model with unobserved components and stochastic volatility (UC-SV) to forecast the Russian consumer price index. I extend the model which was previously suggested as a model for inflation forecasting in the USA to take into account a possible difference in model parameters and seasonal factor. Comparison of the out-of-sample forecasting performance of the linear AR model and the UC-SV model by mean squared error of prediction shows better results for the latter model. Relatively small absolute value of the standard error of the forecasts calculated by the UC-SV model makes it a reasonable candidate for a real time forecasting method for the Russian CPI.
    Keywords: Stochastic volatility, MCMC, Russia, CPI, forecasting.
    JEL: C53 E37
    Date: 2013
  48. By: Papageorgiou, Chris; Saam, Marianne; Schulte, Patrick
    Abstract: Recently Acemolgu, Aghion, Bursztyn and Hemous (AER 2012) formulated a model in which a high macroeconomic elasticity of substitution between clean and dirty production represents a crucial condition for green growth. Until now it has never been systematically estimated. Using a novel panel of cross-country sectoral data, we formulate specifications of nested CES production functions that allow to estimate a special case of this parameter: the elasticity of substitution between clean and dirty energy inputs. Contrary to what is expected based on the earlier interfuel substitution literature, we find evidence that this elasticity exceeds one. --
    Keywords: clean and dirty energy inputs,aggregate elasticity of substitution,CES function,cross-country sectoral data,environmental policy
    JEL: O44 O47 Q54 Q58
    Date: 2013
  49. By: Karolina Konopczak (Warsaw School of Economics and Institute for Market, Consumption and Business Cycles Research)
    Abstract: The aim of the study is to estimate the magnitude of the Balassa-Samuleson effect as well as the effectiveness of the labour and the product market in its absorption in Poland, the Czech Republic, Hungary and Slovakia. The obtained results allowed to determine the magnitude of the systematic component of inflation differentials relative to the euro area, hence to assess the risk of common monetary policy inadequacy with respect to these economies. The obtained estimates suggest that the catching-up driven inflationary pressure is a non-negligible issue in the context of the CEECs integration with the euro area, since the systematic inflation differentials were comparable in size to those experienced by the so-called peripheral member states in the first decade after the introduction of the euro. Moreover, in the case of Poland none of the potential absorption mechanisms of the Balassa-Samuelson effect seemed to mitigate the convergence-induced inflationary pressure over the sample period. The outcomes suggest that ignoring the non-fulfilment of theoretical model assumptions regarding wages and markups, which is common in the literature, distorts estimation results.
    Keywords: Balassa-Samuelson hypothesis, monetary integration, real convergence, panel cointegration
    JEL: F41 E31 C33
    Date: 2013
  50. By: Hirsch, Boris (University of Erlangen-Nuremberg); Jahn, Elke J. (Institute for Employment Research (IAB), Nuremberg); Schnabel, Claus (University of Erlangen-Nuremberg)
    Abstract: This paper investigates the behaviour of employers' monopsony power and workers' wages over the business cycle. Using German administrative linked employer-employee data for the years 1985-2010 and an estimation framework based on duration models, we construct a time series of the firm-level labour supply elasticity and estimate its relationship to the aggregate unemployment rate. In line with theory, we find that firms possess more monopsony power during economic downturns, which shows to be robust to controlling for time-invariant unobserved worker heterogeneity. We also document that cyclical changes in workers' entry wages are of similar magnitude as those predicted under monopsonistic wage setting, suggesting that monopsony power should not be neglected when analysing wage cyclicality.
    Keywords: monopsony power, business cycle, entry wages
    JEL: J42 J31
    Date: 2013–11
  51. By: Ben Salha, Ousama; Jaidi, Zied
    Abstract: The present paper aims at examining the money demand function in Tunisia during the period 1981-2011. Unlike previous conventional money demand studies, the major components of real income are considered in this paper. Using the ARDL bounds testing approach, results reveal evidence of cointegration between broad money demand and its determinants, namely final consumption expenditure, expenditure on investment goods, export expenditure and interest rate. In the long-run, final consumption expenditure represents the major money demand determinant. This finding is robust to a variety of alternative money demand specifications and estimation methods. The empirical investigation suggests also the stability of the broad money demand function during the sample period. We conclude that monetary policy in Tunisia should be based on a broad definition of money. Furthermore, the estimation of the money demand function must take into account the different expenditure components of real income.
    Keywords: Money demand, M2, expenditure components, ARDL, Tunisia.
    JEL: C22 E41 E52
    Date: 2013–11–01
  52. By: Nikolay Gospodinov; Ibrahim Jamali
    Abstract: Using futures data for the period 1990–2008, this paper finds evidence that expansionary monetary policy surprises tend to increase crude and heating oil prices, and contractionary monetary policy shocks increase gold and platinum prices. Our analysis uncovers substantial heterogeneity in the magnitude of this response to positive and negative surprises across different commodities and commodity groups. The results also suggest that the positions of futures traders for the metals and energy commodities strongly respond to monetary policy shocks. The adjustment of the net long positions of hedgers and speculators appears to be a channel through which the monetary policy shocks are propagated to commodity price changes.
    Date: 2013
  53. By: N. H. Dimsdale (The Queens College, University of Oxford)
    Abstract: The paper examines the behavior of the British economy 1890-1913 by using a newly assembled quarterly data set. This provides a basis for estimating a small macroeconomic model, which can be used to explore the relationship between the policy responses of the Bank of England and the course of the economy. It is one of the few papers to make use of UK quarterly data and seeks to extend the earlier work of Goodhart (1972). The paper goes on to look into the determinants of external and internal gold flows and relates these to an extensive historical literature. The outcome is compared with the traditional representation of the working of the gold standard, as set out in the well-known Interim Report of the Cunliffe Committee (1918). It is found that operation of the model accords in general with the view of the Committee. The views of the Committee were applicable to the pre 1914 gold standard, but less so to the restored interwar gold standard. The next question to be considered is how far the Bank observed ‘The Rules of the Game’ in the sense of relating the reserves of the commercial banks to the gold reserves held at the Bank. It is shown that the relationship between the Bank’s reserves and the reserves of the commercial banks was severely distorted by the massive gold movements of 1895-6. These flows were associated with US political conflicts over the monetization of silver. With the exception of this episode, the Bank is shown to have had a limited measure of discretion in operating the gold standard. The final question to be considered is whether a similar model can be estimated from US data and related to the views of Friedman and Schwartz.
    Date: 2013–10–30
  54. By: S.Chatterji; S.Ghosal
    Abstract: Bank crises, by interrupting liquidity provision, have been viewed as resulting in welfare losses. In a model of banking with moral hazard, we show that second best bank contracts that improve on autarky ex ante require costly crises to occur with positive probability at the interim stage. When bank payoffs are partially appropriable, either directly via imposition of …nes or indirectly by the use of bank equity as a collateral, we argue that an appropriately designed ex-ante regime of policy intervention involving conditional monitoring can prevent bank crises.
