nep-mac New Economics Papers
on Macroeconomics
Issue of 2014‒05‒04
eighty-one papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Labour Market and Monetary Policy Reforms in the UK: a Structural Interpretation of the Implications By Francesco Zanetti
  2. Uncertainty in a model with credit frictions By Cesa-Bianchi, Ambrogio; Fernandez-Corugedo, Emilio
  3. Sectoral shocks and monetary policy in the United Kingdom By Dixon, Huw; Franklin, Jeremy; Millard, Stephen
  4. Fiscal Policy in an Unemployment Crisis By Pontus Rendahl
  5. Effects of Mineral-Commodity Price Shocks on Monetary Policy in Developed Countries By Atsushi Sekine
  6. Bond Market Exposures to Macroeconomic and Monetary Policy Risks By Dongho Song
  7. Estimating sustainable output growth in emerging market economies By Krupkina, Anna; Deryugina, Elena; Ponomarenko, Alexey
  8. Globalization and Inflation: A Swiss Perspective By John A. Tatom
  9. Price-Level Targeting: an omelette that requires breaking some Inflation-Targeting eggs? By Julian A. Parra-Polania; Luisa F. Acuña-Roa
  10. Accuracy, Speed and Robustness of Policy Function Iteration By Todd B. Walker; Alexander W. Richter; Nathaniel A. Throckmorton
  11. Fisher's Relation and the Term Structure: Implications for IS Curves By Malikane, Christopher; Ojah, Kalu
  12. Unemployment Benefit Extensions Caused Jobless Recoveries!? By Kurt Mitman; Stanislav Rabinovich
  13. The Elasticity of Intertemporal Substitution Reconsidered By Dladla, Pholile; Malikane, Christopher; Ojah, Kalu
  14. The role of financial intermediaries in monetary policy transmission By Thorsten Beck; Andrea Colciago; Damjan Pfajfar
  15. Post Reunification Economic Fluctuations in Germany: A Real Business Cycle Interpretation By Michael A. Flor
  16. An exploration on interbank markets and the operational framework of monetary policy in Colombia By Camilo González; Luisa F. Silva; Carmiña O. Vargas; Andrés M. Velasco
  17. From Volatility to Stabilization: Cyclicality of Fiscal Policy in Latin America over the Last Decades By Bruno Martorano
  18. The FRBNY staff underlying inflation gauge: UIG By Amstad, Marlene; Potter, Simon M.; Rich, Robert W.
  19. Incomplétude et intermédiation en macroéconomie financière avec risque collectif et actifs réels By Larnac, Pierre-Marie
  20. Merger waves and the Austrian business cycle theory By Jimmy A. Saravia
  21. The "True" Deficit By Maria Marcanova; Ludovit Odor
  22. The Overlooked Assumption Behind the New Keynesian Phillips Curve By Belanger, Gilles
  23. Bank Lending, Risk Taking, and the Transmission of Monetary Policy: New Evidence for Colombia By Nidia Ruth Reyes; José Eduardo Gómez G.; Jair Ojeda Joya
  24. Nonlinearities in Sovereign Risk Pricing: The Role of CDS Index Contract By Portes, Richard; Fouquau, Julien; Delatte, Anne-Laure
  25. Asset Price Targeting Government Spending and Equilibrium Indeterminacy in A Sticky-Price Economy By Kengo Nutahara
  26. How Does Tax Progressivity and Household Heterogeneity Affect Laffer Curves? By Hans A. Holter; Dirk Krueger; Serhiy Stepanchuk
  27. Ben Bernanke: Theory and Practice By Alexander J. Gill
  28. A model of viability for a monetary economy By Saint-Pierre, Patrick; Cartelier, Jean
  29. Adding financial flows to a CGE model of PNG By Peter Dixon; Maureen Rimmer; Louise Roos
  30. Electronic Money and Payments: Recent Developments and Issues By Ben Fung; Miguel Molico; Gerald Stuber
  31. Policy Uncertainty in China, Oil Shocks and Stock Returns By Wensheng Kang; Ronald A. Ratti
  32. The Impact of Different Types of Foreign Exchange Intervention: An Event Study Approach By Juan José Echavarría; Luis Fernando Melo Velandia; Mauricio Villamizar
  33. The international transmission of bank capital requirements: evidence from the United Kingdom By Aiyar, Shekhar; Calomiris, Charles; Hooley, John; Korniyenko , Yevgeniya; Wieladek, Tomasz
  34. The "Second Dividend" and the Demographic Structure By Jouvet, Pierre-André; Gonand, Frédéric
  35. The Krusell-Smith Algorithm: Are Self-fulfilling Equilibria Likely? By Marco Cozzi
  36. What drives the German current account? And how does it affect other EU member states? By Robert Kollmann; Marco Ratto; Werner Roeger; Jan in’t Veld; Lukas Vogel
  37. Forecasting South African Inflation Using Non-Linear Models: A Weighted Loss-Based Evaluation By Pejman Bahramian; Mehmet Balcilar; Rangan Gupta; Patrick T. kanda
  38. Modeling the relationship between GDP and unemployment for Okun’s law specific to Jordan By alamro, Hassan; Al-dalaien, Qusay
  39. James Tobin and Modern Monetary Theory By Robert W. Dimand
  40. A Theory of Price Adjustment under Loss Aversion By Ahrens, Steffen; Pirschel, Inske; Snower, Dennis J.
  41. Inflation-Targeting, Flexible Exchange Rates and Macroeconomic Performance since the Great Recession By Barnebeck Andersen, Thomas; Malchow-Møller, Nikolaj; Nordvig, Jens
  42. What Asset Prices Should be Targeted by a Central Bank? By Kengo Nutahara
  43. Are financial markets fit for purpose? By DE KONING, Kees
  44. Heterogeneity and redistribution shocks in business cycles By Keiichiro Kobayashi; Daichi Shirai
  45. Informality and formality: Fiscal policy in DSGE model By Jesús Botero G.; Christian Vargas; Álvaro Hurtado Rendón; Humberto Franco
  46. The Impact of Oil Price Shocks on U.S. Bond Market Returns By Wensheng Kang; Ronald A. Ratti; Kyung Hwan Yoon
  47. Policy Regime Change against Chronic Deflation? Policy option under a long-term liquidity trap By FUJIWARA Ippei; NAKAZONO Yoshiyuki; UEDA Kozo
  48. Capturing the Interaction of Trend, Cycle, Expectations and Risk Premia in the US Term Structure By Soloschenko, Max; Weber, Enzo
  49. A macroeconomic model of liquidity crises By Keiichiro Kobayashi; Tomoyuki Nakajima
  50. Labor Market Institutions and Long-Term Effects of Youth Unemployment By Kawaguchi, Daiji; Murao, Tetsushi
  51. Gender Gaps and the Rise of the Service Economy By Ngai, L. Rachel; Petrongolo, Barbara
  52. Okun's law: evidence for the Brazilian economy By Tombolo, Guilherme Alexandre; Hasegawa, Marcos Minoru
  53. Estimation de l’élasticité prix de la demande électrique en France By Bourbonnais, Régis; Keppler, Jan Horst
  54. The sectorial impact of commodity price shocks in Australia By Vespignani, Joaquin L.; Knop, Stephen J
  55. Trade Misinvoicing and Macroeconomic Outcomes in India By Raghbendra Jha; Truong Duc Nguyen
  56. On the architecture of the rings of Saturn: An “identity” theory of the distribution of gaps within rings By Albers, Scott
  57. Have U.S. Budget Deficits Raised the Real Interest Rate Yield on Tax-Free Municipal Bonds? By Cebula, Richard
  58. Safe Asset Shortages and Asset Price Bubbles By Kosuke Aoki; Tomoyuki Nakajima; Kalin Nikolov
  59. Critical Remarks on Piketty´s 'Capital in the Twenty-first Century' By Homburg, Stefan
  60. Transitions to Stable and Unstable Jobs Before and During the Crisis By Nagore García, Amparo; van Soest, Arthur
  61. Assessing Reserve Adequacy: The Colombian Case By Javier Gómez Restrepo; Juan Sebastián Rojas Bohorquez
  62. Did the Intergenerational Solidarity Pact increase the employment rate of the elderly in Belgium? A macro-econometric evaluation By Catherine SMITH
  63. The productivity puzzle: a firm-level investigation into employment behaviour and resource allocation over the crisis By Barnett, Alina; Chiu, Adrian; Franklin, Jeremy; Sebastia-Barriel, Maria
  64. Bond Markets, Stock Markets and Exchange Rates: A Dynamic Relationship By Suleyman Hilmi Kal; Ferhat Arslaner; Nuran Arslaner
  65. Forecasting Chilean Inflation with International Factors By Pablo Pincheira; Andrés Gatty
  66. Follow the leader? Public and private wages in the Netherlands By Annette Zeilstra; Adam Elbourne
  67. Stock Market Development and Economic growth in India: An Empirical Analysis By P., Srinivasan
  68. Entreprenörskap och ekonomisk tillväxt: En kritisk granskning By Delmar, Frédéric; Wennberg, Karl
  69. Volatility and Growth: An Explanation for the Disagreement By Michael Jetter
  70. Academic Performance and the Great Recession By Adamopoulou, Effrosyni; Tanzi, Giulia M.
  71. A Note on the Representative Adaptive Learning Algorithm By Jaqueson Galimberti; Michele Berardi
  72. Capital income shares and income inequality in the European Union By Eva Schlenker; Kai D. Schmid
  73. A Survey of the Role of Fiscal Policy in Addressing Income Inequality, Poverty Reduction and Inclusive Growth By Heshmati, Almas; Kim, Jungsuk
  74. Why Do People Leave Bequests? For Love or Self-Interest? By Charles Yuji Horioka
  75. Global trends in relative and absolute wealth concentrations By Thomas Goda
  76. A primer on the GCF Repo® Service By Agueci, Paul; Alkan, Leyla; Copeland, Adam; Davis, Isaac; Martin, Antoine; Pingitore, Kate; Prugar, Caroline; Rivas, Tyisha
  77. Bifurcation structure in a bimodal piecewise linear business cycle model By Viktor Avrutin; Iryna Sushko; Fabio Tramontana
  78. Editorial for the Special Issue on 'Computational Methods for Russian Economic and Financial Modelling' By Fantazzini, Dean
  79. Crises e Ciclos no Pensamento Económico Português na Primeira Metade do Século XX By Ana Bela Nunes
  80. Finding Yeti: More robust estimates of output gap in Slovakia By Ludovit Odor; Judita Jurasekova Kucserova
  81. Medidas Macroprudenciales aplicadas en el Perú By Choy, Marylin; Chang, Giancarlo

  1. By: Francesco Zanetti
    Abstract: This paper estimates�a New Keynesian model to investigate to what extent labour market reforms undertaken by the Thatcher government in the late 1930s and the introduction of a constant inflation target in 1992 might have changed the UK economic outlook if they had been introduced in the early 1970s.� The results suggest that a stronger reaction to deviations of inflation from target have contributed to a more stable economic outlook, while labour market reforms and the introduction of a constant inflation target are unlikely to have produced a different outcome.
