nep-mac New Economics Papers
on Macroeconomics
Issue of 2015‒03‒13
67 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Assessing public debt sustainability in EU member states:a guide By Carone, Giuseppe; Berti, Katia
  2. The Effects of Conventional and Unconventional Monetary Policy Surprises on Asset Markets in the United States By Unalmis, Deren; Unalmis, Ibrahim
  3. The impact of aid on total government expenditures: New evidence on fungibility By Marc, Lukasz
  4. The Conduct of Monetary Policy in the Future: Instrument Use By Kei-Ichiro Inaba; Rory O’Farrell; Łukasz Rawdanowicz; Ane Kathrine Christensen
  5. Resolution of balance of payments crises: Emergency financing and debt workouts By Ocampo, Jose Antonio
  6. Overfunding and underfunding, a main cause of the business cycle? By De Koning, Kees
  7. A DSGE Model for China’s Monetary and Macroprudential Policies By Sinclair, Peter; Sun, Lixn
  8. Heterogeneous ability and the effects of fiscal policy on employment, income and welfare in general equilibrium By Freddy Heylen; Renaat Van de Kerckhove
  9. Inflation Dynamics and the Hybrid Neo Keynesian Phillips Curve: The Case of Chile By Medel, Carlos
  10. European Economic and Monetary Union Sovereign Debt Markets By Ahmet Sensoy; Ahmed Rostom; Erk Hacihasanoglu
  11. Non-residential capital stock in Latin America. 1875-2008 By Xavier Tafunell; Cristián Ducoing
  12. Monetary policy implications for an oil-exporting economy of lower long-run international oil prices By Franz Hamann; Jesús Bejarano; Diego Rodríguez
  13. The Determinants of Interest Rates in Microbanks: Age and Scale By Jacinta C. Nwachukwu; Simplice Asongu
  14. La Financiación Autonómica By Espasa, Marta
  15. Not all emerging markets are the same: A classification approach with correlation based networks By Ahmet Sensoy; Kevser Ozturk; Erk Hacihasanoglu; Benjamin M. Tabak
  16. Robots at Work By Georg Graetz; Guy Michaels
  17. The International Transmission of Risk: Causal Relations Among Developed and Emerging Countries’ Term Premia By Juan Andrés Espinosa-Torres; Jose E. Gomez-Gonzalez; Luis Fernando Melo-Velandia; José Fernando Moreno-Gutiérrez
  18. Worker Search Effort as an Amplification Mechanism By Paul Gomme; Damba Lkhagvasuren
  19. Leaning Against the Credit Cycle By Paolo Gelain; Kevin J. Lansing; Gisle J. Natvik
  20. Sustainable growth and financial markets in a natural resource rich country By Emma Hooper
  21. EuroMInd-D: A Density Estimate of Monthly Gross Domestic Product for the Euro Area By Tommaso Proietti; Martyna Marczak; Gianluigi Mazzi
  22. How do Shocks to Domestic Factors Affect Real Exchange Rates of Asian Developing Countries By Taya Dumrongrittikul; Heather M. Anderson
  23. Keynes, the Pope and the IMF By Mark Hayes
  24. The accumulation of capital and economic growth in Brazil. A long-term prospective (1950-2008) By Mateo Tomé, Juan Pablo
  25. Regional Inflation, Financial Integration and Dollarization By de Haas, R.; Brown, M.; Sokolov, V.
  26. Liquidity Constraints of the Middle Class By Campbell, J.R.; Hercowitz, Zvi
  27. Cross-subsidies, and the elasticity of informality to social expenditures By Alonso-Ortiz Jorge; Leal-Ordoñez Julio C.
  28. The informal sector in contemporary models of the aggregate economy By Leal-Ordoñez Julio C.
  29. A note on the diffusion of business cycles By Guerrero Santiago; Martínez-Ovando Juan Carlos
  30. The Labor Market Effects of Skillbiased Technological Change in Malaysia By Marouani, Mohamed Ali; Nilsson, Björn
  31. Spillover of the ECB's Monetary Policy Outside the Euro Area: How Different is Conventional From Unconventional Policy? By Oxana Babecka Kucharcukova; Peter Claeys; Borek Vasicek
  32. Adverse Effects of Monetary Policy Signalling By Jan Filacek; Jakub Mateju
  33. Implementing Basel III through the Capital Requirements Directive (CRD) IV: leverage ratios and capital adequacy requirements By Ojo, Marianne
  34. Credit Smoothing and Determinants of Loan Loss Reserves. Evidence from Europe, US, Asia and Africa By Ozili, Peterson K
  35. Change in Fixed Costs and the Division of Labor within Firms through Labor Reallocation By Shintaku, Koji
  36. Measuring the Core Inflation in Turkey with the SM-AR Model By Kulaksizoglu, Tamer
  37. Firms entry, oligopolistic competition and labor market dynamics By Andrea Colciago; Lorenza Rossi
  38. International Debt Deleveraging By Fornaro, Luca
  39. Trade, Wages, and Collective Bargaining: Evidence from France By Carluccio, Juan; Fougère, Denis; Gautier, Erwan
  40. Cross-Border Liquidity, Relationships and Monetary Policy: Evidence from the Euro Area Interbank Crisis By Abbassi, Puriya; Bräuning, Falk; Fecht, Falko; Peydró, José Luis
  41. How Has the Crisis of 2008-2009 Affected Subjective Well-Being? Evidence from 25 OECD Countries By Heinz Welsch; Jan Kühling
  42. Gefährden die unkonventionellen Maßnahmen der EZB den Ausstieg aus dem Niedrigzinsumfeld? By Demary, Markus; Hüther, Michael
  44. Can international macroeconomic models explain low-frequency movements of real exchange rates? By Pau Rabanal; Juan F. Rubio-Ramirez
  45. A joint affine model of commodity futures and US Treasury yields By Chin, Michael; Liu, Zhuoshi
  46. Κρίση, Σύγχρονος Καπιταλισμός και Ταξικές Ανακατατάξεις By Tsoulfidis, Lefter
  47. Essentials of Constructive Heterodoxy: Profit By Kakarot-Handtke, Egmont
  48. Firm performance, macroeconomic conditions, and “animal spirits” in a Post Keynesian model of aggregate fluctuations By Shyam Gouri Suresh; Mark Setterfield
  49. Multi-Agent Systems as a Tool for Analyzing Path-Dependent Macrodynamics By Mark Setterfield; Shyam Gouri Suresh
  50. The Budgetary Implications of Higher Federal Reserve Board Interest Rates By Dean Baker
  51. Innovations in mortgage finance and the onset of the Great Recession in a small open economy with a euro peg By Andersen, Thomas Barnebeck; Malchow-Møller, Nikolaj
  52. Robots at work By Georg Graetz; Guy Michaels
  53. Can firms grow without credit?: evidence from the Euro Area, 2005-2011: a quantile panel analysis By Sophia Dimelis; Ioannis Giotopoulos; Helen Louri
  54. A Retrospective Look at Rescuing and Restructuring General Motors and Chrysler By Austan D. Goolsbee; Alan B. Krueger
  55. Regional Redistribution Through the U.S. Mortgage Market By Erik Hurst; Benjamin J. Keys; Amit Seru; Joseph S. Vavra
  56. TFP, News, and "Sentiments:'" The International Transmission of Business Cycles By Andrei A. Levchenko; Nitya Pandalai-Nayar
  57. La Mesure de la Fuite des Capitaux et son Impact sur l’Investissement Domestique : Cas des Pays Émergents By Dachraoui, Hajer; Smida, Mounir
  58. Notes on Business Cycle Theory from a Dynamic Stochastic General Equilibrium Perspective By Solomon, Bernard Daniel
  59. Forecast Accuracy of Small and Large Scale Dynamic Factor Models in Developing Economies By Germán López Espinosa
  60. The Portuguese economy in the 1980s: structural change and short-term upheavals By Ana Bela Nunes
  61. Appropriate Macroeconomic Model Support for the Ministry of Finance and the National Institute of Economic Research: A Pilot Study By Hjelm, Göran; Bornevall, Helena; Fromlet, Pia; Nilsson, Jonny; Stockhammar , Pär; Wiberg, Magnus
  62. Assessing bankruptcy reform in a model with temptation and equilibrium default By Nakajima, Makoto
  63. Business cycle fluctuations and the distribution of consumption By De Giorgi, Giacomo; Gambetti, Luca
  64. “Financial stress transmission in EMU sovereign bond market volatility: a connectedness analysis” By Fernando Fernández-Rodríguez; Marta Gómez-Puig; Simón Sosvilla-Rivero
  65. “Sovereigns and banks in the euro area: a tale of two crises” By Marta Gómez-Puig; Simón Sosvilla-Rivero; Manish K. Singh
  66. “Regional Forecasting with Support Vector Regressions: The Case of Spain” By Oscar Claveria; Enric Monte; Salvador Torra
  67. “Financial stress transmission in EMU sovereign bond market volatility: a connectedness analysis” By Fernando Fernández-Rodríguez; Marta Gómez-Puig; Simón Sosvilla-Rivero

  1. By: Carone, Giuseppe; Berti, Katia
    Abstract: The aim of this paper is to illustrate the methodological approach used by the Commission services (DG ECFIN/C2) to carry out, in a systematic and harmonised way, public debt sustainability analysis (DSA) for EU Member States. Analysing recent and prospective public debt developments and risks to debt sustainability is crucial for EA countries and the EU as a whole to be able to formulate appropriate policy responses. To this aim, the Commission services (DG ECFIN) prepare on a regular basis (twice a year, following autumn and spring Commission forecasts) an internal "Debt Sustainability Monitor" report (DSM) presenting, for each Member State, a detailed public debt sustainability analysis, accompanied by the analysis of fiscal sustainability indicators. The DSM provides key information for regular budgetary surveillance. The assessment of Member States' debt developments is indeed a key component of fiscal surveillance under the Stability and Growth Pact, the European semester and the Europe 2020 strategy. Public debt dynamics is analysed in the DSM through traditional (deterministic) debt projections, accompanied by sensitivity analysis, and stochastic debt projections. Brand new tools have also been introduced in the DSA framework with the aim of ensuring a more comprehensive assessment of risks to public debt sustainability (capturing risks arising, for instance, from the structure of public debt financing and from governments' contingent liabilities). Other new tools have been introduced to make it possible to assess the realism of underlying macroeconomic assumptions. Main features of the renewed Commission's DSA framework are the following: 1) Criteria are used to identify "vulnerable" countries from the point of view of public debt sustainability. For the latter, the DSA is "enhanced" with a detailed write-up, in which the macro-fiscal assumptions used in the projections are illustrated and debt projection results, and risks to debt sustainability more broadly, are discussed. 