    Keywords: bank runs, contagion, moral hazard, liquidity, random, contracts, monitoring.
    JEL: G21 D82
    Date: 2013–11
  55. By: Jonathan Zinman
    Abstract: The intersection of research and policy on consumer credit often has a Goldilocks feel. Some researchers and policymakers posit that consumer credit markets produce too much credit. Other researchers and policymakers posit that markets produce too little credit. I review theories and evidence on inefficient consumer credit supply. For each of eight classes of theories I sketch some of the leading models and summarize any convincing empirical tests of those models. I also discuss more “circumstantial” evidence that does not map tightly into a particular model but has the potential to shed light on, or obscure, answers to key questions. Overall there is a lack of convincing evidence on whether markets err, and in which direction. We do not yet understand whether and under what conditions markets over-supply or under-supply credit, much less why.
    JEL: D03 D14 D18 D82 E32 G21 G23 G28 R31
    Date: 2013–11
  56. By: Alexandrer Groves
    Abstract: An individual with present bias is one who is particularly impatient for consumption now at the expense of consumption later, but less impatient between any two dates in the future. A hypothesis for the cause of present bias is that immediate consumption is subject to temptation, whereas future consumption is not. Under this hypothesis an individual's level of present bias is a combination of what she is tempted to do and the amount of self-control she uses to avoid succumbing to this temptation. I show that given a level of present bias what is tempting and how much self-control is used is not always identified: it could be that she is tempted to consume everything she has available right now, but she controls herself; that her temptation is more mild and she succumbs to it completely; or something in between. I then present an algorithm that is able to disentangle this combination by eliciting the maximum price she will pay for commitment and her present bias. This works because for a given level of present-bias commitment becomes more valuable as the effort required to control one's self increases.
    JEL: D0 D9
    Date: 2013–11–21
  57. By: Campbell, Douglas L.
    Abstract: This study uses new measures of real exchange rates to investigate the decline of American manufacturing employment in the early 2000s, comparing it to the smaller decline in the 1980s. I find that US manufacturing sectors with greater initial exposure to trade in the 1970s were disproportionately affected by the ensuing dollar appreciation in the 1980s, and that more open sectors in the 1990s also suffered comparative declines in output and employment when US unit labor costs appreciated relative to US trading partners. Employment losses in both the 1980s and in the early 2000s were due to increased job destruction and suppressed job creation, and appear to exhibit hysteresis. Additionally, more open sectors experienced relative declines in shipments, value-added, investment, production worker wages, and total factor productivity as US relative unit labor costs in manufacturing rose. I explain the persistent effects of exchange rate movements on manufacturing using a Melitz model extension with sunk fixed costs, which leads to a dynamic gravity equation whereby shocks to trade have persistent effects that decay over time. The appreciation of US relative unit labor costs can plausibly more than two-thirds of the decline in manufacturing employment in the early 2000s.
    Keywords: Exchange Rates, American Manufacturing, Hysteresis, Trade
    JEL: E62 F1 F16 L60 N6 N60
    Date: 2013
  58. By: Gauti Eggertsson; Andrea Ferrero; Andrea Raffo
    Abstract: Structural reforms that increase competition in product and labor markets are often indicated as the main policy option available for peripheral Europe to regain competitiveness and boost output. We show that, in a crisis that pushes the nominal interest rate to its lower bound, these reforms do not support economic activity in the short run, and may well be contractionary. Absent the appropriate monetary stimulus, reforms fuel expectations of prolonged deation, increase the real interest rate, and depress aggregate demand. Our findings carry important implications for the current debate on the timing and the design of structural reforms in Europe.
    Date: 2013
  59. By: Francisco J. Buera; Joseph P. Kaboski; Yongseok Shin
    Abstract: We provide a quantitative evaluation of the aggregate and distributional impact of microfinance or credit programs targeted toward small businesses. We find that the redistributive impact of microfinance is stronger in general equilibrium than in partial equilibrium, but the impact on aggregate output and capital is smaller in general equilibrium. Aggregate total factor productivity (TFP) increases with microfinance in general equilibrium but decreases in partial equilibrium. When general equilibrium effects are accounted for, scaling up the microfinance program will have only a small impact on per-capita income, because the increase in TFP is counterbalanced by lower capital accumulation resulting from the redistribution of income from high-savers to low-savers. Nevertheless, the vast majority of the population will be positively affected by microfinance through the increase in equilibrium wages.
    Keywords: Macroeconomics ; Small business - Finance
    Date: 2013
  60. By: John C. Driscoll; Ruth A. Judson
    Abstract: We examine the dynamics of eleven different deposit rates for a panel of over 2,500 branches of about 900 depository institutions observed weekly over ten years. We replicate previous work showing that rates are downwards-flexible and upwards-sticky, and show that a simple menu cost model can generate this behavior. The degree of asymmetric rigidity varies substantially by deposit type, bank size, and across branches of the same bank. In the absence of such stickiness, depositors would have received as much as $100 billion more in interest per year during periods when market rates were rising. These results also suggest that deposit rates are likely to lag increases in policy and market rates in future tightening cycles.
    Date: 2013
  61. By: Palme, Joakim (Uppsala Center for Labor Studies)
    Abstract: The background to this report is the growing variation between EU Member States' economic and social situation, which has been reinforced by the economic recession and subsequent fiscal consolidation measures. It is increasingly recognized that economic and social responses to the crisis will require strengthened solidarity between Member States, in the first place within the Eurozone but also beyond. While most decisions about taxes and spending remain at national level within the EU, it can equally be argued that continued successful European integration needs an elaborate risk-sharing system where various forms of automatic fiscal transfer mechanisms may have a key role, particularly in Eurozone countries. One strategy is to set up EU- or Eurozone wide unemployment provisions where resources are transferred to areas particularly hit by asymmetric shocks.
