nep-mac New Economics Papers
on Macroeconomics
Issue of 2014‒11‒17
113 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Monetary and Fiscal Policy in Times of Crises: A New Keynesian Perspective in Continuous Time By Bernd Hayo; Britta Niehof
  2. Inflation Targeting As a Monetary Policy Rule: Experience and Prospects By Manai Daboussi, Olfa
  3. The Return of the Original Phillips curve? An Assessment of Lars E. O. Svensson's Critique of the Riksbank's Inflation Targeting, 1997-2012 By Andersson, Fredrik N. G.; Jonung, Lars
  4. Drifting Inflation Targets and Monetary Stagflation By Knotek, Edward S.; Khan, Shujaat
  5. Liquidity Premia, Price-Rent Dynamics, and Business Cycles By Miao, Jianjun; Wang, Pengfei; Zha, Tao
  6. The Effects of a Money-Financed Fiscal Stimulus By Jordi Galí
  7. Monetary Policy, the Composition of GDP, and Crisis Duration in Europe By Nicolas Cachanosky; Andreas Hoffmann
  8. Optimal monetary policy in the presence of human capital depreciation during unemployment By Laureys, Lien
  9. Dinámica económica y coordinación de políticas fiscal – monetaria en América Latina: Evaluación a través de una DSGE By Valdivia, Daney; Pérez, Danyira
  10. Housing market cycles – a disequilibrium model and its application to the primary housing market in Warsaw By Augustyniak, Hanna; Åaszek, Jacek; Olszewski, Krzysztof; Waszczuk, Joanna
  11. Is South Africa's inflation target too persistent for monetary policy conduct? By Faul, Joseph; Khumalo, Bridgette; Pashe, Mpho; Khuzwayo, Miranda; Banda, Kamogelo; Jali, Senzo; Myeni, Bathandekile; Pule, Retlaodirela; Mosito, Boitshoko; Jack, Lona-u-Thando; Phiri, Andrew
  12. Sectoral Labor Market Effects of Fiscal Spending By Wesselbaum, Dennis
  13. Loan loss provisioning, bank credit and the real economy By Sebastiaan Pool; Leo de Haan; Jan Jacobs
  14. Macroeconomic Shocks, Housing Market and Banks’ Performance in Venezuela By Carvallo, Oscar; Pagliacci, Carolina
  15. Central Banks: Powerful, Political and Unaccountable? By Buiter, Willem
  16. Labor Market Reforms and Current Account Imbalances – Beggar-thy-neighbor Policies in a Currency Union? By Ansgar Belke; Timo Baas
  17. Exchange Rate Flexibility under the Zero Lower Bound By Cook, David; Devereux, Michael B.
  18. Towards a quantitative theory of automatic stabilizers: the role of demographics By Alexandre Janiaka; Paulo Santos Monteiro
  19. A closer look at the Phillips curve using state-level data By Kumar, Anil; Orrenius, Pia M.
  20. The Golden Rule of Capital Accumulation and Global Recession. Aggregate Production Function and the Cambridge Capital Controversy. By Yashin, Pete
  21. Vietnam: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for Vietnam By International Monetary Fund. Asia and Pacific Dept
  22. La brecha del producto y el producto potencial en Venezuela: una estimación SVAR By Acevedo Rueda, Rafael Alexis; Mora Mora, José U.; Harmath Fernández, Pedro Alexander
  23. Dynamic causal chain of money, output, interest rate, exchange rate and prices: Nigeria as a case study By Masih, Mansur; AbdulKarim, Fatima
  24. In Lands of Foreign Currency Credit, Bank Lending Channels Run Through? The Effects of Monetary Policy at Home and Abroad on the Currency Denomination of the Supply of Credit By Steven Ongena; Ibolya Schindele; Dzsamila Vonnak
  25. Model Averaging in Markov-Switching Models: Predicting National Recessions with Regional Data By Guérin, Pierre; Leiva-Leon, Danilo
  26. Liquidity expansion in China and the U.S. economy By Kang, Wensheng; Ratti, Ronald A.; Vespignani, Joaquin L.
  27. The financial meltdown: a model with endogenous default probability By Ferrari, Massimo
  28. Macro Stress Testing Framework at the National Bank of Slovakia By Jan Klacso
  29. Oil prices and the economy: A global perspective By Ratti, Ronald A.; Vespignani, Joaquin L.
  30. Tax Power and Economics By Estrada, Fernando; González, Jorge Iván
  31. The mortgage spread as a predictor of real-time economic activity By Hännikäinen, Jari
  32. Technical Innovations and Banking in a Quantum Economy By Song, Edward
  33. Unemployment Flows, Participation, and the Natural Rate for Turkey By Sengul, Gonul; Tasci, Murat
  34. Does the halo effect still hold? The (post-) crisis perspective for the euro candidates By Szczypińska, Agnieszka
  35. The Impact of Debt on Economic Growth: A Case Study of Indonesia By Swastika, Purti; Dewandaru, Ginanjar; Masih, Mansur
  36. Unemployment Flows, Participation and the Natural Rate for Turkey By Gonul Sengul; Murat Tasci
  37. House Prices and Stock Prices: Evidence from a Dynamic Heterogeneous Panel in China By Nannan Yuan; Shigeyuki Hamori; Wang Chen
  38. Which economic states are sustainable under a slightly constrained tax-rate adjustment policy By Krawczyk, Jacek B.; Judd, Kenneth L.
  39. 'Financial Regulation, Credit and Liquidity Policy and the Business Cycle' By George J. Bratsiotis; William J. Tayler; Roy Zilberman
  40. The societal benefits of a financial transaction tax By Aleksander Berentsen; Samuel Huber; Alessandro Marchesiani
  41. Real-Time Information Content of Macroeconomic Data and Uncertainty: An Application to the Euro Area By Katharina Glass; Ulrich Fritsche
  42. Kenya: 2014 Article IV Consultation-Staff Report; Press Release; and Statement by the Executive Director for Kenya By International Monetary Fund. African Dept.
  43. Elasticity of substitution and the slowdown of the Italian productivity By Saltari, Enrico; Federici, Daniela
  44. An Empirical Comparison of Interest and Growth Rates By Julia, Knolle
  45. Financial Development and the Diffusion of Technologies under Uncertainty in Africa By Zivanemoyo Chinzara
  46. On the Sources of Uncertainty in Exchange Rate Predictability By Byrne, Joseph P; Korobilis, Dimitris; Ribeiro, Pinho J
  47. Central African Economic and Monetary Community (CEMAC) Selected Issues By International Monetary Fund. African Dept.
  48. Cycling in stochastic general equilibrium By Zhijian Wang; Bin Xu
  49. Macro Stress-Testing Credit Risk in Romanian Banking System By Ruja, Catalin
  50. Income distribution, turnover speed and profit rate in Japan, Chile, Netherlands and United States By Maito, Esteban Ezequiel
  51. The Nexus between Inflation and Inflation Uncertainty via Wavelet Approach: Some Lessons from Egyptian Case By Bouoiyour, Jamal; Selmi, Refk
  52. Bubbles and Central Banks: Historical Perspectives By Markus K. Brunnermeier; Isabel Schnabel
  53. Trade linkages and the globalisation of inflation in Asia and the Pacific By Raphael Anton Auer; Aaron Mehrotra
  54. What do we know about the effects of macroprudential policy? By Gabriele Galati; Richhild Moessner
  55. Family Welfare and the Great Recession By Hotchkiss, Julie L.; Moore, Robert E.; Rios-Avila, Fernando
  56. Personal Income Inequality and Aggregate Demand By Laura Carvalho; Armon Rezai
  57. Individual Experience of Positive and Negative Growth is Asymmetric: Evidence from Subjective Well-being Data By Femke De Keulenaer; Jan-Emmanuel De Neve; Georgios Kavetsos; Michael I. Norton; Bert Van Landeghem; George W. Ward
  58. Early Public Banks By Roberds, William; Velde, Francois R.
  59. Are Fiscal Multipliers Regime-Dependent? A Meta Regression Analysis By Sebastian Gechert; Ansgar Rannenberg
  60. Do US Macroeconomic Forecasters Exaggerate Their Differences? By Michael P. Clements
  61. What is the role of Emerging Asia in global oil prices? By Melolinna, Marko
  62. Social Security and Retirement across the OECD By Alonso Ortiz, Jorge
  63. Dollarization:Demand of time or the result of mismanagement of economy By -, Anurag
  64. The Dynamic Causal Relationship between Government Revenue and Government Expenditure Nexus in Ghana By Takumah, Wisdom
  65. Bayesian Forecasting of US Growth using Basic Time Varying Parameter Models and Expectations Data By Nalan Basturk; Pinar Ceyhan; Herman K. van Dijk
  66. The volume of euro coins held for transaction purposes in Germany By Altmann, Markus; Bartzsch, Nikolaus
  67. Political Economy of Argentine Sovereign Debt and the Holdouts Problem By Swamy, Vighneswara
  68. Housing Dynamics: Theory Behind Empirics By Wang, Ping; Xie, Danyang
  69. Guatemala: Selected Issues and Analytical Notes By International Monetary Fund. Western Hemisphere Dept.
  70. Using Online Prices to Anticipate Official CPI Inflation By Manuel Bertoloto; Alberto Cavallo; Roberto Rigobon
  71. Capital Freedom, Financial Development and Provincial Economic Growth in China By Söderlund, Bengt; Gustavsson Tingvall, Patrik
  72. Contagion in the Euro crisis: capital flows and trade linkages By Eleonora Cutrini and Giorgio Galeazzi
  73. Purchasing Power Parities and Real Expenditures: A Summary Report By Asian Development Bank (ADB); ; ;
  74. Cyprus: Selected Issues Paper By International Monetary Fund. European Dept.
  75. Bank Industry Structure and Public Debt By Varelas, Erotokritos
  76. Growth and Distribution: A Guyana Case Study By Constantine, Collin
  77. Transitional Dynamics of Oil Prices By Kal, Süleyman Hilmi; Arslaner, Ferhat; Arslaner, Nuran
  78. News Media Sentiment and Investor Behavior By Roman Kräussl; Elizaveta Mirgorodskaya
  79. The effects of intraday foreign exchange market operations in Latin America: results for Chile, Colombia, Mexico and Peru By Miguel Fuentes; Pablo Pincheira; Juan Manuel Julio; Hernán Rincón
  80. Lessons learned for monetary policy from the recent crisis By Michael D. Bordo
  81. Der Transaktionskassenbestand von Euro-Münzen in Deutschland By Altmann, Markus; Bartzsch, Nikolaus
  82. Explaining the Differences between Local Currency versus FX-denominated Loans and Deposits in the Central-Eastern European Economies By Judit Temesváry
  83. A Comparison of the Internal and External Determinants of Global Bank Loans: Evidence from Bilateral Cross- Country Data By Uluc Asyun; Ralf Hepp
  84. Regional inflation, spatial location and the Balassa-Samuelson effect By Nagayasu, Jun
  85. On Remittances, Foreign Currency Exposure and Credit Constraints: Evidence from Nepal By Nephil Matangi Maskay; Sven Steinkamp; Frank Westermann
  86. The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment By Kakarot-Handtke, Egmont
  87. Income and Wealth Distributionin Germany: A Macro-Economic Perspective By Jan Behringer; Thomas Theobald; Till van Treeck
  88. Invoice Currency in Brazil By Reiss, Daniel Gersten
  89. Cross-subsidies, and the elasticity of informality to social expenditures By Alonso-Ortiz, Jorge; Leal Ordonez, Julio
  90. Sierra Leone: Ad Hoc Review Under the Extended Credit Facility Arrangement and Request for Augmentation of Access and Modification of Performance Criteria and Financing Assurances Review-Staff Report; Press Release; and Statement by the Executive Director for Sierra Leone By International Monetary Fund. African Dept.
  91. What is driving the Capital Inflows to Costa Rica? Risk Premium and Interest Rate Differentials By Leon, Jorge; Vega, Melissa
  92. A Post-Keynesian Response to Piketty's "Fundamental Contradiction of Capitalism" By Javier Lopez Bernardo; Felix Lopez Martinez; Engelbert Stockhammer
  93. The effects of ratings-contingent regulation on international bank lending behavior: Evidence from the Basel 2 accord By Hasan, Iftekhar; Kim, Suk-Joong; Wu , Eliza
  94. Sticky Multiple-Price Policies By Luminita Stevens
  95. Governing by Panic: The Politics of the Eurozone Crisis By David M. Woodruff
  96. Hedging and Pricing in Imperfect Markets under Non-Convexity By Assa, Hirbod; Gospodinov, Nikolay
  97. Stock Price and Industrial Production in Developing Countries: A Dynamic Heterogeneous Panel Analysis By Masih, Mansur; Majid, Hamdan Abdul
  98. Child Poverty and the Great Recession in the United States By Marianne Bitler; Hilary Hoynes; Elira Kuka; UNICEF Innocenti Research Centre
  99. St. Kitts and Nevis: Ninth and Final Review Under the Stand-By Arrangement, Request for Waiver of Nonobservance of Performance Criterion, and Proposal for Post-Program Monitoring-Staff Report; Press Release By International Monetary Fund. Western Hemisphere Dept.
  100. L'intensite de l'investissement au Canada et aux Etats-Unis, 1990 a 2011 By Liu, Huju; Gu, Wulong; Baldwin, John R.
  101. Women Financing and Household Economics By Swamy, Vighneswara; B K, Tulasimala
  102. New Evidence on the Gender Wage Gap in Indonesia By Taniguchi, Kiyoshi; Tuwo, Alika
  103. Tax Revenue and Economic Growth in Ghana: A Cointegration Approach By Takumah, Wisdom
  104. Institutions and Economic Performance in Mexican States By Sonora, Robert
  105. Panel analysis of home prices in the primary and secondary market in 17 largest cities in Poland By Leszczyński, Robert; Olszewski, Krzysztof
  106. Essays on Growth and Political Transition By Hakobyan, Lilit
  107. Incompatible European Partners? Cultural Predispositions and Household Financial Behavior By Haliassos, Michael; Jansson, Thomas; Karabulut, Yigitcan
  108. The risk of financial intermediaries By Delis , Manthos D.; Hasan, Iftekhar; Tsionas, Efthymios G.
  109. Capital Adequacy and Liquidity in Banking Dynamics: Theory and Regulatory Implications By Cao, Jin; Chollete, Loran
  110. Regulatory Intensity, Crash Risk, and the Business Cycle By Xuan Tam; Eric Young; bo sun
  111. Corruption, Tax Evasion and Social Values By Litina, Anastasia; Palivos, Theodore
  112. Introduction: Telling the Story of MIT Economics in the Postwar Period By E. Roy Weintraub
  113. A Revival of the Private Rental Sector of the Housing Market?: Lessons from Germany, Finland, the Czech Republic and the Netherlands By Rik de Boer; Rosamaria Bitetti

  1. By: Bernd Hayo (University of Marburg); Britta Niehof (University of Marburg)
    Abstract: To analyse the interdependence between monetary and fiscal policy during a financial crisis, we develop an open-economy DSGE model with monetary and fiscal policy as well as financial markets in a continuous-time framework based on stochastic differential equations. Monetary policy is modelled using both a standard and a modified Taylor rule and fiscal policy is modelled as either expansionary or austere. In addition, we differentiate between open economies and monetary union members. We find evidence that the modified Taylor rule notably reduces the likelihood that the financial market crisis affects the real economy. But if we assume that households are averse with respect to outstanding government debt, we find that a combination of expansionary monetary policy and austere fiscal policy provides better stabilisation of both domestic and foreign economies in terms of both output and inflation. In the case of a monetary union, we find that stabilisation of output in the country where the financial shock originates is no longer as easy and, in terms of prices, there is now deflation in the country where the crisis originated and a positive inflation rate in the other country.
    Keywords: New Keynesian Models, Financial Crisis, Dynamic Stochastic General Equilibrium Models, Continuous Time Model, Fiscal Policy, Monetary Policy
    JEL: C63 E44 E47 E52 E62 F41
    Date: 2014
  2. By: Manai Daboussi, Olfa
    Abstract: This paper examines the inflation targeting experience in developing countries. Based on panel data of 53 developing countries, of which 20 those have adopted inflation targeting policy by the end of 2007, the purpose is to show the effects of inflation targeting on macroeconomic performance in these economies. We use the Great Moderation approach of Pétursson (2005) to analyze the relationship between inflation targeting and macroeconomic performance over the period 1980-2012. A key lesson from this experience is that this monetary policy realizes macroeconomic performance and contributes to the reduction of inflation, especially in developing countries with hyperinflation.
