nep-mac New Economics Papers
on Macroeconomics
Issue of 2014‒08‒20
114 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. "Economic Policy in India: For Economic Stimulus, or for Austerity and Volatility?" By Sunanda Sen; Zico DasGupta
  2. Russia’s Banking Sector in 2013 By Mikhail Khromov
  3. Optimal Monetary Responses to Oil Discoveries By Samuel Wills
  4. EMU and the Cyclical Behavior of Fiscal Policy: A Suggested Interpretation By Oliver Landmann
  5. Financial Stability, Monetary Policy, Banking Supervision, and Central Banking By Martin F. Hellwig
  6. News about Aggregate Demand and the Business Cycle By Jang-Ting Guo; Anca-Ioana Sirbu; Mark Weder
  7. Non-Standard Monetary Policy Measures – Magic Wand or Tiger by the Tail? By Ansgar Belke
  8. Assessing the Link between Price and Financial Stability By Christophe Blot; Jerome Creel; Paul Hubert; Fabien Labondance; Francesco Saraceno
  9. Estimating the Expected Duration of the Zero Lower Bound in DSGE Models with Forward Guidance By Mariano Kulish; James Morley; Tim Robinson
  10. How has empirical monetary policy analysis changed after the financial crisis? By Francis, Neville; Jackson, Laura E.; Owyang, Michael T.
  11. Issues in the Design of Fiscal Policy Rules By Simon Wren-Lewis; Jonathan Portes
  12. Central bank macroeconomic forecasting during the global financial crisis: the European Central Bank and Federal Reserve Bank of New York experiences By Alessi, Luci; Ghysels, Eric; Onorante, Luca; Peach, Richard; Potter, Simon M.
  13. The Habit Persistence Hypothesis: Empirical Evidence from Jamaica By Bamikole, Oluwafemi
  14. Central bank independence and sovereign debt crisis. Any link? By Kari Heimonen; Aleksandra Maslowska-Jokinen
  15. The Power of International Reserves: the impossible trinity becomes possible By Layal Mansour
  16. Myths and Facts about Fiscal Discretion: A New Measure of Discretionary Expenditure By Fabrizio Coricelli; Riccardo Fiorito
  17. Indebtedness and macroeconomic imbalances in a monetary-union DSGE model By Florina-Cristina Badarau; Florence Huart; Ibrahima Sangaré
  18. Ghana: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for Ghana By International Monetary Fund. African Dept.
  19. Evaluating Treatment Effect and Causal Effect of Fiscal Rules on Procyclicality New assessments on old debate: rules vs. discretion By Pierre MANDON
  20. Political Booms, Financial Crises By Helios Herrera; Guillermo Ordoñez; Christoph Trebesch
  21. Macroeconomic and Financial Determinants of the Volatility of Corporate Bond Returns By Belén Nieto; Alfonso Novales Cinca; Gonzalo Rubio
  22. Peru: Staff Report for the 2013 Article IV Consultation By International Monetary Fund. Western Hemisphere Dept.
  23. Analysis of the main parameters of the federal budget of the RF in 2009-2013 and for the period 2014-2016 By Arseny Mamedov
  24. Sensitivity Analysis of Domestic Credit to Private Sector in Pakistan: A Variable Replacement Approach Applied with Con-integration By Omar Masood; Shazaib Butt; Syed Alamdar Ali; Frederic Teulon; Olivier Levyne
  25. Transparency and Deliberation within the FOMC: A Computational Linguistics Approach By Stephen Hansen; Michael McMahon; Andrea Prat
  26. Gauging the nonstationarity and asymmetries in the oil-stock price links: a multivariate analysis By Heni Boubaker; Khaled Guesmi; Duc Khuong Nguyen
  27. Liquidity Trap and Excessive Leverage By Anton Korinek; Alp Simsek
  28. Sri Lanka Quarterly Economic Update - July 2012 By Asian Development Bank (ADB); ; ;
  29. The Welfare Cost of Sovereign Default and Liquidity Injections By Guangling Liu
  30. CES Technology and Business Cycle Fluctuations By Cristiano Cantore; Paul Levine; Joseph Pearlman; Bo Yang
  31. Asymmetry and Lilien’s Sectoral Shifts Hypothesis: A Quantile Regression Approach By Theodore Panagiotidis; Gianluigi Pelloni
  32. Key trends in the development of the budgetary system of the Russian Federation in 2013 By Arseny Mamedov
  33. Monetary Policy and Financial Stability : A speech at the 30th Annual National Association for Business Economics Economic Policy Conference, Arlington, Virginia, February 25, 2014 By Tarullo, Daniel K.
  34. US Monetary Policy and Commodity Sector Prices By Shawkat Hammoudeh; Duc Khuong Nguyen; Ricardo M. Sousa
  35. Fiscal Multipliers in a Panel of CountriesAbstract: We estimate fiscal multipliers in a panel of countries using dynamic panel techniques and quarterly data for 55 countries. By using a GMM estimator and lagged dependent variables as instruments in a SVAR model, we attempt to correct for the biases present in this setting, to alleviate concerns about causality, and to decrease potential effects of third factors. Contrary to previous research, we find no strong evidence of monetary accommodation, a positive and larger fiscal multiplier in developing than in high-income countries, and zero in high-debt countries and in flexible exchange rates countries. By Juan Contreras; Holly Battelle
  36. Europe, USA and Japan Recent Macroeconomic Policy Errors and a Way Forward By Richard Wood
  37. Paraguay: 2013 Article IV Consultation-Staff Report; Press Release By International Monetary Fund. Western Hemisphere Dept.
  38. Rented vs. Owner-Occupied Housing and Monetary Policy By Margarta Rubio
  39. Forecasting the Term Structure of Interest Rates in Mexico Using an Affine Model By Rocío Elizondo    
  40. Preference Shocks, International Frictions, and International Business Cycles By Hideaki Hirata
  41. Confronting the Representative Consumer with Household-Size Heterogeneity By Christos Koulovatianos; Carsten Schröder; Ulrich Schmidt
  42. Financial stress regimes and the macroeconomy By Galvão, Ana B.; Owyang, Michael T.
  43. US Long Term Interest Rates and Capital Flows to Emerging Economies By Eduardo Olaberria
  44. Stability and Identification with Optimal Macroprudential Policy Rules By Jean-Bernard Chatelain; Kirsten Ralf
  45. Algeria: Staff Report for the 2013 Article IV Consultation By International Monetary Fund. Middle East and Central Asia Dept.
  46. Republic of Azerbaijan: 2014 Article IV Consultation-Staff Report; Press Release By International Monetary Fund. Middle East and Central Asia Dept.
  47. Republic of Lithuania: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for the Republic of Lithuania By International Monetary Fund. European Dept.
  48. Monetary Policy and the Economic Recovery : a speech at the Economic Club of New York, New York, New York , April 16, 2014 By Yellen, Janet L.
  49. Update on economic and fiscal conditions in Puerto Rico By Dudley, William
  50. 'Sudden Floods, Macroprudential Regulation and Stability in an Open Economy' By Pierre-Richard Agénor; K. Alper; L. Pereira da Silva
  51. Sudan: Staff Monitored Program-Staff Report; Press Release; and Statement by the Executive Director for Sudan By International Monetary Fund. Middle East and Central Asia Dept.
  52. Chile: 2014 Article IV Consultation - Staff Report; Press Release; and Statement by the Executive Director for Chile By International Monetary Fund. Western Hemisphere Dept.
  53. Botswana: 2014 Article IV Consultation-Staff Report; and Press Release By International Monetary Fund. African Dept.
  54. Can Intangible Capital Explain Cyclical Movements in the Labor Wedge? By Leena Rudanko
  55. Böhm-Bawerk und die Anfänge der monetären Zinstheorie By Peter Spahn
  56. Switzerland: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for Switzerland By International Monetary Fund. European Dept.
  57. Solomon Islands: Staff Report for the 2013 Article IV consultation and Second Review Under the Extended Credit Facility Arrangement and Request for Modification of Performance Criterion By International Monetary Fund. Asia and Pacific Dept
  58. Nepal: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for Nepal By International Monetary Fund. Asia and Pacific Dept
  59. Income inequality and monetary policy: a framework with answers to three questions By Bullard, James B.
  60. Policy-Induced Changes in Income Distribution and Profit-Led Growth in A Developing Economy By Mitra Thakur, Gogol
  61. Qatar: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for Qatar By International Monetary Fund. Middle East and Central Asia Dept.
  62. Macro fiscal policy in economic unions: states as agents By Carlino, Gerald A.; Inman, Robert P.
  63. Kyrgyz Republic: Sixth Review Under the Three-Year Arrangement Under the Extended Credit Facility; Staff Report; and Press Release By International Monetary Fund. Middle East and Central Asia Dept.
  64. Sri Lanka Quarterly Economic Update - April 2012 By Asian Development Bank (ADB); ; ;
  65. Economic Uncertainties and their Impact on Activity in Greece compared with Ireland and Portugal By Jan-David Schneider; Claude Giorno
  66. Advances in Financial Risk Management and Economic Policy Uncertainty: An Overview By Shawkat Hammoudeh; Michael McAleer
  67. The home affordability challenge By Eaqub, Shamubeel
  68. Panama: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for Panama By International Monetary Fund. Western Hemisphere Dept.
  69. Germany: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for Germany By International Monetary Fund. European Dept.
  70. Evaluating Treatment Effect and Causal Effect of Fiscal Rules on Procyclicality By Pierre Mandon
  71. Are Americans and Indians More Altruistic than the Japanese and Chinese? Evidence from a New International Survey of Bequest Plans By Charles Yuji Horioka
  72. Return and volatility transmission between oil prices and oil-exporting and oil-importing countries By Khaled Guesmi; Salma Fattoum
  73. Zambia: 2013 Article IV Consultation By International Monetary Fund. African Dept.
  74. Adjustment in Euro Area Deficit Countries: Progress, Challenges, and Policies By Thierry Tressel; Shengzu Wang; Joong Shik Kang; Jay C. Shambaugh; Jörg Decressin; Petya Koeva Brooks
  75. Increase in Home Bias and the Eurozone Sovereign Debt Crisis By Camille Cornand; Pauline Gandré; Céline Gimet
  76. Uganda: Second Review Under the Policy Support Instrument and Request for Modification of Assessment Criteria-Staff Report; Press Release; and Statement by the Executive Director for Uganda By International Monetary Fund. African Dept.
  77. Hedging inflation risk in a developing economy: The case of Brazil By Marie Briere; Ombretta Signori
  78. The Macroeconomic Effects of Government Transfers: a Social Accounting Matrix Approach By Marcelo Neri; Fabio Monteiro Vaz; Pedro Herculano Guimarães Ferreira de Souza
  79. Luxembourg: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for Luxembourg By International Monetary Fund. European Dept.
  80. Kingdom of Swaziland: 2014 Article IV Consultation-Staff Report; and Press Release By International Monetary Fund. African Dept.
  81. Barbados: Staff Report for 2013 Article IV Consultation By International Monetary Fund. Western Hemisphere Dept.
  82. Bangladesh: Fourth Review Under the Three-Year Arrangement Under the Extended Credit Facility and Request for Modification of Performance Criteria-Staff Report; Debt Sustainability Analysis Update; and Press Release By International Monetary Fund. Asia and Pacific Dept
  83. The People’s Republic of China’s Financial Markets : Are They Deep and Liquid Enough for Renminbi Internationalization? By Prince Christian Cruz; Yuning Gao; Lei Lei Song
  84. Republic of Palau: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for the Republic of Palau By International Monetary Fund. Asia and Pacific Dept
  85. Jamaica: 2014 Article IV Consultation and Fourth Review Under the Extended Fund Facility and Request for Modification of Performance Criteria-Staff Report; Press Release; and Statement by the Executive Director for Jamaica By International Monetary Fund. Western Hemisphere Dept.
  86. Pacific Economic Monitor March 2013 By Asian Development Bank (ADB); ; ;
  87. Spain: 2014 Article IV Consultation-Staff Report; Staff Supplement; Press Release; and Statement by the Executive Director for Spain By International Monetary Fund. European Dept.
  88. Republic of the Marshall Islands: Staff Report for the 2013 Article IV Consultation By International Monetary Fund. Asia and Pacific Dept
  89. Chad: 2013 Article IV Consultation and Assessment of Performance Under the Staff-Monitored Program-Staff Report; Press Release; and Statement by the Executive Director for Chad By International Monetary Fund. African Dept.
  90. Demographic versus Cyclical Influences on US Labor Force Participation By William R. Cline; Jared Nolan
  91. Changing Times, Changing Values: A Historical Analysis of Sectors within the US Stock Market 1872-2013 By Oliver D. Bunn; Robert J. Shiller
  92. Governance Reforms and Macroeconomic Policies in Europe By Marcel Fratzscher
  93. Republic of Poland: 2014 Article IV Consultation - Staff Report; Press Release; and Statement by the Executive Director for the Republic of Poland By International Monetary Fund. European Dept.
  94. Mineral Revenues and Countercyclical Macroeconomic Policy in Kazakhstan By Kyle, Steven
  95. Russian Industrial Enterprises in 2013 By Sergey Tsukhlo
  96. Bulgaria: Staff Report for the 2013 Article IV Consultation By International Monetary Fund. European Dept.
  97. Namibia: 2013 Article IV Consultation-Staff Report; Press Release By International Monetary Fund. African Dept.
  98. A Cross-Country Comparison of the Impact of Labor Income Tax on Female Labor Supply By Marina Mendes
  99. Pakistan: Second Review Under the Extended Arrangement and Request for Waivers of Nonobservance of Performance Criteria; Staff Report; Press Release; and Statement by the Executive Director for Pakistan By International Monetary Fund. Middle East and Central Asia Dept.
  100. The digital traces of bubbles: feedback cycles between socio-economic signals in the Bitcoin economy By David Garcia; Claudio Juan Tessone; Pavlin Mavrodiev; Nicolas Perony
  101. Grenada: 2014 Article IV Consultation and Request for An Extended Credit Facility Arrangement-Staff Report; and Press Release By International Monetary Fund. Western Hemisphere Dept.
  102. Republic of San Marino: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for the Republic of San Marino By International Monetary Fund. European Dept.
  103. Togo: Staff Report for 2013 Article IV Consultation By International Monetary Fund. African Dept.
  104. Corporate income tax, legal form of organization, and employment By Chen, Daphne; Qi, Shi; Schlagenhauf, Don E.
  105. Economic Implications of the IEA Efficient World Scenario By Jean Chateau; Bertrand Magné; Laura Cozzi
  106. Does the Link between Unemployment and Crime Depend on the Crime Level? A Quantile Regression Approach By Entorf, Horst; Sieger, Philip
  107. Re-examining Turkey's trade deficit with structural breaks: Evidence from 1989-2011 By Erten, Irem; Okay, Nesrin
  108. How Global is Globalization? By Jac C. Heckelman; Andrew T. Young
  109. Republic of Poland: Selected Issues By International Monetary Fund. European Dept.
  110. The Political Intergenerational Welfare State By Bishnu, Monisankar; Wang, Min
  111. Les effets macroéconomiques des transferts gouvernementaux: matrice de comptabilité sociale By Marcelo Neri; Fabio Monteiro Vaz; Pedro Herculano Guimarães Ferreira de Souza
  112. St. Kitts and Nevis: 2014 Article IV Consultation and the Seventh and Eighth Reviews Under the Stand-by Arrangement and Request for Waivers of Applicability and Nonobservance of Performance Criterion-Staff Report; Press Releases By International Monetary Fund. Western Hemisphere Dept.
  113. Jordan: 2014 Article IV Consultation, Third and Fourth Reviews Under the Stand-By Arrangement, Request for Waivers of Nonobservance of Performance Criterion and Applicability of Performance Criterion - Staff Report; Press Releases; and Statement by the Executive Director for Jordan By International Monetary Fund. Middle East and Central Asia Dept.
  114. Malawi: Third and Fourth Reviews Under the Extended Credit Facility Arrangement, Request for Waivers for Non-observance of Performance Criteria, Extension of the Arrangement, Rephasing of Disbursements, and Modification of Performance Criteria-Staff Report; Staff Supplement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Malawi By International Monetary Fund. African Dept.

  1. By: Sunanda Sen; Zico DasGupta
    Abstract: The implementation of economic reforms under new economic policies in India was associated with a paradigmatic shift in monetary and fiscal policy. While monetary policies were solely aimed at "price stability" in the neoliberal regime, fiscal policies were characterized by the objective of maintaining "sound finance" and "austerity." Such monetarist principles and measures have also loomed over the global recession. This paper highlights the theoretical fallacies of monetarism and analyzes the consequences of such policy measures in India, particularly during the period of the global recession. Not only did such policies pose constraints on the recovery of output and employment, with adverse impacts on income distribution; but they also failed to achieve their stated goal in terms of price stability. By citing examples from southern Europe and India, this paper concludes that such monetarist policy measures have been responsible for stagnation, with a rise in price volatility and macroeconomic instability in the midst of the global recession.