    Keywords: unemployment benefits; unemployment assistance
    JEL: J65 J68
    Date: 2013–11–29
  62. By: Corradin, Stefano; Fontana, Alessandro
    Abstract: This paper examines the house price dynamics for thirteen European countries. A Markov-switching error correction model is estimated on house price returns at the country level, with deviations between house prices and fundamentals feeding into the short-run dynamics. The system is assumed to be in either a stable regime, in which deviations from the long-run equilibrium tend to vanish over time, or in an unstable regime, in which no such correction takes place. The analysis yields three sets of results. First, house price returns in Europe are generally characterized by three (high, medium and low) phases; growth rates within regimes differ largely across countries. Second, for some European countries the observed high growth phases are associated with a stable regime. Third, European housing markets have been more in sync with each other since 2000 following a growing trend in the time-span 2002-2006 and a dramatic downturn after the Lehman collapse in 2008 and during the Euro area sovereign debt crisis. JEL Classification: G12, R11, R31
    Keywords: house prices, Markov-switching and error-correction models
    Date: 2013–11
  63. By: Gabriel Ulyssea
    Abstract: Este texto desenvolve um arcabouço que permite analisar os impactos micro e macroeconômicos de diferentes políticas para formalização. O modelo é estimado e utilizado para avaliar os efeitos das duas principais abordagens para reduzir a informalidade: i) diminuir os custos da formalidade; e ii) elevar os custos da informalidade. Os resultados mostram que há importantes tradeoffs entre os impactos micro e macro destas abordagens. Políticas que visam aumentar os custos da informalidade têm efeitos piores sobre as firmas que políticas que reduzem os custos da formalização. O oposto é verdade para os indicadores macroeconômicos. Quando considerados os efeitos líquidos sobre o bem-estar agregado, políticas que aumentam o custo da informalidade têm melhor desempenho. Não obstante, reduções no grau de informalidade não estão necessariamente associadas a mais bem-estar. This paper develops a framework for performing ex ante evaluations of the micro (at the firm level) and macro impacts of formalization policies. I estimate the model and use it analyze the two main policy approaches towards informality: increasing the costs of informality (the stick), and reducing the costs of formality (the carrot). The results show that there exist important tradeoffs between their micro and macro effects: while stick policies have uniformly worse effects on firms, their effects on aggregate outcomes are better than carrot policies. In net terms, however, stick policies have better welfare effects. Under either approach, informality reductions are not necessarily associated to welfare gains.
    Date: 2013–11
  64. By: Alessandra Bonfiglioli; Gino Gancia
    Abstract: We study the incentives to acquire skill in a model where heterogeneous firms and workers interact in a labor market characterized by matching frictions and costly screening. When effort in acquiring skill raises both the mean and the variance of the resulting ability distribution, multiple equilibria may arise. In the high-effort equilibrium, heterogeneity in ability is sufficiently large to induce firms to select the best workers, thereby confirming the belief that effort is important for finding good jobs. In the low-effort equilibrium, ability is not sufficiently dispersed to justify screening, thereby confirming the belief that effort is not so important. The model has implications for wage inequality, the distribution of firm characteristics, sorting patterns between firms and workers, and unemployment rates that can help explaining observed cross-country variation in socio-economic and labor market outcomes.
    Keywords: wage inequality, firm heterogeneity, unemployment, effort, beliefs, sorting, selection, multiple equilibria
    JEL: E24 J24 J64
    Date: 2013–10
  65. By: Thomas C. Baxter, Jr.
    Abstract: Remarks at the Future of Banking Regulation and Supervision in the EU Conference, Frankfurt, Germany.
    Keywords: European Central Bank ; Banks and banking, Central ; Federal Reserve System ; Federal Reserve Act ; Financial institutions - Law and legislation ; Financial Regulatory Reform (Dodd-Frank Act) ; Financial stability ; Financial crises
    Date: 2013
  66. By: Vladimir Kossov (Research University Higher School of Economics , professor); Elena Kossova (Research University Higher School of Economics, Ph.D. in mathematics, lecturer)
    Abstract: For the large majority of goods, the price dispersion between countries does not exceed 1:10. Diesel fuel stands out, with a dispersion which exceeds 1:100. Given a constant oil price the difference in diesel fuel prices between countries is caused by the different taxes. The average share of taxes in the price determines the normal price. An estimation of the normal price of diesel fuel is made using an econometric model (using 79 countries, 1998-2008 by even years). Of greatest interest to economic policy are normal prices for countries with economies in transition and developing countries. This paper is organized as follows. In the introduction a definition of the term "normal price" and why it is important are presented. The first chapter is devoted to the notion of "price level" both international and national. The normal price is calculated using an econometric model. The estimation of the normal price of goods is determined by the international component and deviation of the normal price by the national one. In the second chapter the results of evaluating the parameters of the econometric model and the values of normal prices are given. In the third chapter price deviations in Russia and Kazakhstan are discussed and it is concluded that they have reached the maximum value, above which mass protests may result
    Keywords: budget revenue; diesel fuel price; motor fuel tax; mass protests; normal price; oil rent; price level
    JEL: C23 D49 E37 Q48
    Date: 2013
  67. By: Alfred V Guender (University of Canterbury); Bernard Tolan
    Abstract: This paper examines whether information from bond markets provides a reliable signal for future economic activity in Europe. It evaluates the marginal predictive content and economic significance of a risk-adjusted yield credit spread in five European countries from the early 1990s to the recent past. The inclusion of this bond yield spread improves markedly the goodness of fit of the forecasting equation for economic activity in countries on the European periphery. The within-sample forecasting ability of the GZ-spread is remarkable, both over the whole sample period and a sub-sample period marking the effective beginning of the Economic and Monetary Union of Europe in 1999. Its effect on economic activity is felt particularly during the 2007-12 Crisis period.
    JEL: E3 E4 G1
    Date: 2013–09–01
  68. By: Gudmundur S. Gudmundsson (Universitat Pompeu Fabra); Gylfi Zoega (Department of Economics, Mathematics & Statistics, Birkbeck; University of Iceland)
    Abstract: We adjust current account surpluses and deficits of 57 countries in the period 2005-2009 for differences in the age structure of their populations and find that these differences can account for a significant part of the variation in the data. Among the large countries we find that the adjustment increases the surpluses of Germany and Japan while the surpluses of China, Singapore, Hong Kong, Korea, Thailand, Indonesia and Malaysia are significantly diminished.
    Keywords: Current account, age structure, life-cycle saving behavior.
    JEL: J1 E2
    Date: 2013–11
  69. By: Thorsten Drautzburg
    Abstract: New businesses are important for job creation and have contributed more than proportionally to the expansion in the 1990s and the decline of employment after the 2007 recession. This paper provides a framework for analyzing determinants of business creation in a world where new business owners are exposed to idiosyncratic risk due to initial imperfect diversification. This paper uses this framework to analyze how entrepreneurial risk has changed over time and how this has affected employment in the US. Conditions are provided under which entrepreneurial risk can be identified using micro data on the size distribution of new businesses and their exit rates. The baseline model considers both upside and downside risk. Applied to US time series data, structural estimates suggest that higher upside risk explains much of the high job creation in the late 1990s. Time variation in risk explains around 40% of the variation in employment of new businesses. Reduced form results show that this relationship is strongest in IT-related industries. When restricting the model to a single risk factor, the explanatory power for employment drops by 25% to 50% compared to the baseline estimates.