    Keywords: Monetary policy, inflation targeting, macroeconomic performance, developing economies.
    JEL: E52 E58
    Date: 2014–09–14
  3. By: Andersson, Fredrik N. G. (Department of Economics, Lund University); Jonung, Lars (Department of Economics, Lund University)
    Abstract: We examine Lars E O Svensson's prominent critique of the monetary policy of the Sveriges Riksbank (the Swedish central bank) from 1995-2012. Our main objection concerns Svensson's conclusion that the original pre-Friedman/Phelps version of the Phillips curve based on constant inflation expectations has returned for Sweden. Based on estimates of this model, Svensson claims that that the Riksbank's policy has contributed to an average of 38 000 more unemployed a year between 1997-2011. This result is based on Svensson's unrealistic as well as unnecessary assumption of constant inflation expectations anchored at the Riksbank's inflation target of 2 per cent. Data show, however, that the public's inflation expectations have varied between 0 and 4 per cent, thus they have not been anchored. The negative employment effect found by Svensson vanishes once actual data on inflation expectations are included in the estimates of the Phillips curve. The long run non-vertical Phillips curve is transformed into a vertical one, in line with the Friedman/Phelps theory. We have additional objections to Svensson's reasoning. First, we show that the Riksbank has on average met its inflation target between 1995 and 2012. Second, we suggest that the original Phillips curve is too simple a model to draw any firm policy conclusions about unemployment and monetary policy in a small open economy such as Sweden. Third, we do not want to overburden Swedish monetary policy by making the Riksbank responsible for three objectives. It has already two objectives: price stability and financial stability. Criticising the Riksbank for employment losses, as Svensson does, gives priority to a third objective, high employment. Finally, Svensson adopts a short-term perspective by focusing on the period 1995-2011. When we compare the Riksbank's inflation targeting regime with previous monetary policy regimes over the past 100 years, inflation targeting in the past fifteen years is clearly one of the most successful.
    Keywords: Sweden; inflation targeting; Phillips curve; inflation expectations; Swedish Riksbank; unemployment
    JEL: C51 D84 E24 E31 E42 E50 E58 N14
    Date: 2014–08–29
  4. By: Knotek, Edward S. (Federal Reserve Bank of Cleveland); Khan, Shujaat (Johns Hopkins University)
    Abstract: This paper revisits the phenomenon of stagflation. Using a standard New Keynesian dynamic, stochastic general equilibrium model, we show that stagflation from monetary policy alone is a very common occurrence when the economy is subject to both deviations from the policy rule and a drifting inflation target. Once the inflation target is fixed, the incidence of stagflation in the baseline model is essentially eliminated. In contrast with several other recent papers that have focused on the connection between monetary policy and stagflation, we show that while high uncertainty about monetary policy actions can be conducive to the occurrence of stagflation, imperfect information more generally is not a requisite channel to generate stagflation.
    Keywords: stagflation; inflation; time-varying inflation target; onetary policy; rules; imperfect nformation
    JEL: E31 E52
    Date: 2014–11–03
  5. By: Miao, Jianjun (Boston University); Wang, Pengfei (Hong Kong University of Science and Technology); Zha, Tao (Federal Reserve Bank of Atlanta)
    Abstract: n the U.S. economy during the past 25 years, house prices exhibit fluctuations considerably larger than house rents, and these large fluctuations tend to move together with business cycles. We build a simple theoretical model to characterize these observations by showing the tight connection between price-rent fluctuation and the liquidity constraint faced by productive firms. After developing economic intuition for this result, we estimate a medium-scale dynamic general equilibrium model to assess the empirical importance of the role the price-rent fluctuation plays in the business cycle. According to our estimation, a shock that drives most of the price-rent fluctuation explains 30 percent of output fluctuation over a six-year horizon.
    Keywords: asset pricing; financial frictions; working capital; cutoff productivity; heterogeneous firms; endogenous TFP; house price; liquidity constraint
    JEL: E22 E32 E44
    Date: 2014–08–01
  6. By: Jordi Galí
    Abstract: I analyze the effects of an increase in government purchases financed entirely through seignorage, in both a classical and a New Keynesian framework, and compare them with those resulting from a more conventional debt-financed stimulus. My findings point to the importance of nominal rigidities in shaping those effects. Under a realistic calibration of such rigidities, a money-financed fiscal stimulus is shown to have very strong effects on economic activity, with relatively mild inflationary consequences. If the steady state is sufficiently inefficient, an increase in government purchases may increase welfare even if such spending is wasteful.
    Keywords: seignorage, government spending, fiscal multiplier
    JEL: E32 E52 E62
    Date: 2014–09
  7. By: Nicolas Cachanosky; Andreas Hoffmann
    Abstract: This paper analyzes the effects of changes in interest rates on the composition of production in ten European countries during the boom period of the 2000s. We find that output elasticity differs across industries and across countries for similar industries. The paper suggests that in the run-up to the 2008 crisis, the ECB’s low interest rate policy affected the allocation of resources across industries. This may explain the sluggish overall recovery from the crisis in Europe.
    Keywords: Monetary Policy; Interest Rate Sensitivity; Crisis Duration; GDP Composition
    JEL: E32 E52 E58
    Date: 2014–10
  8. By: Laureys, Lien (Bank of England)
    Abstract: When workers are exposed to human capital depreciation during periods of unemployment, hiring affects the unemployment pool’s composition in terms of skills, and hence the economy’s production potential. Introducing human capital depreciation during unemployment into an otherwise standard New Keynesian model with search frictions in the labour market leads to the finding that the flexible-price allocation is no longer constrained-efficient even when the standard Hosios condition holds. This is because it generates a composition externality in job creation: firms ignore how their hiring decisions affect the extent to which the unemployed workers’ skills erode, and hence the output that can be produced by new matches. Consequently, it might be desirable from a social point of view for monetary policy to deviate from strict inflation targeting. But quantitative analysis shows that although optimal price inflation is no longer zero, strict inflation targeting stays close to the optimal policy.
    Keywords: skill erosion; monetary policy; unemployment
    JEL: E24 E52 J64
    Date: 2014–10–24
  9. By: Valdivia, Daney; Pérez, Danyira
    Abstract: The recent sovereign debt and subprime crises affected the world economy and highlighted the role and importance of policy coordination against adverse scenarios (price, demand, supply and external shocks, etc.). This paper asses the effectiveness of fiscal and monetary policy coordination, for a set of Latin American countries (Bolivia, Brazil, Chile, Colombia, Peru, Uruguay, Venezuela) during the periods 2007-2008 and 2009-2010, through the application of dynamic stochastic general equilibrium model specified in parameters for each economy and comparable in structure to each other. The results show that a combined shock of fiscal and monetary policy have important effects when faced with an adverse situation, especially in preserving price stability and economic growth in the short and long run, as opposed to individual shocks, which in some cases be offset by not pursuing a common goal. In the first case, an active monetary policy, helped by fiscal intervention was more effective in maintaining macroeconomic stability, and in the second case the determinant was fiscal policy. Additionally, the framework proposed would contribute to an adoption and evaluation of fiscal and monetary policies through various instruments.
    Keywords: policy coordination, dynamic stochastic general equilibrium, macroeconomic stability.
    JEL: E32 E61 E63 O40
    Date: 2013–10–29
  10. By: Augustyniak, Hanna; Åaszek, Jacek; Olszewski, Krzysztof; Waszczuk, Joanna
    Abstract: This paper presents a simple disequilibrium model in the primary housing market, calibrated to the Warsaw market. Our aim is to point out that the primary housing market, due to the long construction process is always in disequilibrium, which has important policy implications. We discuss the last housing cycle and show how a combination of slight demand shocks with short-term rigid supply leads to strong fluctuations of house prices and new construction. The primary market can create a significant distress to the economy, because when house prices rise, this sector attracts capital and workers and is able to generate excessive supply, which finally can lead to the burst of the price bubble. The cyclical character is a permanent feature of the property market and can be explained by the inelasticity of supply. Market participants form price and demand expectations based on past observations. This causes frequent cycles that, under specific conditions, can lead to economic crises. We believe that the model describes the reality of the primary housing market better than equilibrium models do, so it can be useful for central banks and financial supervision institutions in the analysis of the impact of fiscal and monetary policy and regulations on the real estate market.
    Keywords: Cycles in the housing market, disequilibrium, imbalances, banking sector, banking regulations.
    JEL: E32 E37 E44 R21 R31
    Date: 2014
  11. By: Faul, Joseph; Khumalo, Bridgette; Pashe, Mpho; Khuzwayo, Miranda; Banda, Kamogelo; Jali, Senzo; Myeni, Bathandekile; Pule, Retlaodirela; Mosito, Boitshoko; Jack, Lona-u-Thando; Phiri, Andrew
    Abstract: Can the South African Reserve Bank’s (SARB) substantially control inflation within their set target of 3-6 percent? We sought to investigate this phenomenon by examining multiple threshold effects in the persistence levels of quarterly aggregated inflation data collected between 2003 and 2014. To this end, we employ the three-regime threshold autoregressive (TAR) model of Hansen (2000). We favour this approach over other conventional linear econometric models as it permits us to test for varying persistency within the autoregressive (AR) components of the inflation process. Our empirical explorations reveal that the SARB’s set target does indeed lie within a range in which inflation is found to be most persistent. Overall and more importantly, our results suggest that the SARB should either consider revising their set inflation target by redefining the inflation target range to accommodate higher inflation rates or the Reserve Bank should consider abandoning the inflation targeting regime altogether.
    Keywords: Inflation persistence; TAR Models; Monetary Policy; South African Reserve Bank (SARB); Inflation Targeting; Developing Economy.
    JEL: C22 E30 E31 E52 E58
    Date: 2014–09–01
  12. By: Wesselbaum, Dennis
    Abstract: This paper studies sectoral effects of fiscal spending. We estimate a New Keynesian model with search and matching frictions and two sectors. Fiscal spending is either wasteful (consumption) or productivity enhancing (investment). Using U.S. data we find significant differences across sectors. Further, we show that government investment rather than consumption shocks are driver of fluctuations in sectoral and aggregate outputs and labor market variables. Finally, government investment shocks are much more effective in stimulating the economy than spending shocks. However, this comes at the cost of a very persistent increase in debt.
    Keywords: Government Consumption, Government Investment, Search and Matching, Sectoral Effects.
    JEL: C1 C11 E32 E62 H5 H50
    Date: 2014–09–09
  13. By: Sebastiaan Pool; Leo de Haan; Jan Jacobs
    Abstract: This paper examines how credit risk affects bank lending and the business cycle. We estimate a panel Vector Autoregression model for an unbalanced sample of 12 OECD countries over the past two to three decades, consisting of the output gap, inflation, the short-term interest rate, bank lending, as well as loan loss provisioning by banks (as proxy for credit risk). Our main findings are that: (i) bank lending and loan loss provisioning are important drivers of business cycle fluctuations, (ii) loan loss provisioning decreases in relative terms as bank lending increases, and (iii) bank lending is primarily affected by output fluctuations.
    Keywords: loan loss provisioning; bank lending; business cycle
    JEL: E44 G21
    Date: 2014–10
  14. By: Carvallo, Oscar; Pagliacci, Carolina
    Abstract: Which structural macroeconomic shocks have typified rising house prices? What ultimate factors have compromised financial stability and risk? These questions are answered for the Venezuelan economy by estimating a FAVAR model with macroeconomic, banking and asset price variables. We find that real house prices only respond to demand shocks occurring at aggregate or sectorial level. Most significant house price growths also take place with greater financial exposure to mortgages and real domestic currency depreciations, two factors that potentially magnify rising house prices. Monetary expansions from fiscal origin also increase house prices. In terms of banks’ performance, we find that credit is directed toward firms for expansionary supply shocks, but toward household spending, on goods or housing, for expansionary demand shocks. In all these cases, banking leverage increases, but mainly when shocks have a significant effect on output. Rising risk and financial instability stem from the combination of growing interest rates and domestic currency appreciation, two events that provide incentives for banks to re-arrange portfolio allocation at the cost of a higher volatility of returns. Increasing risk seems to be strongly conditioned by abrupt reductions in banks’ liabilities.
    Keywords: macroeconomic shocks, housing market, financial stability, banking assets, portfolio allocation
    JEL: E32 E44 R31
    Date: 2013
  15. By: Buiter, Willem
    Abstract: Central banks’ economic and political importance has grown in advanced economies since the start of the Great Financial Crisis in 2007. An unwillingness or inability of governments to use countercyclical fiscal policy has made monetary policy the only stabilization tool in town. However, much of the enhanced significance of central banks is due to their lender †of †last †resort and market †maker †of †last †resort roles, providing liquidity to financially distressed and illiquid financial institutions and sovereigns. Supervisory and regulatory functions – often deeply political, have been heaped on central banks. Central bankers also increasingly throw their weight around in the public discussion of and even the design and implementation of fiscal policy and structural reforms †areas which are way beyond their mandates and competence. In this lecture I argue that the preservation of the central bank’s legitimacy requires that a clear line be drawn between the central bank’s provision of liquidity and the Treasury’s solvency support for systemically important financial institutions. All activities of the central bank that expose it to material credit risk should be guaranteed by the Treasury. In addition, central banks must become more accountable by increasing the transparency of their lender †of †last †resort and market maker †of †last resort activities. Central banks ought not to engage in quasi †fiscal activities. Finally, central banks should stick to their knitting and central bankers should not become participants in public debates and deeply political arguments about matters beyond their mandate and competence, including fiscal policy and structural reform.
    Keywords: seigniorage, quasi-fiscal, independence, legitimacy, accountability, monetary policy, regulation, supervision.
    JEL: E02 E42 E5 E52 E58 E6 E62 E63 G18 G28 H63
    Date: 2014
  16. By: Ansgar Belke; Timo Baas
    Abstract: Member countries of the European Monetary Union (EMU) initiated wide-ranging labor market reforms in the last decade. This process is ongoing as countries that are faced with serious labor market imbalances perceive reforms as the fastest way to restore competitiveness within a currency union. This fosters fears among observers about a beggarthy- neighbor policy that leaves non-reforming countries with a loss in competitiveness and an increase in foreign debt. Using a two-country, two-sector search and matching DSGE model, we analyze the impact of labor market reforms on the transmission of macroeconomic shocks in both, non-reforming and reforming countries. By analyzing the impact of reforms on foreign debt, we contribute to the debate on whether labor market reforms increase or reduce current account imbalances.
    Keywords: Current account deficit, labor market reforms, DSGE models, search and matching labor market
    JEL: E24 E32 J64 F32
    Date: 2014–09
  17. By: Cook, David (Hong Kong University of Science and Technology); Devereux, Michael B. (University of British Columbia)
    Abstract: An independent currency and a flexible exchange rate generally helps a country in adjusting to macroeconomic shocks. But recently in many countries, interest rates have been pushed down close to the lower bound, limiting the ability of policy-makers to accommodate shocks, even in countries with flexible exchange rates. This paper argues that if the zero bound constraint is binding and policy lacks an effective ‘forward guidance’ mechanism, a flexible exchange rate system may be inferior to a single currency area. With monetary policy constrained by the zero bound, under flexible exchange rates, the exchange rate exacerbates the impact of shocks. Remarkably, this may hold true even if only a subset of countries are constrained by the zero bound, and other countries freely adjust their interest rates under an optimal targeting rule. In a zero lower bound environment, in order for a regime of multiple currencies to dominate a single currency, it is necessary to have effective forward guidance in monetary policy.
    JEL: E2 E5 E6
    Date: 2014–09–01
  18. By: Alexandre Janiaka; Paulo Santos Monteiro
    Abstract: Employment volatility is larger for young and old workers than for prime aged. At the same time, in economies with high tax rates, the share of total hours supplied by the young/old workers is smaller. These two observations imply a negative correlation between government size (measured by the share of taxes in total output) and aggregate output volatility. This paper assesses in a calibrated heterogenous agent, overlapping generations model the quantitative importance of these two facts to account for the empirical relation between government size and macroeconomic stability. The baseline calibration accounts correctly for the quantitative relation between output volatility and government size observed in the data.