2) The framework is designed in a way to allow for a comprehensive assessment of risks to public debt sustainability. Sensitivity analysis around baseline public debt projections, for instance, is extensive, covering downside and upside risks to the main macro-fiscal determinants of debt dynamics (possibly emerging from fiscal fatigue, tightening/relaxing of governments' financing conditions on the markets, shocks to GDP growth, inflation and the exchange rate, bank-related contingent liability shocks). 3) Variables capturing risks potentially arising from the structure of public debt (public debt by maturity, holder, currency of denomination) are integrated in the DSA through heat maps, thus usefully complementing the analysis of risks related to the projected public debt dynamics. 4) The analysis of governments' contingent liabilities features prominently in the DSA framework. An overview of overall contingent liabilities for the public sector is provided based on most recent data on state guarantees. Contingent liability risks arising from the banking sector are captured indirectly through heat maps of variables that measure banking sector vulnerabilities, as well as through estimates of the probability of bank losses hitting public finances in a simulated bank crisis. 5) Commission forecast accuracy analysis on the main macro-fiscal determinants of public debt dynamics (real GDP growth, primary balance and inflation) is included in the DSA. This analysis aims at providing some indication on whether forecasts, incorporated in baseline public debt projections, tend to be systematically biased in one direction or the other in a sign of persistent optimism or pessimism. The paper provides an accurate description of the new Commission – DG ECFIN's DSA framework, and all the analytical and reporting tools it encompasses.
    Keywords: Debt, sustainability, fiscal, fiscal risk, debt projection
    JEL: E62 H62 H63 H68
    Date: 2014–09–09
  2. By: Unalmis, Deren; Unalmis, Ibrahim
    Abstract: This study estimates the impacts of conventional and unconventional monetary policy surprises on asset markets in the United States using the heteroskedasticity-based GMM technique suggested by Rigobon and Sack (2004). Monetary policy surprises have statistically significant effects on major asset markets in both periods, yet magnitudes of responses differ notably in the unconventional period. For the unconventional period, the impacts of monetary policy surprises on stock returns and the implied volatilities in stock and bond markets are found to be lower compared to the conventional period. For most of the other asset returns however, responses are similar or higher in the unconventional period.
    Keywords: Monetary Policy; Asset Markets; Identification through Heteroscedasticity
    JEL: E43 E44 E52
    Date: 2015–03–04
  3. By: Marc, Lukasz
    Abstract: Aid is said to be fungible at the aggregate level if it raises government expenditures by less than the total amount. This happens when the recipient government decreases domestic revenue, decreases net borrowing, or when aid bypasses the budget. This stu
    Keywords: foreign aid, fungibility, fiscal response, government expenditures
    Date: 2015
  4. By: Kei-Ichiro Inaba; Rory O’Farrell; Łukasz Rawdanowicz; Ane Kathrine Christensen
    Abstract: The set of monetary policy instruments has expanded since the start of the global financial crisis in the many OECD economies. Against this background, this paper analyses whether some of the new instruments should be retained in the long term when broader financial stability objectives are likely to feature more prominently as monetary policy goals than prior to the crisis. It also assesses if these new instruments should be used during the transition to this situation and when countries are stuck in persistent stagnation. In the post recovery situation, central banks could ultimately revert to targeting short-term market rates with small balance sheets. This might, however, require changes to monetary policy implementation due to new liquidity requirements. The transition to this situation will be lengthy and will require a mixture of liquidity draining instruments. Alternatively, they could adopt a floor system, which may benefit financial stability. The use of unconventional measures as a substitute for policy rate cuts will no longer be needed unless countries remain in persistent stagnation. Nevertheless, in the post-recovery normal, extended collateral and counterparty eligibility could be sustained, and currency swap lines among central banks could be expanded.<P>La conduite de la politique monétaire à l'avenir : L'utilisation d'instruments<BR>Dans de nombreux pays de l’OCDE, la palette des instruments de la politique monétaire s’est élargie depuis le début de la crise financière mondiale. Dans ce contexte, on s’efforce dans le présent document d’analyser s’il conviendrait de conserver certains de ces nouveaux instruments dans la durée, lorsque les objectifs de stabilité financière au sens large s’affirmeront probablement davantage en tant qu’objectifs de la politique monétaires qu’avant la crise. Il s’agit également d’évaluer si ces nouveaux instruments doivent être utilisés pendant la période de transition, et lorsque les pays sont enlisés dans une stagnation persistante. Après la reprise, les banques centrales pourraient revenir au ciblage des taux de marché à court terme avec des bilans d’ampleur modeste. Ceci pourrait toutefois obliger à modifier la mise en oeuvre de la politique monétaire, du fait des nouvelles exigences en matière de liquidité. La phase de transition vers une telle situation sera longue et nécessitera une panoplie d’instruments permettant de drainer des liquidités. Autrement, les banques centrales pourraient adopter un système de plancher, qui pourrait être bénéfique à la stabilité financière. Le recours à des mesures non conventionnelles pour suppléer des baisses des taux directeurs ne sera plus nécessaire, sauf si les pays se retrouvent dans une situation de stagnation persistante. Néanmoins, dans une situation normale d’après reprise, une extension des conditions d’admissibilité des garanties et des contreparties pourrait être maintenue, et les lignes de crédit réciproques entre banques centrales pourraient être élargies.
    Keywords: liquidity, corridor and floor interest rate systems, forward guidance, quantitative easing, conventional and unconventional monetary policy, liquidité, assouplissement quantitatif, systèmes de corridors de taux d’intérêt et de taux d’intérêt plancher, Politique monétaire conventionnelle et non conventionnelle, indications prospectives
    JEL: E42 E43 E52 F33
    Date: 2015–03–05
  5. By: Ocampo, Jose Antonio
    Abstract: This paper analyses the history and effectiveness of the two major mecha
    Keywords: IMF lending, conditionality, debt restructuring, collective action clauses
    Date: 2015
  6. By: De Koning, Kees
    Abstract: In 1946 the economist Arthur Burns defined a business cycle as a period of expansion occurring about the same time in many economic activities, followed by similar general recessions, contractions and revivals, which merge into the expansion phase of the next cycle. Cycles may take from one year to ten or twelve years. Milton Friedman argued that the concept of “cycle” was a misnomer as business declines are more of a monetary phenomenon. In this paper it will be argued that the increase and decrease in individual household debts in the U.S., especially of the long-term variety of home mortgages, was responsible for causing the latest cycle period. It will be argued that the cycle started in 1998 when overfunding became apparent. “Overfunding” occurs when mortgage funds are not only used to build new homes, but also to cause house prices to exceed the CPI indexed levels. In 2004 and 2006 68% of all new mortgage funding was used to cause such excess and only 32% of the funding was used for building new homes. The recession sets in when doubts arise about the ability of individual households to continue to service their long-term debts. Such doubts came into the open in 2007 when the liquidity for U.S. mortgage-backed securities dried up. The contraction was characterized by a turn around from a lending expansion period to a forceful reduction in outstanding debt through foreclosure proceedings and home repossessions. The period of “underfunding” started. The contraction resulted in substantial job losses, income losses for households and a switch to use incomes to reduce debt levels. The latter set off the reduced demand levels for other goods and services. The households most affected were the lower and middle-income families, whose livelihood depends on income earnings rather than on the use and benefits of savings. The tax revenues of the U.S. (Federal, State and Local) government were also seriously affected. The annual tax revenues dropped by $1.5 trillion in fiscal year 2009 as compared to fiscal year 2007; a drop of 29%. The Federal Reserve’s efforts to create a compensatory overfunding situation through Quantitative Easing: a $4.2 trillion exercise in buying up government and mortgage bonds, did not directly address the financial pressures on individual households. It helped the savers, who saw their financial assets increase in values, but not the borrowers who saw their jobs disappear and income levels drop. In a way the rich got richer, but the poor got much poorer. Inequality was enhanced. There is another way and this paper highlights the need to provide overfunding to individual households, once a recession sets in. Such method works directly, rather than indirectly, and shortens the contraction period. It also addresses the inequality issue.