    Keywords: Employment ; Entrepreneurship ; Risk
    Date: 2013
  70. By: Andreas Buehn; Roberto Dell'Anno; Friedrich Schneider
    Abstract: This paper presents an empirical analysis of the relationship between fiscal illusion and the shadow economy for 104 countries over the period 1989–2009. We argue that both unobservable phenomena are closely linked to each other, as the creation of a fiscal illusion may be helpful if governments want to control shadow economic activities. Using a MIMIC model with two latent variables we confirm previous findings on the driving forces of the shadow economy and identify the main determinants and indicators of fiscal. Most importantly, we find that fiscal illusion negatively affects the shadow economy: Concealing the real tax burden through fiscal illusion potentially contributes to the government’s efforts to repress shadow economic activities.
    Keywords: Fiscal illusion; shadow economy; MIMIC model; latent variables, tax burden, tax complexity
    JEL: O17 K42 O54 N16
    Date: 2013–12
  71. By: Alice M. Henriques
    Abstract: The boom and bust of the housing market has been a prominent feature of the household financial landscape in recent years. The exact magnitude of the house price swings depends on whether you ask homeowners how much their houses are worth at two points in time or use the change in a transaction-based house price index (HPI). During the boom, owner-reported values rose much more rapidly than the HPI, and after the bust, owner-reported values fell slightly less than the HPI. Individual homeowner "errors" are estimated to explain about one-third of the different in aggregate changes in the housing stock as measured by the Survey of Consumer Finances and CoreLogic national HPI. In a panel of homeowners surveyed during the housing downturn, owner-reported changes in value do not systematically diverge from local house price index changes.
    Date: 2013
  72. By: Cheng, Terence Chai (Melbourne Institute of Applied Economic and Social Research); Kalb, Guyonne (Melbourne Institute of Applied Economic and Social Research); Scott, Anthony (Melbourne Institute of Applied Economic and Social Research)
    Abstract: This paper investigates the factors influencing the allocation of time between public and private sectors by medical specialists. A discrete choice structural labour supply model is estimated, where specialists choose from a set of job packages that are characterised by the number of working hours in the public and private sectors. The results show that medical specialists respond to changes in earnings by reallocating working hours to the sector with relatively higher earnings, while leaving total working hours unchanged. The magnitudes of the own-sector and cross-sector earnings elasticities fall in the range of 0.21-0.54, and are larger for male than for female specialists. The labour supply response varies by doctors' age and medical specialty. Family circumstances such as the presence of young dependent children influence the hours worked by female specialists but not male specialists. We illustrate the relevance of our findings by simulating the impact of recent trends in earnings growth in the public and private sectors.
    Keywords: labour supply, elasticities, medical specialists, public-private mix
    JEL: I10 I11 J22 J24
    Date: 2013–11
  73. By: Kseniya Abanokova (National Research University Higher School of Economics (Moscow, Russia).); Michael Lokshin (World Bank and National Research University Higher School of Economics (Moscow, Russia). “Centre for Labour Market Studies (CLMS)”)
    Abstract: This paper uses data from the Russian Longitudinal Survey that span the two recent economic recessions of 1998 and 2008 to study the effect of declining incomes on household composition. We hypothesize that individuals face a tradeoff between taking advantages of economies of scale and specialization when living with others and individual privacy. Consumption smoothing is achieved by forgoing privacy during a crisis and results in an increase in household size. Our empirical results suggest that members of the households that experienced negative income shocks are more likely to move in with others than households whose income remained the same or increased.
    Keywords: household structure, coping strategy, macroeconomic shocks, Russia
    JEL: J10
    Date: 2013
  74. By: Kirill Borissov; Ram Sewak Dubey
    Abstract: We investigate the convergence property of the capital stock sequence in Ramsey equilibria with limited borrowing by the households. In our model, at the beginning of each period, households are allowed to borrow against their end of the period wage income. Under this assumption the capital stock sequence converges to the steady state stock irrespective of the technology and turnpike property holds in every Ramsey equilibrium.
    Keywords: Ramsey Equilibrium, Limited Borrowing, Convergence of capital path
    JEL: C61 D61 D90 O41
    Date: 2013–10–01
  75. By: William C. Dudley
    Abstract: Remarks at the Global Economic Policy Forum, New York City.
    Keywords: Bank failures ; Business failures ; Bank size ; Systemic risk ; Bank capital ; Bank liquidity ; Financial stability ; Bank competition ; Federal Deposit Insurance Corporation ; Financial Regulatory Reform (Dodd-Frank Act)
    Date: 2013
  76. By: John C. Williams
    Abstract: Speech at a community leaders luncheon, Los Angeles, CA, November 8, 2013
    Keywords: Economic conditions - China ; Economic conditions - United States
    Date: 2013
  77. By: Maria Cecilia J. LUSTOSA; Yves-André FAURE
    Abstract: En tant qu’objet de l’économie politique, la distribution des revenus se reflète dans les inégalités économiques et sociales, que soit entre les pays ou entre les régions d’un même pays. La croissance économique des pays émergents lors des deux dernières décennies a attiré l’attention du monde, mais les inégalités de revenu sont toujours présentes et se sont même creusées en Russie, Chine et en Inde, sauf au Brésil. En dépit de cet aspect positif, les taux de croissance moyens du Produit Intérieur Brut (PIB) brésilien au cours des décennies 1990 et 2000 étaient plus faibles que dans d’autres pays émergents. On sait que le Brésil s’est longtemps distingué comme un pays à forte inégalité et qu’il s’est caractérisé par la persistance d’importantes couches de population et de vastes régions pauvres, voire misérables. Cependant la réduction des inégalités de revenu dans ce pays ne semble pas pouvoir être expliquée par la seule croissance du produit. Des changements institutionnels significatifs et de nouvelles politiques publiques mises en œuvre dès 1988 ont rendu possible cette réduction de la pauvreté et des inégalités. Notre étude a pour objectif de présenter et d’analyser l’ensemble de ces réorientions et de leurs effets sur la distribution du revenu et sur les inégalités entre les régions du pays. La stabilisation macroéconomique obtenue grâce à la mise en place du « Plan Real » qui a mis fin à la période d’hyperinflation, l’augmentation substantielle du salaire minimum réel et des retraites, l’accroissement des aides sociales et des transferts financiers constitutionnels entre les entités de la fédération ont pesamment contribué à la distribution plus juste et plus égalitaire des revenus. Ainsi l’État joue un rôle significatif dans ces nouvelles politiques d’inclusion sociale. Mais la dynamisation des appareils productifs locaux et l’insertion des populations dans le marché du travail ne sont pas encore au rendez-vous ce qui limite clairement les impacts durables de la lutte contre les inégalités tant sociales que spatiales et n’efface pas le caractère encore nettement assistancialiste des transferts directs de revenus aux personnes et aux familles.