    Keywords: Automatic Stabilizers; Distortionary Taxes; Demographics
    JEL: E32 E62 H30 J10 J21
    Date: 2014–10
  19. By: Kumar, Anil (Federal Reserve Bank of Dallas); Orrenius, Pia M. (Federal Reserve Bank of Dallas)
    Abstract: Studies that estimate the Phillips curve for the U.S. use mainly national-level data and find mixed evidence of nonlinearity, with some recent studies either rejecting nonlinearity or estimating only modest convexity. In addition, most studies do not make a distinction between the relative impacts of short-term vs. long-term unemployment on wage inflation. Using state-level data from 1982 to 2013, we find strong evidence that the wage-price Phillips curve is nonlinear and convex; declines in the unemployment rate below the average unemployment rate exert significantly higher wage pressure than changes in the unemployment rate above the historical average. We also find that the short-term unemployment rate has a strong relationship with both average and median wage growth, while the long-term unemployment rate appears to only influence median wage growth.
    Keywords: Phillips curve; monetary policy; unemployment; wage growth
    JEL: E52 E58
    Date: 2014–10–01
  20. By: Yashin, Pete
    Abstract: A new macroeconomic model is presented, which makes it possible to take a fresh look both at the long-term equilibrium growth process and at short-term deviations from it. Its key hypothesis is investment-to-profits equality. This hypothesis has classical roots and corresponds to the Ricardian and Marx approach and coincides with Phelps’ Golden Rule of capital accumulation as well as with Uzawa’s classical hypothesis. Under this assumption the long-term output growth rate is determined by the rate of capital accumulation, which in turn is equal to the net profit rate. The profit rate value is the result of a trade-off between workers and proprietors. The relationship between aggregate output and inputs is analytically derived in this paper where the variable values are measured not in physical units, but in the current monetary cost. It has the Cobb-Douglas functional form but is neither neoclassical production function nor technical relationship, which could specify the maximum output obtainable from a given set of inputs. The exponent of capital in the resulting function is equal to the investment rate, whose current value is not constant in time. So the output is no longer an unalterable function of inputs, and its shape can vary. The ‘production function’ shift parameter, which is commonly associated with the level of technology, may be expressed in terms of the wage level. The reasons for the 2007–2008 global recession have been clarified.
    Keywords: neoclassical theorem, Uzawa classical hypothesis, Cobb-Douglas function, Uzawa theorem, Uzawa capital intensity condition, business cycle, Harrod-Domar model, accounting identity, path-dependent equilibria, aggregation problems
    JEL: E10 E11 E20
    Date: 2014–09–14
  21. By: International Monetary Fund. Asia and Pacific Dept
    Abstract: KEY ISSUES Context. Economic performance has improved over the last year. The recovery is taking hold, although domestic activity remains weak, in part constrained by weak banks and inefficient state-owned enterprises (SOEs). Inflation has declined, the current account remains in large surplus, and international reserves have increased. The authorities place a priority on preserving macroeconomic stability, tackling banking sector vulnerabilities, and reforming SOEs, though implementation has been gradual in some key areas. Outlook and risks. Growth is projected to recover gradually over the coming years, with the current account returning to a deficit and inflation contained. On current policies, public debt is projected to reach 60 percent of GDP. Risks include weaker trading partner growth, geopolitical tensions, slow structural reforms, and delayed fiscal consolidation. Early conclusion to key trade negotiations would be growth-positive. Fiscal policy. Deficits have been sizable and rising public debt requires attention. A medium-term growth-friendly consolidation is recommended, based on enhancing revenue and rationalizing unproductive expenditures while preserving crucial social and capital spending. This would ensure public debt sustainability with space to address contingent liabilities from banking sector and SOE restructuring. Monetary and exchange rate policy. The current monetary policy stance is appropriate. Greater exchange rate flexibility would help buffer external shocks, facilitate improved reserve adequacy, and help lay the groundwork for shifting toward using inflation as a nominal anchor over the medium term. Banking sector reform. Several policy measures have been taken recently, but the overall gradual approach will likely continue constraining credit growth and keep the system susceptible to shocks and significant asset deterioration. A more expeditious recognition of nonperforming loans, bank restructuring and orderly resolution would support robust credit creation and macro-financial stability. State-owned enterprise reform. Progress is being made. Implementing restructuring plans and accelerating equitization would help ensure more efficient resource allocation, strengthen banks, and deliver higher future growth. Reform should also focus on strengthening corporate governance and ensuring a level playing field.
    Keywords: Article IV consultation reports;Economic growth;Public debt;Fiscal policy;Fiscal reforms;Public enterprises;Monetary policy;Bank restructuring;Bank reforms;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Vietnam;
    Date: 2014–10–16
  22. By: Acevedo Rueda, Rafael Alexis; Mora Mora, José U.; Harmath Fernández, Pedro Alexander
    Abstract: This paper estimates the GDP gap in Venezuela by means of the structural VAR methodology and the Blanchard and Quah decomposition for the period 1999:1-2010:4. We use quarterly data for the inflation rate, real GDP, unemployment rate, and oil prices. We identify fiscal and monetary innovations on the demand side and technological and labor market disturbances on the supply side. Empirical results are consistent with the ones found the literature and reveal that even though there is a wide gap between real and potential GDP at the beginning of the period, it tends to narrow towards the end of the period as a result of the rise in oil prices. The GDP gap out of sample forecast shows that this gap, eventually, could fall as a result of the contraction in economic activity during 2009 and 2010.
    Keywords: Business cycles, potential output, inflation, oil prices, SVAR models
    JEL: C01 E22 O47 P44
    Date: 2012
  23. By: Masih, Mansur; AbdulKarim, Fatima
    Abstract: The primary aim of this study is to investigate the causal chain among output, money, prices, exchange rate and inflation in the context of Nigerian economy following the global economic crisis that hit many countries. The data used are from 1970 to 2012. The methodology employed uses several econometric techniques such as unit root tests, cointegration, vector error-correction model(VECM), variance decompositions and persistent profile in order to capture both the within-sample and out- of- sample causality. The result obtained is quite in line with our expectation given the nature of the Nigerian economy that relies heavily on the crude oil revenue and also imports from abroad. The result of cointegration analysis reveals that there exist long run relationships among the variables under study. From the VECM analysis, it suggests that output, interest rate and prices are the leading variables while exchange rate and money appear to have borne the brunt of the short run adjustments. This finding is in line with the real business cycle theory. In order to capture the impact of economic crisis on the selected variables, a dummy variable was created in the VECM analysis. It indicates an absence of the impact of the global economic crisis on the Nigerian economy as evidenced by the insignificance of the coefficient of the dummy variable. The findings of these results have economic policy implications in that output contains information about the sources of shock that affects the economy and hence output would be useful in predicting the future growth of the economy.
    Keywords: Nigeria, Macroeconomics, cointegration, Granger-causality
    JEL: C22 C58 E44
    Date: 2014–08–25
  24. By: Steven Ongena (University of Zurich, Swiss Finance Institute and CEPR); Ibolya Schindele (BI Norwegian Business School and Central Bank of Hungary); Dzsamila Vonnak (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences)
    Abstract: We analyze the differential impact of domestic and foreign monetary policy on the local supply of bank credit in domestic and foreign currencies. We analyze a novel, supervisory dataset from Hungary that records all bank lending to firms including its currency denomination. Accounting for time-varying firm-specific heterogeneity in loan demand, we find that a lower domestic interest rate expands the supply of credit in the domestic but not in the foreign currency. A lower foreign interest rate on the other hand expands lending by lowly versus highly capitalized banks relatively more in the foreign than in the domestic currency.
    Keywords: bank balance-sheet channel, monetary policy, foreign currency lending
    JEL: E51 F3 G21
    Date: 2014–10
  25. By: Guérin, Pierre; Leiva-Leon, Danilo
    Abstract: This paper estimates and forecasts U.S. business cycle turning points with state-level data. The probabilities of recession are obtained from univariate and multivariate regime-switching models based on a pairwise combination of national and state-level data. We use two classes of combination schemes to summarize the information from these models: Bayesian Model Averaging and Dynamic Model Averaging. In addition, we suggest the use of combination schemes based on the past predictive ability of a given model to estimate regimes. Both simulation and empirical exercises underline the utility of such combination schemes. Moreover, our best specification provides timely updates of the U.S. business cycles. In particular, the estimated turning points from this specification largely precede the announcements of business cycle turning points from the NBER business cycle dating committee, and compare favorably with competing models.
    Keywords: Markov-switching; Nowcasting; Forecasting; Business Cycles; Forecast combination.
    JEL: C53 E32 E37
    Date: 2014–10–17
  26. By: Kang, Wensheng; Ratti, Ronald A.; Vespignani, Joaquin L.
    Abstract: This paper investigates the influence of liquidity shocks in China on the U.S. economy over 1996-2012. The influence on the U.S. is through China’s influence on demand for imports, particularly that of commodities. In all models estimated a positive innovation in China’s liquidity is associated with: 1) a positive and statistically significant effect on oil and commodity prices that builds up rapidly over three months and then persists for twenty months; 2) a positive and statistically significant effect on U.S. CPI inflation that builds up over about six months or so and then persists; 3) a statistically significant depreciation of the real trade-weighted U.S. currency after about two or three months that achieves maximum absolute value after five to eight months and that then persists.
    Keywords: China’s liquidity, oil price, trade-weighted U.S. dollar
    JEL: E0 E4 E44
    Date: 2014–08–01
  27. By: Ferrari, Massimo
    Abstract: Abstract Starting from some of the most recent literature developed after the world financial crisis, it has been developed a model with heterogeneous agents and an active interbank market, characterized by an endogenous default probability. The key feature of the analysis is that the probability of default evolves endogenously and is taken into account by banks in their investment decisions. In each period banks, that are heterogeneous, decide to invest only a part, or even none, of their surplus funds on loans to other financial institutions, if the probability of default is high enough, preferring to use that funds to purchase riskless assets. This decision effects the total supply of credit to firms and, through it, the total level of investments, output and employment. Abstract When a financial crisis occurs, banks reduce their supply of interbank funds replicating, to some extent, the behaviour of the interbank market during the last crisis. Through the definition of an endogenous default probability and the analysis of how it effects the credit supply, it is possible to understand the connections between the behaviour of financial markets and the real economy. The model, at last, is calibrated in order to test the response of the system to exogenous shocks and to conventional and unconventional economic policies.
    Keywords: macroeconomics, macrofinance, endogenous default, crisis, default, policies, DSGE, heterogeneous agents
    JEL: E10 E3 E44 E52 G01 G21
    Date: 2014–01
  28. By: Jan Klacso (National Bank of Slovakia, Research Department)
    Abstract: This paper describes the current macro stress testing framework at the National Bank of Slovakia. Stress testing is aimed at testing the resilience of the banking sector to negative developments on the financial markets and in the real economy. The paper describes satellite models and assumptions used in the framework. The results of back testing and the most actual results of stress testing are also presented.
    Keywords: macro stress testing, banking sector, back testing
    JEL: E44 E47 G21
    Date: 2014–10
  29. By: Ratti, Ronald A.; Vespignani, Joaquin L.
    Abstract: This paper investigates the relationship between oil prices and the global economy. In modelling this relationship, a new approach is proposed in which we introduce the use of a factor error correction model to compress data from the largest developed and developing economies. An important feature of this model is that at global level, we find that global money, output and prices are cointegrated, which is supportive of the quantity theory of money. Positive innovation in global oil price is connected with global interest rate tightening. Positive innovation in global money, CPI and outputs is connected with an increase in oil prices while positive innovations in global interest rate are associated with a decline in oil prices. The US, Euro area and China variables are the main drivers of global factors
    Keywords: Global interest rate, global monetary aggregates, oil prices, GFVEC
    JEL: E0 E00 E02 E4 E40 F0
    Date: 2014–08–01
  30. By: Estrada, Fernando; González, Jorge Iván
    Abstract: The article is divided into two parts. The first describes Hayek's critique of the progressive tax system since its conception of social order and fiscal rationality. Hayek thinks about a key principle in liberal democracies: majority rule. And stretching comments to the influence of morality in taxation decisions. The second is aimed at analyzing the reception of Hayek in constitutional economics Brennan and Buchanan. However, in the interpretation of tax policy has decisively if governments reflect a tyrant or benevolent Leviathan State. The Fiscal Constitution must be accompanied by a monetary constitution. Both constitutional forms are related and prevent leviathánico power of governments, especially when they are short stay. Although, for the authors, the Fiscal Constitution has important implications for monetary constitution.
    Keywords: Power Tax, Hayek, Buchanan, Brennan, Progressive Tax.
    JEL: B13 B15 B25 B41 E42 E62 E64 H3
    Date: 2014
  31. By: Hännikäinen, Jari
    Abstract: We analyze the predictive content of the mortgage spread for U.S. economic activity. We find that the spread contains predictive power for real GDP and industrial production. Furthermore, it outperforms the term spread and Gilchrist– Zakrajsek spread in a real-time forecasting exercise. However, the predictive ability of the mortgage spread varies over time.
    Keywords: mortgage spread, forecasting, real-time data
    JEL: C53 E37 E44
    Date: 2014–09–05
  32. By: Song, Edward
    Abstract: The economy often moves in large jumps. For example, bank runs can quickly cause an economy to suddenly drop into a deep recession. In this paper, bank approval of loans to a genius entrepreneur may cause an economy to jump to a higher income level or growth rate. In a simple model, this implies that the economy has the possibility to exist in discrete states, a ground state (lowest production level) or an excited state (higher production levels). In a more dynamic model, bank approval of the loan causes an apparent technology shock that temporarily increases economic growth. In this paper, the economy is modeled as a regime switching model, i.e. a Markov-Switching model.
    Keywords: Macroeconomics, Banking, Multiple Equilibria, Behavioral Economics, Switching-Models.
    JEL: E0 E02 E22
    Date: 2014–09–09
  33. By: Sengul, Gonul (Istanbul School of Central Banking and the Central Bank of the Republic of Turkey); Tasci, Murat (Federal Reserve Bank of Cleveland)
    Abstract: This paper measures flow rates into and out of unemployment for Turkey and uses them to estimate the unemployment rate trend, that is, the unemployment rate to which the economy converges in the long run. In doing so, the paper explores the role of labor force participation in determining the unemployment rate trend. We find an inverse V-shaped pattern for Turkey’s unemployment rate trend over time, currently between 8.5 percent and 9 percent, with an increasing labor market turnover. We also find that allowing an explicit role for participation changes the results substantially, initially reducing the â€natural†rate but getting closer to the baseline over time. Finally, we show that this parsimonious model can be used to forecast unemployment in Turkey with relative ease and accuracy.
    Keywords: unemployment; unemployment flows; labor force participation; Turkey
    JEL: E24 E32 J64
    Date: 2014–10–27
  34. By: Szczypińska, Agnieszka (Ministry of Finance in Poland)
    Abstract: The euro area bond yield spreads have largely converged since the EMU creation. However, during the crisis most eurozone members reported a dramatic rise in government bond yield differentials to German bonds due to deteriorating public finance and liquidity conditions as well as increase in investors' risk aversion. This paper provides an empirical analysis of determinants of government bond yield spreads in the euro area in time of the crisis and the aftermath. It indicates the significance of countries' fiscal performance and liquidity risk in explaining the evolution of bond differentials. It also demonstrates the significant role of country perception reflected in forecasts and rating changes. Sovereign debt crisis led to a change in the perception of EMU sovereign debt market. Nowadays, euro adoption does not automatically imply the lower profitability of new EA members' bonds. The "euro area level of interest rate" does not exist anymore. It seems to be more conditional on countries' macroeconomic policy. However, on the basis of panel estimation, it turned out that in case of almost all euro-candidates the theoretical values of the EMU convergence criterion bond yields (as if they were the euro area members) would be significantly lower than the empirical ones. This suggests fiscal benefits from euro adoption might be substantial thus most countries with derogation should reassess their scale.