    Keywords: overfunding, underfunding, business cycle, U.S. mortgage lending, U.S. house price inflation, foreclosure proceedings, home repossessions, inequality between rich and poor, U.S.loss of tax revenues,Quantitative Easing,economic growth incentive method.
    JEL: D1 E3 E32 E4 E43 E44 E6 E60
    Date: 2015–03–03
  7. By: Sinclair, Peter; Sun, Lixn
    Abstract: This paper develops a calibrated DSGE model for simulating China’s monetary policy and macroprudential policy. The empirical results show, first, that the interest rate is a better instrument for China’s monetary policy than the required reserve ratio when the central bank is solely concerned by the price stability; second, that the loan-to-value (LTV) ratio is a very useful macroprudential tool for China’s financial stability, and the required reserve ratio could be used as an instrument for both objectives. Whether macroprudential policy complements or conflicts with monetary policy depends upon the instruments choices of two policies. Our policy experiments suggest three combination choices of instruments for China’s monetary and macroprudential policies.
    Keywords: DSGE Model, Monetary Policy, Macroprudental Policy, China’s Economy
    JEL: E5 E6 G1
    Date: 2014–05
  8. By: Freddy Heylen; Renaat Van de Kerckhove (-)
    Abstract: We construct an overlapping generations model for an open economy where hours worked, human capital accumulation, income and welfare are all endogenous. Within each generation we distinguish individuals with high, medium or low innate ability. These differences in ability explain inequality in income and welfare. The composition of fiscal policy plays a central role in our model. The government sets tax rates on labor, capital and consumption. It spends its revenue mainly on goods, nonemployment benefits and pensions. We find that our calibrated model’s predictions match the main facts quite well in a sample of 13 OECD countries. We then use the model to investigate optimal changes in taxes and non-employment benefits if the objective is not only to improve aggregate equilibrium employment, output (income) and welfare, but also to reduce intergenerational and intragenerational welfare inequality. Our results strongly prefer an overall reduction of nonemployment benefits to finance a combined decrease of labor tax rates on older workers and on all low-wage earners.
    Keywords: heterogeneous ability, employment by age, human capital, fiscal policy, welfare inequality, overlapping generations
    JEL: E62 H5 I28 J22 J24
    Date: 2014–12
  9. By: Medel, Carlos
    Abstract: It is recognised that the understanding and accurate forecasts of key macroeconomic variables are fundamental for the success of any economic policy. In the case of monetary policy, many efforts have been made towards understanding the relationship between past and expected values of inflation, resulting in the so-called Hybrid Neo-Keynesian Phillips Curve (HNKPC). In this article I investigate to which extent the HNKPC help to explain inflation dynamics as well as its out-of-sample forecast, for the case of the Chilean economy. The results show that the forward-looking component is significative and accounts from 1.58 to 0.40 times the lagged inflation coefficient. Also, I find predictive gains close to 45% (respect to a backward-looking specification) and up to 80% (respect to the random walk) when forecasting at 12-months ahead.
    Keywords: New Keynesian Phillips Curve; inflation forecast; out-of-sample comparisons; survey data; real-time dataset
    JEL: C22 C53 E31 E37 E47
    Date: 2015–03–06
  10. By: Ahmet Sensoy; Ahmed Rostom; Erk Hacihasanoglu
    Abstract: We focus on the developments in the EMU sovereign debt markets in the last decade. First, we show the integration structure of the EMU bond markets before and after the sovereign debt crisis. Accordingly, a fair integration is observed between EMU bond markets during the pre-crisis period. However, a strict segmen-tation emerges with the sovereign debt turmoil. Second, we comment on the recent decreasing trend in EMU member bond yields and their increasing co-movement degree. Accordingly, these changes are argued to de-pend on not the fiscal performances but the illusion of quality appeared with the Fed tapering signals in 2013.
    Keywords: EMU, global financial crisis, eurozone sovereign debt crisis, systemic risk, ight to quality, Fed tapering, dynamic conditional correlation
    JEL: C58 D85 E58 E62 F34 F36
    Date: 2015–03
  11. By: Xavier Tafunell; Cristián Ducoing
    Abstract: This work offers non-residential capital stock estimation for major Latin American economies – Argentina, Brazil, Chile and Mexico - made towards a homogeneous method. This work covers the whole twentieth century and the years of the XXI century, expanding backward half century the present available estimations. Our research has the virtue of creating a capital stock method that could be applied to almost all Latin American economies, using the gross fixed capital formation data base (1850–1950) elaborated by one of the authors. This data could be linked with the investment series of standardized National Accounts of the Region, by ECLAC (Economic Commission for Latin America and the Caribbean). Also, the authors have done a comparison between Latin American countries and most advanced economies, especially on the comparative performance of two settlers countries, Argentina and Australia.
    Keywords: Capital Stock, Latin America, Gross fixed capital formation, National Accounts.
    JEL: N16 E22 E01
    Date: 2015–03
  12. By: Franz Hamann; Jesús Bejarano; Diego Rodríguez
    Abstract: The sudden collapse of oil prices poses a challenge to inflation targeting central banks in oil exporting economies. This paper illustrates that challenge and conducts a quantitative assessment of the impact of permanent changes in oil prices in a small and open economy, in which oil represents an important fraction of its exports. We calibrate and estimate a variety of real and monetary dynamic stochastic general equilibrium models using Colombian historical data. We find that, in these artificial economies the macroeconomic effects can be large but vary depending on the structure of the economy. The main channels through which the shock passes to the economy come from the increased country risk premium, the real exchange rate depreciation, the sectoral reallocation of resources from nontradables to tradables and the sluggish adjustment of prices. Contrary to the conventional findings in the literature of the financial accelerator mechanism for single-good closed economies, in multiple-goods small open economies the financial accelerator does not play a significant role in magnifying macroeconomic fluctuations. The sectoral reallocation from nontradable to tradables diminishes the financial amplification mechanism.
    Keywords: oil prices, precautionary savings, monetary policy, credit, leverage, financial accelerator, Colombia
    JEL: C61 E31 E37 E52 F41
    Date: 2015–03–06
  13. By: Jacinta C. Nwachukwu (University of Huddersfield, UK); Simplice Asongu (Yaoundé/Cameroun)
    Abstract: This study investigates the legitimacy of the relatively high interest rates charged by those microfinance institutions (MFIs) which have been transformed into regulated commercial banks using information garnered from a panel of 1232 MFIs from 107 developing countries. Results show that formally regulated micro banks have significantly higher average portfolio yields than their unregulated counterparts. By contrast, large-scale MFIs with more than eight years of experience have succeeded in lowering interest rates, but only up to a certain cut-off point. The implication is that policies which help nascent small-scale MFIs to overcome their cost disadvantages form a more effective pricing strategy than do initiatives to transform them into regulated institutions.
    Keywords: Microfinance, microbanks, non-bank financial institutions, interest rates, age, economies of scale, developing countries
    JEL: G21 G23 G28 E43 N20
    Date: 2015–02
  14. By: Espasa, Marta (Institut d'Economía de Barcelona (IEB))
    Abstract: Desde que existen las comunidades autónomas no ha cesado el debate entorno a su modelo de financiación. ¿Es una historia interminable? Es evidente que el contexto económico, político y social es cada vez más cambiante y las políticas, modelos e instrumentos tienen que ir adaptándose a esta realidad mutante. Pero si en esta ocasión se es capaz de avanzar e innovar significativamente y de no establecer meramente retoques al sistema, quizás el modelo pueda persistir durante más tiempo. Precisamente, el presente trabajo pretende, a partir de un diagnóstico de los principales problemas del actual modelo de financiación autonómica,y a la luz de los recientes avances en la teoría del federalismo fiscal, establecer posibles escenarios de reforma.