    Keywords: pays émergents, Brésil, croissance, politique publique, inégalités
    JEL: E61 H55 I38 O54
    Date: 2013
  78. By: Oliveira Martins, Joaquim; El Mekkaoui de Freitas, Najat
    Abstract: This paper analyses the impact of health, pension systems and longevity on savings. It uses a simple life-cycle model embodying social transfers (health care and pension expenditures) and changes in longevity to determine the level of household savings. From this model, we derived an econometric specification, augmented with the effects of public budget balances. The model is estimated for a panel of 22 OECD countries for the period 1970-2009. Our principal result is that, from the point of view of incentive to save, health transfers have a similar impact as pension replacement rates. Therefore, welfare reforms that reduce replacement rates without reforming health system may not have all the expected impact on household savings. In line with life-cycle theory, we found that longevity increases saving ratios.
    Keywords: Ageing; consumption; health; longevity; pension systems; saving;
    JEL: D91 I13 J1 J11 J26
    Date: 2013–10
  79. By: Massimo Bordignon (Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Matteo Gamalerio (University of Warwick); Gilberto Turati (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche, Università di Torino)
    Abstract: In a career-concern model of politics with endogenous candidacy and different types of politicians, following a decentralization reform, politicians with different skills are elected in municipalities characterized by different levels of autonomous resources. As an effect, consumer welfare increases only, or mainly, in richer municipalities. We test these predictions by exploiting the differentiated reduction in Vertical Fiscal Imbalance in Italian municipalities, due to the strong difference in the tax base, following the decentralization reforms of the '90s. Results strongly support our predictions and are robust to several alternative stories.
    Keywords: decentralization, vertical fiscal imbalance, quality of politicians
    JEL: D72 D78
    Date: 2013–11
  80. By: Maria Kokoreva (National Research University Higher School of Economics. Department of Finance, Corporate Finance Center); Anastasia Stepanova (National Research University Higher School of Economics. Department of Finance, Corporate Finance Center)
    Abstract: In this paper we study the performance effects of capital structure, ownership structure and corporate governance of Russian companies. To address the lack of research in corporate performance modeling in emerging markets we contribute to the literature by introducing a cluster analysis of the financial architecture and market performance of Russian companies. Our goal is to find out the most efficient and inefficient types of financial architecture in emerging markets. Using a sample of 52 of the largest Russian non-financial companies between 2005-2010 we demonstrate the existence of three sustainable types of financial architecture. Using cluster analysis we form clusters of companies in the pre-crisis period and then demonstrate the relationship between the type of financial architecture and the level of market performance
    Keywords: capital structure, ownership structure, emerging markets, performance
    JEL: G32 G34
    Date: 2013
  81. By: Dmitry Veselov (National Research University Higher School of Economics, Laboratory of Macroeconomic Analysis)
    Abstract: We consider the problem of finding sufficient conditions for political support of liberal, growth-enhancing policy in a quality-ladders model with heterogeneous agents differing in their endowment of wealth and skills. The policy set is two-dimensional: Agents vote for the level of redistribution as well as for the level of entry barriers preventing the creation of more efficient firms. We show that under the majority voting rule there are three possible stable political outcomes: full redistribution, low redistribution and low barriers for entry (“liberal” order), high redistribution and high barriers for entry (“corporatism”). We show that key variables determining the political outcome are the expected gain from technological adoption, the ratio of total profits to total wages, and the skewness of human capital distribution.
    Keywords: economic systems, political barriers for growth, majority voting, quality-ladders model, wealth inequality, talent inequality, economic growth
    JEL: O33 P16 P48
    Date: 2013
  82. By: Fernando Broner; Aitor Erce; Alberto Martin; Jaume Ventura
    Abstract: In 2007, countries in the euro periphery were enjoying stable growth, low deficits, and low spreads. Then the financial crisis erupted and pushed them into deep recessions, raising their deficits and debt levels. By 2010, they were facing severe debt problems. Spreads increased and, surprisingly, so did the share of the debt held by domestic creditors. Credit was reallocated from the private to the public sectors, reducing investment and deepening the recessions even further. To account for these facts, we propose a simple model of sovereign risk in which debt can be traded in secondary markets. The model has two key ingredients: creditor discrimination and crowding-out effects. Creditor discrimination arises because, in turbulent times, sovereign debt offers a higher expected return to domestic creditors than to foreign ones. This provides incentives for domestic purchases of debt. Crowding-out effects arise because private borrowing is limited by financial frictions. This implies that domestic debt purchases displace productive investment. The model shows that these purchases reduce growth and welfare, and may lead to self-fulfilling crises. It also shows how crowding-out effects can be transmitted to other countries in the euro zone, and how they may be addressed by policies at the European level.
    JEL: F32 F34 F36 F41 F43 F44 G15
    Date: 2013–11
  83. By: Feld, Lars P.; Osterloh, Steffen
    Abstract: [Conclusion] The necessity of establishing a fiscal capacity at the European level in order to smooth asymmetric shocks in EMU is largely based on the theory of optimum currency areas. If countries do not have the possibility to align exchange rates, the effects of asymmetric shocks on a countrys income must be absorbed by other mechanisms. In an economy with sticky wages and prices as well as with low factor mobility, only a transfer mechanism between countries provides for a compensation of such adverse cyclical effects and thus serves as an insurance against the risk of asymmetric shocks. This rationale is based on many assumptions regarding the economic conditions in a country. Instead of a fiscal capacity for risk-sharing an increase in factor mobility or a higher wage and price flexibility also allow for an absorption of shocks. Indeed, a monetary union requires economies to become more flexible. The analysis in this paper shows that the contribution of a fiscal capacity to absorb shocks in federations in which a fiscal union is established is relatively low. This holds for the US, Germany and Canada alike. More important according to empirical studies are capital markets. The more integrated capital markets are, the better they serve as an interregional risk-sharing mechanism. Thus, the creation of a banking union along the lines proposed by Buch et al. (2013) in the EU will be the best way of insuring EMU member countries against adverse asymmetric shocks. In addition, higher labor mobility and higher wage and price flexibility will help to accommodate future shocks. Moreover, if member countries consolidate their budgets following the rules of the fiscal compact and the six pack regulations, their ability to smooth shocks by national fiscal policy will be increased. It should be noted that the establishment of a fiscal capacity does not only provide for at best a rather small risk-sharing mechanism. It also induces negative incentives for member countries to reduce the probability of being affected by economic shocks adversely. Reforms of labor and products markets aiming at higher wage and price flexibility will be postponed. Consolidation efforts will wane. Moral hazard occurs. Given this downside of a fiscal capacity, its introduction cannot be advised. --
    Date: 2013
  84. By: Federico DI PACE; Stefania VILLA
    Abstract: We propose and estimate, using Bayesian techniques, a Dynamic Stochastic General Equilibrium model featuring search and matching frictions with redistributive productivity shocks – which account for fluctuations in the distribution of income across factors of production. We first find supporting evidence that the model is able to replicate cyclical properties of labour market variables. We then disentangle two endogenous sources of labour market amplification: (i) deep habits and (ii) the replacement ratio. The latter appears to be a powerful endogenous amplification mechanism given the shock structure of the model. As far as the exogenous amplification is concerned, labour market variability can be largely explained by redistributive innovations. Finally, contrary to Total Factor Productivity shocks, redistributive shocks increase total hours.