    Keywords: Austerity; Development Expenditures; Exchange Rate Volatility; Fiscal Deficit; Fiscal Policy; FRBMA; Inflation; Interest Payments; Interest Rates; Monetarism; Monetary Policy; Sound Finance
    JEL: E12 E31 E44 E50 E51 E52 E58 E62 E64
    Date: 2014–08
  2. By: Mikhail Khromov (Gaidar Institute for Economic Policy)
    Abstract: This paper deals with Russia's banking sector in 2013. The author focuses on relationship between banks and corporate customers, foreign transactions in the banking sector, banking regulation
    Keywords: Russian economy; banking sector; foreign transactions; banking regulation;
    JEL: E41 E51 E58 E21 E24
    Date: 2014
  3. By: Samuel Wills (Oxford Centre for the Analysis of Resource Rich Economies (OxCarre), Department of Economics, University of Oxford; Centre for Macroeconomics (CFM); Centre for Applied Macroeconomic Analysis, Australian National University.; Centre for Macroeconomics (CFM))
    Abstract: This paper studies how monetary policy should respond to news about an oil discovery, using a workhorse New Keynesian model. Good news about future production can create a recession today under exchange rate pegs and a simple Taylor rule, as seen in practice. This is explained by forward-looking inflation. Recession is avoided by a Taylor rule that accommodates changes in the natural level of output, which closely approximates optimal policy. Central banks have an incentive to exploit oil revenues by appreciating the terms of trade, creating “Dutch disease” and a deflationary bias which is overcome by committing to future policy.
    Keywords: Natural resources, oil, optimal monetary policy, small open economy, news shock
    JEL: E52 E62 F41 O13 Q30 Q33
    Date: 2012–10
  4. By: Oliver Landmann (Institut für allgemeine Wirtschaftsforschung, Universität Freiburg)
    Abstract: Fiscal policy is widely criticized for its failure to act as a stabilizing countercyclical force in the European Monetary Union. Two periods should be distinguished: Prior to the Financial Crisis of 2008, when monetary policy had traction to pursue stability for the aggregate eurozone, fiscal policies failed to contain macroeconomic divergence across the currency area. After the crisis, when interest rates had hit the zero lower bound, widespread fiscal austerity ex‐acerbated the persistent recession. The paper proposes a minimal model of decentralized fiscal policymaking in a monetary union. The model is used to interpret policy behavior in both periods. The analysis points to a pro‐cyclical bias and suggests a need for coordination.
    Keywords: Fiscal Policy, Monetary Union, Multiplier, International Policy Coordination, Monetary‐Fiscal Policy Interaction
    JEL: E5 E6 F41 F42
    Date: 2014–08
  5. By: Martin F. Hellwig (Max Planck Institute for Research on Collective Goods)
    Abstract: The paper gives an overview over issues concerning the role of financial stability in monetary policy and the relation between banking supervision and central banking. Following a brief account of developments in the European Monetary Union since its creation, the systematic treatment contains four parts, first a systematic discussion of how a central bank’s operations differ from those of an administrative authority; second, a discussion of how the shift from convertible currencies to paper currencies has affected our understanding of monetary policy and the role of financial stability; third, a discussion of moral hazard in banking and banking supervision as a threat to monetary dominance and to the effective independence of central bank decision making in an environment in which financial stability is an essential precondition for reaching the central bank’s macroeconomic objective, e.g. price stability; finally, a discussion of the challenges for institution design and policy, with special attention to developments in the euro area.
    Keywords: Banking Supervision, financial stability, monetary policy, central banking, bank resolution, independence of central banks and supervisory authorities
    JEL: G18 G28 E58 E44 E42 E51 E52 G33 H63
    Date: 2014–07
  6. By: Jang-Ting Guo (University of California, Riverside); Anca-Ioana Sirbu (Department of Economics, West Virginia University); Mark Weder (University of Adelaide)
    Abstract: We show that an otherwise standard one-sector real business cycle model with variable capital utilization and mild increasing returns-to-scale is able to generate qualitatively as well as quantitatively realistic aggregate fluctuations driven by news shocks to future consumption demand. In sharp contrast to many studies in the existing expectations-driven business cycle literature, our results do not rely on non-separable preferences or investment adjustment costs.
    Keywords: News Shocks, Aggregate Demand, Business Cycles
    JEL: E32
    Date: 2012–09
  7. By: Ansgar Belke
    Abstract: This paper briefly assesses the effectiveness of the different non-standard monetary policy tools in the Euro Area. Its main focus is on the Outright Monetary Transactions (OMT) Programme which is praised by some as the ECB’s “magic wand”. Moreover, it discloses further possible unintended consequences of these measures in the current context of weak economic activity and subdued growth going forward. For this purpose, it investigates specific risks for price stability and asset price developments in the first main part of the paper. It is not a too remote issue that the Fed does have a “tiger by the tail”, as Hayek (2009) expressed it, i.e. that the bank will finally have to accept either a recession or inflation and that there is no choice in between. Furthermore, it checks on whether the OMT programme really does not impose costs onto the taxpayer. Finally, it comes up with some policy implications from differences in money and credit growth in different individual countries of the Euro Area. The second main part of the paper assesses which other tools the ECB could use in order to stimulate the economy in the Euro Area. It does so by delivering details on whether and how the effectiveness of the ECB’s policies can be improved through more transparency and “forward guidance”.
    Keywords: central bank transparency, euro area, forward guidance, non-standard monetary policies, Outright Monetary Transactions, Quantitative Easing, segmentation of credit markets
    JEL: E52 E58
    Date: 2014–04
  8. By: Christophe Blot (OFCE - Sciences Po); Jerome Creel (OFCE - Sciences Po, and ESCP Europe); Paul Hubert (OFCE - Sciences Po); Fabien Labondance (OFCE - Sciences Po); Francesco Saraceno (OFCE - Sciences Po, and LUISS)
    Abstract: This paper aims at investigating first the (possibly time-varying) empirical relationship between the level and conditional variances of price and financial stability, and second, the effects of macro and policy variables on this relationship in the United States and the Eurozone. Three empirical methods are used to examine the relevance of A.J Schwartz's "conventional wisdom" that price stability would yield financial stability. Using simple correlations, VAR and Dynamic Conditional Correlations, we reject the hypothesis that price stability is positively correlated to financial stability. We then discuss about the empirical appropriateness of the "leaning against the wind" monetary policy approach.
    Keywords: Price Stability, Financial stability, DCC-GARCH, VAR
    JEL: C32 E31 E44 E52
    Date: 2013–02–01
  9. By: Mariano Kulish (School of Economics, Australian School of Business, The University of New South Wales); James Morley (School of Economics, Australian School of Business, The University of New South Wales); Tim Robinson (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: Motivated by the increasing use of forward guidance, we consider DSGE models in which the central bank holds the policy rate fixed for an extended period of time. Private agents’ beliefs about how long the fixed-rate regime will last influences current output and inflation. We estimate the structural for US data and infer the expected duration of the zero lower bound regime. Our results suggest that the average expected duration is around 3 quarters and has varied significantly since the onset of the zero lower bound regime, with changes that can be related to the Federal Reserve’s forward guidance.
    Keywords: Zero lower bound, forward guidance
    JEL: E52 E58
    Date: 2014–07
  10. By: Francis, Neville (University of North Carolina, Chapel Hill); Jackson, Laura E. (University of North Carolina, Chapel Hill); Owyang, Michael T. (Federal Reserve Bank of St. Louis)
    Abstract: In the wake of the Great Recession, the Federal Reserve lowered the federal funds rate target essentially to zero and resorted to unconventional monetary policy. With the nominal FFR constrained by the zero lower bound (ZLB) for an extended period, empirical monetary models cannot be estimated as usual. In this paper, we consider whether the standard empirical model of monetary policy can be preserved without breaks. We consider whether alternative policy instruments (e.g., the size of the balance sheet) can be considered substitutes for the FFR over the ZLB period. Furthermore, we construct a shadow rate via the method proposed in Krippner [2012] to represent an alternative measure of the stance of monetary policy and compare this with the shadow rate of Wu and Xia [2014]. We ask whether the shadow rate is a sufficient representation of the policy instrument or if the financial crisis requires other modifications. We find that, if using a dataset that spans the pre-ZLB period throughout the ZLB environment, the shadow rate acts as a fairly good proxy for monetary policy by producing impulse responses of macro indicators similar to what we’d expect based on the post-WWII, non-ZLB benchmark. However, the linear model exhibits a significant structural break at the onset of the ZLB and the shadow rate may still be insufficient for examining the ZLB period in isolation.
    Keywords: zero lower bound; affine term structure
    JEL: C32 E44
    Date: 2014–08–01
  11. By: Simon Wren-Lewis; Jonathan Portes
    Abstract: Theory suggests that government should as far as possible smooth taxes and its recurrent consumption spending, which means that government debts should act as a shock absorber, and any planned adjustments in debt should be gradual.� This suggests that operational targets for governments (e.g. for 5 years ahead should involve deficits rather than debt, because such rules will be more robust to shocks.� Beyond that, fiscal rules need to reflect the constraints on� monetary policy, and the extent to which governments are subject to deficit bias.� Fiscal rules for countries in a monetary union or fixed exchange rate regime need to include a strong countercyclical element.� Fiscal rule should also contain a 'knock out' if interest rates hit the zero lower bound: in that case the fiscal and monetary authorities should cooperate to formulate a fiscal expansion package that allows interest rates to rise above this bound.� In more normal times, the design of fiscal policy rules is likely to depend on the extent to which governments are subject to deficit bias, and the effectiveness of any national fiscal council.� For example, governments that had not shown a history of deficit bias could aim to target deficits five years ahead (rolling targets), and these would not require cyclical adjustment.� In contrast, governments that were more prone to bias could target a cyclically adjusted deficit at the end of their expected period of office.� In both cases fiscal councils would have an important role to play, in ensuring plans were implemented in the first case and allowing for departures from target when exernal shocks occurrred in the second.
    Keywords: fiscal policy, fiscal rules, fiscal councils
    JEL: E62
    Date: 2014–05–06
  12. By: Alessi, Luci (Federal Reserve Bank of New York); Ghysels, Eric (Federal Reserve Bank of New York); Onorante, Luca (Federal Reserve Bank of New York); Peach, Richard (Federal Reserve Bank of New York); Potter, Simon M. (Federal Reserve Bank of New York)
    Abstract: This paper documents macroeconomic forecasting during the global financial crisis by two key central banks: the European Central Bank and the Federal Reserve Bank of New York. The paper is the result of a collaborative effort between the two institutions, allowing us to study the time-stamped forecasts as they were made throughout the crisis. The analysis does not focus exclusively on point forecast performance. It also examines density forecasts, as well as methodological contributions, including how financial market data could have been incorporated into the forecasting process.
    Keywords: macro forecasting; financial crisis
    JEL: B41 E32 G01 N20
    Date: 2014–07–01
  13. By: Bamikole, Oluwafemi
    Abstract: This paper seeks to empirically verify if the habit persistence phenomenon holds in the Jamaican economy. The results of the GMM time series estimation show the existence of habit formation by Jamaican consumers. Past consumption habits affect the growth rate of consumption, consequently in order to build the confidence of consumers in the Jamaican economy, the inflation rate, foreign and domestic interest rates have to be moderately adjusted to encourage good consumption habits.
    Keywords: Habit persistence, GMM, consumption growth, Jamaica
    JEL: E2 E21
    Date: 2013–05–10
  14. By: Kari Heimonen (School of Business and Economics, University of Jyvaskyla); Aleksandra Maslowska-Jokinen (Department of Economics, University of Turku)
    Abstract: In this paper we ask if central bank independence could lead to a bad fiscal position of some countries. Introducing autonomous central bank without changing other policy habits could expose the country to greater temptation to borrow money. We think that introducing high degree of CBI creates illusion that these countries are of similar credibility as a borrower. It opens new possibilities to borrow money and to increase consumption, thus leading to greater indebtedness. We analyse if the size of improvement in CBI was connected with country's increase in debt. We hypothesise that some countries could misuse the benefits coming from CBI, would not introduce discipline in other parts of economic policy and not only continue spending but also increase their volumes thanks to wider options for borrowing. Panel data estimations results using EMU-14 confirm our hypotheses. Greater increase in CBI was related to greater increase in debt, both public and private. These results are confirmed with alternative models and varying definitions of central bank independence.
    Keywords: central bank independence, sovereign debt, private debt, sound money, panel data
    JEL: C33 E02 E58 E61
    Date: 2014–07
  15. By: Layal Mansour (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)
    Abstract: This aim of the present paper is to measure first, the degree of trilemma indexes: exchange rate stability, monetary independence capital account openness while taking into account the increase of hording IR ratio over GDP, over External Debt and over Short Term External Debt. The evolution of the trilemma indexes shows that countries applying de facto flexible Exchange Rate Regime (ERR) take advantage of the IR and become able to adopt a managed ERR that consist of achieving the three trilemma indexes simultaneously without renouncing to anyone of them. We found that different IR ratio could have different interpretations and different directions of monetary policies, where external debt should be taken into consideration in such study while using the IR. As for country that is applying a de facto fixed exchange rate regime, the IR (different ratio) do not play any role in changing the patter of the Mundell trilemma and do not intervene in monetary authority policies. This paper treats as well the normative aspects of the trilemma, relating the policy choices to macroeconomic outcomes such as the volatility of output growth. We found different results from country to another, while taking different ratios of measuring IR, concluding that the impact of IR on the output volatility could change due to the level of external debt and adopted exchange rate regime.
    Keywords: Monetary policy, International Reserve, External Debts, Impossible Trinity, Managed Exchange Rate, Quadrilemma, Output Volatilily
    JEL: E52 E58 F31 F34
    Date: 2014
  16. By: Fabrizio Coricelli (Paris School of Economics); Riccardo Fiorito (Università degli Studi di Siena)
    Abstract: In this paper we suggest a new measure of discretionary government spending for OECD countries over the period 1980-2011. To identify the components of discretionary expenditure, we use the volatility and persistence properties of the expenditure series. Discretionary policy cannot be inertial and should be free from prior obligations. Commonly used measures of discretionary fiscal policy do not satisfy these two criteria. We find that discretionary expenditure accounts on average for about 30 percent of total primary expenditure, suggesting that most government spending is driven by inertial and automatic components. These features help explain why government expenditure is generally not counter-cyclical even in advanced economies. Furthermore, the small share of discretionary expenditure over total expenditure significantly reduces the room of manoeuvre for counter-cyclical fiscal policy during recessions.
    JEL: E32 E62 H5
    Date: 2013
  17. By: Florina-Cristina Badarau (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - Université Montesquieu - Bordeaux IV : EA2954); Florence Huart (EQUIPPE - ECONOMIE QUANTITATIVE, INTEGRATION, POLITIQUES PUBLIQUES ET ECONOMETRIE - Université Lille I - Sciences et technologies - Université Lille II - Droit et santé - Université Lille III - Sciences humaines et sociales - PRES Université Lille Nord de France); Ibrahima Sangaré (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - Université Montesquieu - Bordeaux IV : EA2954)
    Abstract: We build a two-country open-economy monetary union DSGE model in order to explain some macroeconomic imbalances in the euro area. We fo cus on the role of cyclic al behaviour of public spending and sovereign risk premium. Pro-cyclical primary public expenditures in one country do not lead to higher interest rates on domestic public bonds in the short term as long as output growth helps financing public debt. Spillover effects on th e other country can be positive on output as long as a real effective depreciation of the common currency leads to higher exports to the rest of the world.