    Keywords: Labour market reforms, Search and matching, New Keynesian model
    JEL: E24 E32 E52 J64
    Date: 2014–04–30
  2. By: Cesa-Bianchi, Ambrogio (Bank of England); Fernandez-Corugedo, Emilio (Bank of England)
    Abstract: This paper investigates the relationship between uncertainty and economic activity in a DSGE model with sticky prices and credit frictions. We analyse the effect of a mean preserving shock to the variance of aggregate total factor productivity (macro uncertainty) and we compare it to the effect of a mean preserving shock to the dispersion of entrepreneurs' idiosyncratic productivity (micro uncertainty). We find that micro uncertainty has a larger impact on economic activity. While macro uncertainty is transmitted through precautionary savings, micro uncertainty primarily acts through the cost of external debt and capital demand and, therefore, it is greatly magnified by the credit friction. Our findings suggest that uncertainty shocks can generate sizable impact on economic activity only when transmitted through a credit channel.
    Keywords: Uncertainty shocks; credit frictions; business cycles; micro uncertainty; macro uncertainty; financial accelerator
    JEL: E32 E44
    Date: 2014–04–17
  3. By: Dixon, Huw (Cardiff Business School); Franklin, Jeremy (Bank of England); Millard, Stephen (Bank of England)
    Abstract: In this paper, we use an open economy model of the United Kingdom to examine the extent to which monetary policy should respond to movements in sectoral inflation rates. To do this we construct a Generalised Taylor model that takes specific account of the sectoral make up of the consumer price index (CPI), where the sectors are based on the COICOP classification the UK CPI microdata. We calibrate the model for each sector using the UK CPI microdata and model the sectoral shocks that drive sectoral inflation rates as white noise processes, as in the UK data. We find that a policy rule that allows for different responses to inflation in different sectors outperforms a rule which just targets aggregate CPI. However, the gain is small and comes from partially looking through movements in aggregate inflation driven by movements in petrol price inflation, which is volatile and tends not to reflect underlying inflationary pressure.
    Keywords: CPI inflation; Sectoral inflation rates; Generalised Taylor economy
    JEL: E17 E31 E52
    Date: 2014–04–17
  4. By: Pontus Rendahl
    Abstract: This paper studies a model of equilibrium unemployment in which the ecacy of scal policy increases markedly in times of crises. A sudden rise in pessimism leads households to save rather than to spend, causing a fall in output and rising unemployment But as a persistent rise in unemployment fuels pessimism, the economy is set on a downward spiral in which thrift reinforces thrift. The government can put this process to an end. An expansion in public spending bolsters demand and lowers the unemployment rate both in the present and in the future. Pessimism is replaced by optimism and the vicious cycle is turned into a virtuous. The marginal impact of government spending on output is negative during normal times. But in a severe recession the scal multiplier rises to about three, and expansionary scal policy is unambiguously Pareto improving.
    Keywords: Fiscal multiplier; Fiscal policy; Liquidity trap; Unemployment inertia
    JEL: E24 E60 E62 H12 H30 J23 J64
    Date: 2014–04–29
  5. By: Atsushi Sekine (Graduate School of Economics, Kyoto University)
    Abstract: This paper investigates effects of changes in mineral commodity prices on monetary policy. Using macroeconomic data from five developed countries (Australia, Canada and New Zealand as mineral-producing countries, and the US and the UK as non-mineral-resource countries), I estimate the impulse response functions of the policy interest rates and the core consumer price index (CPI) inflation rates to mineral-commodity price shocks. I find that, in response to an unexpected 10 percent increase in mineral commodity prices, the central banks in the mineral-producing countries are estimated to increase their policy interest rates by approximately one percentage point, and they seem to take anticipatory policy reactions to control core CPI variations triggered by these shocks. Thus, mineral commodity prices appear to be important determinants of the monetary policies in the mineral-producing countries. However, the effects of the increase in their policy interest rates on core CPI inflation are different across the examined mineral-producing countries. I also find that the central banks in the non-mineral- resource countries insignificantly respond to mineral-commodity price shocks because such price shocks have little impact on those countries’ core CPI inflation.
    Keywords: Mineral commodity prices; Systematic monetary policy; Structural vector autoregressions; Impulse responses; Response decompositions; Counterfactual analysis
    JEL: E31 E52 Q02
    Date: 2014–04
  6. By: Dongho Song (Department of Economics, University of Pennsylvania)
    Abstract: I provide empirical evidence of changes in the U.S. Treasury yield curve and related macroeconomic factors, and investigate whether the changes are brought about by external shocks, monetary policy, or by both. To explore this, I characterize bond market exposures to macroeconomic and monetary policy risks, using an equilibrium term structure model with recursive preferences in which inflation dynamics are endogenously determined. In my model, the key risks that affect bond market prices are changes in the correlation between growth and inflation and changes in the conduct of monetary policy. Using a novel estimation technique, I find that the changes in monetary policy affect the volatility of yield spreads, while the changes in the correlation between growth and inflation affect both the level as well as the volatility of yield spreads. Consequently, the changes in the correlation structure are the main contributor to bond risk premia and to bond market volatility. The time variations within a regime and risks associated with moving across regimes lead to the failure of the Expectations Hypothesis and to the excess bond return predictability regression of Cochrane and Piazzesi (2005), as in the data.
    Keywords: Monetary Policy Risks, Regime-Switching Macroeconomic Risks, Stochastic Volatility, Taylor-Rule, Term Structure
    JEL: E43 G12
    Date: 2014–04–30
  7. By: Krupkina, Anna (BOFIT); Deryugina, Elena (BOFIT); Ponomarenko, Alexey (BOFIT)
    Abstract: In the spirit of Borio et al. (2014) we present a model that incorporates information contained in diverse variables when estimating sustainable output growth. For this purpose, we specify a state-space model representing a multivariate HP-filter that links cyclical fluctuation of GDP with several indicators of macroeconomic imbalance. We obtain the parameterization of the model by estimating it over a cross-section of emerging market economies. We show that trend output growth rates estimated using this model are more stable than those obtained with a univariate version of the filter and thus are more consistent with the notion of sustainable output.
    Keywords: output gap; financial cycle; macroeconomic imbalances; emerging markets
    JEL: C33 E32 E44
    Date: 2014–04–08
  8. By: John A. Tatom
    Abstract: Globalization has given rise to new concerns that domestic inflation is caused by global developments, especially in the state of the global gap in GDP and resource utilization, and whether domestic monetary policy can control it. This paper explores the role of globalization, if any, for inflation, particularly in Switzerland, one of the smallest and most open economies where the globalization hypothesis should be most relevant, but where inflation historically has been among the lowest in the world. Is Switzerland and Swiss monetary policy unique in providing a benchmark for price stability, or is Swiss inflation performance an accident, with Swiss inflation being dictated by global experience or at least by its larger neighbors? It provides tests of whether inflation in Switzerland is causally related to inflation elsewhere. It focuses in more detail on Swiss inflation in a P* model and on whether it is also influenced by inflation in Germany, other countries or by inflation abroad via an import channel. Finally, the paper looks more broadly at other evidence of whether Swiss inflation or that in other industrial countries is influenced by globalization. Swiss inflation is largely made at home. There is evidence presented of a cointegrating relationship of Swiss and German inflation, but this and the high correlation of Swiss and German inflation are more likely due to common inflation objectives.
    Keywords: Inflation, Globalization, Switzerland, GDP gap
    JEL: E31 E32 F4
    Date: 2013–12
  9. By: Julian A. Parra-Polania; Luisa F. Acuña-Roa
    Abstract: This manuscript can be divided into two main parts. The first one, using a simple example by Minford (2004) and Hatcher (2011), gives the reader a basic introduction to understand the comparison between two monetary-policy regimes: Inflation Targeting (IT) and Price-Level Targeting (PLT). The second part, using a model with a New Keynesian Phillips curve and a loss function (both of which incorporate partial indexation to lagged inflation), finds that for standard values of underlying parameters (i) the social loss associated to macroeconomic volatility may decrease about 26% by switching from IT to PLT and (ii) only when the initial level of indexation to lagged inflation is higher than 60% then it is better not to switch to PLT.
    Keywords: Inflation targeting, price-level targeting, indexation, macroeconomic stability.
    JEL: E52 E58
    Date: 2013–09–20
  10. By: Todd B. Walker; Alexander W. Richter; Nathaniel A. Throckmorton
    Abstract: Policy function iteration methods for solving and analyzing dynamic stochastic general equilibrium models are powerful from a theoretical and computational perspective. Despite obvious theoretical appeal, significant startup costs and a reliance on grid-based methods have limited the use of policy function iteration as a solution algorithm. We reduce these costs by providing a user-friendly suite of MATLAB functions that introduce multi-core processing and Fortran via MATLAB's executable function. Within the class of policy function iteration methods, we advocate using time iteration with linear interpolation. We examine a canonical real business cycle model and a new Keynesian model that features regime switching in policy parameters, Epstein-Zin preferences, and monetary policy that occasionally hits the zero-lower bound on the nominal interest rate to highlight the attractiveness of our methodology. We compare our advocated approach to other familiar iteration and approximation methods, highlighting the tradeoffs between accuracy, speed and robustness.
    Keywords: Policy function iteration; Zero lower bound; Epstein-Zin preferences; Markov switching; Chebyshev polynomials; Real business cycle model; New Keynesian model
    JEL: C63 C68 E52 E62
    Date: 2014–04
  11. By: Malikane, Christopher; Ojah, Kalu
    Abstract: We derive the new Keynesian IS curve from the Fisher relation and the expectations theory of the term structure, without reference to household preferences. We show that, under certain conditions, parameters of the empirical new Keynesian IS curves need not be estimated but can be calibrated from observed data. We specifically show that the coefficient of relative risk aversion is the steady-state consumption-output ratio and that the interest rate effect on output can be reasonably approximated by the inverse of the average term to maturity of debt instruments. We highlight the implications of these findings for macroeconomic modelling and estimation.
    Keywords: IS curve, no-arbitrage, Fisher relation, expectations theory of the term structure.
    JEL: E4 E43 E44
    Date: 2014–04–26
  12. By: Kurt Mitman (Department of Economics, University of Pennsylvania); Stanislav Rabinovich (Department of Economics, Amherst College)
    Abstract: The last three recessions in the United States were followed by jobless recoveries: while labor productivity recovered, unemployment remained high. In this paper, we show that countercyclical unemployment benefit extensions lead to jobless recoveries. We augment the standard Mortensen-Pissarides model to incorporate unemployment benefits expiration and state-dependent extensions of unemployment benefits. In the model, an extension of unemployment benefits slows down the recovery of vacancy creation in the aftermath of a recession. We calibrate the model to US data and show that it is quantitatively consistent with observed labor market dynamics, in particular the emergence of jobless recoveries after 1990. Furthermore, counterfactual experiments indicate that unemployment benefits are quantitatively important in explaining jobless recoveries.