    Keywords: federalismo fiscal; financiación autonómica; autonomía; responsabilidad fiscal; solidaridad
    JEL: E62 H70 H77 R50
    Date: 2015–03–02
  15. By: Ahmet Sensoy; Kevser Ozturk; Erk Hacihasanoglu; Benjamin M. Tabak
    Abstract: Using dynamic conditional correlations and networks, we bring a novel framework to define the integration and segmentation of emerging countries. The individual EMBI+ spreads of 13 emerging countries from 01/2003 to 12/2013 are used to compare their interaction structure before (phase 1) and after (phase 2) the global financial crisis. Accordingly, the average of dynamic correlations between cross country spreads significantly increases in phase 2. At first, the increased co-movement degree suggests an integration of the sample countries after the crisis. However, correlation based stable networks show that the increase is more likely to be caused by clusters of countries that exhibit high within-cluster co-movement but not between-cluster co-movement. Important implications for international investors and policymakers are discussed. Using dynamic conditional correlations and networks, we bring a novel framework to define the integration and segmentation of emerging countries. The individual EMBI+ spreads of 13 emerging countries from 01/2003 to 12/2013 are used to compare their interaction structure before (phase 1) and after (phase 2) the global financial crisis. Accordingly, the average of dynamic correlations between cross country spreads significantly increases in phase 2. At first, the increased co-movement degree suggests an integration of the sample countries after the crisis. However, correlation based stable networks show that the increase is more likely to be caused by clusters of countries that exhibit high within-cluster co-movement but not between-cluster co-movement. Important implications for international investors and policymakers are discussed.
    Keywords: emerging markets, financial crisis, integration, segmentation, dynamic conditional correlation, financial networks
    JEL: C58 D85 E44 F30 G01
    Date: 2015–03
  16. By: Georg Graetz; Guy Michaels
    Abstract: Despite ubiquitous discussions of robots' potential impact, there is almost no systematic empirical evidence on their economic effects. In this paper we analyze for the first time the economic impact of industrial robots, using new data on a panel of industries in 17 countries from 1993-2007. We find that industrial robots increased both labor productivity and value added. Our panel identification is robust to numerous controls, and we find similar results instrumenting increased robot use with a measure of workers' replaceability by robots, which is based on the tasks prevalent in industries before robots were widely employed. We calculate that the increased use of robots raised countries' average growth rates by about 0.37 percentage points. We also find that robots increased both wages and total factor productivity. While robots had no significant effect on total hours worked, there is some evidence that they reduced the hours of both low-skilled and middle-skilled workers.
    Keywords: Robots, productivity, technological change
    JEL: E23 J23 O30
    Date: 2015–03
  17. By: Juan Andrés Espinosa-Torres; Jose E. Gomez-Gonzalez; Luis Fernando Melo-Velandia; José Fernando Moreno-Gutiérrez
    Abstract: We study the effect of shocks to the United States government bonds term premium on Latin American government bonds term premia. For doing so, we compute dynamic multipliers. Our main findings indicate that Latin American countries’ term premia respond permanently to changes in United States term premium. However, impulse-response functions vary depending on the country and particular time-length for which premia are computed. Responses are larger for Brazil and Colombia. Mexico exhibits the lowest responses for the four economies in our study.
    Keywords: Term Premium, Sovereign Risk, Latin America, Dynamic Multipliers.
    JEL: E43 F36 C22
    Date: 2015–03–02
  18. By: Paul Gomme (Concordia University and CIREQ); Damba Lkhagvasuren (Concordia University and CIREQ)
    Abstract: It is well known that the Diamond-Mortensen-Pissarides model exhibits a strong trade-off between cyclical unemployment fluctuations and the size of rents to employment. Introducing endogenous job search effort reduces the strength of the trade-off while bringing the model closer to the data. Ignoring worker search effort leads to a large upward bias in the elasticity of matches with respect to vacancies. Merging the American Time Use Survey and the Current Population Survey, new evidence in support of procyclical search effort is presented. Average search effort of the unemployed is subject to cyclical composition biases.
    Keywords: Variable Search Effort, Unemployment and Vacancies, Beveridge Curve, Search Intensity, Time Use
    JEL: E24 E32 J63 J64
    Date: 2015–02
  19. By: Paolo Gelain (Norges Bank (Central Bank of Norway)); Kevin J. Lansing (Federal Reserve Bank of San Francisco); Gisle J. Natvik (Norges Bank (Central Bank of Norway) and Department of Economics, BI Norwegian Business School)
    Abstract: We study the interaction between monetary policy and household debt dynamics. To this end, we develop a dynamic stochastic general equilibrium model where household debt is amortized gradually, and only new loans are constrained by the current value of collateral. Long-term debt implies that swings in leverage do not simply reect shifts in borrowing, and brings model implied debt dynamics closer to their empirical counterparts. The model implies that contractive monetary policy has muted inuence on household debt, increasing debt-to-GDP in the short run, while reducing it only in the medium run. If the interest rate is systematically raised whenever the debt-to-GDP ratio or the real debt level is high, equilibrium indeterminacy and greater volatility of debt itself follows. Responding to debt growth does not cast this destabilizing influence.
    Keywords: Monetary policy, Credit, Long-term debt.
    JEL: E52 E32 E44
    Date: 2015–02–27
  20. By: Emma Hooper (_Aix-Marseille University (Aix-Marseille School of Economics), CNRS, & EHESS)
    Abstract: We study the optimal growth path of a natural resource rich country, which can borrow from international financial markets. More precisely, we explore to what extent international borrowing can overcome resource scarcity in a small open economy, in order to have sustainable growth. First, this paper presents a benchmark model with a constant interest rate. We then introduce technical progress to see if the economy's growth can be sustainable in the long-run. Secondly, we analyse the case of a debt elastic interest rate, with a constant price of natural resources and then with increasing prices. The main finding of this paper is that borrowing on international capital markets does not permit sustainable growth for a country with exhaustible natural resources, when the interest rate is constant. Nevertheless, when we endogenize the interest rate the consumption growth rate can be positive before declining.
    Keywords: Exhaustible natural resources, exogenous growth, financial markets
    JEL: E20 O40 Q32 E44
    Date: 2015–02–15
  21. By: Tommaso Proietti (University of Rome “Tor Vergata" and CREATES); Martyna Marczak (University of Hohenheim); Gianluigi Mazzi (Statistical Office of the European Communities)
    Abstract: EuroMInd-D is a density estimate of monthly gross domestic product (GDP) constructed according to a bottom–up approach, pooling the density estimates of eleven GDP components, by output and expenditure type. The components density estimates are obtained from a medium-size dynamic factor model of a set of coincident time series handling mixed frequencies of observation and ragged–edged data structures. They reflect both parameter and filtering uncertainty and are obtained by implementing a bootstrap algorithm for simulating from the distribution of the maximum likelihood estimators of the model parameters, and conditional simulation filters for simulating from the predictive distribution of GDP. Both algorithms process sequentially the data as they become available in real time. The GDP density estimates for the output and expenditure approach are combined using alternative weighting schemes and evaluated with different tests based on the probability integral transform and by applying scoring rules.
    Keywords: Density Forecast Combination and Evaluation, Mixed–Frequency Data, Dynamic Factor Models, State Space Models
    JEL: C32 C52 C53 E37
    Date: 2015–02–24
  22. By: Taya Dumrongrittikul; Heather M. Anderson
    Abstract: This paper examines real exchange rate responses to shocks in exchange rate determinants for fourteen Asian developing countries. The analysis is based on a panel structural vector error correction model, and the shocks are identified using sign and zero restrictions. We find that trade liberalization generates permanent depreciation, and higher government consumption causes persistent appreciation. Traded-sector productivity gains induce appreciation but their effects are not immediate and last only for a few years. Real exchange rate responses to unexpected monetary tightening are consistent with the long-run neutrality of money. The evidence suggests that trade liberalization and government consumption have a strong effect on real exchange rates, while the effects of traded-sector productivity shocks are much weaker.
    Keywords: Exchange rate fundamentals, Government consumption, Monetary policy, Panel vector error correction model, Productivity improvement in the traded sector, Real exchange rates, Sign and zero restrictions, Trade liberalization.
    JEL: C33 C51 E52 F31
    Date: 2015
  23. By: Mark Hayes (University of Durham)
    Abstract: This paper discusses Keynes’s surprisingly positive views on the medieval scholastic teaching on usury and draws upon his work to argue that the traditional view of usury (understood as the charging of rent for the use of money) as anti-social is well-founded. Keynes’s understanding of the nature of probability allows a clear distinction to be made between debt and equity finance which most economists dismiss. Rather than meriting remuneration, the demand for the security provided by money against an uncertain future imposes a social cost in one form or another. This proposition is illustrated with reference to the problems of the modern international financial and monetary system, specifically the role of deposit insurance and the obstacles to a renewed system of managed exchange rates, without which many regions appear doomed to enduring long-term austerity.