    Keywords: macroeconomic divergences ; euro area ; DSGE ; risk premium ; pro-cyclical fiscal policy ; spillover effects
    Date: 2013
  18. By: International Monetary Fund. African Dept.
    Abstract: KEY ISSUES Short-term vulnerabilities have risen significantly amid high fiscal and current account deficits. The international reserve position has weakened alongside mounting public debt. High interest rates and a depreciating currency have begun to weaken private sector activity, and spreads on Ghana’s Eurobonds have risen above those of regional peers. Economic growth is slowing from previously high levels. Following estimated GDP growth of 5½ percent in 2013, staff projects a further deceleration to 4¾ percent in 2014. Driven by the depreciation and administered price increases, inflation reached 13½ percent at end-2013 and 14½ percent in March. Monetary policy was tightened, as the fiscal consolidation target was missed. Despite significant policy efforts, the 2013 fiscal (cash) deficit reached an estimated 10.9 percent of GDP, versus a target of 9 percent. In the absence of additional measures, the 2014 deficit is projected at 10¼ percent of GDP, with consolidation made more difficult by slower growth. To address rising inflation, the monetary policy rate was raised to 18 percent and reserve requirements were tightened. Current vulnerabilities put Ghana’s transformation agenda at risk. The government’s objectives of economic diversification, shared growth and job creation, and macroeconomic stability rely on the reallocation of resources from current to capital spending. Yet, high twin deficits and large interest payments on rising public debt are crowding out priority expenditure and private sector activity. Macroeconomic stability will need to be restored to preserve a positive medium- term outlook. The financial sector is adequately capitalized and liquid, but increasing exposures will need to be monitored closely. Stress tests conducted by the Bank of Ghana suggest that buffers are adequate in most banks and the system in aggregate. Nevertheless, the weaker macroeconomic outlook and currency depreciation expose the financial sector to credit and foreign exchange risks, warranting a strengthening of crisis prevention and management capabilities.
    Keywords: Article IV consultation reports;Budget deficits;Fiscal policy;Fiscal consolidation;Monetary policy;Currency swaps;Stress testing;Banks;Economic indicators;Debt sustainability;Staff Reports;Press releases;Ghana;
    Date: 2014–05–30
  19. By: Pierre MANDON
    Abstract: This article is the first to renews the old debate of "rules versus. discretion" by introducing propensity score matching methods in macro analysis, such as Tapsoba (2012), and by using instrumental methods, to consider the national stability culture. By taking into account, at the same time, the self-selection problem and the omitted unobserved factor bias, in a sample of 126 countries of all level of development over the period 1985-2010, we provide strong evidence about the positive causal effect of fiscal rules adoption on the reduction of fiscal policy procyclicality. We find an asymmetrical impact, since fiscal rules adoption contributed to upgrade budget balance in periods of expansion, while it doesn't increase budget deficit in periods of recession. Furthermore, we show that the budget balance rules and the debt rules are more effective to dampen procyclicality than expenditure rules. We also provide evidence that the coverage of fiscal rules is not a critical issue to strength against procyclicality. Empirical results also displays the positive impact of the adoption of flexible rules, but also the adoption of fiscal rules combined to improve policy responsiveness. Finally, we find that FRs are effective when taking into account the national stability culture. This positive impact of fiscal rules adoption on fiscal policy cyclicality comes from an improvement of fiscal policy disciplinary, by ensuring a sustainable path of deficit and debt, or by smoothing business cycles.
    JEL: E6 E32 H11
  20. By: Helios Herrera (Department of Applied Economics, HEC); Guillermo Ordoñez (Department of Economics, University of Pennsylvania and NBER); Christoph Trebesch (Department of Economics, University of Munich and CESifo)
    Abstract: We show that political booms, measured by the rise in governments’ popularity, predict financial crises above and beyond other better-known early warning indicators, such as credit booms. This predictive power, however, only holds in emerging economies. We show that governments in emerging economies are more concerned about their reputation and tend to ride the short-term popularity benefits of weak credit booms rather than implementing politically costly corrective policies that would help prevent potential crises. We provide evidence of the relevance of this reputation mechanism.
    Keywords: Credit Booms, Reputation, Financial Crises, Political Popularity, Emerging Markets
    JEL: D81 D82 E44 E51 E58 G01 N10 N20
    Date: 2014–07–23
  21. By: Belén Nieto (Departamento de Economía Financiera y Contabilizad, University of Alicante, San Vicente del Raspeig, 03690 Alicante, Spain); Alfonso Novales Cinca (Departamento de Economía Cuantitativa (Department of Quantitative Economics), Facultad de Ciencias Económicas y Empresariales (Faculty of Economics and Business), Universidad Complutense de Madrid); Gonzalo Rubio (University CEU Cardenal Herrera, Elche, 03204 Alicante, Spain)
    Abstract: This paper analyzes the relationship between the volatility of corporate bond returns and standard financial and macroeconomic indicators reflecting the state of the economy. We employ the GARCHMIDAS multiplicative two-component model of volatility that distinguishes the short-term dynamics from the long-run component of volatility. Both the in-sample and out-of-sample analysis show that recognizing the existence of a stochastic low-frequency component captured by macroeconomic and financial indicators may improve the fit of the model to actual bond return data, relative to the constant long-run component embedded in a typical GARCH model.
    Keywords: Corporate bonds, Volatility, Low-frequency component, High-frequency component, Macroeconomic indicators, Financial indicators.
    JEL: G12 C22 E44
    Date: 2014
  22. By: International Monetary Fund. Western Hemisphere Dept.
    Abstract: This 2013 Article IV Consultation highlights that Peru’s economy continues to be a leader in high growth and low inflation in the region, which has been achieved through a prudent macroeconomic policy implementation, a far-reaching structural reform agenda and taking advantage of the benign external environment. After reaching 4.7 percent in 2011, end-period inflation fell to 2.6 percent in 2012, within the 1–3 percent target range. Stimulative monetary and fiscal policies played an instrumental role in supporting the recovery. The outlook remains favorable in the near term despite challenging external conditions.
    Keywords: Article IV consultation reports;Economic growth;Spillovers;Fiscal policy;Monetary policy;Banks;Economic indicators;Staff Reports;Press releases;Peru;Housing;Housing prices;capital inflows, capital market, commodity prices, current account deficit, capital markets, capital outflows, capital flows, debt securities, bond yields, current account balance, private capital inflows, real effective exchange rate, bond issuance, international capital markets, capital adequacy, credit rating, capital accumulation, stock market, capital spending, capital adequacy ratio, credit expansion, credit rating agencies, domestic capital, capital market reforms, capital market developments, short-term capital, capital flow reversal, capital market regulation, capital expenditures, capital requirement, debt swaps, debt stock, capital asset ratio, capital flow reversals, domestic credit, capital stock, risk aversion, indexed securities, real appreciation, net capital, securities market, local capital markets, new securities, equity capital
    Date: 2014–01–29
  23. By: Arseny Mamedov (Gaidar Institute for Economic Policy)
    Abstract: This paper deals with Russia's federal budget
    Keywords: Russian economy; state budget
    JEL: E62 H20 H50 H61 H70
    Date: 2014
  24. By: Omar Masood; Shazaib Butt; Syed Alamdar Ali; Frederic Teulon; Olivier Levyne
    Abstract: This study has been conducted to empirically examine the determinants of domestic credit to private sector (DCPS) in Pakistan over the period from 1980 to 2009. The relationship is determined using Johansen and Juselius’s framework and NLS and ARM based error correction model to complete the long run and short run relationship analysis. We have conducted variable replacement based sensitivity analysis by examining two sets of exogenous variables. It showed that DCPS has no relationship with economic growth in Pakistan so far. Consequently, in Pakistan the development of financial sector is not making any contribution to the economic development. Further government borrowings for non development expenditures is making the lending actions of the banks oligopolistic, which is hindering the conventional flow of financing to private sector for economic development. Therefore, the monetary authority in Pakistan should adopt steeper target oriented policies for financial sector to extend credit for economic development.
    Keywords: Pakistani financial sector; DCPS; Unit root; Cointegration; Sensitivity analysis
    JEL: E44 E51
    Date: 2014–07–24
  25. By: Stephen Hansen; Michael McMahon; Andrea Prat
    Abstract: How does transparency, a key feature of central bank design, affect the deliberation of monetary policymakers? We exploit a natural experiment in the Federal Open Market Committee in 1993 together with computational linguistic models (particularly Latent Dirichlet Allocation) to measure the effect of increased transparency on debate. Commentators have hypothesized both a beneficial discipline effect and a detrimental conformity effect. A difference-in-differences approach inspired by the career concerns literature uncovers evidence for both effects. However, the net effect of increased transparency appears to be a more informative deliberation process.
    Keywords: Monetary policy, deliberation, FOMC, transparency, career concerns
    JEL: E52 E58 D78
    Date: 2014–06
  26. By: Heni Boubaker; Khaled Guesmi; Duc Khuong Nguyen
    Abstract: This paper shows the usefulness and relevance of the multivariate fractional cointegration in exploring the dynamic
    Keywords: oil prices, stock markets, multivariate fractional cointegration, c-DCC-FIAPARCH.
    JEL: C10 E44 G15
    Date: 2014–07–24
  27. By: Anton Korinek; Alp Simsek
    Abstract: We investigate the role of macroprudential policies in mitigating liquidity traps driven by deleveraging, using a simple Keynesian model. When constrained agents engage in deleveraging, the interest rate needs to fall to induce unconstrained agents to pick up the decline in aggregate demand. However, if the fall in the interest rate is limited by the zero lower bound, aggregate demand is insufficient and the economy enters a liquidity trap. In such an environment, agents' exante leverage and insurance decisions are associated with aggregate demand externalities. The competitive equilibrium allocation is constrained inefficient. Welfare can be improved by ex-ante macroprudential policies such as debt limits and mandatory insurance requirements. The size of the required intervention depends on the differences in marginal propensity to consume between borrowers and lenders during the deleveraging episode. In our model, contractionary monetary policy is inferior to macroprudential policy in addressing excessive leverage, and it can even have the unintended consequence of increasing leverage.
    Keywords: Macroprudential Policy;Monetary policy;Liquidity;Demand;Borrowing;Debt markets;Economic recession;Equilibrium. Econometric models;Leverage, liquidity trap, zero lower bound, aggregate demand externality, efficiency, macroprudential policy, insurance
    Date: 2014–07–21
  28. By: Asian Development Bank (ADB); (South Asia Department, ADB); ;
    Abstract: The Quarterly Economic Update (QEU) provides a comprehensive and updated analysis of the recent economic performance of Sri Lanka. The QEU for July 2012 highlights the expected economic slowdown in 2012. With inflation trending up, monetary tightening is expected to continue for a longer period. The QEU also looks at the challenges of managing fiscal policy in 2012.
    Keywords: adb, asian development bank, asdb, asia, pacific, poverty asia, sri lanka economy, indicators, economic growth, economic performance, inflation, gross domestic product, finance, growth rates, economic data, sri lanka gdp
    Date: 2012–07
  29. By: Guangling Liu
    Abstract: This paper develops a dynamic general equilibrium model with endogenous default on entrepreneur loans and funds borrowed from the central bank (liquidity injections) and investigates the welfare cost of sovereign default. The results show that sovereign default affects production through households' investment decisions and the bank's asset portfolio adjustment. The effect of sovereign default on entrepreneurs tends to be in favor of production. Sovereign default reduces the variability of the output gap and hence the welfare loss. Liquidity injections reduce the variability of the output gap and improve price stability during the period of sovereign debt crisis, resulting in an increase in households' welfare.
    Keywords: sovereign default, welfare cost, debt crisis, rollover risk, liquidity
    JEL: E50 E58 E63 G18
    Date: 2014
  30. By: Cristiano Cantore (University of Surrey); Paul Levine (University of Surrey); Joseph Pearlman (City University London); Bo Yang (University of Surrey and Xi’an Jiaotong-Liverpool University)
    Abstract: This paper contributes to an emerging literature that brings the constant elasticity of substitution (CES) specification of the production function into the analysis of business cycle fluctuations. Using US data, we estimate by Bayesian methods a medium-sized DSGE model with a CES rather than Cobb-Douglas (CD) technology. The main empirical result is to confirm decisively the superiority of CES rather than CD production functions in terms of model fit. We estimate a elasticity of substitution of elasticity well below unity at 0.15-0.18 and in a marginal likelihood race assuming equal prior model probabilities, CES beats the CD production decisively. The marginal likelihood improvement is matched by the ability of the CES model to fit the data in terms of second moments and a comparison with a DSGE-VAR further confirms the ability of the CES model to reduce model misspecification. We find that the CES model performance is further improved when the estimation is carried out under the imperfect information assumption. The principle reason for our result is that the CES specification captures movements of factor shares at the business cycle frequency. Hence the main message for DSGE models is that we should dismiss once and for all the use of CD for business cycle analysis.
    JEL: C11 C52 D24 E32
    Date: 2014–08
  31. By: Theodore Panagiotidis (Department of Economics, University of Macedonia, Greece; Rimini Centre for Economic Analysis, Italy); Gianluigi Pelloni (Department of Economics, Wilfrid Laurier University, Canada; The Johns Hopkins University, SAIS-Bologna, Italy; Rimini Centre for Economic Analysis, Italy)
    Abstract: This study revisits Lilien’s sectoral shifts hypothesis for the US. We employ quantile regression estimation in order to investigate the asymmetric nature of the relationship between sectoral employment and unemployment. Significant asymmetries emerge. Lilien’s dispersion index is significant only for relatively high levels of unemployment and becomes insignificant for lower levels suggesting that reallocation affects unemployment only when the latter is relative high. More job reallocation is associated with higher unemployment.
    Keywords: unemployment, employment reallocation, sectoral shifts, aggregate shocks, conditional quantile regression model, bootstrapping
    JEL: C22 C50 E24
    Date: 2014–05
  32. By: Arseny Mamedov (Gaidar Institute for Economic Policy)
    Abstract: This paper deals with Russia's budgetary system
    Keywords: Russian economy; state budget, budgetary system
    JEL: E62 H20 H50
    Date: 2014
  33. By: Tarullo, Daniel K. (Board of Governors of the Federal Reserve System (U.S.))
    Date: 2014–02–25
  34. By: Shawkat Hammoudeh; Duc Khuong Nguyen; Ricardo M. Sousa
    Abstract: This study examines the effects of the monetary policy of the United States on commodity prices. Using a Bayesian Structural VAR, we identify the interest rate shocks as a measure of the stance of the U.S. mon- etary policy and evaluate their impacts on different types of commodity prices. The empirical evidence suggests that a U.S. monetary contraction has a negative and significant effect on the aggregate commodi- ty prices, which takes place with a substantial lag (i.e., eight quarters after the shock). However, the ag- gregate response masks the existence of significant heterogeneity in the responses of the different types of commodities. More specifically, a positive interest rate (contractionary) shock leads to: i) an initial in- crease in the prices of non-fuel commodities, which later reverts path and becomes negative (as in the case of the prices of agricultural raw materials); ii) a positive and persistent rise in the food prices; iii) a fall in the beverage prices; and iv) a persistent reduction in the prices of metals and the prices of fuel (en- ergy) prices.
    Keywords: monetary policy, commodity prices, Bayesian Structural VAR.
    JEL: E37 E52
    Date: 2014–07–24
  35. By: Juan Contreras; Holly Battelle
    Keywords: Fiscal multipliers, Panel of countries, SVAR, GMM.
    JEL: E62 E63 H60
    Date: 2014–07
  36. By: Richard Wood (School of Economics, The University of Queensland)
    Abstract: This paper argues that a number of the central macroeconomic policies adopted by major economic blocks since the Global Financial Crisis have been inappropriate, largely ineffective or counterproductive. These mistaken policies have proven very expensive. An alternative combination of monetary and fiscal policies is suggested as a way to combat high debt, credit traps, deflation tendencies and high unemployment.
    Date: 2014–08–08
  37. By: International Monetary Fund. Western Hemisphere Dept.
    Abstract: This 2013 Article IV Consultation highlights that robust growth in Paraguay has been accompanied by declining inflation, particularly since 2011 when the central bank adopted inflation targeting. Despite the acceleration in growth in the 2000s, poverty and inequality in Paraguay remain among the highest in the region. Activity rebounded to an estimated 13 percent in 2013. The outlook for 2014 is positive. Growth should be strong at 4.8 percent, underpinned by continued dynamism in the agricultural sector and rising infrastructure investment. Annual inflation will likely increase to the central bank’s target rate of 5 percent.
    Keywords: Article IV consultation reports;Economic growth;Fiscal policy;Monetary policy;Banking sector;Bank credit;Bank supervision;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Paraguay;
    Date: 2014–02–21
  38. By: Margarta Rubio
    Abstract: The aim of this paper is to show how housing tenure (rented vs. owner-occupied) affects monetary policy. In order to do that, I propose a dynamic stochastic general equilibrium model with housing, both owned and rented. First, I analyze how, in the model, preference parameters, fiscal incentives and institutional factors determine the rental market share and the residential debt-to-GDP ratio. Then, within this framework, I study how the transmission and optimality of monetary policy differ depending on these factors. From a positive perspective, impulse responses illustrate differences in the monetary transmission mechanism. In normative terms, results show that when the relative size of the rental market is larger, monetary policy is more stabilizing. An optimal monetary policy analysis also suggests that in this case, monetary policy should respond more aggressively to inflation and disregard output, since the financial accelerator effects are weaker.