    Keywords: euro area; sovereign bond yield spreads; convergence criteria; panel data
    JEL: C23 E43 F34 H63
    Date: 2014–01–30
  35. By: Swastika, Purti; Dewandaru, Ginanjar; Masih, Mansur
    Abstract: The paper is the first attempt to analyse the impact of debt on economic growth in the context of Indonesia by combining the application of wavelet and non-linear techniques. Our results tend to indicate that there are complex lead-lag dynamic interactions between external debt-to-GDP ratio and GDP growth. Debt is shown to be inversely related with economic growth in a shorter scale, while it is not in the longer scale. Nonetheless, positive contribution of debt on economic growth is very restricted as it only occurs as the country stops borrowing more debt. Perhaps, this result confirms that Indonesia is one of the examples of "debt intolerance" countries. Therefore, our recommendation to the policy makers would be for a shift to risk-sharing system which shields the economy from any adversity resulting from interest-bearing system and hence spurs the economic growth
    Keywords: Debt Intolerance, Economic Growth, Indonesia, Wavelet Coherence, Maximal Overlap Discrete Wavelet Transform, Non-Linear Hansen Threshold. _____________________________________
    JEL: C22 C58 E44 G12
    Date: 2013–08–20
  36. By: Gonul Sengul; Murat Tasci
    Abstract: This paper measures flow rates into and out of unemployment for Turkey and uses these rates to estimate the unemployment rate trend, that is the level of the unemployment rate the economy converges to in the long-run. In doing so, the paper explores the role of the labor force participation in determining the trend unemployment. We find an inverse V-shaped pattern for the unemployment rate trend over time in Turkey, currently standing between 8.5 and 9 percent, with an increasing labor market turnover. We also find that allowing for an explicit role for participation changes the results substantially, reducing the “natural” rate at first, but then getting closer to the baseline over time. Finally, we show that this parsimonious model can be used for forecasting unemployment in Turkey with relative ease and accuracy.
    Keywords: Firm size, Wage gap, Informal job, Wage posting, Subgame perfection, Taxes, Social networks
    JEL: E24 E32 J64
    Date: 2014
  37. By: Nannan Yuan (Graduate School of Economics, Kobe University); Shigeyuki Hamori (Graduate School of Economics, Kobe University); Wang Chen (Graduate School of Economics, Kobe University)
    Abstract: Several studies have focused on the relationship between stock and house prices, but they reached contradictory conclusions. This paper contributes to the literature by analyzing the effects of stock prices on house prices with panel data of 28 regions in China for the 2003:Q1 to 2012:Q4 period. Compared with the previous studies, we explain these contrasting effects by distinguishing between the long- and short-run effects of stock prices. Our main results show that stock prices have a negative effect on house prices in the long run but positive effects in the short run. Furthermore, we determine that high market openness and low composition risk account for the opposite short-run effects of stock prices.
    Keywords: house prices, stock prices, dynamic relationship
    JEL: G32 E31 E44
    Date: 2014–10
  38. By: Krawczyk, Jacek B.; Judd, Kenneth L.
    Abstract: Viability theory is the study of dynamical systems that asks what set of initial conditions will generate evolutions which obey the laws of motion of a system and some state constraints, for the length of the evo- lution. We apply viability theory to Judd’s (JPE, 1987) dynamic tax model to identify which economic states today are sustainable under only slightly constrained tax-rate adjustments in the future, when the dynamic budget constraint and consumers’ transversality condition at infinity are satisfied. We call the set of such states the economic viability kernel. In broad terms, knowledge of the viability kernel can tell the planner what economic ob- jectives are achievable and assist in the choice of suitable controls to realise them. We observe, unsurprisingly, that a very high consumption economy lies outside such kernels, at least for annual tax-adjustment levels limited by 20%; higher consumption levels can only be sustained when capital is abundant. Furthermore, we notice that the sizes of the kernel slices for a given taxation level do not diminish as the tax rate rises, hence high taxation economies are not necessarily more prone to explode, or implode, than their low taxation counterparts. In fact, higher tax rates are neces- sary to keep many consumption choices viable, especially when capital approaches the constraint-set boundaries.
    Keywords: taxation policy, macroeconomic modeling, dynamic systems, vi- ability theory; VIKAASA
    JEL: C61 E61 E62
    Date: 2014
  39. By: George J. Bratsiotis; William J. Tayler; Roy Zilberman
    Abstract: The global fi?nancial crisis in 2007 prompted policy makers to introduce a combination of bank regulation and macroprudential policies, including non-conventional monetary policies, such as interest on reserves and changes in required reserves. This paper examines how the combination of such policies can help stabilize the effects of real and ?financial shocks in economies where ?financial frictions are important. Although there is an extensive literature on ?financial regulation and macro-prudiential policy, and more recently some literature on the effects of interest on reserves, these policies are usually examined independently. The results point to the importance of coordination between ?financial regulation and monetary policy in minimizing welfare losses following such shocks. Interest on reserves is shown to be more effective in reducing welfare losses than changes in required reserves and to play a signi?cant role in making stabilization policy more effective. The results also suggest an easing of bank capital requirements during recessions, when output and loans are falling and the risk of default is high.
    Date: 2014
  40. By: Aleksander Berentsen; Samuel Huber; Alessandro Marchesiani
    Abstract: We investigate the positive and normative implications of a tax on financial market transactions in a dynamic general equilibrium model, where agents face idiosyncratic liquidity shocks and financial trading is essential. Our main finding is that agents' portfolio choices display a pecuniary externality which results in too much trading. We calibrate the model to U.S. data and find an optimal tax rate of 2.5 percent. Imposing this tax reduces trading in financial markets by 30 percent.
    Keywords: Tobin tax, financial transaction tax, OTC trading
    JEL: E44 E50 G18
    Date: 2014–10
  41. By: Katharina Glass (Universität Hamburg (University of Hamburg)); Ulrich Fritsche (Universität Hamburg (University of Hamburg))
    Abstract: Most macroeconomic data is continuously revised as additional information becomes available. We suggest that revisions of data is an important source of uncertainty about the state of the economy. This paper evaluates the quality of major real macroeconomic Euro area variables, published by Eurostat since 2001. The real time data set contains 159 vintages, covering the period of January 1991 until March 2014. The information content or informativeness of revision is measured using three methods: descriptive error statistics, signal-to-noise ratios and entropy measures. Our results document a trend of growing data uncertainty over the past decade for Euro area variables. As a robustness check, we reckon our results using US data and additionally show that uncertainty calculations are robust towards changes in final revision definition. Moreover, Euro area signal-noise-ratios and entropy measures are correlated with popular uncertainty proxies, Euro area news-based EPU and the VSTOXX. Our finding corresponds to the recent literature on increased macroeconomic uncertainty and especially economic policy uncertainty during and after the “Great Recession”.
    Keywords: forecasting, information content, uncertainty, revisions, revision errors, entropy, signal-to-noise ratio, integrated signal-to-noise ratio, recession, EPU, VSTOXX
    JEL: C53 C8 D80 E3
    Date: 2014–06
  42. By: International Monetary Fund. African Dept.
    Abstract: KEY ISSUES Context: Kenya has embarked on major reforms in line with the 2010 constitution. The new government has started the process of devolution at a fast pace, introducing a reporting framework that allows for monitoring progress and challenges. Macroeconomic stability in a market-friendly environment continues attracting the interest of foreign investors. Kenya placed its first US$2 billion Eurobond at favorable terms, with proceeds to be used to upgrade power generation and transportation. Promising commercial prospects of oil discoveries have the potential of providing significant foreign exchange and fiscal resources. Kenya is actively participating in the integration of East Africa, showing progress in reducing delays from the port of Mombasa to Kampala and Kigali. Kenyan banks export their successful business models through East Africa and other countries in the region, while complying with upgraded prudential regulations. The Central Bank of Kenya (CBK) maintains proactive financial inclusion policies that have been effective in facilitating access to credit by small and medium enterprises. Thanks to legal reforms, the Financial Action Task Force has removed Kenya from its watch list. Recent terrorist attacks and threats have raised security concerns, especially in coastal areas bordering Somalia. Outlook and policies: Growth is projected to accelerate to 5.8 percent in 2014/15 on the back of higher public and private investment and measures to improve the business environment. The 2014/15 budget aims at rebalancing recurrent and development spending. Medium-term fiscal policies intend to bring down the debt burden consistent with the East African Community Monetary Union (EAMU) Protocol convergence criteria. Inflation remains broadly in check, but rising food prices and rapid credit growth require careful monitoring by the CBK. Focus: Discussions centered on the implementation of devolution, in particular on the enforcement of accountability provisions. Some checks and balances are proving effective, such as the required Treasury approval of guarantees for county borrowing. However, a more systematic framework is needed. Staff and the authorities agreed that the scale of transfers to counties magnified government’s cash management problems that need to be addressed with the help of the recently introduced Treasury Single Account (TSA). This would also contribute to more effective monetary operations. Discussions also focused on the design of the legal framework for natural resource management aimed at ensuring consistency with public finance management provisions.
    Keywords: Article IV consultation reports;Economic growth;Fiscal policy;Fiscal reforms;Monetary policy;Reserves adequacy;Banks;Capital markets;Exchange rate assessments;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Kenya;
    Date: 2014–10–02
  43. By: Saltari, Enrico; Federici, Daniela
    Abstract: In Saltari et al. (2012, 2013) we estimated a dynamic model of the Italian economy. The main result of those papers is that the weakness of the Italian economy in the last two decades has been the total factor productivity slowdown. The aim of this paper is to investigate the roots of this slowdown. Specifically, we want to analyze the specific pattern of technical progress in determining the TFP dynamics. This analysis can not be done with the Cobb-Douglas technology but requires the employ of a CES function which allows to distinguish between the direction and the bias of technical progress. We employ a CES specification embodying both labor- and capital-augmenting technical change, with a σ less than 1. We obtain three main results. 1) There seems to have been a structural break around the mid-nineties in the direction and bias of technological change; 2) The first half of the sample features a labor-augmenting technical change and a capital bias; 3) In the second part of the sample both these characteristics seem to disappear, and factor endowments evolution assumes a key role. This last fact may be view as one of the potential causes of the Italian productivity stagnation.
    Keywords: CES production function; Elasticity of substitution; Factor-augmenting technical progress and ICT technical change
    JEL: C30 E22 E23 O33
    Date: 2014–09–03
  44. By: Julia, Knolle
    Abstract: This paper investigates methods of assessing dynamic efficiency, points out their shortcomings and develops a new criterion of determining whether or not an economy accumulates too much capital. This criterion is then applied to the OECD countries as well as China. The analysis sheds a new light on recent proposals of raising public debt levels during a time of low interest rates.
    Keywords: Overaccumulation; dynamic efficiency; public debt; ponzi games; zero lower bound; WACC.
    JEL: E22 E43 O47
    Date: 2014–10
  45. By: Zivanemoyo Chinzara
    Abstract: Using novel measures of technology diffusion and adoption developed by Comin and Hobijn (2012), we examine the role of finance in the timing of adoption and the diffusion of thirteen sectoral technologies in 44 Sub-Saharan Africa countries. These technologies cover sectors such as agriculture, communication and information technology, industry, and transport. The results show that financial development enhances the timing and diffusion of technologies both directly, and indirectly, through reducing the risk associated with new technologies. However, the results differ across technologies, with the information and communication technologies showing more responsiveness to changes in financial development. There is also evidence to suggest that, subject to the level of economic development, some technologies diffusion faster, while others diffuse slower. The latter result implies that some sector-specific technologies may diffuse quicker in less developed economies, and thus economic theory needs to be extended to account for this technology-specific feature
    Keywords: Financial Depth, Technology Diffusion, Timing of Adoption, Economic Development, Macroeconomic Volatility, institutions, Dynamic panels, GMM
    JEL: E44 G21 O30 O33
    Date: 2014
  46. By: Byrne, Joseph P; Korobilis, Dimitris; Ribeiro, Pinho J
    Abstract: We analyse the role of time-variation in coefficients and other sources of uncertainty in exchange rate forecasting regressions. Our techniques incorporate the notion that the relevant set of predictors and their corresponding weights, change over time. We find that predictive models which allow for sudden, rather than smooth, changes in coefficients significantly beat the random walk benchmark in out-of-sample forecasting exercise. Using an innovative variance decomposition scheme, we identify uncertainty in coefficients estimation and uncertainty about the precise degree of coefficients' variability, as the main factors hindering models' forecasting performance. The uncertainty regarding the choice of the predictor is small.
    Keywords: Instabilities; Exchange Rate Forecasting; Time-Varying Parameter Models; Bayesian Model Averaging; Forecast Combination; Financial Condition Indexes; Bootstrap
    JEL: C53 C58 E44 F37 G01
    Date: 2014–09–26
  47. By: International Monetary Fund. African Dept.
    Keywords: Liquidity management;Banks;Monetary policy;Public investment;Infrastructure;Economic growth;Global competitiveness;Financial sector;Access to capital markets;Staff Reports;Selected Issues Papers;Central African Economic and Monetary Community;
    Date: 2014–10–06
  48. By: Zhijian Wang; Bin Xu
    Abstract: By generalizing the measurements on the game experiments of mixed strategy Nash equilibrium, we study the dynamical pattern in a representative dynamic stochastic general equilibrium (DSGE). The DSGE model describes the entanglements of the three variables (output gap [$y$], inflation [$\pi$] and nominal interest rate [$r$]) which can be presented in 3D phase space. We find that, even though the trajectory of $\pi\!-\!y\!-\!r$ in phase space appears highly stochastic, it can be visualized and quantified. It exhibits as clockwise cycles, counterclockwise cycles and weak cycles, respectively, when projected onto $\pi\!-\!y$, $y\!-\!r$ and $r\!-\!\pi$ phase planes. We find also that empirical data of United State (1960-2013) significantly exhibit same cycles. The resemblance between the cycles in general equilibrium and the cycles in mixed strategy Nash equilibrium suggest that, there generally exists dynamical fine structures accompanying with equilibrium. The fine structure, describing the entanglement of the non-equilibrium (the constantly deviating from the equilibrium), displays as endless cycles.
    Date: 2014–10
  49. By: Ruja, Catalin
    Abstract: This report presents an application of a macro stress testing procedure on credit risk in the Romanian banking system. Macro stress testing, i.e. assessing the vulnerability of financial systems to exceptional but plausible macroeconomic scenarios, maintains a central role in macro-prudential and crisis management frameworks of central banks and international institutions around the globe. Credit risk remains the dominant risk challenging financial stability in the Romanian financial system, and thus this report analyses the potential impact of macroeconomic shocks scenarios on default rates in the corporate and household loan portfolios in the domestic banking system. A well-established reduced form model is proposed and tested as the core component of the modelling approach. The resulting models generally confirm the influence of macroeconomic factors on credit risk as documented in previous research including applications for Romania, but convey also specific and novel findings, such as inclusion of leading variables and construction activity level for corporate credit risk. Using the estimated model, a stress testing simulation procedure is undertaken. The simulation shows that under adverse shock scenarios, corporate default rates can increase substantially more than the expected evolution under the baseline scenario, especially in case of GDP shock, construction activity shock or interest rate shocks. Under the assumptions of these adverse scenarios, given also the large share of corporate loans in the banks’ balance sheet, the default rates evolution could have a substantial impact on banks’ loan losses. The households sector stress testing simulation show that this sector is more resilient to macroeconomic adverse evolutions, with stressed default rates higher than expected values under baseline scenario, but with substantially lower deviations. The proposed macro-perspective model and its findings can be incorporated by private banks in their micro-level portfolio risk management tools. Additionally, supplementing the authorities’ stress tests with independent approaches can enhance credibility of such financial stability assessment.