    Keywords: Interest, monetary system, commodity standard, deposit insurance
    JEL: E42 E52 G28
    Date: 2015–03
  24. By: Mateo Tomé, Juan Pablo (Kingston University London)
    Abstract: This article analyses the development of economic growth in Brazil in terms of capital accumulation, following the Marxist approach. The aim is to identify the relationship between the two processes, looking at the profit rate, which along with investment effort determines productive investment. In turn, this one affects the capital-labour ratio and labour productivity. Both, with the addition of the price ratio, determine the productivity of capital, a key variable in understanding the accumulation process in Brazil. Using the period 1950-2008 allows comparing two phases in the Brazilian economy, the period of substitutive industrialisation and the neoliberal phase, all from the perspective of the relationship between the aforementioned variables.
    Keywords: growth; investment; profitability; productivity
    JEL: E11 E22 E32 N16 O40
    Date: 2015–03–04
  25. By: de Haas, R. (Tilburg University, Center For Economic Research); Brown, M. (Tilburg University, Center For Economic Research); Sokolov, V.
    Abstract: We exploit variation in consumer price inflation across 71 Russian regions to examine the relationship between the perceived stability of the domestic currency and financial dollarization. Our results show that regions with higher inflation experience an increase in the dollarization of household deposits and a decrease in the dollarization of loans to households and to firms in non-tradable sectors. The impact of inflation on credit dollarization is weaker in regions with less integrated banking markets. This suggests that the currency-portfolio choices of households and firms may be constrained by the asset-liability management of banks.
    Keywords: Financial dollarization; Financial Integration; regional inflation
    JEL: E31 E42 E44 F36 G21 G22 G24
    Date: 2015
  26. By: Campbell, J.R.; Hercowitz, Zvi
    Abstract: Among U.S. middle-class households, the marginal propensity to consume is either invariant to household wealth or a U-shaped function thereof. In contrast, precautionary savings models predict that wealth reduces the marginal propensity to consume. We bridge this gap between theory and data with term saving, households' savings for large forecastable expenditures. Household data indicate that term saving is widespread. Once incorporated into a calibrated precautionary savings model, it generates marginal propensities to consume like those from the data. This is because the approaching expenditure simultaneously motivates saving and raises the marginal propensity to consume by shortening the effective planning horizon.
    Keywords: fiscal policy; tax rebates; marginal propensity to consume; term saving; precautionary saving
    JEL: E21
    Date: 2015
  27. By: Alonso-Ortiz Jorge; Leal-Ordoñez Julio C.
    Abstract: How is the size of the informal sector affected when the distribution of social expenditures across formal and informal workers changes? Given this distribution, how is it affected when the generosity of these transfers changes? We use a search frictions model with informality, (ex post) heterogeneous workers, and conditional taxes and transfers. In the model, formal jobs are "better" than informal jobs, but harder to get. Taxes are proportional to the wage, while transfers are lump sum, implying a cross-subsidy from high-income to low-income workers. As a result, the marginal worker weighs two opposing forces: changes in taxes vs. changes in transfers. We calibrate the model to Mexico and perform counterfactuals. We find that informality is quite inelastic due to frictions, and due to the opposing forces of taxes and transfers.
    Keywords: Informality, elasticity of informality, social expenditures, cross-subsidies, taxes and transfers, search frictions.
    JEL: E2 E26 J6
    Date: 2014–12
  28. By: Leal-Ordoñez Julio C.
    Abstract: I review a contemporary branch of the informal sector literature that focus on understanding the way firm behavior is affected by the presence of informality and how such distortions have an impact on aggregate variables. The authors in this group all make use of dynamic general equilibrium (DGE) models. I focus on models with heterogeneous firms and a cost of informality that is increasing with firm size: reducing informality entails a tradeoff because there are some distortions associated with the formal sector and some others with the informal. Quantitative evaluations of this tradeoff using these models show that, in general, reducing informality brings gains. In conclusion, substantial progress has been made in understanding informality and its consequences through the use of DGE models with heterogeneous firms. More research is needed to understand how informality affects the economy when other sources of heterogeneity are considered.
    Keywords: informality, literature survey, dynamic general equilibrium, heterogeneous firms, distortions, productivity.
    JEL: E26 O17 O40
    Date: 2014–11
  29. By: Guerrero Santiago; Martínez-Ovando Juan Carlos
    Abstract: For over five decades, diffusion indexes have been widely used by statistical and economic agencies as an instrument to summarize the dynamics of a group of disaggregated time-series economic data. In this note we revise the methods for constructing diffusion indexes, propose a novel generalized diffusion index and apply it to the U.S. State Coincident Indexes published by the Federal Reserve Bank of Philadelphia. We show that the proposed index is more informative and conclusive regarding the stage of the aggregate business cycle than the traditional indexes used by some statistical agencies. Moreover, one of the unique properties of the generalized diffusion index is that it allows a consistent reading of the contributions of its constituent units.
    Keywords: Diffusion indexes, coincident indexes, business cycles, monitoring.
    JEL: C1 C5 E3
    Date: 2015–01
  30. By: Marouani, Mohamed Ali; Nilsson, Björn
    Abstract: During the last half-century, the evolution of educational attainment among Malaysians has been spectacular, and current enrollment rates suggest this progression will continue, albeit at a slower pace. Such a transformation of the educational attainment of labor should bring about macroeconomic effects such as wage compression, sectoral shifts and/or high skill un- employment, unless compensatory mechanisms exist. This article examines the impact of this evolution using a dynamic general equilibrium model applied to Malaysia. We argue that skill biased technological change occurred in Malaysia in recent years, and permitted unemployment figures to remain low and skill premia not to sink, despite the shift in skill structure. We run a retrospective simulation, looking at how unemployment and wages would have reacted had skill biased technological change not been prevalent. We also simulate the effects of a restriction in the supply of education to understand the impact of recent educational policy in Malaysia. The results are fed to a microdata set using a microaccounting technique, addressing distributional concerns. Our results show that the reduction in wage inequalities could have been substan- tially more important had skill biased technological change not been present. Furthermore, they suggest that the open-door higher education policy has contributed heavily to a reduction in wage inequalities
    Keywords: Skills acquisition; CGE; Education and the Labor Market; Technological change; Acquisition de compétences; EGC; Education et marché du travail; progrès technique;
    JEL: E17 O53 I28 E24 H52 O30
    Date: 2014–12
  31. By: Oxana Babecka Kucharcukova; Peter Claeys; Borek Vasicek
    Abstract: This paper studies the macroeconomic impact of ECB policy on the euro area and six non-EMU countries. The analysis is based on the evolution of a synthetic index of overall euro area monetary conditions (MCI) that can be decomposed into conventional and unconventional policy measures. A standard monetary VAR including the MCI subcomponents shows that the transmission of unconventional monetary policy in the euro area is quite different than under conventional policy: prices react quickly, but the response of output (industrial production) is muted. A block-restricted VAR analysis confirms that euro area monetary policy spills over to the macroeconomic developments of non-EMU countries. While conventional monetary policy has a generalised effect on economic activity, exchange rates and prices, unconventional measures have generated a variety of responses. Exchange rates respond rather quickly, but an effect on the real economy is found only for some countries, and inflation remains largely unaffected.
    Keywords: ECB, monetary policy, synthetic indicator, unconventional measures, VAR
    JEL: E58 F42
    Date: 2014–12
  32. By: Jan Filacek; Jakub Mateju
    Abstract: Assuming information asymmetry between private agents and the central bank about the state of the economy, an unexpected change in interest rates signals the central bank's perceived state of the economy and facilitates an update of private expectations in an adverse, perhaps unintended way. This "updating channel" might counteract the standard transmission from interest rates to inflation and output. We develop a simple model laying down a theoretical basis for the adverse effects of monetary policy signalling. We also detect the presence of the updating channel in private forecasts of inflation in a cross-country sample of selected OECD countries.
    Keywords: Asymmetric information, monetary policy, monetary transmission, signalling, updating channel
    JEL: E17 E43 E58
    Date: 2014–12
  33. By: Ojo, Marianne
    Abstract: The Capital Requirements Directive (CRD) IV, which constitutes the Capital Requirements Regulation (CRR), as well as the Capital Requirements Directive (CRD), is aimed at implementing Basel III in the European Union. Consequently, this CRD package, replaces Directives 2006/48 and 2006/49 with a Regulation and a Directive. The significance of such a move not only highlights the awareness of the importance of ensuring that Basel rules and regulations become more binding and enforceable, but also signals an era whereby the use of enforcement and supervisory tools such as Binding Technical Standards (BTS) are being introduced and generated by the European Banking Authority, as its plays a crucial role in the implementation of Basel III in the EU. Another significance of such a move towards Basel rules and regulations becoming more enforceable and binding lies in the facilitation of greater consistency, convergence and compliance, which the introduction of a Regulation, Binding Technical Standards, as well as other reporting requirements and provisions would generate in the implementation process. The increased relevance of Basel rules, and particularly Basel III rules, as well as their significance for the Eurozone, European Union institutions and European banks is hereby emphasised. This paper is also aimed at providing an analysis of the recent updates which have taken place in respect of the Basel III Leverage Ratio and the Basel III Supplementary Leverage Ratio – both in respect of recent amendments introduced by the Basel Committee and proposals introduced in the United States. As well as highlighting and addressing gaps which exist in the literature relating to liquidity risks, corporate governance and information asymmetries, by way of reference to pre-dominant based dispersed ownership systems and structures, as well as concentrated ownership systems and structures, this paper will also consider the consequences – as well as the impact - which Basel III, and in particular, the recent Basel Leverage ratios could have on the Eurozone, and European financial institutions. From this perspective, the rise of macro economics, micro economic inefficiency debates - as well as the validity of such debates will be considered.