    Keywords: Housing market, rental, owner-occupied housing, monetary policy
    Date: 2014
  39. By: Rocío Elizondo    
    Abstract: The purpose of this paper is to show that an affine model which incorporates the condition of no arbitrage enables improvements in forecasting the term structure of interest rates in Mexico. The three factors of the yield curve (level, slope and curvature) used in the model are estimated by the method of principal components. The forecasting model is specified as a linear relationship between each of the interest rates and these factors, for maturities of 1 to 60 months. Affine model predictions are compared with four benchmark models: a forward rate, an AR(1), a VAR(1), and a random walk model. The main finding is that the affine model has a performance comparable to benchmark models for horizons of 12 and 18 months, except for the random walk model. However, improving its forecasting performance for the 24-month horizon, and especially for 60-month maturities.
    Keywords: Affine Model, Forecasts, Yield Curve, Principal Components, Condition of no Arbitrage
    JEL: G12 E43 C12 C53
    Date: 2013–04
  40. By: Hideaki Hirata
    Abstract: AbstractReplicating the degree of cross-country comovements of macroeconomic aggregates, dynamics of prices and quantities of international trade, and the behavior of consumption and labor remains an important challenge in international business cycle literature. This paper incorporates preference shocks into a standard two-country model in which there exist international frictions, such as costs of transportation and restrictions to international asset trade. Country-specific preference shocks that generate fluctuations in each country's consumption and labor solve the puzzles, except for the discrepancy between theory and data regarding international trade variables. The presence or absence of international frictions plays a limited role in solving the puzzles.
    Keywords: Comovement; International Business Cycles; International frictions; Preference shocks
  41. By: Christos Koulovatianos (CREA, Université de Luxembourg); Carsten Schröder (DIW, Free University of Berlin,); Ulrich Schmidt (IFW, University of Kiel)
    Abstract: Most simulated micro-founded macro models use solely consumer-demand aggregates in order to estimate deep economy-wide preference parameters, which are useful for policy eva- luation. The underlying demand-aggregation properties that this approach requires, should be easy to empirically disprove: since household-consumption choices differ for households with more members, aggregation can be rejected if appropriate data violate an affine equa- tion regarding how much individuals benefit from within-household sharing of goods. We develop a survey method that tests the validity of this equation, without utility-estimation restrictions via models. Surprisingly, in six countries, this equation is not rejected, lending support to using consumer-demand aggregates.
    Keywords: Linear Aggregation, Dynamic Representative Consumer, Household-Size Economies, Equivalent Income, Survey Method
    JEL: C42 E21 D12 E01 D11 D91 D31 I32
    Date: 2014
  42. By: Galvão, Ana B. (University of Warwick); Owyang, Michael T. (Federal Reserve Bank of St. Louis)
    Abstract: We identify financial stress regimes using a model that explicitly links financial variables with the macroeconomy. The financial stress regimes are identified using a large unbalanced panel of financial variables with an embedded method for variable selection and, empirically, are strongly correlated with NBER recessions. The empirical results on the selection of financial variables support the use of credit spreads to identify asymmetries in the responses of economic activity and prices to financial shocks. We use a novel factor-augmented vector autoregressive model with smooth regime changes (FASTVAR). The unobserved financial factor is jointly estimated with the parameters of a logistic function that describes the probabilities of the financial stress regime over time.
    Keywords: factor-augmented VAR models; Smooth Transition VAR models; Gibbs variable selection; financial crisis
    JEL: C32 E44
    Date: 2014–07–24
  43. By: Eduardo Olaberria
    Abstract: Following Chairman Ben Bernanke’s comments before Congress that the FOMC may ‘take a step down in the pace of asset purchases if economic improvement appears to be sustained’, US 10-year interest rates picked up sharply and gross capital flows to emerging market economies (EMEs) reversed. These events raised concerns that further increases in US interest rates could trigger sharp changes of capital flows that would be followed by financial crises in EMEs. To assess this possibility, this paper studies the association between US long term interest rates and cycles of capital flows to EMEs. It finds that, indeed, cycles in capital flows to EMEs are linked to global conditions, including global risk aversion and long term interest rates in the United States. In particular, higher US long term interest rates are associated with lower levels of gross capital flows to EMEs, and to a higher probability of observing sharp reversals in those flows. Episodes of net capital inflows, on the other hand, are mostly associated with domestic macroeconomic conditions. In particular, economies with relatively low levels of gross outflows, with a high ratio of short-term debt to international reserves or with weak domestic fundamentals are more vulnerable to the risk of a classic sudden stop à la Calvo. This Working Paper relates to the OECD Economic Survey of the United States 2014 ( htm) Taux d'intérêt à long-terme des États-Unis et flux de capitaux vers les pays émergents Après les commentaires de Ben Bernanke devant le Congrès que le FOMC pourrait "ralentir dans le rythme des achats d'actifs si l'amélioration économique semble se maintenir», les taux d'intérêt américains à 10 ans ont fortement remontés et les flux de capital brut vers les économies émergentes (EME) se sont inversés. Ces événements ont soulevé des préoccupations que de nouvelles hausses des taux d'intérêt américains pourraient déclencher des changements brusques de flux de capitaux qui seraient suivies par des crises financières dans les pays émergents. Pour évaluer cette possibilité, ce document étudie l'association entre les taux d'intérêt à long terme des États-Unis et les cycles de flux de capitaux vers les pays émergents. Il constate que, en effet, les cycles des flux de capitaux vers des pays émergents sont liés à la conjoncture mondiale, y compris l'aversion au risque global et les taux d'intérêt à long terme aux États-Unis. En particulier, la hausse des taux d'intérêt à long terme américains sont associés à des niveaux plus bas de capital flux bruts de pays émergents, et à une plus grande probabilité d'observer des inversions brutales des flux de capitaux. Cependant, cette association ne vaut que pour les flux de capitaux mesurées en termes bruts. En outre, l’étude ne trouve aucune preuve d'un lien entre les taux d'intérêt à long terme des États-Unis et les flux de capitaux, mesurée en termes nets. Les principaux facteurs associés aux flux nets de capitaux sont les conditions macro-économiques nationales. Ce Document de travail se rapporte à l’Étude économique de l’OCDE des Etats-Unis 2014 ( tm).
    Keywords: capital inflows, asset prices, exchange rate regimes, sudden stops, interest rate, taux d'intérêt, prix d’actifs, déséquilibres financiers, régime de taux de change, flux de capitaux
    JEL: E32 F32 F41 G10 G12 G15
    Date: 2014–07–24
  44. By: Jean-Bernard Chatelain (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, UP1 - Université Paris 1, Panthéon-Sorbonne - Université Paris I - Panthéon-Sorbonne - PRES HESAM); Kirsten Ralf (Ecole Supérieure du Commerce Extérieur - ESCE)
    Abstract: This paper investigates the identification, the determinacy and the stability of ad hoc, "quasi-optimal" and optimal policy rules augmented with financial stability indicators (such as asset prices deviations from their fundamental values) and minimizing the volatility of the policy interest rates, when the central bank precommits to financial stability. Firstly, ad hoc and quasi-optimal rules parameters of financial stability indicators cannot be identified. For those rules, non zero policy rule parameters of financial stability indicators are observationally equivalent to rule parameters set to zero in another rule, so that they are unable to inform monetary policy. Secondly, under controllability conditions, optimal policy rules parameters of financial stability indicators can all be identified, along with a bounded solution stabilizing an unstable economy as in Woodford (2003), with determinacy of the initial conditions of non- predetermined variables.
    Keywords: Identification; Financial Stability; Optimal Policy under Commitment; Augmented Taylor rule; Monetary Policy.
    Date: 2014–04–12
  45. By: International Monetary Fund. Middle East and Central Asia Dept.
    Abstract: This 2013 Article IV Consultation highlights that Algeria’s economic performance in 2013 has been satisfactory. Inflation, which reached 8.9 percent last year, has decelerated significantly in 2013 thanks to fiscal consolidation and prudent monetary policy. Real GDP growth is expected to slow to 2.7 percent in 2013 from 3.3 percent in 2012, reflecting a continued decline in hydrocarbon sector output and lower public spending. The current account surplus is expected to narrow to 1.1 percent of GDP in 2013, as robust domestic hydrocarbon consumption, together with declining prices, weighs on hydrocarbon exports and import growth remains sizeable.
    Keywords: Article IV consultation reports;Economic growth;Hydrocarbons;Fiscal policy;Fiscal consolidation;Fiscal reforms;Monetary policy;Real effective exchange rates;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Algeria;
    Date: 2014–02–04
  46. By: International Monetary Fund. Middle East and Central Asia Dept.
    Abstract: KEY ISSUES Context Economic activity accelerated in 2013 as oil output stabilized while non-oil growth continued at close to 10 percent. Inflation remained low and the external position strengthened further. President Aliyev won a third term in the October election. Favorable economic prospects and large buffers provide an opportune environment to speed up reforms. Focus of consultation and recommendations In an environment of high oil prices but with a relatively short oil production horizon, the overarching challenge for Azerbaijan remains bringing fiscal policy to a sustainable position while accelerating structural reforms to foster broad-based private sector-led growth. Staff recommends: • Pursuing a growth-friendly fiscal consolidation strategy by cutting investment projects with small growth returns and advancing decisive reforms to improve the business environment and thereby create opportunities for private investment; • Maintaining monetary policy in a neutral stance while improving the transmission mechanism and taking steps to enable greater exchange rate flexibility in the medium term; and • Fostering private sector–led growth in the non-oil sector by ensuring financial stability, promoting the deepening of financial markets, strengthening governance, and removing barriers to competition and trade. Previous Consultation During the 2013 Article IV Consultation, Directors encouraged the authorities to: (i) undertake a moderate front-loaded fiscal consolidation based on a rules-based fiscal framework; (ii) discontinue the Central Bank’s direct lending to the real economy; (iii) strengthen the supervisory framework and adopt prudential measures to contain the growth of consumer credit; and (iv) advance ambitious structural reforms to reduce barriers to trade and competition. Since then, the authorities have signaled a change in the course of economic policies by approving a budget for 2014 that contains government spending, unwinding part of the central bank’s directed lending to the real sector, and adopting measures to rein in consumer credit. The pace of reforms aimed at strengthening the fiscal framework and improving governance and the business climate remains slow.
    Keywords: Article IV consultation reports;Economic growth;Fiscal policy;Nonoil sector;Private sector;Fiscal consolidation;Fiscal reforms;Banking sector;Monetary policy;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Azerbaijan;
    Date: 2014–06–11
  47. By: International Monetary Fund. European Dept.
    Abstract: This 2014 Article IV Consultation highlights that Lithuania’s economy has entered a broadly favorable trajectory of healthy and balanced growth, but income convergence with Western Europe has a long way to go. With inflation at historical lows and well-advanced repair of public finances damaged by the 2008/09 crisis, meeting the entry criteria seems on track. Financial stability has improved further in 2013, with the capital adequacy ratio exceeding 17 percent and steady progress in reducing nonperforming loans. The main challenge is now resuscitating the sluggish private sector credit growth, which could undermine investment and the recovery if it continued for much longer.
    Keywords: Article IV consultation reports;Fiscal policy;Fiscal consolidation;Unemployment;Labor market policy;Fiscal reforms;Banking sector;Economic indicators;Staff Reports;Press releases;Lithuania;
    Date: 2014–05–08
  48. By: Yellen, Janet L. (Board of Governors of the Federal Reserve System (U.S.))
    Date: 2014–04–16
  49. By: Dudley, William (Federal Reserve Bank of New York)
    Abstract: Remarks to the Association of Certified Public Accountants of Puerto Rico, San Juan, Puerto Rico.
    Keywords: Commonwealth government; economic growth; public debt; public corporations
    JEL: E2
    Date: 2014–06–24
  50. By: Pierre-Richard Agénor; K. Alper; L. Pereira da Silva
    Abstract: A dynamic stochastic model of a small open economy with a two-level banking intermediation structure, a risk-sensitive regulatory capital regime, and imperfect capital mobility is developed. Firms borrow from a domestic bank and the bank borrows on world capital markets, in both cases subject to a premium. A sudden flood in capital flows generates an expansion in credit and activity, as well as asset price pressures. Countercyclical capital regulation, in the form of a Basel III-type rule based on credit gaps, is effective at promoting macro stability (defined in terms of the volatility of a weighted average of inflation and the output gap) and financial stability (defined in terms of three measures based on asset prices, the credit-to-GDP ratio, and the ratio of bank foreign borrowing to GDP). However, because the gain in terms of reduced economic volatility exhibit diminishing returns, in practice a countercyclical regulatory capital rule may need to be supplemented by other, more targeted macroprudential instruments when shocks are large and persistent.
    Date: 2014
  51. By: International Monetary Fund. Middle East and Central Asia Dept.
    Abstract: EXECUTIVE SUMMARY Context: Sudan is a fragile state mired in a heavy debt burden, international sanctions, and volatile domestic and regional political environments. These problems, together with limited revenue mobilization, are constraining Sudan’s growth prospects and poverty reduction efforts. The economic situation worsened following the secession of South Sudan in 2011, resulting in the buildup of large economic imbalances. The authorities have embarked on a stabilization program and are expecting that a return of peace in South Sudan will ensure continuation of oil flows, which are crucial for sustaining the government renewed adjustment process resumed last September. Focus of the Staff-Monitored Program (SMP): In the attached Letter of Intent, dated March 7, 2014, the authorities requested a new SMP covering the period January– December, 2014. The objective of the SMP is to restore macroeconomic stability, strengthen social safety nets, and develop the required reforms to refocus the economy on its non- resource sector and lay the groundwork for sustainable economic growth. Risks to the SMP: Risks are mainly tilted to the downside. The social unrest that followed the announcement of the policy measures in September 2013 has abated, but the situation remains fragile. Security conditions remain volatile in several parts of the country, and the current standoff in South Sudan may hinder the flow of oil to Port Sudan. Furthermore, the forthcoming presidential elections in 2015 is already fueling political uncertainty, and complicating the economic policy-making process. Policy recommendations: The main recommendations from the 2013 Article IV consultation were: (i) a fiscal adjustment in the context of the 2014 budget framed in a medium-term strategy, including a gradual phasing-out of fuel subsidies, and a strengthening of social safety nets; (ii) a tighter monetary stance to contain inflation and lessen exchange rate pressures; (iii) further exchange rate flexibility to improve external competitiveness; and (iv) improvement of the business environment to boost private sector- led growth. Debt relief prospects: Relief is predicated on reaching out to creditors, normalizing relations with international financial institutions, and establishing a track record of cooperation with the IMF on policies and payments. Arrears to the Fund: Sudan has been in arrears to the Fund since July 1984. As of end- February 2014, those arrears amounted to SDR 981.5 million.
    Keywords: Staff-monitored programs;Regional shocks;South Sudan;Fiscal policy;Fiscal reforms;Monetary policy;Exchange rate policy;Bank restructuring;Economic indicators;Staff Reports;Letters of Intent;Press releases;Sudan;
    Date: 2014–07–15
  52. By: International Monetary Fund. Western Hemisphere Dept.
    Abstract: KEY ISSUES Politics: President Bachelet won the Presidential election on a platform to foster inclusive growth and reduce inequality. Her government took office in March 2014 and is launching an ambitious policy agenda that includes important reforms in several areas, including taxation, education, productivity, and energy. Outlook and risks: Chile’s global environment is shifting, with a dimmer outlook for its main export, copper, and normalization of global monetary conditions. Growth has slowed markedly, resulting in a modest output gap. The peso has depreciated, feeding into inflation. Staff projects growth to bottom out in 2014 and then gradually recover. Key risks relate to a large and lasting drop in copper prices and global financial volatility. Policy mix: The freely floating peso is working as a shock absorber and will support the economic recovery. The policy mix with broadly neutral fiscal and accommodative monetary policy is appropriate. Room for further monetary easing has narrowed but space remains if domestic demand flounders, so long as inflation expectations remain well anchored. On fiscal, given the strong public finances, automatic stabilizers should be allowed to operate unimpeded and there is space for stimuli in the event of a major downturn. The commitment to close the structural fiscal deficit by 2018 is appropriate and should be phased in a way that avoids undue drag on the recovery. Should risks materialize, the freely floating currency is the first line of defense. Growth and equity reforms: Achieving strong growth while reducing inequality will require structural reforms. The authorities’ agenda focuses on the right areas but many details remain work in progress. Clarity on the details, timetables, and prioritization will reduce uncertainty and the risk of delays. Financial stability: Risks to financial stability appear contained, but it will be important to push through with regulatory reforms underway, including initiatives currently in Congress. Further effort will be needed to close regulatory gaps, in particular bank capital requirements, relative to international benchmarks.