    Keywords: Unemployment Insurance, Business Cycles, Jobless Recoveries
    JEL: E24 E32 J65
    Date: 2014–04–21
  13. By: Dladla, Pholile; Malikane, Christopher; Ojah, Kalu
    Abstract: The elasticity of intertemporal substitution (EIS) is a crucial parameter in finance and macroeconomics, yet its estimation remains elusive. We show, based on Fisher's relation and the expectations theory of the term structure, that the EIS is the inverse of the product of the average term to maturity of debt instruments and the consumption-output ratio. Therefore, the EIS need not be estimated but can be calibrated from observable data.
    Keywords: Elasticity of intertemporal substitution, Fisher's relation, expectations theory of the term structure.
    JEL: E43 E44
    Date: 2014–04–26
  14. By: Thorsten Beck; Andrea Colciago; Damjan Pfajfar
    Abstract: The recent financial crisis has stimulated theoretical and empirical research on the propagation mechanisms underlying business cycles, in particular on the role of financial frictions. Many issues concerning the interactions between banking and monetary policy forced policy makers to economic policies, and motivated macroeconomists to focus on the implications of financial intermediation constraints on asset price fluctuations, the behavior of non-financial firms, households, governments and in turn for real macroeconomic performance. This paper surveys research on the role of financial intermediaries and financial frictions in the transmission of monetary policy and discusses how to design both the new banking regulatory and supervisory structures and monetary policy in order to stabilize the economy. It also serves as an introduction to this special issue.
    Keywords: Financial Intermediation; DSGE models; Financial Frictions
    JEL: E40 E50 G20
    Date: 2014–04
  15. By: Michael A. Flor (University of Augsburg, Department of Economics)
    Abstract: We consider the cyclical properties of the German economy prior and after reunification in 1990 from the perspective of a real business cycle model. The model provides the framework for the selection and consistent measurement of the variables whose time series properties characterize the cycle. Simulations of the calibrated model reveal the model's potential to interpret the data. Major findings are that: i) the volatility of most aggregate time series has not changed significantly between the two time periods, ii) despite many conceptual differences between the European and the U.S. System of Accounts, the calibrated parameter values for the German economy are within the range of values usually employed in the real business cycle literature, iii) the model is closer to the data for the time period prior to reunification.
    Keywords: Macroeconomic Data, National Income, Product Accounts, Economic Fluctuations, Real Business Cycles
    JEL: C82 E01 E32
    Date: 2014–04
  16. By: Camilo González; Luisa F. Silva; Carmiña O. Vargas; Andrés M. Velasco
    Abstract: We set a dynamic stochastic model for the interbank daily market for funds in Colombia. The framework features exogenous reserve requirements and requirement period, competitive trading among heterogeneous commercial banks, daily open market operations held by the Central Bank (auctions and window facilities), and idiosyncratic demand shocks and uncertainty in the daily auction. The model highlights the institutional framework and the money supply mechanisms for the interbank market. We construct a data base for the Colombian case that incorporates the principal variables of the model and give us some insights about the behavior of them in a typical requirement period. We corroborate the Martingale hypothesis for the interbank interest rate.
    Keywords: Interbank Market; Overnight Rates; Reserve Demand.
    JEL: E44 E52 G21
    Date: 2013–09–18
  17. By: Bruno Martorano
    Abstract: Latin American countries experienced important changes over the last decade. The implementation of fiscal reforms, public debt reduction and the high level of accumulated reserves gave them more policy space than in the past. As a result, Latin American countries were able to implement countercyclical policies to face the negative economic and social consequences associated with the recent macroeconomic shock. Some countries performed better than others. In particular, Social Democratic and Centrist governments enjoyed more fiscal space; they had realized larger budget surpluses over the good years and were able to cope with the crisis without impairing their fiscal conditions.
    Keywords: fiscal policy, fiscal space, countercyclical policy, policy regime, Latin America
    JEL: E62 E63 O23
    Date: 2014
  18. By: Amstad, Marlene (Federal Reserve Bank of New York); Potter, Simon M. (Federal Reserve Bank of New York); Rich, Robert W. (Federal Reserve Bank of New York)
    Abstract: Monetary policymakers and long-term investors would benefit greatly from a measure of underlying inflation that uses all relevant information, is available in real time, and forecasts inflation better than traditional underlying inflation measures such as core inflation measures. This paper presents the “FRBNY Staff Underlying Inflation Gauge (UIG)” for CPI and PCE. Using a dynamic factor model approach, the UIG is derived from a broad data set that extends beyond price series to include a wide range of nominal, real, and financial variables. It also considers the specific and time-varying persistence of individual subcomponents of an inflation series. An attractive feature of the UIG is that it can be updated on a daily basis, which allows for a close monitoring of changes in underlying inflation. This capability can be very useful when large and sudden economic fluctuations occur, as at the end of 2008. In addition, the UIG displays greater forecast accuracy than traditional measures of core inflation.
    Keywords: expectations; survey forecasts; imperfect information; term structure of disagreement
    JEL: C13 C33 C43 E31
    Date: 2014–04–22
  19. By: Larnac, Pierre-Marie
    Keywords: Macroéconomie; Modèles mathématiques; Équations d'Euler; Économie publique;
    JEL: E62 E63 D81
    Date: 2013–06
  20. By: Jimmy A. Saravia
    Abstract: Following standard Austrian School theory, in this paper I identify merger waves as parts of Austrian type business cycles. As indicated by Mises, Rothbard and Hayek, when loan rates are reduced below their natural level through bank credit expansion this falsifies the monetary calculation of capitalist-entrepreneurs. As a result, new investments are initiated that calculation showed were not profitable before the interest rate reduction. On the other hand, the fall in interest rates falsifies households’ appraisals of their income and wealth, which turns them overly optimistic and causes them to over-consume, save less and go into debt. As a consequence of these developments the economy does not have enough resources for the completion of the new projects and businesses must increasingly withdraw the resources from other companies. I conclude that the increase in investment activity and the accompanying “resource crunch” cause a merger wave that helps prolong the boom phase of the cycle. The merger wave ends when the credit expansion is not sufficient to sustain the economic boom (which usually occurs when central banks finally let interest rates rise again and an overextended financial system tightens credit standards) and the bust phase begins. On the other hand, if the newly created fiduciary media does not enter the economy through the loan market to finance business investment, there should be no pronounced and sustained increase in merger activity followed by an economic bust.
    Keywords: Austrian business cycle; merger waves; Austrian; Neoclassical; Behavioral
    JEL: B53 E32 G34
    Date: 2013–11–07
  21. By: Maria Marcanova (Council for Budget Responsibility); Ludovit Odor (Council for Budget Responsibility)
    Abstract: In this paper we propose a new methodology to improve the estimation of structural budget balances in Slovakia. Major innovations compared to currently used methods are in using more robust output gap estimates, inclusion of pensions in the analysis, imposing consistency between various gap measures, elimination of effects of different deflators and using time-varying elasticities. Significant attention is attached also to one-off and temporary measures, where we define 10 principles for identification. The estimation is complemented with bottom-up approaches which focus more directly on discretionary fiscal action. Latest changes to the European fiscal framework have strengthened significantly the role of structural budget balances. With the adoption of the Fiscal Compact there is a numerical threshold each year for the deviation of the structural balance from the medium - term objective (or the adjustment path toward it). Moreover, automatic correction mechanisms are activated if the deviation is above the threshold. The basic motivation of this paper was that independent fiscal institutions are going to play an important role in triggering these correction mechanisms.
    Keywords: fiscal policy, budget balance, structural fiscal balance, one-off measures
    JEL: E32 E60 E62 H30 H60 H62
    Date: 2014–03
  22. By: Belanger, Gilles
    Abstract: The New Keynesian Phillips Curve rests on an assumption not mentioned in the literature. Specifically, firms that are price constrained align their production along the demand curve, ignoring the effects of marginal cost on supply. This paper investigates what happens when the relationship between marginal cost and pricing conforms instead to standard microeconomic theory. It shows that the New Keynesian Phillips Curve is invalid and prices are not procyclical, but acyclical in this case. Therefore, if the assumption in question is necessary to the model, it should be acknowledged for the sake of transparency.
    Keywords: New Keynesian Phillips Curve, micro-foundations, price rigidity, marginal cost.
    JEL: D43 E31
    Date: 2014–04–28
  23. By: Nidia Ruth Reyes; José Eduardo Gómez G.; Jair Ojeda Joya
    Abstract: We study the existence of a monetary policy transmission mechanism through banks in Colombia, using monthly banks’ balance sheet data for the period 1996:4 – 2012:12. We obtain results which are consistent with the basic postulates of the bank lending channel (and the risk-taking channel) literature. The impact of short-term interest rates on the growth rate of loans is negative, indicating that increases in these rates lead to reductions in the growth rate of loans. This impact is stronger for consumer loans than for commercial loans. We find important heterogeneity in the monetary policy transmission across banks depending on banks-specific characteristics.
    Keywords: Monetary policy transmission, Bank lending channel, Risk taking channel, Colombia
    JEL: E5 E52 E59 G21
    Date: 2013–06–17
  24. By: Portes, Richard; Fouquau, Julien; Delatte, Anne-Laure
    Abstract: Is the pricing of sovereign risk linear during bearish episodes? Or can initial shocks on economic fundamentals be exacerbated by endogenous factors that create nonlinearities? We test for nonlinearities in the sovereign bond market of European peripheral countries during the debt crisis and explain them. Our estimates based on a panel smooth threshold regression model during January 2006 to September 2012 show four main findings: 1) Peripheral sovereign spreads are subject to significant nonlinear dynamics. 2) The deterioration of mark et conditions for financial names changes the way investors price risk of the sovereigns. 3) The spreads of European peripheral countries have been priced above their historical values, given fundamentals, because of amplification effects. 4) Two CDS indices on financial names unambiguously stand out as leading drivers of these amplification effects.
    Keywords: European sovereign crisis; Panel Smooth Threshold Regression Models; CDS indices;
    JEL: E44 F34 G12 H63 C23
    Date: 2014–03
  25. By: Kengo Nutahara
    Abstract: This study investigates aggregate implications of fiscal policy that responds to asset price fluctuations. In our sticky-price model, the monetary authority follows a Taylor rule and the fiscal authority follows a rule that the target of government spending is asset prices and responds negatively to the asset price fluctuations. It is shown that government spending that targets asset prices is a source of equilibrium indeterminacy.
    Date: 2013–05
  26. By: Hans A. Holter (Uppsala University and UCFS); Dirk Krueger (Department of Economics, University of Pennsylvania, CEPR and NBER); Serhiy Stepanchuk (Cole Polytechnique Federale de Lausanne)
    Abstract: The recent public debt crisis in most developed economies implies an urgent need for increasing tax revenues or cutting government spending. In this paper we study the importance of household heterogeneity and the progressivity of the labor income tax schedule for the ability of the government to generate tax revenues. We develop an overlapping generations model with uninsurable idiosyncratic risk, endogenous human capital accumulation as well as labor supply decisions along the intensive and extensive margins. We calibrate the model to macro, micro and tax data from the US as well as a number of European countries, and then for each country characterize the labor income tax Laffer curve under the current country-specific choice of the progressivity of the labor income tax code. We find that more progressive labor income taxes significantly reduce tax revenues. For the US, converting to a flat tax code raises the peak of the laffer curve by 7%. We also find that modeling household heterogeneity is important for the shape of the Laffer curve.