    Keywords: Basel III; Capital Requirements Directive IV; European Banking Authority; enforcement; supervision; Binding Technical Standards; Keynesian revolution; macroeconomics; micro economic inefficiency
    JEL: D8 E3 E6 G2 G3 K2 M4
    Date: 2015–03–06
  34. By: Ozili, Peterson K
    Abstract: This study provides a link between accounting, managerial discretion and monetary policy. Monetary authorities encourage banking institutions to supply credit to the economy. Increased bank supply of credit is a good thing but too much of a good can be a bad thing. This paper investigates under what circumstances excessive loan supply ceases to be a good thing and how bank managers react to this. After examining 82 bank samples, I find that (i) bank underestimate the level of reserves to boost credit supply in line with expectations of monetary authorities, particularly, in Asia and UK (ii) consistent with the credit smoothing hypothesis, US and Chinese banks smooth credit supply to minimize unintended stock market signaling; (iii) managerial priority during a recession is to smooth credit over time rather than to boost credit supply; (iv) non-performing loans, bank portfolio risk and loan portfolio size are significant determinants of the level of loan loss reserves; and (v) credit risk, proxy by loan growth, do not have a significant impact on loan loss reserves but tend to have some significant effect during a recession, particularly, when change in loans is negative. The implications of these findings are two-fold: (i) bank managers use their discretion over reserves to influence bank credit supply; (ii) bank supply of credit is not solely driven by loan demand but by a combination of several factors, particularly, capital market concerns, the need to avoid scrutiny from monetary authorities, and country-specific factors.
    Keywords: Credit Risk, Monetary Policy, Loan Loss Reserves, Credit Smoothing, Accounting, Signaling, Bank supervision.
    JEL: E52 E58 G21 G28 M41
    Date: 2015–03–07
  35. By: Shintaku, Koji
    Abstract: This paper investigates the effects of a decrease in fixed costs on the division of labor within firms. In the constant markup rate model, a decrease in fixed costs curbs the division of labor. In the short run, the division of labor is promoted through labor reallocation within firms while in the long run, the division of labor is curbed through labor reallocation across firms. The latter effect dominates the former effect. In the variable markup rate model whose markup rate depends on the number of firms, the decrease in fixed costs induces labor reallocation across firms which is the opposite direction of that of the constant markup rate model in addition. The direction of labor reallocation across firms based on procompetition is opposite to that of the model of Kamei (2014) which does not impose free-entry and free-exit condition. The free-entry and free-exit condition plays a key role in determining the direction of that reallocation based on procompetition effect.
    Keywords: fixed costs, division of labor within firms, labor reallocation
    JEL: E23 E24 J24 L16 L22
    Date: 2015–03–06
  36. By: Kulaksizoglu, Tamer
    Abstract: This paper employs a new econometric technique to estimate the core inflation in Turkey measured as the shifting means in levels between 1955 and 2014. Using monthly series, we determine the number of shifts using the BIC, the hv-block cross-validation, the Lin-Teräsvirta parameter constancy test, and the neural networks test for neglected non-linearity. We find that there are at least three shifts in the inflation series. The findings help detect the exact dates of the shifts between different inflation regimes and the duration of each shift, which should be important information in evaluating the success of past economic policies in fighting inflation.
    Keywords: Inflation; Shifting mean autoregressive model; Transition function
    JEL: C22 C45 C52 E31
    Date: 2015–03–07
  37. By: Andrea Colciago; Lorenza Rossi
    Abstract: Using U.S. quarterly data we provide VAR evidence showing that a positive productivity shock leads to a persistent decrease in the unemployment rate and in the price markup, together with an increase in aggregate profits. In response to the shock the labor share of income decreases on impact and overshoots its long run trend before reverting to equilibrium. To address these facts, we propose a model where Cournot competition and firms' entry in the goods market interact with search and matching frictions in the labor market. The price markup countercyclicality delivered by our model is a key factor to jointly account for the empirical facts we documented.
    Keywords: Firms' Entry; Oligopolistic competition
    JEL: L11 E32
    Date: 2015–03
  38. By: Fornaro, Luca
    Abstract: This paper provides a framework to understand debt deleveraging in a group of financially integrated countries. During an episode of international deleveraging, world consumption demand is depressed and the world interest rate is low, reflecting a high propensity to save. If exchange rates are allowed to float, deleveraging countries can rely on depreciations to increase production and mitigate the fall in consumption associated with debt reduction. The key insight of the paper is that in a monetary union this channel of adjustment is shut off, because deleveraging countries cannot depreciate against the other countries in the monetary union, and therefore the fall in the demand for consumption and the downward pressure on the interest rate are amplified. Hence, deleveraging can easily push a monetary union against the zero lower bound and into a recession.
    Keywords: Debt Deflation; Global Debt Deleveraging; Liquidity Trap; Monetary Union; Precautionary Savings; Sudden Stops
    JEL: E31 E44 E52 F32 F34 F41 G01 G15
    Date: 2015–03
  39. By: Carluccio, Juan; Fougère, Denis; Gautier, Erwan
    Abstract: We estimate the impact of international trade on wages using data for French manufacturing firms. We instrument firm-level trade flows with firm-specific instrumental variables based on world demand and supply shocks. Both export and offshoring shocks have a positive effect on wages. Exports increase wages for all occupational categories while offshoring has heterogeneous effects. The impact of trade on wages varies across bargaining regimes. In firms with collective bargaining, the elasticity of wages with respect to exports and offshoring is higher than in firms with no collective bargaining. Wage gains associated with collective bargaining are similar across worker categories.
    Keywords: collective bargaining; exports; firm-level wages; offshoring
    JEL: E24 F16 J51
    Date: 2015–03
  40. By: Abbassi, Puriya; Bräuning, Falk; Fecht, Falko; Peydró, José Luis
    Abstract: We analyze the impact of financial crises and monetary policy on the supply of wholesale funding liquidity, and also on the compositional supply effects through cross-border and relationship lending. For empirical identification, we draw on the proprietary bank-to-bank European interbank dataset extracted from Target2 and also exploit the Lehman and sovereign crisis shocks as well as the main Eurosystem non-standard monetary policy measures. The robust results imply that the crisis shocks lead to worse access, volumes and spreads (in both the overnight and longer-term maturities). The quantitative impact on interbank access and volume is stronger than on spreads. Liquidity supply restrictions are exacerbated for cross-border lending after the Lehman failure; for banks headquartered in periphery countries, the impact is quantitatively stronger in the sovereign debt crisis. Moreover, the interbank market – unlike other credit markets – allows to exploit the price dispersion from different lenders on identical credit contracts, i.e. overnight uncollateralized loans in the same morning for the same borrower. This price dispersion increases massively with the crisis, and even more for riskier borrowers. Cross-border and previous relationship lenders charge higher prices for identical contracts in the crisis. Importantly, this price dispersion substantially decreases when the Eurosystem promises unlimited access to liquidity at a fixed price in October 2008 and announces the 3-year LTRO in December 2011, with economically stronger effects for borrowers in weaker countries.
    Keywords: credit rationing; credit supply; euro area; financial crises; financial globalization; information asymmetry; interbank liquidity; monetary policy
    JEL: E44 E58 G01 G21 G28
    Date: 2015–03
  41. By: Heinz Welsch (University of Oldenburg - Department of Economics & ZenTra); Jan Kühling (University of Oldenburg - Department of Economics & ZenTra)
    Abstract: This paper uses life satisfaction data of almost 140,000 individuals in 25 OECD countries to study how changes in the rates of GDP growth, unemployment and inflation during the macroeconomic crisis of 2008-2009 have affected subjective well-being. The relative contributions of the three macroeconomic variables to individuals’ life satisfaction are used to assess how each country performed on balance during the crisis. This approach follows a recent trend of using subjective well-being data for monitoring economic performance and for policy appraisal. We find that in the countries most strongly affected by the crisis the effects on an average citizen’s well-being may be of a similar magnitude as the effects of the most serious personal life events. The main driver of these effects is the drop in GDP, whose impact is aggravated by the increase of unemployment. Though the inflation rate went down in several of the countries, the effect was too weak to significantly reduce the negative effect of the changes in GDP and unemployment. The results show that GDP fluctuations are important drivers of subjective well-being.