    Keywords: Stress Testing, Macro Stress Testing, Credit Risk, Banking Crisis, Monte Carlo simulation, Romania
    JEL: C01 C12 C13 C15 C32 C52 C53 C87 E58 G01 G21
    Date: 2014–07–23
  50. By: Maito, Esteban Ezequiel
    Abstract: This paper analyzes the valorization process in Chile, Japan, Netherlands and United States, estimating advanced constant and variable capital, turnover speed, capital composition and profit rate on total advanced capital. Furthermore, it analyzes the role of turnover speed in the valorization process. In core countries, turnover speed of capital tends to be higher due to a larger development of productive forces. Thus, in Netherlands, United States and Japan there is higher labor share, representing at the same time, the wage bill adjusted by capital turnover, a lower proportion related to total capital and income, compared to peripheral countries like Chile
    Keywords: rate of profit – labor share – turnover speed – value capital composition - annual surplus value rate
    JEL: E11 E23 E25 E3 O4 P1 P16
    Date: 2014–03
  51. By: Bouoiyour, Jamal; Selmi, Refk
    Abstract: The nexus between inflation and its uncertainty has been a topic of wide dispute. Using wavelet decomposition and with special reference to Egypt for the period 1960-2013, we find that the focal relationship varies substantially among the different frequencies involved. In the short-run, inflation expands inflation uncertainty and vice versa. In the medium term, higher inflation leads to greater volatility, while there is no evidence of significant link in the long-run. The main causes of these mixed outcomes have been organized into demand pull factors, cost push ones and the possible reflect of the conflicting underlying objectives pursued to avoid political pitfalls and the great instability that unfolded since 25th January 2011.
    Keywords: Inflation; inflation uncertainty; wavelet approach; Egypt.
    JEL: C1 C6 E3
    Date: 2014–10
  52. By: Markus K. Brunnermeier (Princeton University); Isabel Schnabel
    Abstract: This paper reviews some of the most prominent asset price bubbles from the past 400 years and documents how central banks (or other institutions) reacted to those bubbles. The historical evidence suggests that the emergence of bubbles is often preceded or accompanied by an expansionary monetary policy, lending booms, capital inflows, and financial innovation or deregulation. We find that the severity of the economic crisis following the bursting of a bubble is less linked to the type of asset than to the financing of the bubble – crises are most severe when they are accompanied by a lending boom, high leverage of market players, and when financial institutions themselves are participating in the buying frenzy. Past experience also suggests that a purely passive “cleaning up the mess” stance towards inflating bubbles in many cases is costly. At the same time, while interest - rate leaning policies and macroprudential tools can and sometimes have helped to deflate bubbles and mitigate the associated economic crises, the correct implementation of such proactive policy approaches remains fraught with difficulties.
    Date: 2014–10–31
  53. By: Raphael Anton Auer; Aaron Mehrotra
    Abstract: Some observers argue that increased real integration has led to greater co-movement of prices internationally. We examine the evidence for cross-border price spillovers among economies participating in the pan-Asian cross-border production networks. Starting with country-level data, we find that both producer price and consumer price inflation rates move more closely together between those Asian economies that trade more with one another, ie that share a higher degree of trade intensity. Next, using a novel data set based on the World Input-Output Database (WIOD), we examine the importance of the supply chain for cross-border price spillovers at the sectoral level. We document the increasing importance of imported intermediate inputs for economies in the Asia-Pacific region and examine the impact on domestic producer prices of changes in costs of imported intermediate inputs. Our results suggest that real integration through the supply chain matters for domestic price dynamics in the Asia-Pacific region.
    Keywords: globalisation, inflation, Asian manufacturing supply chain, price spillovers
    JEL: E31 F4 F14 F15
    Date: 2014
  54. By: Gabriele Galati; Richhild Moessner
    Abstract: The literature on the effectiveness of macroprudential policy tools is still in its infancy and has so far provided only limited guidance for policy decisions. In recent years, however, increasing efforts have been made to fill this gap. Progress has been made in embedding macroprudential policy in theoretical models. There is increasing empirical work on the effect of some macroprudential tools on a range of target variables, such as quantities and prices of credit, asset prices, and on the amplitude of the financial cycle and financial stability. In this paper we review recent progress in theoretical and empirical research on the effectiveness of macroprudential instruments.
    Keywords: Macroprudential policy; financial regulation
    JEL: E58 G28
    Date: 2014–09
  55. By: Hotchkiss, Julie L. (Federal Reserve Bank of Atlanta); Moore, Robert E. (Georgia State University); Rios-Avila, Fernando (Bard College)
    Abstract: The analysis in this paper provides estimates of family welfare losses generated by wage and nonlabor income declines experienced across the Great Recession and by labor market constraints existing postrecession. Welfare losses are greater as families (both married and single) move up the income distribution. Total static welfare losses are estimated to amount to roughly $190 billion, comparing family welfare between 2007 and 2011.
    Keywords: family welfare; joint labor supply; microsimulation; constrained hours
    JEL: D19 E32 I30 J22
    Date: 2014–08–01
  56. By: Laura Carvalho; Armon Rezai
    Abstract: This paper presents a theoretical and empirical investigation of how changes in the size distribution of income can affect aggregate demand and the demand regime of an economy. After presenting empirical evidence for the US economy that the propensity to save increases significantly from the bottom to the top quintile of wage earners, we demonstrate that more equal distributions always lead to higher output in the traditional neo-Kaleckian macroeconomic model. We also present conditions under which a reduction of income inequality among workers turns demand more wage-led. This view is supported by the results of an econometric study for the United States (1967-2010) which show that the rise after 1980 in income inequality has made the US economy more profit-led.
    Keywords: Income inequality; demand regimes; Neo-Kaleckian model; personal and functional income distribution
    JEL: D31 D33 E25 C32
    Date: 2014–10–29
  57. By: Femke De Keulenaer; Jan-Emmanuel De Neve; Georgios Kavetsos; Michael I. Norton; Bert Van Landeghem; George W. Ward
    Abstract: Are individuals more sensitive to losses than gains in macroeconomic growth? Using subjective well-being measures across three large data sets, we observe an asymmetry in the way positive and negative economic growth are experienced, with losses having more than twice as much impact on individual happiness as compared to equivalent gains. We use Gallup World Poll data drawn from 151 countries, BRFSS data taken from a representative sample of 2.5 million US respondents, and Eurobarometer data that cover multiple business cycles over four decades. This research provides a new perspective on the welfare cost of business cycles with implications for growth policy and our understanding of the long-run relationship between GDP and subjective well-being.
    Keywords: Economic growth, business cycles, subjective well-being, loss aversion
    JEL: D03 O11 D69 I39
    Date: 2014–10
  58. By: Roberds, William (Federal Reserve Bank of Atlanta); Velde, Francois R. (Federal Reserve Bank of Chicago)
    Abstract: Publicly owned or commissioned banks were common in Europe from the 15th century. This survey argues that while the early public banks were characterized by great experimentation in their design, a common goal was to create a liquid and reliable monetary asset in environments where such assets were rare or unavailable. The success of these banks was, however, never guaranteed, and even well-run banks could become unstable over time as their success made them susceptible to fiscal exploitation. The popularization of bearer notes in the 18th century broadened the user base for the public banks' money but was also accompanied by increased fiscal abuse. Wartime demands of the Napoleonic Era resulted in the reorganization or dissolution of many early public banks. A prominent exception was the Bank of England, whose adept management of a fiscally backed money provided a foundation for the development of central banks as they exist today.
    Keywords: central banks; exchange banks; public banks
    JEL: E58 N13
    Date: 2014–08–03
  59. By: Sebastian Gechert; Ansgar Rannenberg
    Abstract: Die Studie untersucht, ob fiskalische Multiplikatoreffekte im Abschwung systematisch größer sind als im Aufschwung. Dazu wird eine Meta-Regressions-Analyse durchgeführt, die einen neuartigen Datensatz von 98 empirischen Studien mit über 1800 Beobachtungen von Multiplikatoreffekten auswertet und für die Regime-Abhängigkeit von Multiplikatoren kontrolliert. Es zeigt sich, dass ausgabeseitige Multiplikatoren im Abschwung um 0,6 bis 0,8 Punkte höher liegen. Darüber hinaus übersteigen ausgabeseitige Maßnahmen in ihrer Multiplikatorwirkung signifikant jene von Steueränderungen um etwa 0,3 während konjunktureller Normalphasen - und noch deutlicher im Abschwung. Auf einer breiten Basis empirischer Evidenz schlussfolgern wir, dass zur Begrenzung der negativen Folgen auf die Konjunktur Konsolidierungsmaßnahmen besser im Aufschwung und verstärkt über die Einnahmeseite erfolgen sollten.
    Keywords: fiscal multiplier, regime dependance, meta regression analysis
    JEL: E27 E62 H30
    Date: 2014
  60. By: Michael P. Clements (ICMA Centre, Henley Business School, University of Reading)
    Abstract: Application of the Bernhardt, Campello and Kutsoati (2006) test of herding to the calendar-year annual output growth and inflation forecasts suggests forecasters tend to exaggerate their differences, except at the shortest horizon when they tend to herd. We consider whether these types of behaviour can help to explain the puzzle that professional forecasters sometimes make point predictions and histogram forecasts which are mutually inconsistent.
    Keywords: Macro-forecasting, imitative behaviour, histogram forecasts, point predictions.
    Date: 2014–09
  61. By: Melolinna, Marko (BOFIT)
    Abstract: This paper studies the effects of demand shocks caused by Emerging Asian (EMA) countries on oil prices over the past two decades, using vector autoregression models. The analysis builds on previous work done on identifying different types of oil shocks using structural time series methods. However, uniquely, this paper introduces a commodity demand indicator for EMA economies that is based on data independent of oil production and consumption data, thus properly accounting for oil demand pressures stemming from macroeconomic conditions in the EMA economies and the rest of the world. The analysis strongly suggests that EMA demand shocks have had a persistent and statistically significant effect on the level and variation of global oil prices over the past two decades. This result differs from some of the previous literature and hence proves that the choice of oil demand indicator in an oil-market VAR makes a material difference for the results. Furthermore, tentative evidence suggests that the effect of EMA demand is mainly driven by demand dynamics in China. The results of the benchmark model are robust to different sample periods and to variations in the definition of the oil demand indicators, as well as to an alternative identification strategy based on sign restrictions.
    Keywords: macroeconomic shocks; oil markets; sign restrictions; vector autoregression
    JEL: C32 E32 Q43
    Date: 2014–09–29
  62. By: Alonso Ortiz, Jorge
    Abstract: Employment to population ratios differ markedly across Organization for Economic Cooperation and Development (OECD) countries, especially for people aged over 55 years. In addition, social security features differ markedly across the OECD, particularly with respect to features such as generosity, entitlement ages, and implicit taxes on social security benefits. This study postulates that differences in social security features explain many differences in employment to population ratios at older ages. This conjecture is assessed quantitatively with a life cycle general equilibrium model of retirement. At ages 60–64 years, the correlation between the simulations of this study׳s model and observed data is 0.67. Generosity and implicit taxes are key features to explain the cross-country variation, whereas entitlement age is not.
    Keywords: Social security; Retirement; Idiosyncratic labor income risk
    JEL: E24 H53 J14 J26
    Date: 2014–10–01
  63. By: -, Anurag
    Abstract: This paper tries to evaluate costs and benefits of the dollarization and clears some basic understanding about dollarization. This paper provides the empirical evidence for the determinants of dollarization and finds that underlying vulnerability of economic system leads to dollarization and dollarization is feasible in small economies and only at inflationary environment
    Keywords: Dollarization, vulnerability, inflation, institution
    JEL: E02 F55
    Date: 2012–11–30
  64. By: Takumah, Wisdom
    Abstract: The relationship between government revenue and government expenditure has been an important topic in public economics, given its relevance for policy especially with respect to the budget deficit. The purpose of this paper is to investigate the relationship between government revenue and government expenditure in Ghana for the period of 1986 - 2012. We include GDP as a control variable into the model. Data properties were analyzed to determine their stationarity using the DF-GLS and PP unit root tests which indicated that the series are I(1). We find a cointegration relationship between government revenue and government expenditure. The causality tests indicate that there is a bidirectional causal relationship between government expenditure and revenues in both the long and the short run hence confirming the Fiscal synchronization hypothesis. The policy implication of the results suggests that there is interdependence between government expenditure and revenues. The government makes its expenditure and revenues decision simultaneously. Under this scenario the fiscal authorities of these countries with budget deficits should raise revenues and decrease spending simultaneously in order to control their budget deficits.
    Keywords: Government revenue, Government expenditure; Cointegration; Causality, Budget Deficit, Fiscal synchronization, Fiscal policy.
    JEL: C32 E62 H20 H50 H62
    Date: 2014–09–14
  65. By: Nalan Basturk (Maastricht University, the Netherlands); Pinar Ceyhan (Erasmus University Rotterdam); Herman K. van Dijk (Erasmus University Rotterdam, VU University Amsterdam, the Netherlands)
    Abstract: Time varying patterns in US growth are analyzed using various univariate model structures, starting from a naive model structure where all features change every period to a model where the slow variation in the conditional mean and changes in the conditional variance are specified together with their interaction, including survey data on expected growth in order to strengthen the information in the model. Use is made of a simulation based Bayesian inferential method to determine the forecasting performance of the various model specifications. The extension of a basic growth model with a constant mean to models including time variation in the mean and variance requires careful investigation of possible identification issues of the parameters and existence conditions of the posterior under a diffuse prior. The use of diffuse priors leads to a focus on the likelihood fu nction and it enables a researcher and policy adviser to evaluate the scientific information contained in model and data. Empirical results indicate that incorporating time variation in mean growth rates as well as in volatility are important in order to improve for the predictive performances of growth models. Furthermore, using data information on growth expectations is important for forecasting growth in specific periods, such as the the recession periods around 2000s and around 2008.
    Keywords: Growth, Time varying parameters, Expectations data
    JEL: C11 C22 E17
    Date: 2014–09–01
  66. By: Altmann, Markus; Bartzsch, Nikolaus
    Abstract: According to estimates using the seasonal method, the volume of euro coins held for transaction purposes in Germany in 2011 stood at €2.3 billion; this corresponds to around 36% of the total volume of German (ie issued by the Deutsche Bundesbank) euro coins in circulation. 76% of the total volume of coins held for transaction purposes was accounted for by €1 and €2 coins. Only in the case of €2 coins has the cash stock held for transaction purposes made a significant contribution to the growth in the volume of coins in circulation in recent years. Therefore, structural models are the most suitable method of determining the demand for this denomination. Given the overall weakness in the growth of the cash held for transaction purposes, coin processing costs have, all other things being equal, risen less sharply than the volume of coins in circulation. Small denomination coins (1 and 2 cent coins) account for comparatively low shares of the coins held for transaction purposes (less than 30%). This is because they are hoarded to a greater extent in order to lighten one’s wallet or purse, or are lost. This could be used as an argument for applying a rounding rule (to nearest five cents). It is presumed that abroad German euro coins are, on balance, only held outside the euro area. There they are being hoarded on a permanent basis. Due to the inadequate data availability, the cash balance held for domestic transactions by sector cannot be fully recorded. Estimates for 2011 put them at between €0.7 billion and €1.0 billion. Households and credit institutions accounted for the largest share.
    Keywords: Coins, transaction balance, hoarding, foreign demand, seasonal method, introduction of euro cash
    JEL: E41 E42
    Date: 2014–08
  67. By: Swamy, Vighneswara
    Abstract: There seems to be no end to the sovereign debt woes of Argentina in the near future, as the ‘holdouts’ are accused of turning out to be vultures and are hell bent on their pound of flesh. The crisis has resurfaced as the Argentine President Cristina Fernandez de Kirchner, having been advised by her country’s lawyers, to intentionally default on dollars of its sovereign debt in order to force a renegotiation of the debt and to take the case away from American judges. This is the second such default by Argentine in the last thirteen years. Expert analysts term this a bad advice, and Argentina continues to follow it. Even if Argentina nudges ahead to restructure all its sovereign debt outside US to avoid the jurisdiction of the US courts, it might further deepen its status as a pariah country. The debt crisis has indeed compounded the problems for Argentina as it is already imbued with an array of macroeconomic woes caused by the artificially overvalued currency leading to stubbornly high inflation, state subsidies that are sapping resources, and an abysmal business climate that has seen investment all but dry up. If the crisis is not resolved adequately, there is every danger of driving the Argentine economy into structural economic mess.
    Keywords: Sovereign Debt, Crisis
    JEL: F34 G01
    Date: 2014
  68. By: Wang, Ping; Xie, Danyang
    Abstract: We construct a dynamic general equilibrium model of housing, incorporating some key features that bridge time and space. We model explicitly the evolution of housing structures/household durables and the separate role played by land, fully accounting for households’ locational choice decisions. Housing services derive positive utility, but are decayed away from the city center. Our model enables a full characterization of the dynamic paths of housing as well as housing and land prices. The model is particularly designed to be calibrated to fit some important stylized facts, including faster growth of housing structure/household durables than housing, faster growth of land prices than housing prices, a locationally steeper land rent gradient than the housing price gradient, and relatively flatter housing quantity and price gradients in larger cities with flatter population gradients. The calibrated model is then used to quantitatively assess the dynamic and spatial consequences of demand and supply shifts. We find that nonhomotheticity in forms of income-elastic spending on housing/household durables and minimum structure requirement in housing production are essential ingredients.