    Date: 2014–07–22
  53. By: International Monetary Fund. African Dept.
    Abstract: KEY ISSUES Setting: The seeds of good governance and prudent macroeconomic and natural resources management planted by the Botswana authorities paid off with an impressive increase in the GDP per capita during the last three decades. However, as in many other small middle-income countries (SMICs) in the region, trend growth has softened in recent years, reflecting the decline in the contribution of total factor productivity (TFP) to growth which calls for policies to reduce structural bottlenecks in the economy. Current conditions and outlook: Botswana’s economy remains broadly internally and externally balanced and the authorities’ near-term macroeconomic policy mix is appropriate. Output growth is expected to slowdown in 2014 reflecting partly weaknesses in the non-mineral sector, while inflation is expected to remain within the Bank of Botswana’s (BoB) medium-term objective range of 3-6 percent. Fiscal policy: Staff supports the FY2014/15 budget, which reins in unproductive current spending, while protecting growth-promoting capital spending. Achieving medium-term fiscal consolidation objectives adopted in the budget, would require articulating concrete measures to reduce the wage bill relative to GDP and broaden the revenue base. Financial sector development: Botswana’s banking system is well-capitalized and profitable with relatively low nonperforming loans. Although from a low base, credit growth to households continues to expand at a high rate, which poses potential vulnerabilities for the financial sector. Thus, staff recommends that macro prudential measures be considered to temper the rate of growth of household borrowing. In this context, staff welcomes the government’s emphasis on enhancing greater financial deepening and inclusion, while preserving the stability of the financial system. Reinvigorating growth: Returning to an era of strong growth and accelerating Botswana’s convergence to higher income levels would require policies to reinvigorate TFP growth. These include improving the quality of public spending, notably in public investment projects and education to ensure the transformation of diamond wealth into sustainable assets. The authorities’ efforts to improve the country’s competitiveness, including through reducing the regulatory burden on firms, is also welcomed. Past advice: There is broad agreement between the Fund and the authorities on the macroeconomic policy stance and structural reform policy priorities. Consistent with staff’s advice, the FY 2014/15 budget outlined a framework to reduce the burden of loss- making state-owned enterprises on fiscal resources and propel them toward commercial viability. Furthermore, the budget includes medium-term projections of government accounts, as recommended by staff during past consultations. However, progress towards reducing the wage bill relative to GDP remains modest.
    Keywords: Article IV consultation reports;Economic growth;Fiscal policy;Fiscal consolidation;Wage policy;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Botswana;
    Date: 2014–07–15
  54. By: Leena Rudanko (Boston University)
    Abstract: Intangible capital is an important factor of production in modern economies that is generally neglected in business cycle analyses. We demonstrate that intangible capital can have a substantial impact on business cycle dynamics, especially if the intangible is complementary with production capacity. We focus on customer capital: the capital embodied in the relationships a firm has with its customers. Introducing customer capital into a standard real business cycle model generates a volatile and countercyclical labor wedge, due to a mismeasured marginal product of labor. We also provide new evidence on cyclical variation in selling effort to discipline the exercise.
    Date: 2014
  55. By: Peter Spahn
    Abstract: Böhm-Bawerk defines the rate of interest as the ratio of intertemporal goods prices, but cannot show the emergence of interest as a financial market price. The alleged efficiency ofroundabout production methods is ill-suited to derive a uniform rate of return of capital. Time preference may affect the allocation of income flows and the decision to build up individual wealth, but credit supply follows from a portfolio decision on the structure of the stock of assets. Here, liquidity preference and monetary policy operations have a decisive influence, whereas changes of productivity and time preference are poor predictors of even the sign of market interest changes. A 'natural' rate of interest, determined by 'deep' parameters of capital, production and time, does not exist; it turns out to be a mere estimated value of the bank rate, as a proxy for goods market equilibrium conditions.
    Keywords: interest rate theory, capital goods and capital value, time preference, liquidity preference
    JEL: B13 E43
    Date: 2014–04
  56. By: International Monetary Fund. European Dept.
    Abstract: This 2014 Article IV Consultation outlines that the growth of the Swiss economy has gathered pace, but inflation remains close to zero. The recovery is expected to continue and inflation should rise gradually although the output gap will progressively close. The fiscal position is healthy, with a broadly neutral stance projected for 2014. Despite improved market confidence toward the euro area and tapering in the United States, the exchange rate has remained close to the floor. The authorities have taken several measures to contain risks, including raising the countercyclical capital buffer and adopting prudential measures to tighten lending standards and conditions.
    Keywords: Article IV consultation reports;Economic growth;Immigration;Labor mobility;Banking sector;Housing;Monetary policy;Bank supervision;Economic indicators;Staff Reports;Press releases;Switzerland;
    Date: 2014–05–28
  57. By: International Monetary Fund. Asia and Pacific Dept
    Abstract: This 2013 Article IV Consultation highlights that economic growth in Solomon Islands is slowly rebounding from the slowdown of the first half of 2013, when agriculture, logging, and gold production fell, owing mainly to unfavorable weather developments, lower terms of trade, and one-off factors. Real GDP growth is projected at 2.9 percent for 2013 and 4 percent for 2014. Risks are tilted to the downside, including from lower external demand and grants. Inflation has stabilized at about 6.5 percent and is expected to fall gradually as agricultural prices react to the recovery of production.
    Keywords: Article IV consultation reports;Economic growth;Infrastructure;Fiscal policy;Monetary policy;Reserves adequacy;Exchange rate assessments;Economic indicators;Extended Credit Facility;Debt sustainability analysis;Staff Reports;Press releases;Solomon Islands;central bank, external debt, balance of payments, payment arrears, debt management strategy, external payments, external shocks, private debt, debt forgiveness, external obligations, external payments arrears, domestic financing, government debt, repurchases, external debt-service obligations, external debt service, publicly-guaranteed, reserve holdings, public debt, current account, public debt management, public finance, treasury bills, current account balance, domestic debt, external public debt, current account deficits, foreign aid, debt service payments, external borrowing, repayments, public debt service, reserve assets, currency composition, external liabilities, external debt obligations, debt management strategies, debt servicing, long-term external debt, public finances
    Date: 2014–01–22
  58. By: International Monetary Fund. Asia and Pacific Dept
    Abstract: KEY ISSUES Context: Successful elections for a new Constituent Assembly and formation of a new government have stabilized the political situation. Macroeconomic situation and outlook: Nepal’s macroeconomic situation remains broadly favorable. Growth is projected to recover in 2013/14 owing to good monsoons, robust growth in services, and increased public spending. Inflation is moderating, in line with developments in India. High remittance inflows are supporting a strong external position, as well as high reserve money growth. Risks to the outlook are slightly tilted to the downside, involving slower-than-expected growth in countries hosting Nepali workers and domestic financial sector risks. Medium term prospects: While remittances are expected to continue to support the external position, the outlook for growth depends on improving the environment for private investment. This requires a decisive boost in public capital spending, and structural reforms in key areas. Financial sector: Despite progress, significant vulnerabilities remain. The recent assessment under the FSAP, Nepal’s first, raised concerns about asset quality and interconnectedness, as well as financial sector infrastructure—including the legal framework—and supervision and crisis preparedness. At the same time, a largely unsupervised cooperatives sector is growing rapidly. Key policy recommendations: Monetary policy should aim at controlling the volatility and level of excess reserves in the financial system, implying a modest tightening of monetary conditions. The exchange rate peg to the Indian rupee provides a useful nominal anchor for the economy, and the real exchange rate is broadly in line with fundamentals. Capital spending needs to be boosted to provide key infrastructure, and reforms implemented to support private investment, which will help generate sustained economic growth and employment opportunities. In the financial sector, further reforms to bolster regulation and supervision, and improve financial infrastructure are needed to reduce risk and increase access to finance.
    Keywords: Article IV consultation reports;Monetary policy;Currency pegs;Indian rupee;Fiscal policy;Fiscal reforms;Financial sector;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Nepal;
    Date: 2014–07–18
  59. By: Bullard, James B. (Federal Reserve Bank of St. Louis)
    Abstract: June 26, 2014. Remarks. "Income Inequality and Monetary Policy: A Framework with Answers to Three Questions." C. Peter McColough Series on International Economics, Council on Foreign Relations, New York, N.Y.
    Date: 2014–06–26
  60. By: Mitra Thakur, Gogol
    Abstract: In a demand-side growth model we show that a developing economy may experience a steady positive equilibrium growth rate of investment and profit as long as– investment in the economy is responsive to the aspirations of the richer section of the population to match the consumption level of the developed world and imitation of foreign production technology is not very expensive. A worsening of income distribution is not required to sustain this kind of growth process but a sufficiently unequal initial distribution of income is enough to propel it. We also show that the technologically dynamic sector producing for the rich is incapable in generating much employment. If the process is accompanied by no change in the distribution of income then the employment share of the the technologically stagnant sector producing for the poor increases at the cost of declining growth rate of real wage. In case the growth process is accompanied by an exogenous change in the distribution of income induced by shifts in economic policy regime then the positive and stable equilibrium growth rate of investment is associated with an increasing growth rate of output though more is gained in terms of increase in output growth when income distribution improves rather than worsens. On the other hand, growth rate of employment for the entire economy might decline.
    Keywords: Profit-led Growth, Luxury Consumption, Investment, Technology Transfer, Policy Regimes, Income Distribution
    JEL: E12 E2 O11 O3
    Date: 2013
  61. By: International Monetary Fund. Middle East and Central Asia Dept.
    Abstract: This 2014 Article IV Consultation highlights that Qatar’s macroeconomic performance has remained strong. GDP growth slowed from 13 percent in 2011 to 6.2 percent in 2012, mostly owing to the self-imposed moratorium on additional hydrocarbon production from the North Field. Growth was 6.5 percent in 2013, driven by strong expansion in the nonhydrocarbon sector. The negative spillovers from sluggish global growth and financial market volatility have been limited. The baseline macroeconomic outlook is positive. GDP growth could stay at about 6 percent in 2014, with public investments keeping growth at about 6–7 percent over the medium term.
    Keywords: Article IV consultation reports;Economic growth;Hydrocarbons;Fiscal policy;Public investment;Monetary policy;Banking sector;Exchange rate assessments;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Qatar;Housing prices;
    Date: 2014–05–06
  62. By: Carlino, Gerald A. (Federal Reserve Bank of Philadelphia); Inman, Robert P. (University of Pennsylvania)
    Abstract: An important component of the American Recovery and Reinvestment Act’s (ARRA’s) $796 billion proposed stimulus budget was $318 billion in fiscal assistance to state and local governments, yet the authors have no precise estimates of the impact of such assistance on the macroeconomy. In evaluating ARRA, both the Council of Economic Advisors (CEA) and the Congressional Budget Office (CBO) used instead the impacts of direct federal spending and tax relief. These estimates miss the role of states as agents. The authors provide estimates of aid’s multiplier effects allowing explicitly for state behavior, first from an SVAR analysis separating federal aid from federal tax relief, second from a narrative analysis using the political record for unanticipated federal aid programs, and third from constructed macroeconomic estimates implied by an estimated model of state governments’ fiscal choices. The authors reach three conclusions. First, federal transfers to state and local governments are less stimulative than transfers to households and firms. Second, federal aid for welfare spending is more stimulative than is general purpose aid. Third, an estimated model of state government fiscal behavior provides a microeconomic foundation for the observed macroeconomic impacts of aid.
    Keywords: American Recovery and Reinvestment Act; ARRA; Macroeconomics; Stimulus;
    Date: 2014–07–31
  63. By: International Monetary Fund. Middle East and Central Asia Dept.
    Abstract: EXECUTIVE SUMMARY Political context. On April 3, 2014, parliament approved a new government, led by Mr. Otorbaev, the new Prime Minister. The ministers of economy and finances kept their positions. Moreover, on May 7, 2014, a new chairperson was appointed for the National Bank of the Kyrgyz Republic (NBKR). No major changes in economic policies are expected. In February 2014, parliament approved a new deal with Centerra, ending a two-year dispute over the Kumtor gold mine. Background. In the first quarter, growth moderated to 5.6 percent (year-on-year) after the 2013 growth spike at 10.5 percent related to an unexpectedly high level of gold production. In the same period, inflation picked up slightly, owing to depreciation of the som in response to pressures from the depreciation of the Russian ruble and the devaluation of the Kazakh tenge. The NBKR intervened heavily to mitigate these pressures, but has recently rebuilt reserves to ensure a more comfortable level of over three months of imports. The current account is expected to deteriorate this year because of higher imports related to large public investments and FDI-financed infrastructure projects. Fiscal performance in 2013 was better than expected, with a deficit of 4 percent of GDP, but revenue headwinds call for a cautious budget in 2014. The medium-term outlook remains broadly favorable, provided prudent macroeconomic policies continue and are supported with structural reforms, including tax policy and administration reforms, public financial management (PFM) reforms, and implementation of FSAP recommendations, in particular the Banking Code. Program. The program is broadly on track, with all end-December 2013 quantitative performance criteria and all but one indicative targets (IT) met for end-December 2013. Although three March 2014 ITs were missed, since then there has been progress in rebuilding reserves and enhancing tax collections. The two structural benchmarks (SBs) for end-December were met, and the SB on signing the contract with one of the big four audit companies to audit the Debt Resolution Agency (DEBRA) is expected to be completed with delay. The remaining SB on introducing the Treasury Single Account (TSA) on a pilot basis was missed. Overall, the Kyrgyz authorities are completing a broadly successful three-year ECF arrangement, although further reforms will be needed to preserve and deepen the accomplishments. Despite occasional domestic political turmoil, the authorities have regained and maintained macroeconomic stability, consolidated the fiscal position, implemented a new monetary framework, and embarked on a comprehensive banking sector reform. The authorities have not yet expressed their intentions regarding a successor program.
    Keywords: Extended Credit Facility;Economic growth;Fiscal policy;Fiscal consolidation;Fiscal reforms;Monetary policy;Economic indicators;Staff Reports;Letters of Intent;Press releases;Kyrgyz Republic;
    Date: 2014–07–11
  64. By: Asian Development Bank (ADB); (South Asia Department, ADB); ;
    Abstract: The Quarterly Economic Update (QEU) provides a comprehensive and updated analysis of recent economic performance in Sri Lanka. The QEU for April 2012 highlights balancing between inflation and economic growth, given that external demand is slowing down, and that year-on-year inflation will be high because of supply side factor. Slow growth will decrease fiscal revenue, and the government may face a dilemma between maintaining the level of capital investment and containing fiscal deficit.