    Date: 2013–11
  85. By: Nicholas Lawson (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)
    Abstract: A common finding of the optimal unemployment insurance literature is that the optimal UI replacement rate is around 50%, implying that current levels in the US are close to optimal. However, a key assumption in the existing literature is that unemployment benefits are the only government spending activity. In this paper I show that recommendations for optimal UI levels are dramatically reduced when one incorporates the fact that UI spending is a small part of overall government spending. This occurs because the negative impact of UI on income tax revenues implies added welfare costs, a mechanism that I refer to as a fiscal externality. Using both a calibrated structural job search model and a "sufficient statistics" method that relies on reduced-form elasticities, I find that the optimal replacement rate drops to zero once fiscal externalities are incorporated. However, I also consider the possibility that more generous UI could increase reservation wages and thus potentially increase the tax base, and I show that this second fiscal externality could have important effects on the results, with an optimal replacement rate which could rise above 70%.
    Keywords: unemployment insurance, fiscal externality, job search, sufficient statistics, government spending
    Date: 2013–11–21
  86. By: Feld, Lars P.; Schnellenbach, Jan
    Abstract: We discuss the effect of formal political institutions (electoral systems, fiscal decentralization, presidential and parliamentary regimes) on the extent and direction of income (re-) distribution. Empirical evidence is presented for a large sample of 70 economies and a panel of 13 OECD countries between 1981 and 1998. The evidence indicates that presidential regimes are associated with a less equal distribution of disposable incomes, while electoral systems have no significant effects. Fiscal competition is associated with less income redistribution and a less equal distribution of disposable incomes, but also with a more equal primary income distribution. Our evidence also is in line with earlier empirical contributions that find a positive relationship between trade openness and equality in primary and disposable incomes, as well as the overall redistributive effort. --
    Keywords: Redistribution,Formal Institutions,Fiscal Decentralization,Presidential and Parliamentary Regimes,Electoral Systems
    JEL: D31 H22 H11 H50 I38 P50
    Date: 2013
  87. By: Berliant, Marcus; Weiss, Adam
    Abstract: We examine econometric and elementary economic theory issues arising from the model specification in Henderson, Storeygard and Weil (2012), that uses night light data to proxy for missing or unreliable GDP growth data. An alternative approach based on the expenditure function is outlined. It can accommodate prices as well as quantity information from other commodity markets.
    Keywords: GDP; Night light data; Omitted variable; Expenditure function; Spatial autocorrelation
    JEL: D11 D61 O47 O57
    Date: 2013–11–25
  88. By: Grimaud, André; Neubauer, Mauricio; Rougé, Luc
    Abstract: We study an economy in which a final good is produced by two sectors. One uses a non-renewable and polluting resource, the other a renewable and clean resource. A specific type of research is associated to each sector. The public authorities levy a carbon tax and simultaneously subsidize both research sectors. We study the impact of such a policy scheme on the rate of resource extraction and emissions. The subsidy to research in the clean sector goes in the opposite direction of the effects of the carbon tax. If the tax creates a green paradox, the subsidy moderates it; if the tax slows down resource extraction, then the subsidy generates a green paradox
    Keywords: carbon tax, directed technical change, green paradox, R&D policy
    JEL: O32 O41 Q20 Q32
    Date: 2013–11
  89. By: Matthias Kehrig; Nicolas Ziebarth
    Abstract: We separate changes in labor supply and demand through changes in higher-order moments of the wage distribution. We illustrate this idea in a study of the effects of oil price shocks, which generate a predictable labor demand adjustment across regions. Empirically, oil price shocks decrease average wages, particularly skilled wages, and increase wage dispersion, particularly unskilled wage dispersion. In a model with spatial energy intensity differences and nontradables, labor demand shifts, while explaining the response of average wages to oil price shocks, have counterfactual implications for the response of wage dispersion. Only shifts in labor supply can explain this latter fact.
    Date: 2013–11
  90. By: Evans, Olaniyi
    Abstract: In the literature, there has been an acquiescence that the greater the dependence on oil and mineral resources, the worse the growth performance of an economy. With time series data of Oil Revenue (proxy for petroleum industry), Non-oil Revenue, Investment and GDP per capital from 1970-2012, the paper explores the correlations between the petroleum industry and real per capita income in Nigeria. Using cointegration and error correction approach, the study finds that oil revenue has a positive and significant impact on per capital real income in the long-run. As well, the study shows that non-oil revenue and investment has insignificant impact on per capital real income, validating the fact that the entire economy is dominated by oil. Contrary to a report by the Ernst & Young (2013) which indicated that Nigeria’s per capita Gross Domestic Product is expected to cross the $2,000 threshold by 2017, Nigeria may not harness its petroleum revenues to lift its teeming population out of the vicious circle of poverty because only a small percentage of the population is employed in the petroleum industry. Therefore, Nigeria needs to develop other sectors of the economy. Some of the suggested means are: economic diversification, technology management, transparency, investments in education, domestic private ownerships, public involvement and strong institutions among others.
    Keywords: Petrolum industry, oil revenue, real per capital income, cointegration, error correction model, dutch disease
    JEL: E6 L7 O2
    Date: 2013–11–21
  91. By: Kok, Christoffer; Schepens, Glenn
    Abstract: This paper investigates whether European banks have capital targets and how deviations from the target impact their equity composition and activity mix. Using quarterly data for a sample of large European banks between 2004 and 2011, we show that there are notable asymmetries in banks' reactions to deviations from optimal capital levels. Banks prefer to reshuffle risk-weighted assets or increase asset holdings when being above their optimal Tier 1 ratio, whereas they rather try to increase equity levels or reshuffle risk-weighted assets without changing asset holdings when being below target. At the same time, focusing instead on a unweighted equity ratio target, we find evidence of deleveraging and lower loan growth for undercapitalized banks during the recent financial crisis, whereas in the pre-crisis periods banks primarily reacted to deviations from their optimal target by adjusting equity levels. JEL Classification: D22, E44, G20, G21, G28
    Keywords: bank capital optimisation, banking, capital structure, deleveraging, financial regulation
    Date: 2013–11
  92. By: Baert, Stijn (Ghent University); Heylen, Freddy (Ghent University); Isebaert, Daan (Ghent University)
    Abstract: This paper examines the impact of housing tenure choice on unemployment duration in Belgium using EU‐SILC micro data. We contribute to the literature in distinguishing homeowners with mortgage payments and outright homeowners. We simultaneously estimate unemployment duration by a mixed proportional hazard model, and the probability of being an outright homeowner, a homeowner with mortgage payments or a tenant by a mixed multinomial logit model. To be able to correctly identify the causal influence of different types of housing tenure on unemployment duration, we use instrumental variables. Our results show that homeowners with a mortgage exit unemployment first. Outright owners stay unemployed the longest. Tenants take an intermediate position. Moreover, our results reveal the different share of mortgage holders within the group of homeowners as a possible explanation for the discrepancy between former contributions to this literature.