    Keywords: Progressive Taxation, Fiscal Policy, Laffer Curve, Government Debt
    JEL: E62 H20 H60
    Date: 2014–03–01
  27. By: Alexander J. Gill
    Abstract: Ben Bernanke researched monetary policy for over 25 years prior to becoming a policymaker, and his two-term career as Chairman of the Federal Reserve featured a severe recession coupled with a nancial crisis, a chief subject of Bernanke's research. His reaction to economic events is noteworthy in its originality and breadth, but its intellectual underpinnings are, with a few exceptions discussed in the paper, not without written precedent. This paper will summarize and connect Bernanke's research and policymaking and show that the two are closely aligned.
    Keywords: Economic thought, history of economic thought, central banking, Fed, Bernanke
    JEL: B31 E58 E65
    Date: 2014
  28. By: Saint-Pierre, Patrick; Cartelier, Jean
    Keywords: Exchange and Production Economies; Applied General Equilibrium Models; exchange; monetary economy;
    JEL: D58 D51 E52
    Date: 2013–06
  29. By: Peter Dixon; Maureen Rimmer; Louise Roos
    Abstract: Traditionally, CGE models do not include equations modelling the financial sector of a country. Interest rates are therefore set exogenously and often the nominal exchange rate is set as the numeraire. Normally, these models would show that tighter monetary policy (i.e. increase in interest rates) would lead to a fall in investments and a decline in the domestic price level relative to foreign prices. This causes a real devaluation of the currency. The fall in domestic prices would be good for the trade balance because the country becomes more competitive with exports increasing and imports falling. However, there is another mechanism not captured in these models. If interest rates increase, we expect that foreigners would want to hold more domestic assets (due to the higher returns) and domestic agents would want to hold more domestic assets and less foreign assets. We expect a net inflow of capital and an appreciation of the currency. This appreciation would then hurt the trade account. Our task is to develop a financial module and run simulations to investigate the impact of tighter monetary policy in Papua New Guinea (PNG). The financial module is a set of equations that are added, as an extension, to an existing comparative-static model for PNG, see Kauzi (2003). The comparative-static model of PNG is an ORANIG-style model and includes the core economic equations. In this paper we do not explain the equations of the core economic module. For a detailed description of the core module, see Dixon et al. (1982). The financial module is linked to the core CGE model via three conditions. Firstly, the current account deficit is equal to the net inflow of capital. Secondly, the government deficit is equal to the new acquisition of domestic bonds. Thirdly, investment in industry i is set equal to the new acquisition of assets in industry i by agents z. Once these equations are activated, we endogenously determine the nominal exchange rate, domestic bond rate and the change in the cost of funds to industries. In this paper we describe the theory underlying the financial module. We simulate a 1 per cent increase in the interest rate the BPNG pays to the commercial banks for holding deposits with the BPNG. The first two simulations with the comparative-static module are conducted with the financial module inoperative. This means that the financial module is not linked to the core economic module and that the nominal exchange rate and rates of interest are set exogenously. We expect the results of these two simulations to show that tighter monetary policy leads to an improvement in the trade balance. In simulations 3 we activate the first condition where we set the current account balance equal to the net capital inflow. This allows us to endogenously determine the nominal exchange rate. In simulation 4 we activate the second condition where we set the government deficit equal to the issuing of domestic bonds. We can now endogenously determine the domestic bond rate. In simulation 5 we activate the final constraint where we endogenously determine the change in the cost of lending funds to industries. By activating all the conditions we linked the financial module to the core economic module. We expect the results of the final three simulations to show that tighter monetary policy leads to a worsening of the trade balance.
    Keywords: Computable general equilibrium (CGE) models, Financial markets, Interest rates, Monetary Policy
    JEL: C68 E44 E47 E52
    Date: 2014–02
  30. By: Ben Fung; Miguel Molico; Gerald Stuber
    Abstract: The authors review recent developments in retail payments in Canada and elsewhere, with a focus on e-money products, and assess their potential public policy implications. In particular, they study how these developments will affect the demand for bank notes, and the central bank’s balance sheet and its seigniorage revenue, which as a result might affect the central bank’s ability to implement and conduct monetary policy and to promote financial stability. Other public policy issues, such as safety and efficiency, and user protection as well as legal, security and law enforcement, are also considered. While the demise of cash is not imminent, it is important for the central bank to continue to evaluate its potential roles with regard to e-money.
    Keywords: Bank notes, E-money, Financial services, Payment clearing and settlement systems
    JEL: E41 E42
    Date: 2014
  31. By: Wensheng Kang; Ronald A. Ratti
    Abstract: This paper examines the interdependence of China's policy uncertainty, the global oil market, and stock market returns in China. A structural VAR model is estimated that shows a positive shock to economic policy uncertainty in China has a delayed negative effect on global oil production, real oil prices and real stock market returns. Shocks to oil market specific demand significantly raise China's economic policy uncertainty and reduce the real stock market returns. As measured by a spillover index the interdependence between these variables is rising since 2003 as China's influence in the oil market increases. An equivalent spillover index calculated for the U.S. is smaller and largely flat over time.
    Keywords: China's policy uncertainty, China's stock market return, Oil shocks, Structural VAR
    JEL: E44 G15 P40 Q43
    Date: 2014–04
  32. By: Juan José Echavarría; Luis Fernando Melo Velandia; Mauricio Villamizar
    Abstract: To date, there is still great controversy as to which exchange rate model should be used or which monetary channel should be considered, when measuring the effects of monetary policy. Since most of the literature relies on structural models to address identification problems, the validity of results largely turn on how accurate the assumptions are in describing the full extent of the economy. In this paper we compare the effect of different types of central bank interventions using an event study approach for the Colombian case during the period 2000-2012, without imposing restrictive parametric assumptions or without the need to adopt a structural model. We find that all types of interventions (international reserve accumulation options, volatility options and discretionary) have been successful according to the smoothing criterion. In particular, volatility options seemed to have the strongest effect. We find that results are robust when using different windows sizes and counterfactuals
    Keywords: Central bank intervention, foreign exchange intervention mechanisms, event study.
    JEL: E52 E58 F31
    Date: 2013–10–09
  33. By: Aiyar, Shekhar (International Monetary Fund); Calomiris, Charles (Columbia Business School); Hooley, John (International Monetary Fund); Korniyenko , Yevgeniya (International Monetary Fund); Wieladek, Tomasz (Bank of England)
    Abstract: We use data on UK banks’ minimum capital requirements to study the impact of changes to bank-specific capital requirements on cross-border bank loan supply from 1999 Q1 to 2006 Q4. By examining a sample in which each recipient country has multiple relationships with UK-resident banks, we are able to control for demand effects. We find a negative and statistically significant effect of changes to banks’ capital requirements on cross-border lending: a 100 basis point increase in the requirement is associated with a reduction in the growth rate of cross-border credit of 5.5 percentage points. We also find that banks tend to favour their most important country relationships, so that the negative cross-border credit supply response in ‘core’ countries is significantly less than in others. Banks tend to cut back cross-border credit to other banks (including foreign affiliates) more than to firms and households, consistent with shorter maturity, wholesale lending which is easier to roll off and may be associated with weaker borrowing relationships.
    Keywords: Cross-border lending; loan supply; capital requirements; international transmission
    JEL: E44 E51 E52 G18 G21
    Date: 2014–04–17
  34. By: Jouvet, Pierre-André; Gonand, Frédéric
    Abstract: The demographic structure of a country influences economic activity. The "second dividend" modifies growth. Accordingly, in general equilibrium, the second dividend and the demographic structure are interrelated. This paper aims at assessing empirically the "second dividend" in a dynamic, empirical and intertemporal setting that allows for measuring its impact on growth, its intergenerational redistributive effects, and its interaction with the demographic structure. The article uses a general equilibrium model with overlapping generations, an energy module and a public finance module. Policy scenarios compare the consequences of recycling a carbon tax through lowe r proportional income tax rather than higher public lumpsum expenditures. They are computed for two countries with different demographics (France and Germany). Results suggest that the magnitude of the "second dividend" is significantly related with the demographic structure. The more concentrated the demographic structure on cohorts with higher income and saving rate, the stronger the effect on capital supply of the second dividend. The second dividend weighs on the welfare of relatively aged working cohorts. It fosters the wellbeing of young working cohorts and of future generations. The more concentrated the demog raphic structure on aged working cohorts, the higher the intergenerational redistributive effects of the second dividend.
    Keywords: Energy transition; intergenerational redistribution; overlapping generations; double dividend; general equilibrium;
    JEL: D58 D63 E62 L7 Q28 Q43
    Date: 2014–04
  35. By: Marco Cozzi (Queen's University)
    Abstract: I investigate whether the popular Krusell and Smith algorithm used to solve heterogeneous-agent economies with aggregate uncertainty and incomplete markets is likely to be subject to multiple self-fulfilling equilibria. In a benchmark economy, the parameters representing the equilibrium aggregate law of motion are randomly perturbed 500 times, and are used as the new initial guess to compute the equilibrium with this algorithm. In a sequence of cases, differing only in the magnitude of the perturbations, I do not find evidence of multiple self-fulfilling equilibria. The economic reason behind the result lies in a self-correcting mechanism present in the algorithm: compared to the equilibrium law of motion, a candidate one implying a higher (lower) expected future capital reduces (increases) the equilibrium interest rates, increasing (reducing) the savings of the wealth-rich agents only. These, on the other hand, account for a small fraction of the population and cannot compensate for the opposite change triggered by the wealth-poor agents, who enjoy higher (lower) future wages and increase (reduce) their current consumption. Quantitatively, the change in behavior of the wealth-rich agents has a negligible impact on the determination of the change in the aggregate savings, inducing stability in the algorithm as a by-product.
    Keywords: Unemployment Risk, Business Cycles, Incomplete Markets, Heterogeneous Agents, Numerical Methods, Self-fulfilling Equilibria
    JEL: C63 C68 E21 E32
    Date: 2014–04
  36. By: Robert Kollmann; Marco Ratto; Werner Roeger; Jan in’t Veld; Lukas Vogel
    Abstract: We estimate a three-country model using 1995-2013 data for Germany, the Rest of the Euro Area (REA) and the Rest of the World (ROW) to analyze the determinants of Germany’s current account surplus after the launch of the Euro. The most important factors driving the German surplus were positive shocks to the German saving rate and to ROW demand for German exports, as well as German labour market reforms and other positive German aggregate supply shocks. The convergence of REA interest rates to German rates due to the creation of the Euro only had a modest effect on the German current account and on German real activity. The key shocks that drove the rise in the German current account tended to worsen the REA trade balance, but had a weak effect on REA real activity. Our analysis suggests these driving factors are likely to be slowly eroded, leading to a very gradual reduction of the German current account surplus. An expansion in German government consumption and investment would raise German GDP and reduce the current account surplus, but the effects on the surplus are likely to be weak.