    Keywords: adb, asian development bank, asdb, asia, pacific, poverty asia, macroeconomic developments, economic indicators, sector performance, growth rates, sri lanka, sri, fiscal performance, financial developments
    Date: 2012–04
  65. By: Jan-David Schneider; Claude Giorno
    Abstract: Uncertainty faced by households and firms affects economic activity. The rise in uncertainty since the beginning of the sovereign debt crisis in Greece could be one factor that has contributed to the steep and long-lasting recession. This paper presents a brief empirical analysis quantifying this phenomenon and compares it with developments in Ireland and Portugal. Overall, this analysis shows that the uncertainty impact on growth has been relatively small in Greece between 2008 and 2013, although stronger than in Ireland or Portugal. This quantification appears to be robust to various specification changes of the vector auto regressive models developed for this exercise. This working paper relates to the 2013 Economic Survey of Greece ( Les incertitudes économiques et leur impact sur l'activité en Grèce comparés avec l'Irlande et le Portugal Les incertitudes auxquelles sont confrontés les ménages et les entreprises affectent l’activité économique. La montée des incertitudes depuis le début de la crise de la dette souveraine en Grèce semble avoir été l’un des facteurs qui a contribué à la récession forte et prolongée du pays. Cet article présent une brève analyse empirique qui quantifie ce phénomène et le compare avec les développements enregistrés en Irlande et au Portugal. Au total, cette analyse montre que l’impact de l’incertitude sur la croissance a été relativement modeste en Grèce entre 2008 et 20013, bien que plus fort qu’en Irlande et au Portugal. Cette quantification apparaît robuste aux divers changements de spécifications du modèle vectoriel autorégressif développé pour cet exercice. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de la Grèce, 2013 (
    Keywords: uncertainty, GDP, Ireland, investment, confidence, Greece, Portugal, private consumption, vector auto regressive model, simulations, activity, modèle vectoriel autorégressif, investissement, Irlande, activité, Portugal, Grèce, confiance, consommation privée, simulation, incertitude, PIB
    JEL: E25 E65
    Date: 2014–07–21
  66. By: Shawkat Hammoudeh (Drexel University, Philadelphia, United States); Michael McAleer (National Tsing Hua University, Taiwan; Erasmus University Rotterdam, the Netherlands; Complutense University of Madrid, Italy)
    Abstract: Financial risk management is difficult at the best of times, but especially so in the presence of economic uncertainty and financial crises. The purpose of this special issue on “Advances in Financial Risk Management and Economic Policy Uncertainty” is to highlight some areas of research in which novel econometric, financial econometric and empirical finance methods have contributed significantly to the analysis of financial risk management when there is economic uncertainty, especiallythe power of print: uncertainty shocks, markets, and the economy, determinants of the banking spread in the Brazilian economy: the role of micro and macroeconomic factors, forecasting value-at-risk using block structure multivariate stochastic volatility models, the time-varying causality between spot and futures crude oil prices: a regime switching approach, a regime-dependent assessment of the information transmission dynamics between oil prices, precious metal prices and exchange rates, a practical approach to constructing price-based funding liquidity factors, realized range volatility forecasting: dynamic features and predictive variables, modelling a latent daily tourism financial conditions index, bank ownership, financial segments and the measurement of systemic risk: an application of CoVaR, model-free volatility indexes in the financial literature: a review, robust hedging performance and volatility risk in option markets: application to Standard and Poor’s 500 and Taiwan index options, price cointegration between sovereign CDS and currency option markets in the global financial crisis, whether zombie lending should always be prevented, preferences of risk-averse and risk-seeking investors for oil spot and futures before, during and after the global financial crisis, managing financial risk in Chinese stock markets: option pricing and modeling under a multivariate threshold autoregression, managing systemic risk in The Netherlands, mean-variance portfolio methods for energy policy risk management, on robust properties of the SIML estimation of volatility under micro-market noise and random sampling, asymmetric large-scale (I)GARCH with hetero-tails, the economic fundamentals and economic policy uncertainty of Mainland China and their impacts on Taiwan and Hong Kong, prediction and simulation using simple models characterized by nonstationarity and seasonality, and volatility forecast of stock indexes by model averaging using high frequency data.
    Keywords: Financial risk management, Economic policy uncertainty, Financial econometrics, Empirical finance
    JEL: C58 D81 E60 G32
    Date: 2014–06–23
  67. By: Eaqub, Shamubeel (New Zealand Institute of Economic Research)
    Abstract: New Zealand’s crippling home affordability rates cannot be fixed by a single solution such as changing immigration policy or urban planning rules, or imposing a capital gains tax or lending ratios. The report explains that New Zealand’s obsession with home ownership is one of the key reasons that it took so long for New Zealand’s economy to recover after the 2008 Global Financial Crisis. “Our reliance on future capital gains to pay for debt-funded spending caused a long hangover when households realised they needed to pay off the mortgage.”
    Keywords: New Zealand; housing policy; home ownership
    JEL: E20 R21 R31
    Date: 2014–08–05
  68. By: International Monetary Fund. Western Hemisphere Dept.
    Abstract: KEY ISSUES Background. Panama’s economic performance remains buoyant. Real GDP growth slowed to 8.4 percent in 2013, after the strong expansion in 2011–12, and is projected at above 7 percent in 2014. Inflation is declining, though it is resilient and still higher than in major trading partners, and unemployment is at historically low levels. The 2013 fiscal deficit was within the revised Social and Fiscal Responsibility Law (SFRL) ceiling despite strong public investment. The current account deficit remains elevated, reflecting high investment, but is financed mainly by FDI. The banks are well capitalized, profitable, and liquid. Outlook and Risks. Near-term risks arise mainly from shifts in global trade and financial conditions (such as the normalization of global monetary conditions or a protracted economic slowdown in trading partners), domestic overheating pressures, persistent economic and political difficulties in Venezuela, and the risk of further significant delays in the Canal expansion. Strong domestic fundamentals and the ability to implement countercyclical fiscal policies would, however, mitigate the impact of external shocks. Fiscal and Financial Policies. Targeting a fiscal balance below the SFRL ceilings would help contain overheating pressures and build policy buffers against possible adverse shocks. It is imperative to strengthen the financial safety net and to enhance financial supervision and integrity in line with the recommendations of the 2011 FSAP and the 2014 IMF’s Detailed Assessment Report on Anti-Money Laundering and Combating the Financing of Terrorism. Medium-term Challenges. Structural, social, and institutional reforms should continue to boost productivity, competitiveness, and inclusiveness. This will be essential to ensure a smooth transition towards strong and sustainable medium-term growth when large public investment projects are completed. In particular, further investment in the quality of education, training, and health, as well as promoting female labor force participation, should complement capital accumulation, raise labor productivity, and improve living standards.
    Keywords: Article IV consultation reports;Economic growth;Fiscal policy;Budget deficits;Fiscal reforms;Banking sector;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Panama;
    Date: 2014–06–09
  69. By: International Monetary Fund. European Dept.
    Abstract: KEY ISSUES Context: ? Germany fundamentals are sound: balance sheets are generally healthy, unemployment is at a historic low, and the fiscal position is strong. ? While a recovery is underway, medium-term growth prospects are subdued and the current account surplus remains high. The economy also faces a still weak international environment, lingering uncertainty (including about future energy costs), and fast approaching adverse demographic changes. ? Germany could do more to increase its growth, thus strengthening its role as an engine of euro area recovery. Policy recommendations: ? Germany has the fiscal space to finance an increase in needed public investment, particularly in the transport infrastructure. Unlike public consumption, this would durably raise German output and have measurable growth spillovers on the rest of the euro area. ? Further reforms in services sector regulation would boost competition and productivity. ? Greater clarity about the future energy sector regulatory framework would encourage private investment in the energy infrastructure and beyond and strengthen the outlook. ? Decisions on the future level of the minimum wage should take into account the employment effects in certain regions. ? Banks should keep strengthening their capital position ahead of the completion of the ECB’s Comprehensive Assessment. ? The macroprudential framework needs to be ready as monetary conditions are set to remain accommodative for a prolonged period.
    Keywords: Article IV consultation reports;Economic recovery;Fiscal policy;Public investment;Government expenditures;Minimum wage;Fiscal reforms;Services sector;Banking sector;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Germany;
    Date: 2014–07–21
  70. By: Pierre Mandon (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: This article is the first to renews the old debate of "rules versus. discretion" by introducing propensity score matching methods in macro analysis, such as Tapsoba (2012), and by using instrumental methods, to consider the national stability culture. By taking into account, at the same time, the self-selection problem and the omitted unobserved factor bias, in a sample of 126 countries of all level of development over the period 1985-2010, we provide strong evidence about the positive causal effect of fiscal rules adoption on the reduction of fiscal policy procyclicality. We find an asymmetrical impact, since fiscal rules adoption contributed to upgrade budget balance in periods of expansion, while it doesn't increase budget deficit in periods of recession. Furthermore, we show that the budget balance rules and the debt rules are more effective to dampen procyclicality than expenditure rules. We also provide evidence that the coverage of fiscal rules is not a critical issue to strength against procyclicality. Empirical results also displays the positive impact of the adoption of flexible rules, but also the adoption of fiscal rules combined to improve policy responsiveness. Finally, we find that FRs are effective when taking into account the national stability culture. This positive impact of fiscal rules adoption on fiscal policy cyclicality comes from an improvement of fiscal policy disciplinary, by ensuring a sustainable path of deficit and debt, or by smoothing business cycles.
    Keywords: Fiscal Rules; Fiscal Rules Spread; Fiscal Policy Responsiveness; Procyclicality; Treatment Effect; Propensity Scores Matching
    Date: 2014–06–20
  71. By: Charles Yuji Horioka
    Abstract: This paper discusses three alternative assumptions concerning household preferences (altruism, self-interest, and a desire for dynasty building) and shows that these assumptions have very different implications for bequest motives and bequest division. After reviewing some of the literature on actual bequests, bequest motives, and bequest division, the paper presents data on the strength of bequest motives, stated bequest motives, and bequest division plans from a new international survey conducted in China, India, Japan, and the United States. It finds striking inter-country differences in bequest plans, with the bequest plans of Americans and Indians appearing to be much more consistent with altruistic preferences than those of the Japanese and Chinese and the bequest plans of the Japanese and Chinese appearing to be much more consistent with selfish preferences than those of Americans and Indians. These findings have important implications for the efficacy and desirability of stimulative fiscal policies, public pensions, and inheritance taxes.
    JEL: D12 D14 D64 D91 E21 H31 J14 P52 Z12
    Date: 2014–05
  72. By: Khaled Guesmi; Salma Fattoum
    Abstract: This paper provides further evidence of the comovements and dynamic volatility spillovers between stock markets and oil prices for a sample of four oil-exporting countries (United Arab Emirates, Kuwait, Saudi Arabia and Venezuela). We make use of a multivariate GJR-DCCGARCH approach developed by Glosten et al. (1993). The results show that cross-market comovements as measured by conditional correlation coefficients increase positively in response to significant aggregate demand (precautionary demand) and oil price shocks due to global business cycle fluctuations or world turmoil and oil prices exhibit positive correlation with stock markets.
    Keywords: oil prices, oil-exporting countries, conditional correlations, DCC-GARCH model.
    JEL: Q43 E44 G15 C1
    Date: 2014–07–24
  73. By: International Monetary Fund. African Dept.
    Abstract: This 2013 Article IV Consultation highlights that The Zambian economy has performed well in recent years, with strong growth and modest inflation, and has high growth potential. The government has resolved to step up development by scaling up investment in infrastructure. The current fiscal stance is unsustainable. To address risks of large arrears accumulations and additional central bank financing in 2013, it will be important for the authorities to adhere to their plans to reduce low-priority investment spending, and contain goods and services spending. IMF Staff recommends firmly addressing the fiscal slippages in 2014 and continuing to reduce fiscal deficits over the medium term.
    Keywords: Article IV consultation reports;Economic growth;Fiscal policy;Budget deficits;Government expenditures;Wage increases;Nonbank financial sector;Monetary policy;Economic indicators;Millennium Development Goals;Debt sustainability analysis;Staff Reports;Press releases;Zambia;wages, salaries, wage freeze, minimum wage, minimum wages, benefits, retirement age, worker, salary, compensation of employees, fiscal operations, fiscal consolidation, fiscal stance, fiscal adjustment, wage levels, fiscal position, public debt, merit increases, private transfers, capital expenditures, fiscal developments, wage policy, early retirement, fiscal deficit
    Date: 2014–01–09
  74. By: Thierry Tressel; Shengzu Wang; Joong Shik Kang; Jay C. Shambaugh; Jörg Decressin; Petya Koeva Brooks
    Abstract: Imbalances within the euro area have been a defining feature of the crisis. This paper provides a critical analysis of the ongoing rebalancing of euro area “deficit economies†(Greece, Ireland, Portugal, and Spain) that accumulated large current account deficits and external liability positions in the run-up to the crisis. It shows that relative price adjustments have been proceeding gradually. Real effective exchange rates have depreciated by 10-25 percent, driven largely by reductions in unit labor costs due to labor shedding. While exports have typically rebounded, subdued demand accounts for much of the reduction in current account deficits. Hence, the current account balance of the euro area as a whole has shifted into surplus. Internal rebalancing has come with subdued activity—notably very high unemployment in the deficit economies—and made continued adjustment more difficult. To advance rebalancing further, the paper emphasizes the need for: (1) macroeconomic policies that support demand and bring inflation in line with the ECB’s medium-term price stability objective; (2) continued EMU reforms (banking union) to ensure proper financial intermediation; and (3) structural reforms in product and labor markets to improve productivity and support the reallocation of resources to tradable sectors.
    Date: 2014–07–14
  75. By: Camille Cornand (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Pauline Gandré (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Céline Gimet (, Institute of Political Studies, CHERPA, EA 4261, Aix-en-Provence, France and GATE Lyon Saint-Etienne, Ecully, F-69130, France)
    Abstract: One of the most striking consequences of the recent episode of sovereign debt market stress in the Eurozone has been the increase in the share of public debt held by the domestic sector in fragile economies. First, we identify the shocks that explain most of the variation in this share in an S-VAR model on a sample of 7 Eurozone countries between 2007 and 2012. Home bias in sovereign debt responds positively to fundamentals and expectations shocks but we find no evidence that the increase in home bias is destabilizing per se. Second, we theoretically model the impact of the previous shocks in a second-generation model of crisis with endogenous home bias in sovereign debt. We derive conditions under which a higher home bias is associated with a change in the government’s decision. Finally, we discuss which case of the model best applies to the distinct countries in our sample during the recent sovereign debt crisis in the Eurozone.
    Keywords: Eurozone, Sovereign debt crises, Home bias, Bayesian panel S-VAR, Second-generation model
    JEL: E4 E5 F3 G15
    Date: 2014
  76. By: International Monetary Fund. African Dept.
    Abstract: KEY ISSUES Economic performance has been broadly favorable. Despite difficult conditions, real GDP growth has proved resilient in the context of low inflation and strong international reserves. The policy mix has deviated from program expectations. Significant revenue shortfalls and expenditure overruns raised the fiscal deficit and domestic borrowing needs, and hindered an opportunity to ease monetary policy more markedly. Policies are set to return to the envisaged path. To reverse course, the authorities intend to adopt a package of tax measures, efficiency gains, rationalization of spending, and reduction of arrears. The tighter fiscal stance would create space for further interest rate declines and support private sector credit expansion. However, with deteriorating bank asset quality, strengthening financial oversight will be crucial. Progress has been made on structural reforms, but further steps are needed. Starting the construction of the two hydropower projects without further delay, approving and regulating the Public Financial Management Bill, and strengthening accounting controls are crucial steps in the reform effort. The expected amendments to the Bank of Uganda Act should support the inflation targeting regime. Downside risks to the program are significant. Success of the adjustment efforts will depend critically on parliament’s approval of the entire revenue package and government’s subsequent ability to enforce tax collections and resist further spending pressures in a pre-electoral year. Based on the proposed policies, staff supports completion of the second PSI review. Quantitative assessment criteria were met with the exception of the ceiling on net domestic financing, missed by a small margin, to which staff supports a waiver. The PFM- related structural benchmarks were observed, and others are proposed to be redefined or postponed given their good prospects for completion.
    Keywords: Policy Support Instrument;Fiscal policy;Revenue mobilization;Fiscal reforms;Monetary policy;Inflation targeting;Economic indicators;Staff Reports;Letters of Intent;Press releases;Performance criteria modifications;Uganda;
    Date: 2014–07–10
  77. By: Marie Briere; Ombretta Signori
    Abstract: Inflation shocks are one of the pitfalls of developing economies and are usually difficult to hedge. This paper examines the optimal strategic asset allocation for a Brazilian investor seeking to hedge inflation risk at different horizons, ranging from one to 30 years. Using a vector-autoregressive specification to model inter-temporal dependency across variables, we measure the inflation hedging properties of domestic and foreign investments and carry out a portfolio optimisation. Our results show that foreign currencies complement traditional assets very efficiently when hedging a portfolio against inflation: around 70% of the portfolio should be dedicated to domestic assets (equities, inflation-linked (IL) bonds and nominal bonds), whereas 30% should be invested in foreign currencies, especially the US dollar and the euro. © 2012 Elsevier B.V.
    Keywords: Inflation hedge; Pension finance; Portfolio optimisation; Shortfall risk
    Date: 2013–01
  78. By: Marcelo Neri (FGV, Centre for Social Policies - IBRE and EPGE); Fabio Monteiro Vaz (IPEA); Pedro Herculano Guimarães Ferreira de Souza (IPEA)
    Keywords: The Macroeconomic Effects of Government Transfers: a Social Accounting Matrix Approach
    Date: 2014–04
  79. By: International Monetary Fund. European Dept.
    Abstract: This 2014 Article IV Consultation highlights that with a strong policy framework, Luxembourg has weathered the crisis well and the economy is rebounding. The fiscal position remains sound, and the large financial sector has been resilient. After a shallow recession in 2012, growth reached 2.1 percent in 2013. The improving economic and financial environment in Europe drove the recovery in services exports. The outlook is for growth to firm up but without returning to its pre-crisis trend. Output is forecast to grow broadly in line with potential (2 to 2½ percent) during 2014–2019.