    Keywords: unemployment, housing tenure, duration analysis
    JEL: C41 J64 R2
    Date: 2013–11
  93. By: Matteo PICCHIO (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Stefano STAFFOLANI (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)
    Keywords: Apprenticeship, hazard function, permanent work, regression discontinuity, temporary work
    JEL: C36 C41 J24 J41
    Date: 2013–11
  94. By: N. H. Dimsdale (The Queens College, University of Oxford)
    Abstract: In the late 19th century Britain accumulated substantial overseas assets. It has been generally accepted that overseas investment displaced domestic investment. This paper questions this assumption by pointing to the rise in the savings ratio, which enabled high capital exports to be combined without reducing the rate of domestic investment. The determinants of consumption and savings are examined and it is argued that the rise in savings can be attributed to the fall in the dependency ratio. This phenomenon is familiar from modern studies of economic development and also from US experience in the 19th century. The determinants of business investment are analysed and the results indicate the importance of both real profits and accelerator effects for investment, but there is no evidence of crowding out of home investment by overseas issues. House building then is examined and demographic factors are found to be important. Crowding out effects may have been present, but this is not the only hypothesis, which is consistent with the data. The collapse in house building could also be attributed to the massive boom and bust in the property market in the period 1890-1914.
    Date: 2013–10–30
  95. By: Djajic, S.; Mesnard, A.
    Abstract: Guest-worker programs have been providing rapidly growing economies with millions of temporary foreign workers over the last couple of decades. With the duration of stay strictly limited by program rules in most of the host countries and wages paid to guest workers often set at sub-market levels, many of the migrants choose to overstay and seek employment in the underground economy. This paper develops a general-equilibrium model that relates the flow of guest workers transiting to the underground economy to the rules of the program, enforcement measures of the host country and market conditions facing migrants at home and abroad.
    Date: 2013
  96. By: Hübler, Michael
    Abstract: This North-South model of Schumpeterian endogenous growth combines a market, productivity and knowledge effect. A set of various convergent and divergent growth paths is derived that is much richer than in the literature so far. South-North convergence based on North-South technology diffusion through intermediate goods trade is guaranteed if the knowledge effect dominates the productivity effect. Moreover, a larger Southern market expands the area of convergence and can prevent divergence. Not only a larger Southern market size, but also a higher Southern steady state growth rate benefit the North so that convergence is desirable for both, the South and the North. --
    Keywords: Schumpeter,endogenous growth,technology diffusion,convergence,poverty trap
    JEL: F18 O11 O33 O41
    Date: 2013
  97. By: Robert Jump
    Abstract: This paper presents results on the stability of the wage dispersion model presented in Mortensen (2003). Specifically, we test four 'positive definite' learning processes on a single parameterisation of the underlying model, and submit the most successful to a thorough sensitivity analysis. The general result of existing studies of the stability of price dispersion models is that learning processes can converge on limiting distributions that qualitatively match the equilibrium distribution. In contrast, the most successful process considered in this paper can converge on a limiting distribution that quantitatively matches the equilibrium distribution. financial stability?
    Keywords: Price dispersion; Search market equilibrium; Reinforcement learning
    JEL: C62 C63 D83 J31
    Date: 2013–11
  98. By: Fromlet, Pia (National Institute of Economic Research)
    Abstract: In this paper, the effects on export prices (in the currency of the exporter) of shocks to the exchange rate, the exporting firms' costs and foreign prices are investigated. The theoretical analysis is done with alternative assumptions regarding the currency in which prices are set and the desired markup. After that, a VAR-framework is used to analyze which theory predicts actual outcome the best. The results indicate that export prices (in the currency of the exporter) respond strongly to exchange rate shocks and the effects seem to be in line with the theory of producer currency pricing and pricing to market. Wage shocks have insignificant effects.
    Keywords: Vector autoregression; exchange rates; export prices; local currency pricing; producer currency pricing; pricing to the market
    JEL: E31 F14 F31
    Date: 2013–11–26
  99. By: Bryan, Mark L. (University of Essex); Longhi, Simonetta (ISER, University of Essex)
    Abstract: We examine how couples' labour supply behaviour in the UK responds to a job loss by one partner, using the Labour Force Survey to compare the period of growth of 1995-2007 to the Great Recession and its aftermath of 2008-11. In single earner couples during the recession, both men and women substantially increased their job search activity following a partner's job loss, while the increase in search during the boom was smaller (and non-existent for men). However, the increase in job search during recession did not appear to translate into more success in finding work for either men or women. Among dual earner couples, we find little evidence that individuals searched for alternative jobs or tried to increase their hours if their partner lost their job, except that women working part-time were more likely to start looking for another job. Both men and women were more likely to quit their job voluntarily if their partner lost their job, but the recession seems to have made people more cautious about voluntarily quitting their job. We find little evidence that people react in advance of job losses, suggesting that unemployment typically comes as a surprise.
    Keywords: added-worker effect, recession, employment, household labour supply
    JEL: J22 J64
    Date: 2013–11
  100. By: Anna Lukiyanova (Senior Reseacher, Centre for Labor Market Studies, Higher School of Economics, Moscow.)
    Abstract: In this paper I investigate the impact of informality on earnings inequality in Russia using RLMS-HSE data for 2000-2010. I find that during the whole period earnings inequality was substantially higher in the informal sector. Informality increases earnings polarization, thereby widening both tails of the distribution. Changes in the earning distribution of the formal sector were mainly generated by changes in the distribution of hourly earnings. In the informal sector, reduction of inequality occurred via two channels: Differences in hourly rates and working hours both declined. Changes in the structure of informality and conditional wage differentials did not have a significant impact on the overall earnings inequality, with the exception of decline in irregular employment
    Keywords: earnings inequality, informal economy, decomposition, recentered influence functions
    JEL: C21 D63 J31 J42
    Date: 2013
  101. By: Igor Pospelov (Research University Higher School of Economics); Stanislav Radionov (National Research University Higher School of Economics. Research group on macro-structural modeling of Russian economy. Junior Researcher)
    Abstract: We present a natural generalization of the Dixit-Stiglitz monopolistic competition model (DSM) | we assume that there is a continuum of industries, each of them described as in DSM, and each characterized with its own elasticity of substitution. Although rms in all industries share the same level of productivity and costs, exogenous technological progress leads to non-trivial reallocations of labor and production to industries with lower elasticities of substitution. Thus the model, despite is simplicity and absence of additional assumptions about industry structure, generates the structural changes described in the economic growth literature
    Keywords: Dixit-Stiglitz model, monopolistic competition, economic growth, labor reallocations.