    Keywords: Macro Housing, Locational Choice, Dynamic Spatial Equilibrium
    JEL: D90 E20 O41 R13
    Date: 2014–09–29
  69. By: International Monetary Fund. Western Hemisphere Dept.
    Keywords: Monetary policy;Spillovers;United States;Economic growth;Fiscal sustainability;Economic models;Selected Issues Papers;Guatemala;
    Date: 2014–09–18
  70. By: Manuel Bertoloto (PriceStats); Alberto Cavallo (MIT & NBER); Roberto Rigobon (MIT & NBER)
    Date: 2014–10
  71. By: Söderlund, Bengt (The Ratio institute and Stockholm School of Economics); Gustavsson Tingvall, Patrik (Södertörn University and The Ratio Institute)
    Abstract: For more than three decades, China has managed to combine rapid economic growth with a heavily regulated financial sector. The discrepancy between economic and financial development has raised the question of whether China might be an exception to the so-called finance-growth nexus. This study examines the relationship between finance and growth at the provincial level in China using a new set of measures of capital freedom and financial development. The results indicate that capital freedom and financial development are associated with both higher income and growth rates. In particular, we find that the marketization of financial institutions and strengthening of legal and government institutions have a particularly strong impact on income and growth in low-income provinces.
    Keywords: Keywords: China; Economic growth; Financial institutions
    JEL: C23 E44 G28 O11 O43
    Date: 2014–10–02
  72. By: Eleonora Cutrini and Giorgio Galeazzi (University of Macerata)
    Abstract: Against the backdrop of the contagion literature, the paper analyses the impact of financial and trade linkages on sovereign bonds spreads in the Eurozone crisis. Using quarterly data for a sample of EMU countries during the period 2000-2013, we estimate fixed-effect panel models with Driscoll and Kraay standard errors that are robust to general forms of spatial and temporal dependence. Our main results can be summarized as follows. First, we suggest that the "sudden stop" of capital inflow toward the peripheral sovereign debt triggered a re-segmentation of financial markets and economic systems along national borders, with negative implications for risk sharing and the efficient allocation of capital. The "home bias" effect - i.e. the increase in the share of sovereign debt held by domestic banks - worsened the country-specific risk because the twin crisis (sovereign and banking) began to be conceived as more closely intertwined within countries than before. Second, the structure of international trade helps to account for the geographic scope of contagion, even after controlling for macroeconomic and fiscal vulnerabilities. Finally, the potential influence of wider financial spillovers related to the emerging markets' decoupling hypothesis is confirmed by our analysis. However, the "substitution-effect" of public debt securities of stand-alone emerging countries has affected more the sovereign spreads in the core than in the periphery.
    Keywords: Eurozone,decoupling,sovereign debt crisis,contagion,trade and financial linkages,foreign debt
    JEL: E44 F36 F40 F42 G12 H63
    Date: 2014–10
  73. By: Asian Development Bank (ADB); (Economics and Research Department, ADB); ;
    Abstract: This report presents the summary results of purchasing power parities (PPP) in the 2011 International Comparison Program in Asia and the Pacific and background information on the concepts that underpin the results. The PPPs are disaggregated by major economic aggregates which enable robust cross-country comparison as they include variables such as per capita real gross domestic product; real per capita actual final consumption expenditure for measures of economic well-being; gross fixed capital formation reflecting investment; and price level indexes showing relative cost of living by country.
    Keywords: International Comparison Program, ICP, 2011 ICP, Purchasing Power Parity, PPP, benchmark PPP, Asia and the Pacific, real expenditures, gross domestic product, GDP, national accounts, NA, price level index, PLI, reference currency, base country, big mac index, cross-country comparison, nominal GDP, real GDP, basic heading, GDP aggregates, GDP per capita, per capita expenditures, household final consumption expenditures, government final consumption expenditures, actual final consumption by household, gross fixed capital formation, consumer price index, CPI, country-product-dummy, CPD, EKS, linking asia and the pacific, exchange rates, market exchange rates, price indices, prices, poverty
    Date: 2014–04
  74. By: International Monetary Fund. European Dept.
    Keywords: Fiscal policy;Fiscal consolidation;Banking sector;Private savings;Housing;Household credit;Economic growth;Economic models;Selected Issues Papers;Cyprus;
    Date: 2014–10–22
  75. By: Varelas, Erotokritos
    Abstract: Based on a traditional approach to the behavior of a bank which lends both private and public sector, and utilizing a typical expression for public debt accumulation, this paper concludes that the optimality of the number and size of banks depends heavily on the course of the public debt, ceteris paribus. If the intergenerational dimension of the public debt is assumed away, fiscal consolidation presupposes a limited number of banks under normal only profit, a sort of quasi-competitive banking. In the presence of intergenerational considerations, fiscal consideration requires a few efficient banks experiencing perhaps positive profit, which is consistent with the notion of workable competition. Consequently, the pre-consolidation size distribution of banks is immaterial policy-wise.
    Keywords: Optimum number of banks, Public debt accumulation, Perfect vs. workable competition, Commercial bank seigniorage
    JEL: E50 G20 L10
    Date: 2014
  76. By: Constantine, Collin
    Abstract: The principal contribution of this article is that it provides evidence of recent trends of inequality in Guyana, but the article goes beyond this and describes the evolution of inequality since 1974 to 2013. This is done within a Kaleckian framework to derive profit and wage rates, since recent Gini coefficients data are absent. The evidence implies that inequality is on the rise. The article argues that the mining and quarrying sector regulates Guyana’s growth performance and ignites growth in the non-tradable services sector, which are characterized by low-wage-low-employment opportunities. Thus, a greater share of the gains in income in these sectors goes to profits when growth is sustained.
    Keywords: inequality, Kaleckian framework, Guyana, growth
    JEL: D30 D33 D63 E25
    Date: 2014
  77. By: Kal, Süleyman Hilmi; Arslaner, Ferhat; Arslaner, Nuran
    Abstract: There has been a well-known relationship between macro financial fundamentals and oil prices, yet there is also ample evidence that this relationship weakens during some periods. In this paper, we investigated whether the relationship between oil and macro financial fundamentals vary depending on gold price of oil. To achieve this, a Markov model is implemented to the monthly data for the period 1974 - 2010. In the Markov model utilized in this paper, transition probabilities are endogenous and governed by the volatilities of oil, gold, stock market and exchange rate. This allowed us to endogenously model the switching process. Our results provide evidence that the link between oil price and macro financial fundamentals disappears in the periods of inexpensive gold price of oil. Our findings also provide evidence that the volatilities of the variables matter only when gold price of oil is inexpensive.
    Keywords: Oil Price; Gold Oil Ratio; Exchange Rates; Interest Rates; Stock Market Yields; Time Series Analysis; Markov Switching Regimes
    JEL: C22 E44 G12
    Date: 2013–04
  78. By: Roman Kräussl; Elizaveta Mirgorodskaya (LSF)
    Abstract: This paper investigates the impact of news media sentiment on financial market returns and volatility in the long-term. We hypothesize that the way the media formulate and present news to the public produces different perceptions and, thus, incurs different investor behavior. To analyze such framing effects we distinguish between optimistic and pessimistic news frames. We construct a monthly media sentiment indicator by taking the ratio of the number of newspaper articles that contain predetermined negative words to the number of newspaper articles that contain predetermined positive words in the headline and/or the lead paragraph. Our results indicate that pessimistic news media sentiment is positively related to global market volatility and negatively related to global market returns 12 to 24 months in advance. We show that our media sentiment indicator reflects very well the financial market crises and pricing bubbles over the past 20 years.
    Keywords: Investor behavior; News media sentiment; Financial market crises; Pricing bubbles; Framing effects
    JEL: G01 G10 E32
    Date: 2014
  79. By: Miguel Fuentes; Pablo Pincheira; Juan Manuel Julio; Hernán Rincón
    Abstract: This paper analyses the effects of sterilised, intraday foreign exchange market operations (non-discretionary and discretionary) on foreign exchange returns and volatility in four inflation targeting economies in Latin America. The distribution of exchange rates during intervention and non-intervention days are first compared, and then event study regressions are used to estimate the impact of intervention (and macro surprises) on exchange rate returns and exchange rate volatility as well as on foreign exchange market turnover (in Colombia). In general, the results suggest that the impact of both non-discretionary and discretionary operations is at times significant but transitory. However, an analysis of Chile’s experience suggests that the announcement effects of even non-discretionary programmes may be significant and persistent.
    Keywords: Exchange rate, central bank intervention, microstructure.
    JEL: E58 F31 G14
    Date: 2014–10–21
  80. By: Michael D. Bordo
    Date: 2014–07
  81. By: Altmann, Markus; Bartzsch, Nikolaus
    Abstract: Der Transaktionskassenbestand von Euro-Münzen in Deutschland betrug im Jahr 2011 nach Schätzungen mit der saisonalen Methode 2,3 Mrd. €, was etwa 36 % des gesamten deutschen (von der Deutschen Bundesbank emittierten) Euro-Münzumlaufs entspricht. 76 % dieses Transaktionskassenbestandes entfiel auf die 1-Euro- und die 2-Euro-Münze. Nur bei letzterer hat die Transaktionskasse in den letzten Jahren einen nennenswerten Beitrag zur Dynamik des Umlaufs geleistet. Daher eignen sich strukturelle Modelle am besten für die Münznachfrage nach dieser Stückelung. Wegen der insgesamt schwachen Dynamik der Transaktionskassenbestände sind die Münzgeldbearbeitungskosten in den letzten Jahren ceteris paribus weniger gestiegen als der mengenmäßige Münzumlauf. Die Transaktionskassenanteile sind bei den Kleinmünzen (1-Cent- und 2-Cent-Münzen) mit unter 30 % vergleichsweise niedrig, da diese in größerem Umfang gehortet werden, um das Portemonnaie zu entlasten, oder verloren gegangen sind. Dies könnte als Argument für eine Rundungsregel (auf fünf Cent) herangezogen werden. Im Ausland befinden sich deutsche Euro-Münzen (per Saldo) vermutlich nur außerhalb des Euro-Raums, wo sie dauerhaft gehortet werden. Die inländischen sektoralen Transaktionskassenbestände können wegen der unzureichenden Datenlage nur unvollständig erfasst werden. Sie lagen im Jahr 2011 schätzungsweise zwischen 0,7 Mrd. € und 1,0 Mrd. €. Der größte Teil entfiel auf Privatpersonen und Kreditinstitute.
    Keywords: Münzen, Transaktionskasse, Hortung, Auslandsumlauf, saisonale Methode, Euro-Bargeldeinführung
    JEL: E41 E42
    Date: 2014–05
  82. By: Judit Temesváry (Department of Economics, Hamilton College)
    Abstract: Foreign currency-based loans and deposits became very popular in Central-Eastern European countries (CEECs) over the 2000-2011 period. This paper employs a structural approach to simultaneously examine the demand-side (consumer-related) and supply-side (bank-related) determinants of the quick spread of FX-based banking. The econometric analysis uses a unique newly constructed dataset on FX and domestic currency loans, deposits and interest rates, covering 16 CEECs overtime. Results show that deregulation and cheap funding from parents abroad helped fuel FX lending. There is substantial heterogeneity across market segments, currencies and maturities. Corporate sector FX lending is fundamentally different from retail and mortgage markets.
    Keywords: Bank lending, Interest rate choices, Discrete choice, Simultaneous equations, Cross-country analysis
    JEL: E44 F31 G21 G28
    Date: 2014–01
  83. By: Uluc Asyun (University of Central Florida); Ralf Hepp (Fordham University)
    Abstract: This paper finds that factors determined outside of a country are more closely related to the global bank loans she receives. These loans are more stable when global banks are less competitive and have a higher presence in the recipient country. We obtain our results by using data on the bilateral loans positions of 15 countries and a unique methodology to identify and compare the independent effects of external and internal factors. We find support for our empirical results and draw more detailed inferences for competition and global bank presence by solving a simple model of global banking.
    Keywords: Cross-country loans, global banks, competition, overlapping generations model.
    JEL: E44 F34 G15 G21
    Date: 2014
  84. By: Nagayasu, Jun
    Abstract: We empirically analyze regional inflation using data from Japan where there is no regulation to impede the free movement of labor, capitals, goods and services across regions. In particular, our analysis will focus on the geographical location of regions and the productivity effect as explanation for the dynamics of regional inflation. Technically, given that home inflation is often affected by that of neighbors, spatial models have been employed in order to explicitly capture this spillover effect. Similarly, the productivity spillover is modelled in the specification. Then we find that both spatial location and productivity are important determinants of regional inflation. Furthermore inflation persistence is reported to play an important role in explaining regional data.
    Keywords: Regional inflation, Balassa-Samuelson effect, transaction costs, spatial econometric models
    JEL: E3 F3 R1
    Date: 2014–09–01
  85. By: Nephil Matangi Maskay (Nepal Rastra Bank); Sven Steinkamp (Osnabrück University); Frank Westermann (Osnabrück University)
    Abstract: In this paper, we investigate whether foreign currency accounts help overcome credit constraints in developing countries. We analyze a novel bank-level data set from Nepal, where a steady inflow of remittances has contributed to foreign currency deposits on commercial bank balance sheets. In this data set we find that: (i) Banks hedge their FX exposure by investing in FX assets. (ii) Banks also hedge indirectly via their sectoral lending composition: Banks with a large share of FX deposits primarily lend to firms in traded-goods sectors. They lend only little to the non-traded sectors, as well as deprived sectors of the economy that have been targeted by various support programs. While the direct impact of FX accounts on relaxing credit constraints thus appears small, and biased towards specific sectors, there is also a substantial indirect effect via the additional creation of domestic deposits – that benefits all sectors of the economy.
    Keywords: Foreign Currency Deposits, Sectoral Lending, Financial Development
    JEL: F31 F24 E58
    Date: 2014–10–22
  86. By: Kakarot-Handtke, Egmont
    Abstract: Axiomatization is the prime task of theoretical economics. Without correct axioms,no correct theory. Without correct theory, no understanding of how the economy works. Without empirically corroborated understanding, no useful economic policy advice. Yet, much more important than any political reputation of economics is indeed: without correct axioms, no acceptance as science. There is no way around it, neither for Orthodoxy nor for Heterodoxy. The conceptual consequence of this paper is to discard the subjective-behavioral axioms and to take objective-structural axioms as the formal point of departure. This enables the rectification of the most fatal analytical mistakes of conventional economics.
    Keywords: new framework of concepts; structure-centric; axiom set
    JEL: B49 B59 E10
    Date: 2014–09–02
  87. By: Jan Behringer; Thomas Theobald; Till van Treeck
    Abstract: Household surveys like the German Socio-Economic Panel (SOEP) notoriously underestimate the degree of income and wealth inequality at the upper end of the distribution. A new approach developed by Thomas Piketty and co-authors therefore analyses tax return data in an attempt at better measuring top incomes and wealth. In the case of Germany, however, this approach faces a number of difficulties. Since 2009, capital incomes are subject to a flat rate withholding tax, levied at source. Moreover, Germany abandoned the wealth tax in 1997. This makes it difficult to measure the distribution of wealth and capital incomes. Moreover, at the conceptual level, top household income shares underestimate the rise of inequality in Germany because much of the shift in income distribution since the early 2000s has taken the form of rising corporate profits, which in large part have been retained by firms and hence are not counted as household income. Despite these problems, measures of income and wealth inequality can be developed by combining information from household surveys and national accounts data. The article also argues that reducing inequality would contribute to reducing Germany's export surplus and thereby enhance macroeconomic stability.