    Keywords: Article IV consultation reports;Financial sector;International banks;Spillovers;Bank supervision;Exchange rate assessments;Fiscal policy;Fiscal consolidation;Economic indicators;Staff Reports;Press releases;Luxembourg;
    Date: 2014–05–09
  80. By: International Monetary Fund. African Dept.
    Abstract: KEY ISSUES Setting: Swaziland has gradually recovered from the fiscal crisis of 2010-11, buoyed by the improved revenues from the Southern African Customs Union (SACU). Growth modestly recovered, and international reserves rebounded. Swaziland’s challenges, however, remain significant, in view of its high vulnerability to exogenous shocks and its sluggish growth performance, while facing significant social and development challenges with high unemployment and the prevalence of HIV/AIDS. Swaziland now stands at a critical juncture to strengthen its resilience to exogenous shocks, address its weak growth performance, and meet critical social and development needs. Outlook and risks: Under the status-quo policies, the outlook is for continued sluggish growth and increasing fiscal and external imbalances, reflecting low private investment, elevated government spending, and prospective decline in SACU revenues. Risks are associated with the high volatility of the SACU revenues, possible negative spillovers from South Africa (including higher policy rate and lower growth), and uncertain prospects for preferential trade agreements with the U.S. and EU. Strengthening Resilience to Shocks: Over the medium term, international reserves should be targeted at five to seven months of imports, and public debt be kept below 30 percent of GDP. This calls for a prudent fiscal policy stance, with fiscal deficit below 2 percent of GDP. Raising growth: It is essential to enhance the efficiency of the public sector and promote private sector-led growth through structural reforms including improving business climate and accelerating land reforms. Maintaining financial stability: Financial soundness indicators are generally strong. The strong growth of the nonbank financial sector in recent years calls for strengthening of supervision and regulation for the sector. Past advice: There is broad agreement between the Fund and the authorities on macroeconomic policy and structural reform priorities. With the authorities’ fiscal consolidation efforts and the improved SACU revenues, fiscal and external sustainability is being restored, consistent with staff’s advice. However, progress on structural reforms—including re-launching the privatization process, improving access to modern finance and improving the business climate—has been modest.
  81. By: International Monetary Fund. Western Hemisphere Dept.
    Abstract: Barbados’ economy is estimated to have contracted by 0.7 percent in 2013, with weakness across both the traded and non-traded sectors. The 2013 Article IV Consultation highlights that long stay tourist arrivals, which are highly dependent on the U.K. and North American markets, were down by 5.2 percent in 2013. Inflation dropped sharply to 1.9 percent by end-November, although unemployment rose to 11.7 percent. Foreign reserves declined during 2013 to close out the year at US$578 million. The financial system appears to be well capitalized, but credit quality and profitability have suffered with the prolonged downturn.
    Keywords: Article IV consultation reports;Economic growth;Fiscal policy;Debt sustainability;Fiscal consolidation;Fiscal reforms;Public enterprises;Monetary policy;Exchange rate assessments;Economic indicators;Staff Reports;Press releases;Barbados;
    Date: 2014–02–12
  82. By: International Monetary Fund. Asia and Pacific Dept
    Abstract: KEY ISSUES Context: Economic activity was disrupted by political unrest and uncertainty in the run-up to the January 2014 general elections. However, macroeconomic stability was maintained and international reserve buffers have been built up further. As calm returns following the elections and activity normalizes, growth is expected to recover in the second half of fiscal year 2014 (FY14, July 2013–June 2014) and in FY15, supported by domestic demand. Exports, on the other hand, face headwinds as the garment industry adjusts to higher costs from increased minimum wages and stricter labor and safety standards. A resurgence of political violence poses the main risk to the outlook. Program: The program, supported by a three-year Extended Credit Facility (ECF) arrangement for SDR 639.96 million (120 percent of quota) approved in April 2012, remains on track. All performance criteria at end-December 2013 (the test date for the fourth review) were met and all structural benchmarks have been completed. Policy framework: Fiscal and monetary policies are set to retain a prudent stance to safeguard macroeconomic stability. The structural reform agenda remains centered on: (i) strengthening fiscal revenue and tax administration capacity, including through steady implementation of the new value-added tax (VAT); (ii) enhancing public financial management, particularly debt management, cash flow forecasting, and financial reporting in state-owned enterprises; (iii) reforming the state-owned commercial banks through improved governance, credit risk management and internal controls, along with recapitalization; and (iv) boosting inclusive growth through a revamped and well-prioritized public investment plan, enhanced social safety nets, streamlined trade and foreign exchange regulations, and improved labor and safety standards. Staff recommendation: Based on strong program performance to date and the policy framework going forward, staff recommends completion of the review, as well as modification of performance criteria for end-June 2014 on account of reserve over- performance. The authorities have consented to publication of the staff report and the Letter of Intent and attachments.
    Keywords: Extended Credit Facility;Fiscal policy;Financial management;Fiscal reforms;Public enterprises;Monetary policy;Bank supervision;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Performance criteria modifications;Bangladesh;
    Date: 2014–06–02
  83. By: Prince Christian Cruz (Asian Development Bank Institute (ADBI)); Yuning Gao; Lei Lei Song
    Abstract: Domestic financial market development is a key determinant of a currency’s international status, and financial depth and market liquidity are two essential attributes for an international currency. This paper discusses the status of the People’s Republic of China’s (PRC) financial markets and their depth and liquidity conditions. The paper also compares the PRC’s financial markets with those in developed and emerging economies, contemporaneously and historically. The paper finds that the PRC’s financial markets are not as deep and liquid as those in developed economies, and are much less so than those with international currencies. To support the internationalization of the renminbi, the PRC needs to remove several major obstacles to deepen its financial markets and improve their liquidity conditions.
    Keywords: financial market, financial development, financial depth, market liquidity, Currency Internationalization
    JEL: E4 E5
    Date: 2014–04
  84. By: International Monetary Fund. Asia and Pacific Dept
    Abstract: This 2014 Article IV Consultation highlights that after two years of strong expansion, growth is estimated at about zero percent in the fiscal year 2013 (FY2013, ending in September) in the Republic of Palau owing to declines in construction and tourism. Inflation moderated to 2¾ percent (annual average) in FY2013 thanks to stable international food and fuel prices, and it is expected to stay at about 3 percent in FY2014. Growth is projected to increase to 1¾ percent in FY2014 and to 2¼–2½ percent over the medium term driven by the recovery in tourism and infrastructure developments.
    Keywords: Article IV consultation reports;Economic growth;Tourism;Fiscal consolidation;Fiscal sustainability;Private sector;Tax reforms;Fiscal reforms;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Palau;
    Date: 2014–05–06
  85. By: International Monetary Fund. Western Hemisphere Dept.
    Abstract: EXECUTIVE SUMMARY Addressing imbalances. For decades, Jamaica has been stuck in a negative spiral of low growth, high unemployment, high debt, and precarious fiscal finances. In an attempt to break with the past, in 2013 the authorities embarked on an ambitious reform program, supported by the Fund through the Extended Fund Facility. A fragile recovery is underway. Growth is slowly picking up, there has been a sizeable contraction of the current account deficit, and inflation is falling (although remains in the high single digits). The 2014/15 budget targets an ambitious 7½ percent of GDP primary surplus. The reform agenda remains complex and challenging. A large fiscal adjustment has been put in place, important tax reforms and a fiscal rule have been introduced, and the exchange rate has been allowed to adjust in an effort to restore competitiveness. However, investor confidence remains tentative and tangible signs of a growth and job creation dividend from the painful reform efforts are urgently needed. Future policy priorities include improving tax collection, creating a smaller and more efficient public sector, and removing red tape to boost growth. Vulnerabilities within the financial system need to be proactively addressed, including through an overhaul of the securities dealers industry. The program is on track. Jamaica’s four-year, SDR 615.38 million (225 percent of quota) Extended Arrangement under the EFF was approved by the IMF Executive Board on May 1, 2013, and the first three reviews under the program were completed on schedule. All end- March 2014 quantitative performance criteria were met. The structural benchmarks for end- March and April were also met, except that the Banking Services Bill required fine-tuning after it had been tabled in March. Based on the strong performance to date and the authorities’ updated policy intentions and commitments, staff recommends completion of the fourth review under the extended arrangement. But risks continue to be high. A delayed growth recovery could undermine social support for the reform efforts, financial sector vulnerabilities could become more pressing, or risks to external financing (including from PetroCaribe) could crystallize.
    Keywords: Article IV consultation reports;Fiscal policy;Fiscal reforms;Monetary policy;Reserves accumulation;Economic indicators;Debt sustainability analysis;Staff Reports;Extended Fund Facility;Performance criteria modifications;Press releases;Jamaica;
    Date: 2014–06–20
  86. By: Asian Development Bank (ADB); (Pacific Department, ADB); ;
    Abstract: The Monitor provides an update of developments in Pacific economies and explores topical policy issues.
    Keywords: economic report, 2013 updates, economic indicators, asia gdp, 2013 gdp, gni, asian economy, pacific economies, energy, electricity supply, pacific energy demand, energy efficiency, energy security, inflation, Economic stimulus, tourism, fishing, energy needs, fossil fuels, Papua New Guinea, PNG, Timor-Leste, Solomon Islands, Kiribati, Micronesia, Samoa, Tonga, Cook Islands, Vanuatu, Nauru, Marshall Islands, Tuvalu, Fiji, New Zealand, Australia
    Date: 2013–03
  87. By: International Monetary Fund. European Dept.
    Abstract: KEY ISSUES Context. Spain has turned the corner. Growth has resumed, labor market trends are improving, the current account is in surplus, banks are healthier, and sovereign yields are at record lows. But unemployment is unacceptably high, incomes have fallen, trend productivity growth is low, and the deleveraging of high debt burdens—public and private—is weighing on growth. Policies. Spain’s overarching policy priority must be to ensure the recovery is strong, long-lasting, and most pressingly, job-rich. This requires: • Reducing the drag on domestic demand from private sector deleveraging with a more comprehensive, coordinated, approach to corporate debt restructuring, and by introducing a personal insolvency framework. • Bolstering banks’ ability to support the recovery by continuing to raise capital levels over time, including by limiting cash dividends and bonuses. • Creating jobs for the low skilled by sharply cutting the fiscal cost of employing them, compensated by higher indirect revenues. • Making the labor market more inclusive and responsive to economic conditions by striking a better balance between highly-protected/permanent and precarious/temporary contracts, and further helping firms adapt working conditions (wages, hours) to their specific circumstances. • Helping the unemployed improve their skills and enhancing the support they receive to find a job. • Removing regulatory barriers that prevent firms from growing, hiring, and becoming more productive, especially at the regional level. • Gradually, but steadily, reducing the fiscal deficit to keep debt on a sustainable path, and making the tax system more growth and job friendly. • Policies by Spain’s European partners, in particular, sufficient monetary easing by the ECB to achieve its inflation targets.
    Keywords: Article IV consultation reports;Economic recovery;Fiscal policy;Labor markets;Unemployment;Fiscal reforms;Tax reforms;Banking sector;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Spain;
    Date: 2014–07–10
  88. By: International Monetary Fund. Asia and Pacific Dept
    Abstract: This 2013 Article IV Consultation highlights that the GDP growth of The Republic of the Marshall Islands (RMI) picked up in FY2012 (fiscal year, ending September 30) to 3.2 percent, lifted by a surge in fishery output and higher copra and coconut oil production. In FY2013, however, growth is expected to have slowed to 0.8 percent, dragged down by delays in the implementation of infrastructure projects. The current account deficit including official transfers remained elevated at 8.1 percent of GDP in FY2012. In FY2014, GDP growth is projected to rebound to 3.2 percent, driven by the resumption of Compact-funded infrastructure projects.
    Keywords: Article IV consultation reports;Fiscal sustainability;Fiscal policy;Public enterprises;Private sector;Bank supervision;Staff Reports;Press releases;Marshall Islands;
    Date: 2014–02–03
  89. By: International Monetary Fund. African Dept.
    Abstract: The staff report for the 2013 Article IV Consultation on Chad focuses on economic background and policy. The country continues to enjoy its longest period of domestic political stability since independence. Macroeconomic performance continued to be stable in 2013, with some deceleration in economic growth and inflation. Recently revised balance-of-payments data show that Chad has been running much larger external current account deficits. Chad’s ability to tackle its developmental needs and poverty reduction objectives is seriously hampered by the projected oil revenue trajectory.
    Keywords: Article IV consultation reports;Economic growth;Fiscal policy;Public investment;Oil revenues;Debt management;Fiscal reforms;Commercial banks;Economic indicators;Staff-monitored programs;Debt sustainability analysis;Staff Reports;Press releases;Chad;
    Date: 2014–04–17
  90. By: William R. Cline (Peterson Institute for International Economics); Jared Nolan (Peterson Institute for International Economics)
    Abstract: This paper applies time series analysis to distinguish between cyclical and demographic causes of the decline of the labor force participation rate. Some public discussions suggest that the decline of US unemployment from its 2009 peak of 10 percent to about 6 percent by mid-2014 grossly exaggerates recovery because most of the decline reflects the exit of discouraged workers from the labor force. This study finds instead that one-half to two-thirds of the decline in labor force participation by about 3 percentage points from late 2007 to early 2014 is attributable to aging of the population. Although about one-third is found attributable to the lagged influence of high, and especially long-term, unemployment, going forward the potential rebound in the participation rate from recovery is projected to be approximately offset by further aging of the population.
    Keywords: labor force participation, aging, unemployment
    JEL: E52 J11 J21
    Date: 2014–07
  91. By: Oliver D. Bunn; Robert J. Shiller
    Abstract: We construct a price, dividend, and earnings series for the Industrials sector, the Utilities sector, and the Railroads sector from the beginning of the 1870s until the beginning of the year 2013 from primary sources. To infer about mispricings in the sector markets over more than a century, we investigate the forecasting power of the Cyclically Adjusted Price-Earnings (CAPE) ratio for these sectors. With regard to the CAPE ratio, which has originally been devised and employed by Campbell and Shiller (1988, 1998, 2001) as well as Shiller (2005), we define a methodological improvement to this ratio to not only be robust to inflationary changes, but also to changes in corporate payout policy. We then update the original evidence from Campbell and Shiller (1998, 2001) of the return predictability of the CAPE ratio for the overall stock market and furthermore extend this evidence to the three forementioned sectors individually. Whereas this part of our analysis focuses on each sector of the US economy in isolation, we subsequently construct an indicator from the CAPE ratio that enables us to perform valuation comparisons across sectors. In addition to establishing the prediction of subsequent return differences based on differences in the CAPE-based valuation indicator, we also suggest a hypothetical, historical, and simple value investment strategy that rotates between the three sectors based on the valuation signals derived from the CAPE-based indicator, generating slightly more than 1:09% annualized, inflation-adjusted excess total return over the market benchmark during a period of nearly 110 years.
    JEL: E37 G11 G14 G17 N20
    Date: 2014–08
  92. By: Marcel Fratzscher
    Date: 2012–11–19
  93. By: International Monetary Fund. European Dept.
    Abstract: The economy is steadily recovering from a substantial slowdown in 2012–13, helped by improving conditions in main trading partners and a rebound in job creation and household consumption. Financial markets and the zloty have stayed relatively stable amidst renewed global financial market turmoil. Going forward, growth is expected to continue to strengthen, though external risks remain on the downside.
    Keywords: Article IV consultation reports;Economic recovery;Economic growth;Fiscal consolidation;Pensions;Fiscal reforms;Monetary policy;Banking sector;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Poland;
    Date: 2014–06–26
  94. By: Kyle, Steven
    Keywords: Agricultural and Food Policy, Production Economics,
    Date: 2014
  95. By: Sergey Tsukhlo (Gaidar Institute for Economic Policy)
    Abstract: The section is prepared using data of monthly business surveys conducted by the Gaidar Institute for Economic Policy (IEP) among managers of industrial enterprises since September 1992. The surveys are based on the European harmonized methodology and encompass the entire territory of the Russian Federation. The size of the panel is about 1000 enterprises that employ over 13% of the total number of employed in industry. The panel is biased towards large enterprises in each of the selected branches. The rate of response to questionnaires ranges from 70% to 75%.
    Keywords: Russian industry performance; lending to industry; labor problems; anti-crisis government measures;
    JEL: C53 E37 L21 L52
    Date: 2014
  96. By: International Monetary Fund. European Dept.
    Abstract: This 2013 Article IV Consultation highlights that in the aftermath of the global financial crisis, growth in Bulgaria has remained low and unemployment is high. Real GDP growth is projected at about 0.5 percent in 2013 as domestic uncertainties undermined demand but exports are performing well. Domestic demand is projected to recover gradually, and exports and foreign direct investment (FDI) will benefit from recovery in Europe, allowing real GDP growth to rise to about 1.6 percent in 2014. The current account of the balance of payments is expected to be in surplus in 2013 but return to a modest deficit in the medium term, financed by FDI.