    JEL: F4 F3 F21 E3
    Date: 2014–04
  37. By: Pejman Bahramian (Department of Economics, Eastern Mediterranean University, Famagusta, Turkish Republic of Northern Cyprus, via Mersin 10, Turkey); Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Famagusta, Turkish Republic of Northern Cyprus, via Mersin 10, Turkey); Rangan Gupta (Department of Economics, University of Pretoria); Patrick T. kanda (Department of Economics, University of Pretoria)
    Abstract: The conduct of inflation targeting is heavily dependent on accurate inflation forecasts. Non-linear models have increasingly featured, along with linear counterparts, in the forecasting literature. In this study, we focus on forecasting South African infl ation by means of non-linear models and using a long historical dataset of seasonally-adjusted monthly inflation rates spanning from 1921:02 to 2013:01. For an emerging market economy such as South Africa, non-linearities can be a salient feature of such long data, hence the relevance of evaluating non-linear models' forecast performance. In the same vein, given the fact that 1969:10 marks the beginning of a protracted rising trend in South African inflation data, we estimate the models for an in-sample period of 1921:02-1966:09 and evaluate 24 step-ahead forecasts over an out-of-sample period of 1966:10-2013:01. In addition, using a weighted loss function specification, we evaluate the forecast performance of different non-linear models across various extreme economic environments and forecast horizons. In general, we find that no competing model consistently and significantly beats the LoLiMoT's performance in forecasting South African inflation.
    Keywords: Inflation, forecasting, non-linear models, weighted loss function, South Africa
    JEL: C32 E31 E52
    Date: 2014–04
  38. By: alamro, Hassan; Al-dalaien, Qusay
    Abstract: The objective of this paper is to measure the impact of economic growth on unemployment in the Jordanian economy in the short and long-run during the period (1980-2011) by implementing the okun's law. The relationship is measured by performing the gap model with Hodrick-Prescott filter (HP filter) to calculate the potential gross domestic product. To this end, an Autoregressive Distributed Lag (ARDL) approach to co-integration and the Error Correction Model (ECM) are employed to represent the short and long term relationship. The results indicate that the economic growth has a weak significant negative short- and long-run effect on unemployment.
    Keywords: unemployment, okun's law, gap model, Autoregressive Distributed Lag(ARDL) approach, co-integration, Error Correction Model.
    JEL: E23 E24 J01
    Date: 2014–04–13
  39. By: Robert W. Dimand
    Abstract: This paper examines the relationship of the monetary economics of James Tobin to modern monetary theory, which has diverged in many ways from the directions taken by Tobin and his associates (for example, moving away from multi-asset models of financial market equilibrium and from monetary models of long-run economic growth) but which has also built upon aspects of his work (e.g., the use of simulation and calibration in his work on inter-termporal consumption decisions). Particular attention will be paid to Tobin's unpublished series of three Gaston Eyskens Lectures at Leuven on Neo-Keynesian Monetary Theory: A Restatement and Defense, and the paper draws on my forthcoming volume of Tobin for Palgrave Macmillan's series on Great Thinkers in Economics.
    Keywords: James Tobin, modern monetary theory, microeconomic foundations, Keynesian economics, corridor of stability
    JEL: B22 B31 E12
    Date: 2014
  40. By: Ahrens, Steffen (Kiel Institute for the World Economy); Pirschel, Inske (Kiel Institute for the World Economy); Snower, Dennis J. (Kiel Institute for the World Economy)
    Abstract: We present a new partial equilibrium theory of price adjustment, based on consumer loss aversion. In line with prospect theory, the consumers' perceived utility losses from price increases are weighted more heavily than the perceived utility gains from price decreases of equal magnitude. Price changes are evaluated relative to an endogenous reference price, which depends on the consumers' rational price expectations from the recent past. By implication, demand responses are more elastic for price increases than for price decreases and thus firms face a downward-sloping demand curve that is kinked at the consumers' reference price. Firms adjust their prices flexibly in response to variations in this demand curve, in the context of an otherwise standard dynamic neoclassical model of monopolistic competition. The resulting theory of price adjustment is starkly at variance with past theories. We find that – in line with the empirical evidence – prices are more sluggish upwards than downwards in response to temporary demand shocks, while they are more sluggish downwards than upwards in response to permanent demand shocks.
    Keywords: price sluggishness, loss aversion, state-dependent pricing
    JEL: D03 D21 E31 E50
    Date: 2014–04
  41. By: Barnebeck Andersen, Thomas; Malchow-Møller, Nikolaj; Nordvig, Jens
    Abstract: Has inflation targeting (IT) conferred benefits in terms of economic growth on countries that followed this particular monetary policy strategy during the crisis period 2007-12? This paper answers this question in the affirmative. Countries with an IT monetary regime with flexible exchange rates weathered the crisis much better than countries with other monetary regimes, predominantly countries with fixed exchange rates. Part of this difference in growth performance reflects differences in export performance during the initial years of the crisis, which in turn can be explained by real exchange rate depreciations. However, IT seems also to confer other benefits on the countries above and beyond the effects from currency depreciation.
    Date: 2014–03
  42. By: Kengo Nutahara
    Abstract: This paper investigates the monetary policy design for restoring equilibrium determinacy. Our interests are whether a central bank should respond to asset price fluctuations, and if so, what asset prices should be targeted. We show that a monetary policy response to the price of a productive tangible asset (capital price) is helpful for equilibrium determinacy, while that to the price of an intangible asset that reflects a firm’s profit (share prices) is a source of equilibrium indeterminacy. This result comes from the two assets’ prices moving in opposite directions in response to a permanent increase in inflation.
    Date: 2013–08
  43. By: DE KONING, Kees
    Abstract: Savings can be used in two different applications. Companies will nearly always use savings –equity, loans and bonds- to help produce and increase output and increase employment levels –the economic use of savings-. Individual households will take up mortgages. However the collective mortgage providers may grant new mortgages at a speed, which not only helps new construction of homes –an economic use of savings-, but also forces house prices up above the increase in average incomes. The latter use can be called the financial use or the un-economic use of savings. No output is created through these price increases, nor are any jobs created. Governments create government deficits, by spending more than their tax revenues. After the year of spending, unless an outside contract creates a cash flow to repay the debt, government debt is another example of the financial use of savings. Stock markets assist in the allocation of savings, but their time horizon is very short term because the market participants have moved from individual households to institutions. The latter trading behavior has moved from active to passive management and technology has induced super fast trading patterns. There is no price set for holding securities, only for trading. Most government debt needs a repayment period of well over seventy years. Study the un-economic use of savings in mortgage-backed securities and the causes of the 2008 financial crisis become a lot clearer. The value of a dollar saved out of incomes was depreciated as compared to the dollar invested in mortgage-backed securities. The reactions of the authorities and of the outside equity providers caused this discrepancy to widen over the period 2004- 2012 rather than helping individual households to get their own balance sheet back to order. The shift in the uses of savings from an economic use to an un-economic one can cause economic recessions.
    Keywords: economic savings; financial (un-economic) savings, financial markets, financial crisis, savings depreciation factor, deflation, economic easing
    JEL: E2 E21 E4 E5 E58
    Date: 2014–04–28
  44. By: Keiichiro Kobayashi; Daichi Shirai
    Abstract: This paper uses a simple heterogeneous-agent economy model to show that redistribution of wealth among heterogeneous agents can play a significant role in business cycle dynamics and financial crises. In an economy where firms with heterogeneous productivity operate under borrowing constraints, redistribution of wealth reproduces the key features of business cycle fluctuations such as persistence and nonlinearity in output and labor, and procyclicality in observed productivity. This model suggests the hypothesis that a redistribution shock may be one of the key driving forces of business cycles. The aggregate variables exhibit strong nonlinearity in both our model and the standard model: however, while the behavior of individual agents does not involve nonlinearity in our model, strong nonlinearity is assumed in the standard model.
    Date: 2014–03
  45. By: Jesús Botero G.; Christian Vargas; Álvaro Hurtado Rendón; Humberto Franco
    Abstract: We develop a DSGE model of the Colombian economy to assess the effect of tax policy on informal employment and income distribution.The model recreates a small open economy, with persistent income inequality, a substantial degree of informality, and different possibilities of government intervention. This paper evaluates the consequences of government transfer payments to households with lower incomes. We find that although transfer payments have a positive effect on income distribution, financing them requires an adjustment in government finances (cut spending or increase revenue through the use of various taxes), have negative effects on the economic as a whole. ***** Desarrollamos un modelo DSGE de la economía colombiana para evaluar el efecto de la política fiscal sobre el empleo informal y distribución del ingreso. El modelo recrea una economía pequeña y abierta, con la persistente desigualdad de ingresos, un alto grado de informalidad, y las diferentes posibilidades de intervención del gobierno. Este documento evalúa las consecuencias de los pagos de transferencia del gobierno a los hogares con ingresos más bajos. Encontramos que si bien los pagos de transferencias tienen un efecto positivo sobre la distribución del ingreso, su financiación requiere un ajuste en las finanzas públicas (reducir el gasto o aumentar los ingresos a través del uso de diversos impuestos), tienen efectos negativos sobre la economía en su conjunto.
    Keywords: Public expenditure; exogenous shock; DSGE
    JEL: E62 D58
    Date: 2014–03–11
  46. By: Wensheng Kang; Ronald A. Ratti; Kyung Hwan Yoon
    Abstract: This paper examines the effect of the demand and supply shocks driving the global crude oil market on aggregate U.S. bond index real returns. A positive oil market-specific demand shock is associated with significant decreases in aggregate bond index real returns for 8 months following the shock. A positive innovation in aggregate demand has a negative effect on real bond return that is statistically significant and becomes more adverse over 24 months. Structural shocks driving the global oil market jointly account for 27.1% of the variation in real bond returns at 24 month horizon. A spillover index from rolling SVAR models is used to identify the interdependence between the oil market and bond returns. The mean for this spillover index is 0.381 over 2001:01-2011:12 and 0.476 over September through December 2008 during the height of the global financial crisis.
    Keywords: Demand shocks, Oil prices, Bond returns, Supply shocks
    JEL: E44 G12 Q43
    Date: 2014–04
  47. By: FUJIWARA Ippei; NAKAZONO Yoshiyuki; UEDA Kozo
    Abstract: The policy package known as Abenomics appears to have influenced the Japanese economy drastically, in particular, in the financial markets. In this paper, focusing on the aggressive monetary easing of Abenomics, the first arrow, we evaluate its role in guiding public perceptions on monetary policy stance through the management of expectations. In order to end chronic deflation, such as that which Japan has been suffering over the last two decades, policy regime change must be perceived by economic agents. Analysis using the Quarterly Services Survey (QSS) monthly survey data shows that monetary policy reaction to inflation rates has been in a declining trend since the mid 2000s, implying intensified forward guidance well before Abenomics. However, Japan seems to have moved closer to a long-term liquidity trap, where even long-term bond yields are constrained by the zero lower bound. Consequently, no sizable difference in perceptions has been found before and after the introduction of Abenomics. Estimated changes in perceptions are not abrupt enough to satisfy "Sargent's (1982) criteria for regime change" termed by Eggertsson (2008). This poses a serious challenge to central banks: what is an effective policy option left under the long-term liquidity trap?