    Keywords: macroeconomic crisis, subjective well-being, life satisfaction
    JEL: E32 I31 E61
    Date: 2015–03
  42. By: Demary, Markus; Hüther, Michael
    Abstract: Ausstieg aus dem Niedrigzinsumfeld? In vielen Ländern der Eurozone haben Regierungen, Unternehmen und private Haushalte den Prozess der Bereinigung ihrer Bilanzen noch nicht erfolgreich abgeschlossen. Die Schuldenstände sind nach wie vor hoch und drohen bei negativen Entwicklungen, wie dem Entstehen einer Deflation, nicht mehr tragfähig zu werden. Die Situation in einigen Ländern der Eurozone ist vergleichbar mit der eines Patienten, der sich von einer schweren Krankheit erholt, dessen Immunsystem ihn aber noch nicht hinreichend vor weiteren Infektionen schützt. Trotz der noch instabilen Situation der Eurozone stehen die umfangreichen geldpolitischen Maßnahmen der Europäischen Zentralbank (EZB) in der Kritik. Dieser Beitrag zeigt, dass die aktuelle Geldpolitik der EZB vor dem Hintergrund einer noch nicht überwundenen Bilanzrezession geboten ist. Zudem sind diese Maßnahmen weder ein Abgesang an einen möglichst baldigen Ausstieg aus dem Niedrigzinsumfeld, noch ein Abgesang an eine Fortführung von angebotsseitigen Reformen. Vielmehr müssen das Potentialwachstum der Eurozone steigen und die Inflationserwartungen in die Nähe des geldpolitischen Inflationsziels zurückkehren, um eine erfolgreiche Entschuldung zu ermöglichen und die Bilanzrezession zu beenden. Erst nach Überwindung der Bilanzrezession kann ein erfolgreicher Ausstieg aus dem Niedrigzinsumfeld erfolgen. Trotz ihrer erheblichen Nebenwirkungen ist die aktuelle ultra-expansive Geldpolitik geboten; es ist aber erforderlich, dass die Politik sämtliche ihrer Nebenwirkungen abmildert. Dazu gehört u.a. eine entschlossene Fortführung der angebotsseitigen Reformmaßnahmen durch die Regierungen der Eurozone.
    Keywords: Banken- und Staatsschuldenkrise,Bilanzrezession,Geldpolitik,Inflationserwartungen,Strukturreformen
    JEL: E44 E52 E58 E61
    Date: 2015
  43. By: Gabriele Fiorentini (Università di Firenze); Alessandro Galesi (CEMFI, Centro de Estudios Monetarios y Financieros); Enrique Sentana (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: We generalise the spectral EM algorithm for dynamic factor models in Fiorentini, Galesi and Sentana (2014) to bifactor models with pervasive global factors complemented by regional ones. We exploit the sparsity of the loading matrices so that researchers can estimate those models by maximum likelihood with many series from multiple regions. We also derive convenient expressions for the spectral scores and information matrix, which allows us to switch to the scoring algorithm near the optimum. We explore the ability of a model with a global factor and three regional ones to capture inflation dynamics across 25 European countries over 1999-2014.
    Keywords: Euro area, Inflation convergence, spectral maximum likelihood, Wiener-Kolmogorov filter.
    JEL: C32 C38 E37
    Date: 2015–02
  44. By: Pau Rabanal; Juan F. Rubio-Ramirez
    Abstract: Real exchange rates exhibit important low-frequency fluctuations. This makes the analysis of real exchange rates at all frequencies a more sound exercise than the typical business cycle one, which compares actual and simulated data after the Hodrick-Prescott …lter is applied to both. A simple two-country, two-good, international real business cycle model can explain the volatility of the real exchange rate when all frequencies are studied. The puzzle is that the model generates too much persistence of the real exchange rate instead of too little, as the business cycle analysis asserts. We show that the introduction of input adjustment costs in production, cointegrated productivity shocks across countries, and lower home bias allows us to reconcile theory and this feature of the data.
    Keywords: Economic Analysis, Global, Research, Working Paper
    JEL: E32 F32 F33 F41
    Date: 2015–01
  45. By: Chin, Michael (Bank of England); Liu, Zhuoshi (Bank of England)
    Abstract: We derive a general joint affine term structure model of US government bond yields and the convenience yields on physical commodities. We apply this framework separately to oil and gold. Our results show clear links between bond and commodity markets, since bond factors play a significant role in the pricing of the convenience yield term structure. Our framework allows us to decompose the term structure of futures prices into expectations of future spot prices and risk premia components. We estimate that the risk premium in oil futures has been negative over the 1980s and 1990s, and turned positive in the mid-2000s, consistent with a declining role for supply shocks in the oil market over this period. In contrast, we estimate that the gold risk premium is mostly positive throughout the sample period.
    Keywords: Commodity futures; gold; oil; risk premium; convenience yields; affine term structure model; Treasury yields
    JEL: E43 G13 Q02 Q40
    Date: 2015–03–06
  46. By: Tsoulfidis, Lefter
    Abstract: The economic crisis that inflicted Greece is international in character and its cause is in the decreasing profitability of capital which from a certain point onwards leads to the stagnation of profits, discourages new investment, reduces production and increases unemployment. If these are combined with the large public debt and the austerity economic policies that were pursued before and after the advent of the Troika, we may explain the vehemence with which the crisis affected the Greek economy. The crisis may also lead to new class realliances and furthermore show the direction and the requirements for the contemplation of an alternative economic policy.
    Keywords: falling rate of profit, investment function, unemployment rate, crisis, debt, Greek economy
    JEL: B50 B51 E11 E12 E32 E4 O50
    Date: 2014
  47. By: Kakarot-Handtke, Egmont
    Abstract: The goal of theoretical economics is to explain how the actual economy works. Since Adam Smith economists have consistently failed to clarify the nature and magnitude of overall profit. No economist, though, would deny that profit is an important phenomenon. Yet, obviously economists are still mired in utter confusion about the most fundamental concept of their discipline. Hence, in the strict sense, there is no valid economics. From all this follows for a methodologically ambitious Constructive Heterodoxy that the accustomed foundations of Orthodoxy have to be replaced. In technical terms this is what a paradigm shift is all about.
    Keywords: new framework of concepts; structure-centric; Structural Law of Supply and Demand; monetary profit; distributed profit; Law of Overall Profit; economic stability; positive feedback
    JEL: B59 E10
    Date: 2015–03–08
  48. By: Shyam Gouri Suresh; Mark Setterfield
    Abstract: We construct a multi-agent system (MAS) model of cyclical growth in which aggregate fluctuations result from variations in activity at firm level. The latter, in turn, result from changes in “animal spirits” or the state of long run expectations (SOLE) and their effect on firms’ investment behavior. We focus on the impact of publicly-available information about macroeconomic conditions – analogous to the press releases of national statistical agencies – on changes in the SOLE and hence the amplitude of aggregate fluctuations. Our results suggest that the amplitude of fluctuations is reduced by extremes of attention or inattention to aggregate economic performance, but that this relationship is subject to complicated (and possibly complex) phase transitions exhibiting extreme sensitivity to initial conditions.
    Keywords: Aggregate fluctuations, cyclical growth, animal spirits, state of long run expectations, sentiment, multi-agent systems
    JEL: C63 E12 E32 E37 O41
  49. By: Mark Setterfield; Shyam Gouri Suresh
    Abstract: This paper discusses the concept of path dependence in macrodynamics, and identifies practical difficulties associated with building path-dependent macrodynamic models of the sort that Keynesians and Schumpeterians regard as necessary for the successful study of long-term growth and development. It is suggested that multi-agent systems (MAS) analysis can help address these difficulties, and therefore provides a useful tool for advancing path-dependent macrodynamic analysis. An illustrative example is provided in the form of a MAS model of path-dependent aggregate fluctuations.
    Keywords: Multi-agent systems, agent based models, path dependence, macrodynamics
    JEL: B41 C63 E12 E32 E37 O41
  50. By: Dean Baker
    Abstract: This paper explores the potential impact of the Federal Reserve Board’s decision on interest rates on the budget deficit. The first part recounts the history of the 1990s surplus, correcting the widely held misunderstanding that this surplus was achieved by the Clinton administration’s tax increases and spending cuts. The second part examines the direct and indirect impact of Fed rate hikes on the federal budget deficit. The third part examines the impact of Fed rate hikes on state budgets.
    Keywords: jobs, employment, interest rates, unemployment, economic policy, Fed
    JEL: E E4 E5
    Date: 2015–03
  51. By: Andersen, Thomas Barnebeck (Department of Business and Economics); Malchow-Møller, Nikolaj (Department of Business and Economics)
    Abstract: The Global Financial Crisis (GFC) of 2008 hit Denmark particularly hard. In this paper we argue that a combination of innovation in mortgage finance and the need to defend a euro exchange rate peg was partly responsible. Sustained pressure against the Danish krone forced the central bank to increase policy interest rates consecutively in the last quarter of 2008. Monetary tightening in the midst of the GFC deepened the ongoing recession for the usual Keynesian aggregate demand reasons. Innovations in mortgage finance, which had made the economy more sensitive to changes in the policy rate, exacerbated this effect.