    Date: 2014
  88. By: Reiss, Daniel Gersten
    Abstract: The article describes the invoice currency choice in the Brazilian foreign trade, focusing on the use of the Brazilian real (BRL). The Ministry of Foreign Trade (MDIC) database is used for the first time for this purpose. Even with the US dollar being far more used in Brazil than in other countries, the BRL use for denominating trade has had exceptional growth. We categorically move away from the idea that the BRL is not used in Brazilian international trade. Brazilian imports show a strong tendency toward being more invoiced in noninternational currencies than exports. Brazilian trade evidence does not confirm some previous international findings. Although they are homogenous products, sugar and tobacco are the two main exports denominated in BRL. BRL use as invoice currency and as payment currency does not match.
    Keywords: international trade, Brazilian real use, currency denomination, currency invoicing
    JEL: D23 E42 E58 F13 F14 F20 F39
    Date: 2014–07–22
  89. By: Alonso-Ortiz, Jorge; Leal Ordonez, Julio
    Abstract: In the quest to alleviate the lack of protection of an important group in the population, social programs directed to informal workers are being introduced in developing countries. How is the size of the informal sector affected when the distribution across formal and informal workers and/or the generosity of social transfers change? The nature of many tax and transfer systems imply a cross subsidy from high-income to low-income workers. Thus, depending on the wage of the worker, the transfers tied to formal jobs could be bigger, equal, or smaller than the taxes paid. The effects of changes in taxes and transfers greatly depend on which of the three situations above is the one prevailing for the marginal worker. In this paper, we use a search frictions model with an informal sector, heterogeneous workers, and conditional taxes and transfers to address this question. In the model formal sector jobs are tied to larger benefits, and are less risky, but harder to get. We calibrate the model to the Mexican economy and perform a number of counter-factuals. We find that the size of the informal sector is quite inelastic to marginal changes in the generosity of transfers due to the presence of two opposing forces on the marginal worker: more taxes vs. more transfers. In comparison, the informal sector is more elastic to changes in the distribution of transfers because only one force is present in this case. Our results are consistent with the novel empirical evidence found in Almeida and Carneiro (2012) for Brazil, and with the evidence found in Azuara and Marinescu (2013) on the effects of Seguro Popular in Mexico.
    Keywords: Informal Sector, Taxes and Transfers, Seguro Popular, Search
    JEL: E24 E26
    Date: 2014–04–05
  90. By: International Monetary Fund. African Dept.
    Abstract: KEY ISSUES Background. The Ebola outbreak that started in one district in late May has spread to the entire country, overwhelming already weak institutions and ill-equipped medical facilities. At end-August, over 1000 people were infected and more than a third had died from the disease. The country’s social and economic fabric is also adversely affected by the epidemic. Economic growth has slowed, inflationary pressures have intensified, and new balance of payments and fiscal financing needs have emerged. The epidemic has heightened food insecurity and impacted livelihoods for a large portion of the population, generating additional distress for vulnerable groups. The program. In October 21, 2013, the Executive Board approved a three-year arrangement under the Extended Credit Facility (ECF) for Sierra Leone totaling SDR 62.2 million (60 percent of quota). The first review under the program was completed on June 19, 2014. Preliminary indications are that performance under the program is on track, in spite of weaknesses in budget execution at end-June. The authorities’ requests. In the attached letter of intent, the Sierra Leone authorities are requesting an Ad Hoc review under the ECF arrangement, and an augmentation of access in an amount equivalent to 25 percent of quota (SDR 25.925 million), in a single disbursement. These resources, together with contributions from other donors will help cover balance of payments and budgetary financing needs generated by the Ebola epidemic. The authorities are also requesting a modification of end-December 2014 performance criteria on net domestic bank credit to the central government, and on net domestic assets of the central bank. Safeguard assessment. A safeguards assessment of the Bank of Sierra Leone (BoSL) was completed in March 2014. The BoSL is taking steps to strengthen its safeguards framework and staff is monitoring implementation of the recommendations from the assessment. Staff views. Staff supports the completion of the Ad Hoc review, and the authorities’ requests.
    Keywords: Extended Credit Facility;Economic conditions;Current account deficits;Balance of payments need;Economic indicators;Debt sustainability analysis;Staff Reports;Letters of Intent;Press releases;Performance criteria modifications;Sierra Leone;
    Date: 2014–09–29
  91. By: Leon, Jorge; Vega, Melissa
    Abstract: The goal of this paper is to analyse the interest rate differential as the possible main factor behind the capital inflows experienced by Costa Rica during the second semester of 2012. For this purpose, a panel data model for interest rate differential is estimated taking into consideration an array of relevant macroeconomic variables. The results suggest that interest rate differentials for Costa Rica in 2012 are above what the estimated model predicts for the lending rate and deposit rate by 8.4 pp., and between 2.7 p.p. and 1.7 p.p., respectively. This excess in the interest rate differential could explain the observed capital inflows. Therefore, a reduction of lending and deposit interest rate differentials is crucial, but an extra effort has to be made to reduce the lending rate differential. As a consequence of the prevailing situation, the difference between lending and deposit rate in Costa Rica is greater than in countries with similar levels of risk.
    Keywords: Interest Rate, Risk Premium, Uncovered Interest Rate Parity
    JEL: E50 F36 G15
    Date: 2013–11
  92. By: Javier Lopez Bernardo (Kingston University); Felix Lopez Martinez; Engelbert Stockhammer
    Abstract: In Capital in the Twenty-First Century, the French economist Thomas Piketty develops a new and rich set of data that deals with income and wealth distribution, output-wealth dynamics and rates of return, and has proposed as well some "laws of capitalism". At the core of his theoretical argument lies the "fundamental inequality of capitalism", an empirical regularity that states that the rate of return on wealth is higher than the growth rate of the economy. This simple construct allows him to conclude that increasing wealth (and income) inequality is an inevitable outcome of capitalism. While we share some of his conclusions, we will highlight some shortcomings of his approach based on a Cambridge post-Keynesian growth-and-distribution model. We argue, first, that r>g (i.e. that the rate of return on wealth is greater than the growth rate of the economy) is not necessarily associated with increasing inequality in functional distribution; second, Piketty commits a fallacy-of-composition argument when he says that the necessary condition for r>g is that capitalists have to save a high amount of their capital income; third, post-Keynesian economists can learn from Piketty’s insights about personal income distribution and incorporate them into their models; and, fourth, we reiterate the post-Keynesian argument that a well-behaved aggregate production function does not exist and it therefore cannot explain the distribution of income.
    Keywords: Rate of return, income distribution, post-Keynesian growth and distribution models, Cambridge equation, Pasinetti's theorem
    JEL: B22 B50 E12 O40
    Date: 2014–10
  93. By: Hasan, Iftekhar (Fordham University and Bank of Finland); Kim, Suk-Joong (University of Sydney); Wu , Eliza (University of Technology Sydney)
    Abstract: We investigate the effects of credit ratings-contingent financial regulation on foreign bank lending behavior. We examine the sensitivity of international bank flows to debtor countries’ sovereign credit rating changes before and after the implementation of the Basel 2 risk-based capital regulatory rules. We study the quarterly bilateral flows from G-10 creditor banking systems to 77 recipient countries over the period Q4:1999 to Q2:2013. We find direct evidence that sovereign credit re-ratings that lead to changes in risk-weights for capital adequacy requirements have become more significant since the implementation of Basel 2 rules for assessing banks’ credit risk under the standardized approach. This evidence is consistent with global banks acting via their international lending decisions to minimize required capital charges associated with the use of ratings-contingent regulation. We find evidence that banking regulation induced foreign lending has also heightened the perceived sovereign risk levels of recipient countries, especially those with investment grade status.
    Keywords: cross-border banking; sovereign credit ratings; Basel 2; rating-contingent financial regulation
    JEL: E44 F34 G21 H63
    Date: 2014–09–21
  94. By: Luminita Stevens (University of Maryland)
    Abstract: We develop an information-based model of discrete adjustment in the labor market, in which the firm adjusts to shocks by varying the number of employed workers. Decisions about the firm's employment level are made on the basis of imprecise awareness of current market conditions. Imperfect information is endogenized using a variant of the theory of rational inattention, giving rise to an endogenous adjustment hazard function of the kind posited by Caballero et al (1997). We contrast the predictions of our model with those a labor demand model with full information but physical adjustment costs that can be interpreted as the costs of disruption to production. We conduct a policy experiment in which variation in the tax wedge changes the firm's optimal information acquisition policy, and we use this experiment to differentiate the employment dynamics implied by the information-based model from those implied by the physical adjustment cost model.
    Date: 2014
  95. By: David M. Woodruff
    Abstract: The Eurozone’s reaction to the economic crisis beginning in late 2008 involved both efforts to mitigate the arbitrarily destructive effects of markets and vigorous pursuit of policies aimed at austerity and deflation. To explain this paradoxical outcome, this paper builds on Karl Polanyi’s account of how politics reached a similar deadlock in the 1930s. Polanyi argued that democratic impulses pushed for the protective response to malfunctioning markets. However, under the gold standard the prospect of currency panic afforded great political influence to bankers, who used it to push for austerity, deflationary policies, and the political marginalization of labor. Only with the achievement of this last would bankers and their political allies countenance surrendering the gold standard. The paper reconstructs Polanyi’s theory of “governing by panic” and uses it to explain the course of the Eurozone policy over three key episodes in the course of 2010-2012. The prospect of panic on sovereign debt markets served as a political weapon capable of limiting a protective response, wielded in this case by the European Central Bank (ECB). Committed to the neoliberal “Brussels-Frankfurt consensus,” the ECB used the threat of staying idle during panic episodes to push policies and institutional changes promoting austerity and deflation. Germany’s Ordoliberalism, and its weight in European affairs, contributed to the credibility of this threat. While in September 2012 the ECB did accept a lender-of-last-resort role for sovereign debt, it did so only after successfully promoting institutional changes that severely complicated any deviation from its preferred policies.
    Keywords: Euro, European Central Bank (ECB), austerity, lender of last resort, Ordoliberalism, gold standard
    Date: 2014–10
  96. By: Assa, Hirbod (University of Liverpool); Gospodinov, Nikolay (Federal Reserve Bank of Atlanta)
    Abstract: This paper proposes a robust approach to hedging and pricing in the presence of market imperfections such as market incompleteness and frictions. The generality of this framework allows us to conduct an in-depth theoretical analysis of hedging strategies for a wide family of risk measures and pricing rules, which are possibly non-convex. The practical implications of our proposed theoretical approach are illustrated with an application on hedging economic risk.
    Keywords: imperfect markets; risk measures; hedging; pricing rule; quantile regression
    JEL: C22 E44 G11 G13
    Date: 2014–08–01
  97. By: Masih, Mansur; Majid, Hamdan Abdul
    Abstract: As an investor, we are interested in the relationship between economic and financial indicators. For this, for the investor, it is of utmost importance to identify the correct model for the long run and short run relationship, as this will determine the timing of entering and exiting the stock market. In this paper we investigate the correlation between the real stock price and the real industrial production index. The estimation of correlation coefficient would involve the panel data of nine (9) developing countries, including the four (4) BRIC countries, using data for the period 2008 to 2010. We employed the panel unit root test and panel cointegration tests using Eviews. We then proceed with the estimation of Fixed Effect (FE), Random Effect (RE), Pool Mean Group (PMG) and the Mean Group (MG) using Stata II command. The application of the heterogeneous panel model of Pool Mean Group (PMG) and the Mean Group (MG) – Im,Pesaran,Smith (IPS,1999) will allow for the heterogeneity effect among the different economies. Our findings proved that RE is superior to FE due to the inconsistency problem, which is the existence of correlation between missing cross sectional variables with the explanatory/regressor variables. The Hausman test performed supported this finding. We observed that the slope coefficients indicate a negative relationship between real industrial production and real stock price. Again, although both PMG and MG are consistent, Hausman test proved that MG is inefficient, and thus PMG is chosen for the final estimation. Finally, while we found out that in the short run the coefficient of industrial production varies with each country, they were the same in the long run.
    Keywords: Stock price; industrial production; panel unit root test; panel co-integration test; long run model estimation; random effect; pool mean group
    JEL: C22 C58 E44 G15
    Date: 2013–11–25
  98. By: Marianne Bitler; Hilary Hoynes; Elira Kuka; UNICEF Innocenti Research Centre
    Abstract: In the midst of the Great Recession, median real household income fell from $61,597 in 2007 to $57,025 in 2010 and $51,007 in 2012. Given that the effects of the Great Recession on unemployment were greater for less skilled workers the authors expect the effects of the Great Recession on household incomes to be larger in relative terms for individuals in the lower end of the income distribution. To explore this issue, in this paper, they comprehensively examine the effects of the Great Recession on child poverty.
    Keywords: child well-being; economic and social conditions; economic crisis; monetary policy;
    Date: 2014
  99. By: International Monetary Fund. Western Hemisphere Dept.
    Abstract: KEY ISSUES Stand-By Arrangement (SBA): The 36-month SBA for SDR 52.51 million (590 percent of quota) was approved on July 27, 2011. The seventh and eighth reviews were completed on March 19, 2014, together with the 2014 Article IV consultation. The authorities plan to continue to treat the arrangement as precautionary, which they began at the last review, and have repaid early a portion of the Fund’s outstanding credit (about 125 percent of quota). Context: Growth is expected to continue at a relatively rapid pace, following a stronger- than-expected recovery of nearly 4 percent in 2013, after a four-year contraction. This reflects rapid expansion in construction related to large Citizenship-by-Investment inflows, and a substantial increase in public sector investment, as well as support from the People Employment Program (PEP). The ECCB is investigating the reclassification of two public sector loans targeted for restructuring that may adversely impact banks’ financial soundness indicators. Program performance: Substantial strides have been made under the government’s home-grown economic program. Fiscal sustainability has improved, debt was substantially reduced and is on a downward path, the financial sector has remained stable, and key structural reforms have been implemented. The fiscal program is on track and all performance criteria were met with the exception of the continuous performance criterion on external arrears. The external arrears were minor and quickly repaid. Progress on the implementation of structural reforms is slow, with delay in one of the two benchmarks that were to be completed for this review, which is now a prior action. Review: The authorities continue to demonstrate their commitment to their home- grown program, and are on track to meet the 2014 fiscal targets. They also plan to press ahead with their structural reform agenda and complete reforms initiated under the program. With ongoing implementation of prudent fiscal management, the authorities are on track to reduce debt to 60 percent of GDP by 2020. In accordance with Fund policy, the Managing Director is recommending the initiation of Post-Program Monitoring (PPM).
    Keywords: Stand-by arrangement reviews;Fiscal policy;Fiscal reforms;Banking sector;Economic indicators;Debt sustainability analysis;Staff Reports;Letters of Intent;Performance criteria waivers;Post-program monitoring;St. Kitts and Nevis;
    Date: 2014–09–26
  100. By: Liu, Huju; Gu, Wulong; Baldwin, John R.
    Abstract: Dans le present document, on examine le rendement de l'investissement au Canada et aux Etats Unis en explorant les similarites et les differences des investissements en actifs fixes de 1990 a 2011, periode durant laquelle les deux pays ont subi des chocs differents. Le declin important des marches de l'habitation qui a frappe les Etats Unis apres 2007 n'a pas affecte le Canada. L'essor mondial des ressources apres 2000 a eu un impact plus marque au Canada qu'aux Etats Unis. Le dollar canadien s'est beaucoup apprecie par rapport au dollar americain apres 2003, ce qui a entraine une reduction relative des couts des machines et du materiel importes au Canada. La comparaison se fonde surtout sur l'intensite de l'investissement, definie comme etant le ratio de l'investissement nominal en dollars au produit interieur brut (PIB) nominal, mais les taux de croissance du volume de l'investissement par rapport au volume du PIB sont egalement compares.