    Date: 2014–04
  48. By: Soloschenko, Max; Weber, Enzo
    Abstract: This paper deals with simultaneous interactions between the determinants of the US yield curve. For this purpose, we derive a multivariate unobserved components model based on the expectation hypothesis. The influencing factors of the term structure that arise from the structural model are a common stochastic trend, the cyclical part of the short rate and maturity-dependent term premiums in the longer rates. We establish a significant influence of both permanent and transitory innovations on the US term structure and find pronounced spillovers between the shocks of the term structure determinants. An interesting result depicts a key role of the spillovers of structural mid-term rate cycle shocks in the formation of the risk premiums.
    Keywords: unobserved components; expectation hypothesis; cointegration; identification; risk premium
    JEL: C32 C58 E43 G12
    Date: 2014–04–22
  49. By: Keiichiro Kobayashi; Tomoyuki Nakajima
    Abstract: We develop a simple macroeconomic model that captures key features of a liquidity crisis. During a crisis, the supply of short-term loans vanishes, the interest rate rises sharply, and the level of economic activity declines. A crisis may be caused either by self-ful lling beliefs or by fundamental shocks. It occurs as a result of market failure due to debt overhang in short-term loans. The government's commitment to deposit guarantee reduces the likelihood of self-ful lling crisis but increases that of fundamental crisis.
    Date: 2014–01
  50. By: Kawaguchi, Daiji (Hitotsubashi University); Murao, Tetsushi (Kyushu University)
    Abstract: Graduating from a school during a time of adverse economic conditions has a persistent, harmful effect on workers' subsequent employment opportunities. An analysis of panel data from OECD countries during the 1960-2010 periods reveals that a worker who experiences a one-percentage-point higher unemployment rate while the worker is 16-24 years old has a 0.14 percentage-point higher unemployment rate at ages 25-29 and 0.03 percentage points higher at ages 30-34. The persistence of this negative effect is stronger in countries with stricter employment protection legislation. A composite index for labor market rigidity is constructed and the index is shown to have positive correlation with the persistence. Moderating macroeconomic fluctuations is more important in countries that have more persistent labor-market entry effects on subsequent outcomes.
    Keywords: persistence, unemployment, port of entry, cohort analysis, hysteresis
    JEL: E24 J64 J65 K31
    Date: 2014–04
  51. By: Ngai, L. Rachel (London School of Economics); Petrongolo, Barbara (Queen Mary, University of London)
    Abstract: This paper investigates the role of the rise of services in the narrowing of gender gaps in hours and wages in recent decades. We document the between-industry component of the rise in female work for the U.S., and propose a model economy with goods, services and home production, in which women have a comparative advantage in producing market and home services. The rise of services, driven by structural transformation and marketization of home production, acts as a gender-biased demand shift raising women's relative wages and market hours. Quantitatively, the model accounts for an important share of the observed trends.
    Keywords: gender gaps, structural transformation, marketization
    JEL: E24 J22 J16
    Date: 2014–04
  52. By: Tombolo, Guilherme Alexandre; Hasegawa, Marcos Minoru
    Abstract: In this article we seek to estimate the Brazilian “Okun’s law” with quarterly data ranging from 1980Q1 until 2013Q3. Considering the typical Okun's relationship, Δu=α-βg_y, where β is the Okun coefficient, we have obtained estimates of β between -0.1878 and -0.2055, such values are in general lower than the values obtained to other countries in similar studies.
    Keywords: Output, Unemployment, Okun’s Law
    JEL: E23 E24 E27
    Date: 2014–04
  53. By: Bourbonnais, Régis; Keppler, Jan Horst
    Abstract: Sur la demande de l’Union française d’électricité (UFE), Jan Horst Keppler, Professeur d’économie à l’Université Paris - Dauphine, et Régis Bourbonnais, Maître de conférences à l’Université Paris - Dauphine et spécialiste en économétrie, ont entrepris une série de tests statistiques pour déterminer l’élasticité prix de la demande électrique en France.
    Keywords: Services de l'électricité; Tarifs; Électricité; Consommation; Consommation d'énergie; France;
    JEL: E31 E21 L94 Q41 C13
    Date: 2013–10
  54. By: Vespignani, Joaquin L.; Knop, Stephen J
    Abstract: It is found that commodity price shocks largely affect the mining, construction and manufacturing industries in Australia. However, the financial and insurance sector is found to be relatively unaffected. Mining industry profits and nominal output substantially increase in response to commodity price shocks. Construction output is also found to increase significantly, especially in response to a bulk commodities shock, as a result of increased demand for resource related construction. Increased demand for construction has a positive spillover effect to parts of the manufacturing industry that supply the construction sector with intermediate inputs, such as the non-metallic mineral sub industry. In contrast, other manufacturing sub industries with only tenuous links to the resources sector such as textiles, clothing and other manufacturing, are relatively unresponsive to commodity price shocks.
    Keywords: Commodity prices, Commodity Shocks, Australian economy
    JEL: E0 E00 E30 F20
    Date: 2014–01–01
  55. By: Raghbendra Jha; Truong Duc Nguyen
    Abstract: This paper has two main objectives. First, it computes capital flight (CF) through trade misinvoicing from India using data from UNCOMTRADE, MIT Observatory of Economic Complexity and IMF E-library. India's trade with 17 countries over the period 1988-2012 is considered. We find that CF has accelerated since 2004 and particularly sharply since 2007. It peaked at nearly $40 billion in 2008 with the total outflow between 1988-2012 exceeding $186 billion. Second, we model the mutual dependence of GDP growth, CF, and various risk factors in a VAR framework. We find that the VAR models chosen fit the data well. We conduct impulse response function analysis, forecast the key variables until 2020 and forecast error variance decomposition. Broadly we find that, if left undisturbed, CF through trade misinvoicing will continue to be high and play a significant macroeconomic role. Thus, CF needs to be checked urgently not only because it is a drain of the country's resources but also because it continues to have a significant and, by its very nature, uncontrollable effect on the economy. At least some of the failures of current macroeconomic policy in India could be attributed to CF.
    Keywords: Trade Misinvocing, VAR, Impulse Response, Forecasting, India
    JEL: E17 F32 F47 K42
    Date: 2014–04
  56. By: Albers, Scott
    Abstract: In the physical world the “identity” of something is taken generally as a given; an apple is an apple; this apple is this apple. When dealing with planetary structure and extension into space, however, the problem of the planet’s “identity” in the surrounding cosmos is writ large. What does a planet’s “identity” imply? What functions must it take on? What internal logic holds it together as a functional “being” in the universe? A model of long-wave economic activity and crisis in the United States – “the Political Economy wave” – portrays the quest for social and economic “identity” with three simple curves: a sine curve over 56 years (20,454 days), a damping cosine curve of one-half the period of the sine curve, and the addition of these two in a “Political Economy Wave.” The logic of this wave is a recurring structure which shapes social “identity” over time. This paper compares the main peaks, intersections and troughs of the Political Economy wave for the United States, 1800-to-present, with the structure of the rings of Saturn, one of the most confounding structures known to science. At the present time gaps appear between rings which are unexplained; dynamism within the rings which should disperse the rings does not do so; edges of the rings are not diffuse but well defined; satellites between rings appear to have an impact but this is uncertain. Comparing these gaps with the various “crises” which predictably impact the “self identity,” the self-understanding, of society, this paper explores the possibility that the mathematics of identity may assist in the understanding of astrophysics, and possibly vice versa.
    Keywords: Rings of Saturn, Real GNP, Golden Mean, Phi, Kondratiev Wave, Global Financial Crisis, American Economic History, GNP Spiral, Okun’s Law, Revolution, Kaluza, Fifth Dimension, General Relativity, Astronomy
    JEL: B41 B5 C01 C02 C5 C50 C6 C63 E0 E01 E1 E19 E3 N00 N01 N1 N11 Z10 Z13
    Date: 2014–04–29
  57. By: Cebula, Richard
    Abstract: Using a half century of data, this empirical study adopts a simple loanable funds to investigate the impact of the budget deficits on the ex post real interest rate yield on high grade municipal bonds in the U.S. Autoregressive 2SLS estimates for the 1960-2012 study period find that the ex post real interest rate yield on high grade municipal bonds is an increasing function of the ex post real interest rate yield on Moody’s Baa-rated corporate bonds, the ex post real interest rate yield on three-year U.S. Treasury notes, the real value of the S&P 500 stock index, and the federal budget deficit (relative to the GDP level). Based on these results, it is observed that factors elevating the federal budget deficit appear to raise the real cost of borrowing to the cities (of all sizes), counties, and states across the U.S. Over the long run, failure to address the federal budget issue could have profound negative impacts on the finances of U.S. cities, counties, and states and their economic activities.
    Keywords: budget deficits; real interest rate; tax-free municipal bonds
    JEL: E43 H62 H74
    Date: 2014–04–26
  58. By: Kosuke Aoki (University of Tokyo); Tomoyuki Nakajima (Kyoto University and CIGS); Kalin Nikolov (European Central Bank)
    Abstract: We build a model economy in which a shortage of safe assets can create conditions for intrinsically useless `safe' bubble assets to circulate at a positive price. Our environment features infinitely lived individuals who are not subject to credit constraints but who face uninsurable idiosyncratic production risk. Bubbly equilibria exist when safe assets offer real returns below the growth rate of the economy. Bubble assets circulate at a positive price only if they offer returns which are safe relative to production returns. These `safe' bubbles reduce consumption volatility but exert a contractionary effect on the economy.
    Keywords: Safe Asset Shortage, Asset Price Bubbles.
    JEL: E3
    Date: 2014–04
  59. By: Homburg, Stefan
    Abstract: This paper is about 'Capital in the Twenty-first Century' by Thomas Piketty. It identifies his central macroeconomic claims and examines them, arguing that the contentions are theoretically and empirically unwarranted.
    Keywords: Capital, wealth, income distribution, taxes
    JEL: D31 E H24
    Date: 2014–04
  60. By: Nagore García, Amparo (Universidad de Valencia); van Soest, Arthur (Tilburg University)
    Abstract: Using administrative records data from Spanish Social Security, we analyse the pattern and the determinants of individual unemployment benefit spell durations. We compare a period of expansion (2005-2007) and the recent recession (2009-2011), allowing us to determine the impact of the current crisis. In line with the duality that characterizes the Spanish labour market, we distinguish between exits to a stable job and exits to an unstable job. We estimate a Multivariate Mixed Proportional Hazard Model for each time period. We find similar effects of the crisis for stable and unstable jobs, which are particularly strong in the first year of the spell. Moreover, slight negative duration dependence is found, especially for stable jobs in the expansion period until the time of unemployment benefit expires. Individuals who are most affected by the financial crisis tend to be males, those aged 16-24 and 40-51 years, those living in regions with higher unemployment rates, individuals who are less qualified or work in manual occupations (particularly construction) and immigrants.