    Keywords: Article IV consultation reports;Fiscal policy;Fiscal reforms;Financial sector;Bank supervision;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Bulgaria;
    Date: 2014–01–30
  97. By: International Monetary Fund. African Dept.
    Abstract: This 2013 Article IV Consultation highlights that Namibia’s real GDP grew by a healthy 5 percent in 2012. Preliminary data for the first half of 2013 suggest that growth has moderated; the slowdown reflects weak global demand for exports, which more than offset the solid growth in the non-mineral sector, most notably in retail trade. At end-October 2013, inflation stood slightly below 5 percent. The IMF Staff projects that output growth would further moderate to about 4 percent in 2013. Mineral exports will likely remain subdued on account of weak external demand with growth slowing in Namibia’s major trading partners.
    Keywords: Article IV consultation reports;Fiscal consolidation;Government expenditures;Spillovers;Fiscal policy;Public enterprises;Financial sector;Economic indicators;Millennium Development Goals;Debt sustainability analysis;Staff Reports;Press releases;Namibia;
    Date: 2014–02–10
  98. By: Marina Mendes (Centro de Investigación Económica (CIE), Instituto Tecnológico Autónomo de México (ITAM))
    Abstract: Macroeconomists have long been interested in understanding differences in hours worked across countries. Prescott (2004) shows that differences in labor income tax explain the majority of the difference in hours worked between the United States and European countries. In this paper we go one step further in quantifying the impact of labor income tax on differences in hours worked between the United States and European countries. First, we decompose hours worked by gender and marital status, and we find that females are responsible for more than half of the difference in hours worked. Within females, we find that married females are responsible for more than half of the difference in hours worked. Second, given these findings, we quantify the impact of differences in labor income tax in explaining differences in aggregate hours worked. The main contribution of this paper is that we do not restrict the analysis of differences in labor income tax to differences in the progressivity of the tax schedule but we also incorporate differences in the treatment of secondary earners across countries. As a result, we find that differences in labor income tax explain two thirds of the difference in aggregate hours worked across countries, and we also find that differences in the treatment of secondary earner explain two thirds of the difference in hours worked between married and single females.
    JEL: E60 H20 J22
    Date: 2013
  99. By: International Monetary Fund. Middle East and Central Asia Dept.
    Abstract: This paper assesses Pakistan’s Second Review Under the Extended Arrangement and Request for Waivers of Non-Observance of Performance Criteria. Discussions focused on progress in addressing the main macroeconomic challenges facing the country and remedial actions to meet missed performance criteria. Pakistan’s economic growth is expected to remain modest with GDP growth forecast revised upward to 3.1 percent. The IMF report highlights that the preliminary data for the first quarter of FY13/14 showed 5 percent growth, mainly driven by services and manufacturing.
    Keywords: Extended arrangement reviews;Economic growth;Fiscal risk;Fiscal policy;Fiscal consolidation;Fiscal reforms;Monetary policy;Economic indicators;Staff Reports;Press releases;Performance criteria waivers;Pakistan;
    Date: 2014–03–28
  100. By: David Garcia; Claudio Juan Tessone; Pavlin Mavrodiev; Nicolas Perony
    Abstract: What is the role of social interactions in the creation of price bubbles? Answering this question requires obtaining collective behavioural traces generated by the activity of a large number of actors. Digital currencies offer a unique possibility to measure socio-economic signals from such digital traces. Here, we focus on Bitcoin, the most popular cryptocurrency. Bitcoin has experienced periods of rapid increase in exchange rates (price) followed by sharp decline; we hypothesise that these fluctuations are largely driven by the interplay between different social phenomena. We thus quantify four socio-economic signals about Bitcoin from large data sets: price on on-line exchanges, volume of word-of-mouth communication in on-line social media, volume of information search, and user base growth. By using vector autoregression, we identify two positive feedback loops that lead to price bubbles in the absence of exogenous stimuli: one driven by word of mouth, and the other by new Bitcoin adopters. We also observe that spikes in information search, presumably linked to external events, precede drastic price declines. Understanding the interplay between the socio-economic signals we measured can lead to applications beyond cryptocurrencies to other phenomena which leave digital footprints, such as on-line social network usage.
    Date: 2014–08
  101. By: International Monetary Fund. Western Hemisphere Dept.
    Abstract: KEY ISSUES Background. Grenada is in the midst of a deep fiscal crisis. Public debt reached about 110 percent of GDP at end-2013, in part reflecting attempts to run countercyclical fiscal policies since the outset of the global crisis. The government that took office in March 2013 found that it was unable to meet its financial obligations and immediately announced that it would seek a “comprehensive and collaborative†debt restructuring. The economy is meanwhile recovering slowly after a long period of negative growth. Article IV Discussions. The discussions focused on the main challenges facing the economy: the fiscal crisis and the debt overhang, weak competiveness and a weakened financial system. These challenges must be fundamentally addressed to unlock sustainable high quality growth in Grenada. The Proposed Program. To address these challenges, the authorities have designed a comprehensive adjustment program focused on: • Strengthening competiveness to improve medium-term growth prospects by tightening income policies, removing constraints to growth through reforms in the energy and other sectors, improving the investment environment, and putting in place the legal infrastructure for public private partnerships. • Restoring fiscal sustainability through a comprehensive three pillar approach consisting of: (i) a significant and frontloaded fiscal adjustment to address flow imbalances, (ii) a comprehensive debt restructuring to address stock imbalances, and (iii) ambitious fiscal structural reforms to support fiscal sustainability. • Strengthening the financial sector. Grenada is participating in the ongoing regional strategy to strengthen financial regulation and supervision in the ECCU and will undertake additional reforms to further strengthen financial institutions in Grenada. Request for an Extended Credit Facility Arrangement. In support of their comprehensive adjustment program, the authorities have requested a three year Extended Credit Facility (ECF) in the amount of SDR14.04 million (120 percent of quota, about US$21.9 million). SDR2.04 million will be available upon Board approval of the ECF and the remainder in six subsequent installments of SDR 2 million upon successful completion of semiannual reviews.
    Keywords: Article IV consultation reports;Fiscal policy;Debt restructuring;Fiscal reforms;Nonbank financial sector;Bank supervision;Extended Credit Facility;Staff Reports;Press releases;Extended arrangement requests;Grenada;
    Date: 2014–07–14
  102. By: International Monetary Fund. European Dept.
    Abstract: This 2014 Article IV Consultation on the Republic of San Marino highlights global crisis and tense relations with Italy, which triggered a 30 percent GDP contraction since 2008 and a sea change in San Marino’s off-shore banking model. High liquidity in the system allowed banks to withstand the shock to deposits. Cassa di Risparmio della Repubblica di San Marino, the largest bank, has required 13 percent of GDP in public support. The deep recession and bank recapitalization costs are weighing heavily on public finances.
    Keywords: Article IV consultation reports;Economic recovery;Fiscal consolidation;Tax reforms;Banking sector;Bank resolution;Bank restructuring;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;San Marino;
    Date: 2014–04–29
  103. By: International Monetary Fund. African Dept.
    Abstract: This 2013 Article IV Consultation highlights that Togo has made significant progress in macroeconomic stability, but challenges remain in accelerating economic reforms and reducing poverty. Real economic growth accelerated from almost 4½ in 2010–2011 to 5¾ in 2012–2013, reflecting dynamism in agriculture, mining, construction and public works, particularly in transportation infrastructure. Growth has been accompanied by a widening of the current account deficit, financed mainly through foreign direct investment. Directors have commended the authorities’ actions to control the fiscal deficit and to set Togo on a sustainable debt path.
    Keywords: Article IV consultation reports;Economic growth;Fiscal policy;Budget deficits;Income distribution;Poverty;Banking sector;Microfinance;Bank supervision;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Togo;
    Date: 2014–02–07
  104. By: Chen, Daphne (Florida State University); Qi, Shi (Florida State University); Schlagenhauf, Don E. (Florida State University)
    Abstract: We adopt a dynamic stochastic occupational choice model with heterogeneous agents and evaluate the impact of a potential reduction in the corporate income tax on employment. We show that a reduction in corporate income tax leads to moderate job creation. In the extreme case, the elimination of the corporate income tax would reduce the non-employed population by 5.4 percent. In the model, a reduction in the corporate income tax creates jobs through two channels, one from new entry firms and one from existing firms changing their form of legal organization. In particular, the latter accounts for 85.7 percent of the new jobs created.
    Keywords: Corporate Income Taxes; Employment; Firm heterogeneity; Entrepreneurs
    JEL: C54 E10 E69 H25 H32
    Date: 2014–04–03
  105. By: Jean Chateau; Bertrand Magné; Laura Cozzi
    Abstract: In its 2012 edition of the World Energy Outlook, the International Energy Agency (IEA) produced an Efficient World Scenario (IEA, 2012) to assess how implementing only economically viable energy efficiency measures would affect energy markets, investment and greenhouse emissions (GHG). The IEA analysis found that in order to halve global primary energy demand over 2010-2035, additional investments of USD 11.8 trillion in more efficient end-use technologies would be necessary. Using the OECD ENV-Linkages macro-economic model, this report simulates the economic and environmental impacts which the IEA Efficient World Scenario implies... Dans son Edition 2012 du « World Energy Outlook », l’Agence Internationale de l’Énergie a élaborée un Scénario pour un monde plus efficace (IEA, 2012) visant à déterminer comment des mesures d’efficacité énergétiques viable affecteront les marchés de l’énergie, les investissements et les émissions de gaz à effet de serre (GES). L’analyse de l’IEA indique que pour diminuer de moitié la demande d’énergie primaire sur l’horizon 2010-2035, près de 11.8 trillions USD d’investissement supplémentaires dans les technologies plus efficace en énergie sont nécessaires. Utilisant le modèle ENV-Linkages de l’OCDE, ce rapport détaille les conséquences économiques et environnementales du Scénario pour un monde plus efficace.
    Keywords: computable general equilibrium, climate change policy, macroeconomic, energy efficiency, efficacité énergétique, équilibre général calculable, macroéconomique, politique du changement climatique
    JEL: D58 E2 Q43 Q54
    Date: 2014–06–11
  106. By: Entorf, Horst (Goethe University Frankfurt); Sieger, Philip (Goethe University Frankfurt)
    Abstract: Two alternative hypotheses – referred to as opportunity- and stigma-based behavior – suggest that the relationship between unemployment and crime also depends on preexisting local crime levels. In order to analyze conjectured nonlinearities between both variables, we are using quantile regressions applied to German county panel data. While both conventional OLS and quantile regressions confirm the positive link between unemployment and crime for property crimes, results for assault differ with respect to the method of estimation. Whereas conventional mean regressions do not show any significant effect (which would confirm the usual result found for violent crimes in the literature), quantile regression uncovers that size and importance of the relationship are conditional on the crime rate: The partial effect is significantly positive for moderately low and median quantiles of local assault rates.
    Keywords: unemployment, crime, quantile regression, market of offences
    JEL: C21 E24 C33
    Date: 2014–07
  107. By: Erten, Irem; Okay, Nesrin
    Abstract: The goal of this paper is to examine the sustainability of the trade deficit of Turkey with cointegration techniques allowing for structural breaks. We follow Husted (1992) model, which shows that if a country’s exports and imports are cointegrated, and if the cointegrating vector is (1,-1), then its trade deficit is sustainable. First, classical cointegration tests indicate that exports and imports are cointegrated, but the cointegrating vector significantly differs from (1,-1). Next, the existence of cointegration is confirmed with an alternative method proposed by Silvestre and Sanso (2006) controlling for structural breaks. Our analysis detects two breaks in the cointegration relationship on 2001:01, and 2008:09, coinciding with economic crises. We show that since 2001, Turkish trade deficit has not been sustainable in the strong form, and after 2008, the country has moved away from sustainability. Based on our analysis, the sustainability of Turkey’s widening trade deficit is highly doubtful.
    Keywords: Exports, Imports, Trade Deficit, Sustainability, Cointegration, Structural Breaks
    JEL: C22 E6 G14 G15
    Date: 2012–10
  108. By: Jac C. Heckelman (Wake Forest University); Andrew T. Young (West Virginia University, College of Business and Economics)
    Abstract: We examine a balanced panel of globalization indices for 129 countries over the years 1991-2010. We report evidence of cross-country sigma convergence in the overall globalization index. Sigma convergence also holds for each of the economic, political, and social globalization indices, as well as each sub-index within these indices. However, the evidence for stochastic convergence, based on panel unit root tests, is only strong for the political globalization index. Regarding the economic and social dimensions of globalization, respectively, we find evidence for stochastic convergence only in the flows and cultural proximity sub-indices. For the OECD subsample, evidence supports stochastic convergence for the overall, economic and political globalization indices. Evidence to support regional convergence among the non-OECD nations on various globalization dimensions is much more limited. Our findings indicate that globalization convergence is truly global only on the political dimension.
    Keywords: globalization, institutions, sigma convergence, stochastic convergence, panel unit root tests
    JEL: E02 F02 F40 O43
    Date: 2014
  109. By: International Monetary Fund. European Dept.
    Keywords: Spillovers;Bond markets;Value added tax;Tax revenues;Business cycles;Pension funds;Private savings;Selected issues;Poland;
    Date: 2014–06–26
  110. By: Bishnu, Monisankar; Wang, Min
    Abstract: This paper characterizes an intergenerational welfare state with endogenous education and pension choice under general equilibrium-probabilistic voting. We show that politically implementing public education program always increases the future human capital, but this higher future human capital would not help support a more generous social security in the future. The effect of implementing PAYG social security on education however crucially depends on the sources of funding for education investment. Establishing PAYG pension program depresses investment in public education. However if the source of funding for education investment is private, in both the cases when pension is the only instrument or when public pension and public education are implemented together as a package, there can be an improvement in education investment if and only if the political influence of the old is limited and so the size of the PAYG social security is small. A substantially thick pension scheme which results from a heavy influence of the old in the political process spoils the mutual benefits.
    Keywords: education; Markov perfect equilibrium; Pension; Probabilistic voting; Endogenous growth
    JEL: D90 E6 H3 H52 H55
    Date: 2014–08–01
  111. By: Marcelo Neri (FGV, Centre for Social Policies - IBRE and EPGE); Fabio Monteiro Vaz (IPEA); Pedro Herculano Guimarães Ferreira de Souza (IPEA)
    Keywords: Les effets macroéconomiques des transferts gouvernementaux: matrice de comptabilité sociale
    Date: 2014–04
  112. By: International Monetary Fund. Western Hemisphere Dept.
    Abstract: This paper elaborates 2014 Article IV Consultation, Seventh and Eight Reviews Under the Stand-By Arrangement (SBA), and Request for Waivers of Applicability and Non-Observance of Performance Criterion for St. Kitts and Nevis. The discussions focus on strategies to secure sustainable growth through enhancing tourism, developing cost-effective energy sources, and improving the business environment. It states that the authorities’ commitment to their program is reflected in the 2014 budget, and their plans to save the bulk of the Citizenship by Investment (CBI) application fees.
    Keywords: Article IV consultation reports;Economic recovery;Economic growth;Fiscal policy;Debt restructuring;Fiscal reforms;Banking sector;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Stand-by arrangement reviews;Performance criteria waivers;St. Kitts and Nevis;
    Date: 2014–03–27
  113. By: International Monetary Fund. Middle East and Central Asia Dept.
    Abstract: Jordan is grappling with strong headwinds. It is facing a political transition even while the Syria crisis is stretching Jordan’s social fabrics. At the same time, gas inflows from Egypt continue to fluctuate, putting pressure on both the external and fiscal accounts.
    Keywords: Article IV consultation reports;Fiscal consolidation;Energy sector;Fiscal reforms;Banking sector;Bank supervision;Monetary policy;Economic indicators;Debt sustainability analysis;Stand-by arrangement reviews;Staff Reports;Press releases;Performance criteria waivers;Jordan;
    Date: 2014–06–09
  114. By: International Monetary Fund. African Dept.
    Abstract: This paper focuses on Malawi’s Third and Fourth Reviews Under the Extended Credit Facility (ECF) Arrangement. Donors have suspended some aid disbursements to Malawi in response to a scandal involving the theft of public funds. Recovery is under way in many sectors of the economy, facilitated by increased availability of foreign exchange. Performance in relation to quantitative targets for the third ECF review was good, but weakened for the fourth review. There was significant fiscal slippage (excessive domestic borrowing) during July–September 2013. The IMF Staff supports the authorities’ requests for waivers based on corrective actions and policy commitments.
    Keywords: Extended Credit Facility;Fiscal policy;Government expenditures;Monetary policy;Bank restructuring;Bank supervision;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Performance criteria modifications;Phasing of purchases;Performance criteria waivers;Malawi;
    Date: 2014–02–07

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