    Keywords: Business cycles, Business performance and ownership, Economic accounts, Gross domestic product, Productivity accounts
    Date: 2014–10–21
  101. By: Swamy, Vighneswara; B K, Tulasimala
    Abstract: This study has uniquely established that financing women though Self Help Groups has a significant role in empowering women, which is a smart economics indeed in achieving the objective of economic development of the weaker sections. The findings of this study establish using the statistical technique and robust sample size that women financing through groups has significant impacts on the food security as well as non-food expenses of the poor families. The study has evidenced significant outreach of impact of women financing in terms of physical as well as qualitative factors on the socially weaker sections of the society such as Women, Scheduled Castes /Scheduled Tribes and Other Backward Classes category of the poor
    Keywords: economic development, institutions and growth, microfinance, banking, poverty, cross-sectional analysis, consumption, saving
    JEL: C21 C3 C31 E2 E21 G21 I38 N3 N35 O4 O43 O47
    Date: 2013–09
  102. By: Taniguchi, Kiyoshi (Asian Development Bank); Tuwo, Alika (World Bank, Jakarta Country Office)
    Abstract: Indonesia has been experiencing impressive economic growth and rapid urbanization in recent years. However, urbanization could affect income inequality through people’s movement from rural to urban areas. Using the 2010 National Labor Force Survey (Sakernas) in Indonesia, this study examines how monthly wages are distributed between male and female workers and tests whether a wage gap exists between them. Regression results reveal that urbanization tends to benefit male workers more favorably, in terms of monthly wages, than female workers. The wage gap tends to be wider among younger workers, particularly among those who are underemployed and severely underemployed. It is also greater among public sector workers than those in the private sector. Gender wage gap in Indonesia is mainly due to gender discrimination. An act to equalize opportunity and wages among workers, especially in the public sector, is proposed.
    Keywords: gender; wage distribution; gender wage gap; Indonesia; urbanization; inclusive growth; migration
    JEL: E24 J16 J31 R23
    Date: 2014–10–28
  103. By: Takumah, Wisdom
    Abstract: This study examines the effect of tax revenue on economic growth in Ghana using quarterly data for the period 1986 to 2010 within the VAR framework. The study found that there exist both short run and long run relationship between economic growth and tax revenue. The result indicated a unidirectional causality between tax revenue and economic growth and it flows from tax revenue to economic growth. The result suggests that tax revenue exerted a positive and statistically significant effect on economic growth both in the long-run and short-run implying that tax revenue enhances economic growth in Ghana. The study recommended that the tax base need to be widened and the tax rates reduced in order to generate more revenue. It was recommended that the government should improve tax collection measures in order to generate more revenue so as to increase economic growth in Ghana.
    Keywords: Tax revenue, Economic Growth, Cointegration, Causality, Ghana
    JEL: C3 E6 H2
    Date: 2014–09–12
  104. By: Sonora, Robert
    Abstract: This paper investigates the relationship between institutional quality and economic performance the 32 Mexican states over the period 2003 -- 2010. Using dynamic panel GMM estimation and the Fraser Institutes index of economic freedom, I find that freedom has an ambiguous impact on economic growth and improvements undermines employment. These results are corroborated with dynamic OLS model and panel fixed and random effects models.
    Keywords: Institutions, Economic Performance \& Growth, Mexico, Dynamic Panel
    JEL: E02 O43 O54
    Date: 2014
  105. By: Leszczyński, Robert; Olszewski, Krzysztof
    Abstract: We analyse the determinants of house prices in the primary and secondary market of 17 largest cities in Poland during the 2002-2013 period. We find that prices are driven by economic fundamentals, such as income growth or rise in employment. Prices in the secondary market react to increases in the loan availability, that was driven by low interest rates resulting from FX denominated housing loans that were granted since 2006. This finding does not hold for the primary market, which is to a large extent financed with cash. We confirm empirically that the house appreciation in the past period has a strong effect on the current price, which confirms herding behaviour in the housing market. Another finding is that the secondary market has a stronger effect on the primary market than the other way around. This means that housing demand is satisfied in the first place from the secondary market, and if prices rise, potential buyers go to the primary market. Finally, we find that price increases in Warsaw spill over to the local markets of 16 regional cities. This finding is consistent with the contagion theory in the real estate market, according to which price increases in the centre lead to price increases in the periphery.
    Keywords: housing market, house prices, primary and secondary market, spillover effects
    JEL: E21 R21 R31
    Date: 2014
  106. By: Hakobyan, Lilit (Department of Economics, Umeå School of Business and Economics)
    Abstract: The thesis consists of a summary and three self-contained papers related to political transition and economic growth with parallel study of countries with and without Military Dictatorship (MD) history. Paper [1]: studies the experience of 83 countries in 1950-2004 and addresses the question: when do democratic transitions produce bad economic outcomes. Following the theoretical papers of Acemoglu et al. (2004, 2008), an attempt is made to control for both de jure and de facto sides of political power. The data seem to indicate that democratization induces additional socially wasteful investments into de facto power. The results also suggest that, under military governments countries with low concentration of economic power show better economic performance. In terms of Acemoglu et al. (2007), this may suggest that the institutional environment switches from a “weak” to a “strong” one. The potential tradeoff between democratization and political stability is mainly relevant to the degree of severity of reoccurring economic crises in countries with MD history. Paper [2]: investigates whether democracy renders economic performance more efficient. Efficiency, measured by (mean)/ (standard deviation) of output growth, becomes an important indicator of economic performance, if countries face a tradeoff between scenarios with high-mean and low-volatility of growth. This seems to hold when economies approach the efficient frontier. The study: (i) employs asymmetric (G)ARCH models; (ii) analyses variations in within-country effects of democratization on the growth efficiency conditional on cross-country variations in income inequality; (iii) studies the asymmetry of deviations from the mean. The results suggest (do not suggest) that in countries with no (with) MD history democratization moves economies towards the efficient frontier. Democratizations has stronger impact on the efficiency of growth in countries with higher (lower) income inequality if countries have (have not) MD history. Paper [3]: studies the survival of four different growth regimes conditional on political regime transitions that occurred during the first or prior year of the economic regime. The results suggest that in countries with no MD history, the fast-growing episodes initiated by democratization have about 40% lower hazard of termination than the episodes with no political transitions. This finding does not hold in countries with MD history. The effects of political transitions on the duration of ongoing economic regimes are additionally studied. Data suggest that transitions of both directions under economic crisis render the ongoing economic regime more durable.
    Keywords: de facto and de jure political power; economic crisis; economic growth; efficient frontier of economic growth; military dictatorship; political regimes; weak institutions
    JEL: D72 E02 O43 P16
    Date: 2014–09–09
  107. By: Haliassos, Michael (Goethe University Frankfurt); Jansson, Thomas (Research Department, Central Bank of Sweden); Karabulut, Yigitcan (Goethe University Frankfurt)
    Abstract: The Eurozone fiscal crisis has created pressure for institutional harmonization, but skeptics argue that cultural predispositions can prevent convergence in behavior. Our paper derives a robust cultural classification of European countries and utilizes unique data on natives and immigrants to Sweden. Classification based on genetic distance or on Hofstede’s cultural dimensions fails to identify a single ‘southern’ culture but points to a ‘northern’ culture. Significant differences in financial behavior are found across cultural groups, controlling for household characteristics. Financial behavior tends to converge with longer exposure to common institutions, but is slowed down by longer exposure to original institutions.
    Keywords: Household Portfolios; Household Finance; Cultural Influences on Economic Behavior
    JEL: E21 G11
    Date: 2014–06–01
  108. By: Delis , Manthos D. (University of Surrey); Hasan, Iftekhar (Fordham University and Bank of Finland); Tsionas, Efthymios G. (Lancaster University Management School)
    Abstract: This paper reconsiders the formal estimation of bank risk using the variability of the profit function. In our model, point estimates of the variability of profits are derived from a model where this variability is endogenous to other bank characteristics, such as capital and liquidity. We estimate the new model on the entire panel of US banks, spanning the period 1985q1–2012q4. The findings show that bank risk was fairly stable up to 2001 and accelerated quickly thereafter up to 2007. We also establish that the risk of the relatively large banks and banks that failed in the subprime crisis is higher than the industry’s average. Thus, we provide a new leading indicator, which is able to forecast future solvency problems of banks.
    Keywords: estimation of risk; profit function; financial institutions; banks; endogenous risk; US banking sector
    JEL: C13 C33 E47 G21 G32
    Date: 2014–07–09
  109. By: Cao, Jin (Norges Bank); Chollete, Loran (UiS)
    Abstract: We present a framework for modelling optimum capital adequacy in a dynamic banking context. We combine the (static) capital adequacy framework of Repullo (2013) with a dynamic banking model similar to that of Corbae and D`Erasmo (2014), with the extra feature that the probability of systemic risk is endogenous. Unlike previous work, we examine frameworks to ameliorate bankruptcy using both capital adequacy and liquidity requirements. Since equity is costly, the social cost of regulation may be reduced if a regulatory capital requirement can be accompanied by other tools such as a liquidity buffer.
    Keywords: Keywords: Bankruptcy; Capital Adequacy; Endogenous Systemic Risk; Liquidity Requirement; Regulation Costs
    JEL: E50 G21 G28
    Date: 2014–09–16
  110. By: Xuan Tam (Cambridge University); Eric Young (University of Virginia); bo sun (GSM, Peking University)
    Abstract: Regulatory investigations affect information in financial markets through two channels: (i) investigations detect financial manipulation and reveal hidden negative information;(ii) regulatory investigations impose adverse consequences for executives involved in manipulation and deter managerial incentives to manipulate ex ante. Moreover, regulatory intensity varies over time, depending on the aggregate state of the economy. We propose a model to study the implications of cyclical regulatory intensity for stock market dynamics, and show that countercyclicality in financial regulation can lead to countercyclicality in crash risk in the stock markets. We also provide evidence that a strong relation between stock crash risk and the business cycle exists in the data. In addition, our model illustrates a unifying mechanism that contributes to a number of stylized facts including gradual booms and sudden crashes in the financial markets, increased crash risk, and countercyclical stock volatility.
    Date: 2014
  111. By: Litina, Anastasia; Palivos, Theodore
    Abstract: We provide empirical support and a theoretical explanation for the vicious circle of political corruption and tax evasion in which countries often fall into. We address this issue in the context of a model with two distinct groups of agents: citizens and politicians. Citizens decide the fraction of their income for which they evade taxes. Politicians decide the fraction of the public budget that they peculate. We show that multiple self-fulfilling equilibria with different levels of corruption can emerge based on the existence of strategic complementarities, indicating that corruption may corrupt. Furthermore, we find that standard deterrence policies cannot eliminate multiplicity. Instead, policies that impose a strong moral cost on tax evaders and corrupt politicians can lead to a unique equilibrium.
    Keywords: Corruption, Tax Evasion, Multiple Equilibria, Stigma
    JEL: D73 E62 H26
    Date: 2014–09–09
  112. By: E. Roy Weintraub
    Abstract: Over the past twenty-five years the Duke history of economics faculty, together with the collection development librarians in the David M. Rubenstein Rare Book and Manuscript Library, have been gathering the papers of notable (mostly) twentieth century economists in what is now called The Economists Papers Project (EPP). Over time that archive has grown and become central to historical research on economics in the postwar period. The papers of Edwin Burmeister, Evsey Domar, Franklin Fisher, Duncan Foley, Lawrence Klein, Franco Modigliani, and Robert Solow, all MIT faculty or students, have attracted scholars from around the world. After Paul Samuelson’s death in December 2009, his papers, by prior arrangement, came to the EPP and quickly became a magnet for historians of economics. In response, early in 2010 I was encouraged by my colleagues Kevin Hoover, Bruce Caldwell, Craufurd Goodwin, and Neil De Marchi to plan a conference in the History of Political Economy Annual Conference series to examine the history of MIT economics. After a year’s worth of conversations and emails, I invited a number of individuals to consider a variety of projects exploring MIT’s role in the transformation of American economics in the postwar period. That conference, held in April 2013 at the R. David Thomas Conference Center at Duke University, was sponsored as usual by the Duke University Press. However the very generous financial support of the Alfred P. Sloan Foundation made possible the expansion of the “standard” HOPE Conference into one that included a larger number of participants and papers. In the end the conferees learned that telling the story of MIT’s role in the postwar period required attending to both the particular circumstances that shaped MIT and the various ways in which economics itself was changing.
    Keywords: MIT, Paul Samuelson, E. B. Wilson, Robert Solow, Graduate Education, historiography of economics
    JEL: A1 A2 B2 B3 D00 E00
    Date: 2014
  113. By: Rik de Boer; Rosamaria Bitetti
    Abstract: This Working Paper studies ways to stimulate the private rental sector (PRS) of the housing market – and compares experiences with policies and reforms in Germany, the Netherlands, Finland and the Czech Republic. Although in many countries the PRS has decreased in importance since the Second World War, there are signs of a growing importance and possible ‘revival’ of the PRS. A well-functioning PRS and neutrality in housing policies can improve the functioning of the housing market – by promoting residential mobility, increasing housing options for households and generating competitive supply and affordable prices. The PRS can have positive effects on the economy and labour mobility and reduce inefficiencies and risks of owner-occupied and social housing. Trade-offs between goals in housing policies, and regulatory impediments to a level playing field between segments of the housing market (owner-occupancy, social rental, private rental) are analysed. The article outlines policy options in promoting a well-functioning PRS: lessons are drawn on tenancy security, rent-setting regulations, social housing, demand subsidies, fiscal measures for rental and owner-occupied housing and barriers for PRS supply. Experiences from the countries show that it is hard to create a level playing field – there are inefficiencies in all four countries. Nonetheless, there are many positive experiences of stimulating the PRS: reforms in Finland and the Czech Republic stimulated the PRS to become a competitive and important part of the housing market, and Dutch policies are adapted to stimulate a level playing field. The ‘resilience’ of the German housing system during the economic crisis shows that the large PRS and tenure neutrality have important stabilising effects on the German economy. Relancer le secteur locatif privé du marché du logement ? : Leçons tirées des expériences allemande, finlandaise, tchèque et néerlandaise Nous étudions dans ce Document de travail les mesures pouvant être prises pour stimuler le secteur locatif privé du marché du logement, et comparons les données d'expérience relatives aux politiques publiques et aux réformes mises en oeuvre en Allemagne, aux Pays-Bas, en Finlande et en République tchèque. Bien que l'importance du secteur locatif privé ait diminué dans de nombreux pays depuis la Seconde Guerre mondiale, certains signes montrent qu'il reprend de l'importance et qu'il est possible de le « relancer ». Un secteur locatif privé fonctionnant bien et des politiques du logement neutres peuvent améliorer le fonctionnement du marché de l'immobilier d'habitation – en favorisant la mobilité résidentielle, en élargissant l'éventail des possibilités de logement offertes aux ménages, et en débouchant sur une offre concurrentielle et des prix abordables. Le secteur locatif privé peut avoir des effets positifs sur l'économie et la mobilité des travailleurs, et réduire les problèmes d'inefficience et les risques inhérents aux logements occupés par leurs propriétaires et au logement social. Les arbitrages à opérer entre les différents objectifs des politiques du logement, et les obstacles réglementaires à l'application de règles du jeu équitables entre les différents segments du marché de l'immobilier d'habitation (logements occupés par leurs propriétaires, logement locatif social, logement locatif privé) sont analysés. L'article expose les options envisageables pour favoriser le bon fonctionnement du secteur locatif privé : des leçons sont tirées concernant la sécurité d'occupation, les règles de fixation des loyers, le logement social, les mécanismes de subventionnement de la demande, les mesures budgétaires en faveur du logement locatif et des propriétaires occupants, ainsi que les obstacles qui limitent l'offre sur le secteur locatif privé. L'expérience des pays considérés montre qu'il est difficile de mettre en place des règles du jeu équitables, puisqu'on observe des problèmes d'inefficience dans chacun des quatre pays examinés. Néanmoins, on relève de nombreux exemples positifs de stimulation du secteur locatif privé : les réformes mises en oeuvre en Finlande et en République tchèque ont permis au secteur locatif privé de devenir un segment concurrentiel et important du marché du logement, tandis que les politiques appliquées aux Pays-Bas sont adaptées pour égaliser les conditions de concurrence. La « résilience » dont a fait preuve le système allemand en matière de logement pendant la crise économique montre que l'ampleur du secteur locatif privé et la neutralité de l'action publique vis-à-vis du mode d'occupation des logements ont d'importants effets stabilisants sur l'économie allemande.
    Keywords: Germany, labour mobility, Czech Republic, housing finance, Finland, housing prices, social rental, Netherlands, housing market, housing policies, private rental, logement locatif privé, mobilité de la main-d’oeuvre, Finlande, République tchèque, marché du logement, prix des logements, politique du logement, financement du logement, logement locatif social, Pays-Bas, Allemagne
    JEL: E21 G21 H24 L74 R21 R31 R38 R52
    Date: 2014–10–28

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