    Keywords: unemployment durations, business cycle, dual labour markets, re-employment probability
    JEL: J64 C41 E32
    Date: 2014–04
  61. By: Javier Gómez Restrepo; Juan Sebastián Rojas Bohorquez
    Abstract: International reserves are very important for emerging economies, as they allow to buffer possible liquidity vulnerabilities within a countries' balance of payments. Consequently, the issue of how many reserves should each country hold is a relevant issue for economic policy. The literature has identified two different methodological approaches to deal with this issue, namely reserve optimality and reserve adequacy indicators, which are carefully reviewed in this paper to determine which is the most appropriate to guide policy decisions in the Colombian case. The indicator proposed by the IMF (2011) was adopted to find the adequate level that this country should hold by calibrating it with historical data for Colombia. This new conservative index suggests that the accumulated levels of reserves have been adequate in recent years and that only in very extreme scenarios there is room to acquire additional reserves. Finally, it is worth highlighting that the methodology developed in this article provides a complementary indicator to the existing ones in order to evaluate the international reserves levels that Colombia should accumulate to reduce its vulnerability to external shocks. ****** Las reservas internacionales son muy importantes para las economías emergentes, ya que permiten amortiguar las posibles vulnerabilidades de liquidez que se puedan presentar en la balanza de pagos. En consecuencia, la cuestión de cuántas reservas debe acumular cada país es un tema relevante para la política económica. La literatura ha identificado dos enfoques metodológicos diferentes para hacer frente a este problema, a saber, nivel óptimo de reservas e indicadores de nivel adecuado, que son revisados cuidadosamente en este trabajo para determinar cuál es el más conveniente para orientar las decisiones de política en el caso Colombiano. Se adoptó el indicador propuesto por el FMI en 2011 para encontrar el nivel adecuado que se debe tener calibrando datos históricos para Colombia. Este nuevo índice conservador sugiere que los niveles de acumulación de reservas han sido adecuados en los últimos años y que sólo en casos muy extremos hay espacio para adquirir reservas adicionales. Por último, cabe destacar que la metodología desarrollada en este trabajo es un complemento a las medidas ya existentes para evaluar los niveles de reservas internacionales que Colombia debe acumular con el fin de reducir su vulnerabilidad a los choques externos.
    Keywords: International reserves, Reserve optimality, Reserve adequacy
    JEL: E58 F32
    Date: 2013–09–12
  62. By: Catherine SMITH (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: In December 2005, the Belgian government adopted the law on the Intergenerational Solidarity Pact (ISP) with the objective to increase the employment rate of the elderly. In order to meet that objective, several active ageing policies and reforms were taken. The aim of this paper is to investigate the overall effectiveness of the ISP in rising the elderly employment rate by gender. Two methods are used. Both rely on a macro-econometric model which explains the evolution of the elderly employment rate by the economic conditions. The first method uses forecasts of the macro-econometric model as an indicator of the value the employment rate would have taken in the absence of the policies. The second method tests for the presence of structural breaks after the introduction of the main policies of the ISP. The results of the first method suggest a positive impact of the policies on elderly employment rate which is slightly larger for men, and a negative impact on younger men's employment rate, suggesting a substitution effect. These effects are however too small to be statistically significant. Using the second method, no structural break is found.
    JEL: J21 J26 H53 E32
    Date: 2014–04–09
  63. By: Barnett, Alina (Bank of England); Chiu, Adrian (Bank of England); Franklin, Jeremy (Bank of England); Sebastia-Barriel, Maria (Bank of England)
    Abstract: Labour productivity in the United Kingdom has been exceptionally weak since the 2007/08 financial crisis. This paper uses firm-level data from the Office for National Statistics Annual Business Survey and the Inter-Departmental Business Register to better understand the nature of this weakness. Overall, our findings are consistent with existing literature which finds that within-firm productivity growth tends to be procyclical and emphasises the importance of the reallocation of resources between firms and sectors for productivity growth. More specifically, we find that up until 2011 there was a doubling in the proportion of firms with shrinking output and flat employment. This suggests that firms were able to respond flexibly to weak demand conditions by retaining staff at the expense of measured productivity, suggestive of an opening up of spare capacity within firms. However, the strength of recent hiring behaviour since 2012 means that this is now likely to be less of a factor. The lack of labour shedding, together with a low firm exit rate, is also indicative of low levels of resource reallocation between firms and sectors. To assess the importance of this to aggregate productivity growth we apply the method used by Baily, Bartelsman and Haltiwanger. We find that reallocation between firms (in terms of both the movement of labour and firm entry and exit) contributed significantly to aggregate productivity growth before the crisis, but its contribution fell substantially after. In fact, around one third of the productivity slowdown after 2007 can be attributed to slower reallocation of resources. The extent to which reduced factor reallocation, and so the weakness in productivity growth, persists remains a key question for the economic outlook.
    Keywords: Productivity growth; long-run growth; resource reallocation; entry; exit; financial crisis
    JEL: E32 L11 O47
    Date: 2014–04–17
  64. By: Suleyman Hilmi Kal; Ferhat Arslaner; Nuran Arslaner
    Abstract: The paper is an investigation concerning whether the deviations of currencies from their fundamental values affects the relationship between economic fundamentals and exchange rates. To this end, a version of the sticky price monetary exchange rate model, which connects the exchange rates to economic fundamentals, is employed. And that model is extended by adding a two state time varying transition probability Markov regime switching process in which transition between regimes is linked to the rate of risk-adjusted excess returns in the currencies. This permits analysis of the transitional dynamics of exchange rates. Quarterly data of the most active four floating currencies are used in the model. These currencies are the Australian dollar, the Canadian dollar, the Japanese yen, and the British pound. The results provide evidence that the Sharpe ratios of debt and equity investments in the currencies influence the evolution of transitional dynamics of the exchange rates’ deviation from their fundamental values. As an extension of this result, it was found that the relationship between economic fundamentals and the nominal exchange rates are subject to change depending on the overvaluation or undervaluation of the currencies relative to their fundamental value.
    Keywords: Bond Price, Stock Price, Sharpe Ratio, Exchange Rates, Time Series Analysis, and Markov Switching Model
    JEL: C22 E44 G12
    Date: 2014–03
  65. By: Pablo Pincheira; Andrés Gatty
    Abstract: In this paper we build forecasts for Chilean year-on-year inflation using simple time-series models augmented with different measures of international inflation. Broadly speaking, we construct two families of international inflation factors. The first family is built using year-on-year inflation of 18 Latin American (LA) countries (excluding Chile). The second family is built using year-on-year inflation of 30 OECD countries (excluding Chile). We show sound in-sample and pseudo out-ofsample evidence indicating that these international factors do help forecast Chilean inflation at several horizons. Incorporating the international factors reduce the Root Mean Squared Prediction Error of pure univariate SARIMA models statistically speaking. We also show that the predictive pass-through from international to local inflation has increased in the recent years. As a final exercise we construct another international inflation factor as an average of the inflation of fifteen countries from which Chile gets a high percentage of its imports. With the aid of this factor the models outperform our univariate benchmarks but also underperform the results obtained with the broader factors built with LA or OECD countries, suggesting that imported inflation is not the only channel explaining our findings.
    Date: 2014–02
  66. By: Annette Zeilstra; Adam Elbourne
    Abstract: This study investigates wage leadership in the Netherlands. We empirically examine public and private wages using several wage definitions for the period 1980-2012. We find no evidence for public wage leadership. Moreover, public wages return to their previous equilibrium value three to four years after an exogenous shock in public wages. By contrast, an exogenous shock to private wages has a permanent influence on both private and public wages. These findings suggest that although a public wage freeze lowers public expenditure in the short-run, it is not an effective policy measure to lower public expenditure in the medium and long-run.
    JEL: C32 H50 J30 E62
    Date: 2014–04
  67. By: P., Srinivasan
    Abstract: The link between stock market development and economic activity has always been the subject of considerable debate in the field of economics and it raises empirical question whether stock market development influences economic activity or whether it is a consequence of increased economic activity. This study attempts to investigate the direction of causality between stock market development and economic growth in the Indian context. Using the cointegration and causality tests for the period June 1991 to June 2013, the study confirms a well defined long-run equilibrium relationship between the stock market development indicators and economic growth in India. The empirical results show bidirectional causality between market capitalisation and economic growth and unidirectional causality from turnover ratio to economic growth in the long-run and short-run. By and large, it can be inferred that the stock market development indicators viz. market capitalisation and turnover ratio have a positive influence on economic growth in India.
    Keywords: Stock Market Development, Cointegration, Granger Causality, Economic Growth
    JEL: C58 E44 O16
    Date: 2014–05–01
  68. By: Delmar, Frédéric (Sten K. Johnson Centre for Entrepreneurship School of Economics and Management, Lund University and Research Institute of Industrial Economics.); Wennberg, Karl (The Ratio Institute and Stockholm School of Economics.)
    Abstract: Akademisk teori såväl som politiska diskussioner framhåller ofta entreprenörskap som gynnsamt för ekonomisk tillväxt. De specifika teoretiska mekanismerna som gör att entreprenörskap leder till tillväxt har dock inte kunnat fastslås och det är därför inte klart om entreprenörskap alltid är ekonomiskt gynnsamt, och, om så är fallet, för vem? I denna artikel kommer vi att sammanfatta den empiriska forskningen inom entreprenörskap för att kritiskt diskutera de potentiella relationerna mellan entreprenörskap och tillväxt.
    Keywords: Entreprenörskap; Tillväxt; Institutioner; Ojämlikhet
    JEL: E24 L26 O15 P46
    Date: 2014–04–22
  69. By: Michael Jetter
    Abstract: This paper reconsiders the effects of volatile growth rates on growth itself. I show that the underlying endogeneity of government size can hide the net growth effects from volatility. There exists a positive direct and a negative indirect channel, with the latter operating through the size of the public sector. Risk-averse citizens respond to volatility either with precautionary savings (direct effect) or by demanding a stronger public safety net, which in turn lowers growth (indirect effect). However, the indirect channel is only available if the political regime allows citizens to determine their desired level of public services. I test this theory on a balanced panel of 95 countries from 1960 { 2010. The paper reveals the latent endogeneity of government size in a single growth equation framework and offers a simultaneous estimation method as an alternative. Results support the existence of both effects. The direct channel is stronger in autocratic societies, but as a country turns to democracy the indirect channel dominates. Volatility has a positive net effect on growth in autocratic nations, but a negative net effect in democratic societies. This finding explains why previous growth analyses of volatility at times reached contradicting conclusions.