    JEL: D43 J21 L13 O41
    Date: 2013
  102. By: Mitsukuni Nishida; Amil Petrin; T. Kirk White
    Abstract: Reallocation growth occurs when an input moves from a lower marginal product to a higher marginal product activity. Three recent studies use two distinct methodologies to examine the sources of the strong surge in aggregate productivity growth (APG) in India’s manufacturing sector since 1990 following significant economic reforms. They all conclude that APG was primarily driven by within-plant increases in technical efficiency and not between-plant reallocation of inputs. Given the nature of the reforms, where many barriers to input reallocation were removed, this finding has surprised researchers and been dubbed “India’s Mysterious Manufacturing Miracle.” In this paper we show that these findings may be an artifact of the way the studies estimate reallocation. One approach counts all reallocation growth arising from the movement of intermediate inputs as technical efficiency growth. The second approach introduces measurement error into estimated reallocation by using plant-level average products - total factor productivity residuals - as a proxy for marginal products, which could be problematic as economic theory suggests that average products and marginal products are unrelated in equilibrium. Using microdata on manufacturing from 4 countries — the U.S., Chile, Colombia, and Slovenia — we show that both approaches significantly understate the true role of reallocation in economic growth. In the U.S. almost 50% of reallocation growth is due to movements of intermediate inputs, meaning if India is similar to the U.S. then reallocation’s share of total Indian manufacturing APG since 1990 increases from the previous estimate of one-third to almost two-thirds.
    Date: 2013–11
  103. By: Macan, Vaneza Jean; Deluna, Roperto Jr
    Abstract: This study investigates the relationship of income inequality (proxied by the Gini Coefficient), labor productivity (output per capita) on fertility rate in the Philippines. Specifically, this presents the trend of income inequality (ineq), labor productivity (lp) and fertility(tfr) in the Philippines from 1985 to 2009. The study uses Ordinary Least Square (OLS) estimates to study the relationship of the variables. Results revealed that income inequality and labor productivity has a negative relationship with fertility. Hence, an increase in this variable decreases fertility rate. This means that income inequality and labor productivity is significant in achieving the replacement level of fertility.
    Keywords: Income Inequality, Labor Productivity, Fertility, Ordinary Least Squares, Replacement level.
    JEL: J10 J11 J13
    Date: 2013–04–30
  104. By: Goulding, Kristine
    Keywords: employment policy, gender equality, Comoros, Jordan, Korea R, Serbia, politique de l'emploi, égalité des genres, Comores, Jordanie, Corée R, Serbie, política de empleo, igualdad de géneros, Comoras, Jordania, Corea R, Serbia
    Date: 2013
  105. By: Alexander Muravyev (Institute for the Study of Labor (IZA, Bonn) and St. Petersburg University Graduate School of Management.); Aleksey Oshchepkov (Center for Labor Marker Studies, Higher School of Economics (HSE), Moscow.)
    Abstract: This paper revisits the effect of minimum wages on employment by taking advantage of a unique institutional setting and data from Russia. The main strength of the paper is the use, for identification purposes, of the large variation in labor market outcomes as well as in the minimum wage across the 89 regions (states) over 10 years, from 2001 to 2010. The study relies on the standard methodology introduced by Neumark and Wascher, in which various labor market outcomes at the regional level are related to the relative minimum wage (captured by the Kaitz index) in a panel setting. We find adverse effects of the minimum wage on young workers in the form of higher unemployment among those aged 16-24. There are also signs that minimum wage increases lead to higher unemployment in the general population, but the effect is small. Our analysis also suggests that higher minimum wages lead to an increase in the share of workers employed in the informal sector.
    Keywords: minimum wages, unemployment, informal employment, Russia.
    JEL: J38 J23
    Date: 2013
  106. By: Timothy J. Kehoe; Jack Rossbach; Kim J. Ruhl
    Abstract: This paper develops a methodology for predicting the impact of trade liberalization on exports by industry (3-digit ISIC) based on the pre-liberalization distribution of exports by product (5-digit SITC). Using the results of Kehoe and Ruhl (2013) that much of the growth in trade after trade liberalization is in products that are traded very little or not at all, we predict that industries with a higher share of exports generated by least traded products will experience more growth. Using our methodology, we develop predictions for industry-level changes in trade for the United States and Korea following the U.S.-Korea Free Trade Agreement (KORUS). As a test for our methodology, we show that it performs significantly better than the applied general equilibrium models originally used for the policy evaluation of the North American Free Trade Agreement (NAFTA).
    Keywords: Trade ; North American Free Trade Agreement ; Korea
    Date: 2013
  107. By: Cavalieri, Duccio
    Abstract: This is an analysis of the present unsatisfactory state of the theory of capital and a proposal to reformulate this theory in line with some neglected late-Marxian views on the subject and in the light of the passage of capitalism from the industrial to a post-industrial era characterized by the dominance of speculative finance. The author’s aim is to provide a better integration of the theory of capital with those of money and finance. Attention is focused on a Marxian price index, the monetary expression of labour value, MEV, which accounts for both explicit and implicit cost components and, differently from MELT, does not consider only the money value of living labour time.
    Keywords: value; capital theory; post-industrialism; critical Marxism; MEV.
    JEL: B12 B13
    Date: 2013–11–25
  108. By: Géraldine Rieucau (CEE - Centre d'études de l'emploi - Ministère de l'Enseignement supérieur et Recherche - Ministère du Travail, de l'Emploi et de la Santé, LED - Laboratoire d'Economie Dionysien - Université Paris VIII - Vincennes Saint-Denis : EA3391)
    Abstract: Les politiques publiques encouragent les chômeurs les moins qualifiés à intensifier leurs recherches d'emploi et à se former. Or, les difficultés que rencontrent ces derniers sur le marché du travail peuvent aussi résulter de la sélection opérée par les recruteurs. C'est ce que montrent des enquêtes sur les pratiques de recrutement menées dans la grande distribution en France et au Royaume-Uni. Cette recherche souligne le rôle des canaux d'embauche et leurs liens avec les critères de sélection déterminants. À côté des mises en relation de proximité (candidatures déposées en en mains propres, annonces placardées) où la sélection des candidats est assurée en magasin et porte sur l'apparence, l'attitude et la disponibilité, co-existent des appariements via les sites internet, où la sélection se fait sur CV ou par test. Le recrutement en magasin peut alimenter les jugements arbitraires, celui via internet exclure ceux qui maîtrisent mal l'outil informatique ou ne sont pas retenus sur CV. S'il devenait exclusif, le recrutement à distance pourrait pénaliser les chômeurs les moins avantagés.
    Keywords: grande distribution ; employabilité ; recrutement ; France ; Grande-Bretagne
    Date: 2013–05–31

This nep-mac issue is ©2013 by Soumitra K Mallick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.