    Keywords: Volatility; Business Cycles; Economic Growth
    JEL: E32 H11 O40
    Date: 2013–06–26
  70. By: Adamopoulou, Effrosyni; Tanzi, Giulia M.
    Abstract: In this paper we study how the Great Recession affected university students in terms of performance, with a special focus on the dropout probability. To do so, we use individual-level data on a representative sample of university students in Italy in 2007 and 2011. We measure the severity of the recession in terms of increases in adult and youth unemployment rate and we exploit geographical variation to achieve identification. On the one hand, an increase in adult male unemployment rate deteriorates the financial condition of the family, raising the dropout probability. On the other hand, by reducing the opportunity cost of tertiary education, an increase in youth unemployment rate decreases the dropout probability. Focusing on students who were enrolled at the university before the recession we are able to study the effects of the crisis on performance net from any potential effect on enrollment. We find evidence that overall, university dropout decreased as a result of the Great Recession and that the probability of on-time graduation increased for more motivated students. The effects, however, are considerably heterogeneous across gender and other socio-economic indicators.
    Keywords: academic performance, dropout, great recession, unemployment
    JEL: D12 E32 J24
    Date: 2014–04
  71. By: Jaqueson Galimberti (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Michele Berardi (University of Manchester, United Kingdom)
    Abstract: We compare forecasts from different adaptive learning algorithms and calibrations applied to US real-time data on inflation and growth. We find that the Least Squares with constant gains adjusted to match (past) survey forecasts provides the best overall performance both in terms of forecasting accuracy and in matching (future) survey forecasts.
    Keywords: expectations, learning algorithms, forecasting, learning-to-forecast, least squares, stochastic gradient
    JEL: C53 D83 D84 E37
    Date: 2014–04
  72. By: Eva Schlenker (University of Hohenheim); Kai D. Schmid (Macroeconomic Policy Institute)
    Abstract: In this paper, we measure the effect of changing capital income shares upon inequality of gross household income. Using EU-SILC data covering 17 EU countries from 2005 to 2011 we find that capital income shares are positively associated with the concentration of gross household income. Moreover, we show that the transmission of a shift in capital income shares into the personal distribution of income depends on the concentration of capital income in an economy. Using fixed effect models we find that changing capital income shares play an important role in the development of household income inequality. Hence, in many industrialized countries income inequality has by no means evolved independently from the observed structural shift in factor income towards a higher capital income share over the last decades.
    Keywords: Factor shares, income inequality, EU-SILC, fixed effects.
    JEL: D31 D33 E6 E25
    Date: 2014–04
  73. By: Heshmati, Almas (Jönköping University, Sogang University); Kim, Jungsuk (Sogang University)
    Abstract: A growing concern on widening income gap between the rich and the poor, the policy mismatch in tackling the relative poverty and income inequality have invited increasing volumes of research focusing on the nexus between equity and efficient growth. Developed countries have experienced the critical challenges and trade-off between their generous welfares provisions and economic growth. Developing countries on the other hand, especially countries in Asia are in the process of shifting their policy direction toward more inclusive growth where most members are transforming themselves from a low-income country into a middle income country (ADB, 2014). This has stimulated the need to understand causes of inequality and poverty for better formulate policies of fostering inclusive growth. Economic growth itself is an important source of welfare distribution in most developing Asian countries. Asian governments used many forms of fiscal policy to mitigate income gaps and poverty because they will substantially undermine the economic growth if left unchecked (ADB, 2014). The objective of this study is to review the previous studies, particularly literatures related with inclusive growth of advanced economies, and to offer an efficient policy options for Asian countries. Major determinant factors of growing inequality, poverty and a range of fiscal policy tools are evaluated from both country and cross-country perspectives. The initiated policy measures are based on experiences of advanced welfare economies and the lessons derived from them will be a meaningful guideline for Asian countries to achieve their goals of inclusive growth.
    Keywords: income inequality, poverty reduction, equity, inclusive growth, fiscal policy, developing Asia, advanced welfare economies
    JEL: D63 E62 I32 I38 J68 O47 P46
    Date: 2014–04
  74. By: Charles Yuji Horioka (School of Economics, University of the Philippines Diliman)
    Abstract: This paper presents a brief exposition of three theoretical models of household behavior and shows that these models have very different implications for bequest motives and bequest division, surveys previous empirical studies on bequest motives and bequest division, presents unique survey data on bequest motives and bequest division in four countries, shows that there are large inter-country differences in the degree of selfishness and altruism, with the Japanese and Chinese being predominantly selfish and Indians and Americans being predominantly altruistic, and argues that differences in religiosity appear to be the main cause of inter-country differences in the degree of selfishness and altruism.
    Keywords: Bequests, inheritances, estates, inter vivos transfers, intergenerational transfers, bequest motives, bequest division, equal division, altruism, selfishness, selfish life cycle model, altruism model, dynasty model, primogeniture, selfish exchange model, culture, religiosity, religion
    JEL: D12 D91 E21 Z12
    Date: 2014–04
  75. By: Thomas Goda
    Abstract: This paper compares changes in relative and absolute wealth concentrations to establish if both processes have followed similar trajectories. The findings indicate that while the level of relative wealth concentration has increased recently, it is not extraordinarily high in an historical perspective. On the contrary, the level of absolute wealth concentration is most likely higher than that previously occurred because of the increase in the wealth holdings and population size of high net worth individuals. The sustainability of this on-going absolute concentration of wealth is questionable insofar as the resulting pressure of investor demand for safe securities poses a potential threat for financial stability.
    Keywords: wealth inequality; wealth concentration; extraordinary wealth; high net worth individuals
    JEL: D31 E21 N30 P46
    Date: 2014–01–21
  76. By: Agueci, Paul (Federal Reserve Bank of New York); Alkan, Leyla (Federal Reserve Bank of New York); Copeland, Adam (Federal Reserve Bank of New York); Davis, Isaac (Federal Reserve Bank of New York); Martin, Antoine (Federal Reserve Bank of New York); Pingitore, Kate (Federal Reserve Bank of New York); Prugar, Caroline (Federal Reserve Bank of New York); Rivas, Tyisha (Federal Reserve Bank of New York)
    Abstract: This primer provides a detailed description of the GCF Repo® Service, a financial service provided by the Fixed Income Clearing Corporation. The primer is composed of an introductory note and two separate papers. The first paper focuses on the clearance and settlement of GCF Repo. These financial plumbing details are especially important because the settlement of GCF Repo has been and will continue to be impacted by the current reforms to the tri-party repo settlement platform. In particular, the authors lay out the various ways that intraday credit was used pre-reform to facilitate the settlement of GCF Repo and why this use of credit is problematic. They also describe the reforms that are planned or in effect already, and consider how these reforms affect the use of intraday credit. The second paper examines how dealers use the GCF Repo Service. The authors first describe the various strategies that dealers employ when trading GCF Repo and then use empirical analysis to quantify the predominance of these strategies. Although they focus on different aspects of the GCF Repo Service, the two papers are complementary. This is because the strategies that dealers follow in trading GCF Repos are influenced by the clearance and settlement procedures in place. Furthermore, when gauging the risks of potential changes to the clearance and settlement of GCF Repo, it is important to take into account how GCF Repos are traded. Consequently, the papers are presented jointly so as to encourage readers to become familiar with both aspects of the GCF Repo Service.
    Keywords: GCF Repo; tri-party repo reforms; financial intermediation
    JEL: E42 E58 G23 G28
    Date: 2014–04–01
  77. By: Viktor Avrutin (DESP, University of Urbino and IST, University of Stuttgart, Germany); Iryna Sushko (Institute of Mathematics, National Academy of Sciences of Ukraine); Fabio Tramontana (Department of Economics and Management, University of Pavia)
    Abstract: We study the bifurcation structure of the parameter space of a 1D continuous piecewise linear bimodal map which describes dynamics of a business cycle model introduced by Day-Shafer. In particular, we obtain the analytical expression of the boundaries of several periodicity regions associated with attracting cycles of the map (principal cycles and related ?n structure) crossing which the map has robust chaotic behavior.
    Date: 2014–04
  78. By: Fantazzini, Dean
    Abstract: This double-issue contains 11 papers invited for the first special issue on “Computational methods for Russian economic and financial modelling”. It was an attempt to explore and bring together practical, state-of-the-art applications of computational techniques with a particular focus on Russia and the Commonwealth of Independent States. The response was beyond expectations and managed to cover a wide range of issues, so that a double-issue was considered: the first dealing with Finance and the second with Economics.
    Keywords: Forecasting; oil price; Google; Russian stock market; T-distribution with vector degrees of freedom; portfolio management; Fund manager; Russian banking sector; Credit Risk; DSGE; Russia; Immigrants; Intertemporal general equilibrium model; Intertemporal equilibrium; Inflation; Inflation expectations;
    JEL: C02 C11 C22 C32 C61 C68 E5 G1 G2 J0 J1
    Date: 2014
  79. By: Ana Bela Nunes
    Abstract: This research aims to critically assess the references to theories of crises and economic cycles that existed in the main textbooks on political economy of Portuguese universities during the first half of the 20th Century, and, as much as possible, categorise their authors into international trends of economic thought. The conclusions support the position that the various studies that have been made of the panorama of economic thought in Portugal up to the end of the first half of the past century, have essentially shown, namely, a delay in the reception of new economic theories and an absence of autonomous production during that period.
    Keywords: Portugal, crises, economic cycles, economic thought JEL classification : A23; B10; B20; E32
    Date: 2014
  80. By: Ludovit Odor (Council for Budget Responsibility); Judita Jurasekova Kucserova (National Bank of Slovakia, Research Department)
    Abstract: Estimates of potential output and the output gap are essential elements in the toolkit of policymakers. Latest changes in the European fiscal framework have strengthened significantly the role of structural budget balances, which rest on output gap calculations. With the adoption of the Fiscal Compact new procedures are entering into force. Independent fiscal institutions are going to play an important role in triggering correction mechanisms. In our view, the new framework will be credible only if meaningful estimates of output gaps and structural budget balances are available in real time. This is a huge problem especially for small countries with short history and many structural breaks, where the estimation of output gap is more an art than a science. Very volatile estimates of output gap with weak information content can quickly undermine the credibility of independent fiscal institutions. In this working paper we critically review the current estimation techniques in Slovakia and propose a new framework to calculate more robust output gap figures. In a companion paper we deal with possible improvements in the estimation of structural budget balances.
    Keywords: output gap, potential output
    JEL: E23 C22 C32
    Date: 2014–01
  81. By: Choy, Marylin (Banco Central de Reserva del Perú); Chang, Giancarlo (Banco Central de Reserva del Perú)
    Abstract: Muchos países han venido implementando medidas macroprudenciales ante la necesidad de complementar la regulación y supervisión tradicionales, las cuales, como quedó demostrado en la reciente crisis financiera internacional, han resultado insuficientes para hacer frente de manera efectiva a los desequilibrios en los mercados, las instituciones y la infraestructura financiera, que puedan originar riesgos sistémicos que pongan en peligro la estabilidad financiera. Este estudio realiza una síntesis y análisis de las medidas macroprudenciales aplicadas en el Perú, las que se enfocaron principalmente en evitar un excesivo crecimiento del crédito del sistema financiero, en reducir el impacto desestabilizador de los grandes flujos de capitales así como en acotar el riesgo cambiario que afrontan los agentes económicos en una economía dolarizada como la peruana.
    Keywords: requerimientos de encaje, política contracíclica, dolarización financiera, flujo de capital, macroprudencial
    JEL: E58 G21 G28
    Date: 2014–04

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