    Keywords: Global Financial Crisis; Great Recession; currency peg; financial innovation; adjustable-rate mortgages
    JEL: E20 E30 E40 F33
    Date: 2015–03–10
  52. By: Georg Graetz; Guy Michaels
    Abstract: Despite ubiquitous discussions of robots’ potential impact, there is almost no systematic empirical evidence on their economic effects. In this paper we analyze for the first time the economic impact of industrial robots, using new data on a panel of industries in 17 countries from 1993-2007. We find that industrial robots increased both labor productivity and value added. Our panel identification is robust to numerous controls, and we find similar results instrumenting increased robot use with a measure of workers’ replaceability by robots, which is based on the tasks prevalent in industries before robots were widely employed. We calculate that the increased use of robots raised countries’ average growth rates by about 0.37 percentage points. We also find that robots increased both wages and total factor productivity. While robots had no significant effect on total hours worked, there is some evidence that they reduced the hours of both low-skilled and middle-skilled workers.
    Keywords: robots; productivity; technological change
    JEL: E23 J23 O30
    Date: 2015–03
  53. By: Sophia Dimelis; Ioannis Giotopoulos; Helen Louri
    Abstract: This paper explores the effects of bank credit on firm growth before and after the recent financial crisis, taking into account different structural characteristics of banking sectors and domestic economies. Panel quantile analysis is used on a sample of 2075 euro area firms in 2005-2011. The post-2008 credit crunch is found to seriously affect only small, slow-growth firms and especially those operating in concentrated and domestic-dominated banking systems, and in riskier and less financially developed economies. Large, high-growth firms seem to be able to find alternative financial sources and, thus, may act as carriers and facilitators of a credit-less recovery.
    Keywords: credit crunch; firm growth; credit-less recovery; financial crisis; panel quantile regressions
    JEL: E51 L1 L25
    Date: 2015–02
  54. By: Austan D. Goolsbee; Alan B. Krueger
    Abstract: This paper takes a retrospective look at the U.S. government’s effort to rescue and restructure General Motors and Chrysler in the midst of the 2009 economic and financial crisis. The paper describes how two of the largest industrial companies in the world came to seek a bailout from the U.S. government, the analysis used to evaluate their request, and the steps taken by the government to rescue them. The paper also summarizes the performance of the U.S. auto industry since the bailout and draws some general lessons from the episode.
    JEL: E0 G01 G33 H0 J01 L50 L62
    Date: 2015–03
  55. By: Erik Hurst; Benjamin J. Keys; Amit Seru; Joseph S. Vavra
    Abstract: An integrated tax and transfer system together with factor mobility can help mitigate local shocks within monetary and fiscal unions. In this paper we explore the role of a new mechanism that may also be central to determining the welfare effects of regional shocks. The degree to which households can use borrowing to smooth location-specific risks depends crucially on the interest rate and how it varies with local economic conditions. In the U.S., the bulk of borrowing occurs through the mortgage market and is heavily influenced by the presence of government-sponsored enterprises (GSEs). We empirically establish that despite large spatial variation in predictable default risk, there is essentially no spatial variation in GSE mortgage rates, conditional on borrower observables. In contrast, we show that the private market does set interest rates based in part on regional risk factors and postulate that the lack of regional variation in GSE mortgage rates is likely driven by political pressure. We quantify the economic impact of the national interest rate policy on regional risk by building a structural spatial model of collateralized borrowing to match various features from our empirical analysis. The model suggests that the national interest rate policy has significant ex-post redistributional consequences across regions.
    JEL: E02 G21 G28
    Date: 2015–03
  56. By: Andrei A. Levchenko; Nitya Pandalai-Nayar
    Abstract: We propose a novel identification scheme for a non-technology business cycle shock, that we label "sentiment." This is a shock orthogonal to identified surprise and news TFP shocks that maximizes the short-run forecast error variance of an expectational variable, alternatively a GDP forecast or a consumer confidence index. We then estimate the international transmission of three identified shocks – surprise TFP, news of future TFP, and "sentiment" – from the US to Canada. The US sentiment shock produces a business cycle in the US, with output, hours, and consumption rising following a positive shock, and accounts for the bulk of short-run business cycle fluctuations in the US. The sentiment shock also has a significant impact on Canadian macro aggregates. In the short run, it is more important than either the surprise or the news TFP shocks in generating business cycle comovement between the US and Canada, accounting for up to 50% of the forecast error variance of Canadian GDP and about one-third of Canadian hours, imports, and exports. The news shock is responsible for some comovement at 5-10 years, and surprise TFP innovations do not generate synchronization.
    JEL: E32 F41 F44
    Date: 2015–03
  57. By: Dachraoui, Hajer; Smida, Mounir
    Abstract: One of the main challenges faced by developing countries is to stimulate investment for achieving higher growth rates. On the other hand, the capital flight phenomenon, which is defined as unrecorded capital outflows by the residents of a capital-scarce country, causes detrimental outcomes on the economies of many developing countries. In this work, we investigate the potentially devastating effects of capital flight on investment in presence of financial liberalization policies. To do so, first, we calculate the capital flight magnitude for 19 emerging market economies during the period 1984-2010 based on the residual method of the World Bank. Afterwards, we employ a dynamic panel methodology that allows controlling for country-specific effects as well as accounting for the potential endogeneity of the explanatory variables. The results suggest that capital flight has a negative and significant effect on total domestic investment. This finding is still robust after disaggregating the total sample into Latin American countries, Asian countries and Mena countries. The results reveal also that capital flight reduces significantly the private investment while its effect on public investment is found to be insignificant. Therefore, the negative impact of capital flight on total domestic investment operates through the private investment channel more than that of public investment. If developing countries can repatriate capital and prevent it from fleeing by implementing sound macroeconomic policies, these funds could be used to enhance domestic investment.
    Keywords: Capital flight ; Domestic investissement ; emerging countries; GMM.
    JEL: E0 E5 G32
    Date: 2014–02–09
  58. By: Solomon, Bernard Daniel
    Abstract: In these notes I go over some basic aspects of the analysis of business cycles and aggregate fluctuations from a dynamic stochastic general equilibrium (DSGE) perspective. I build a cannonical DSGE model with a small number of representative agents and a large set of distortionnary wedges standing for various frictions as an organising framework. I use this model to discuss fundamental properties of business cycle dynamics. I start with some of the basic assumptions common to most applied DSGE models, and the modeling of household and firm behaviour. Then I discuss general equilibrium and the response of the economy to various shocks with flexible prices and wages, as well as ways of applying DSGE models with actual data. Finally I add nominal price rigidities to get the standard New Keynesian model, and discuss some open economy issues, fiscal policy and unconventional monetary policy.
    Keywords: Business cycles, dynamic stochastic general equilibrium
    JEL: E0 E12 E13 E32 E37 E44
    Date: 2015–02–16
  59. By: Germán López Espinosa (Universidad de Navarra)
    Abstract: This paper compares forecast accuracy of two Dynamic Factor Models in a context of constraints interms of data availability. Estimation technique and properties of the factor decomposition depend onthe cross section dimension of the dataset included in each model: a large dataset composed by seriesbelonging to seven broad categories or a small dataset with a few prescreened variables. Short term outof-sample forecast of GDP growth is carried out with both models reproducing the real time situationof data accessibility derived from the publication lags of the series in six Latin American countries.Results show i) the important role of the inclusion of latest released data in the forecast accuracy ofboth models, ii) the better precision of predictions based on factors with respect to autoregressivemodels and iii) identify the most adequate model for each of these six countries in different temporalhorizons.
    Keywords: Factor models, nowcast, forecast, real time, developing economies
    JEL: C32 C53 E37 O54
    Date: 2015–02
  60. By: Ana Bela Nunes
    Abstract: The performance of the Portuguese economy during the 1980s was conditioned by two main factors: structural changes imposed by the decision to join the European Economic Community and external shocks and short-term fluctuations in the world economy. The first half of the 1980s Portugal’s economic performance was dominated by short-term macroeconomic problems, while international economic recovery after 1985 created a positive background for Portuguese economic growth and a convergence path that was followed in the EEC/EU context.
    Keywords: Portugal, Economic policy JEL classification :E65; N44
    Date: 2015
  61. By: Hjelm, Göran (National Institute of Economic Research); Bornevall, Helena (National Institute of Economic Research); Fromlet, Pia (National Institute of Economic Research); Nilsson, Jonny (National Institute of Economic Research); Stockhammar , Pär (National Institute of Economic Research); Wiberg, Magnus (National Institute of Economic Research)
    Abstract: We analyse model choices of various international institutions and find that the majority of the studied central banks have chosen so-called DSGE-models. Ministry of finances have chosen to continue using so-called Semi-Structural Models (SSM) while international organisations such as the IMF and the OECD have “a suite of models” including both DSGE and SSM. Based on these international experiences and the specific institutional set up in Sweden we list a number of criteria and rank different modelling strategies. We propose that a DSGE-model for both forecast and policy analysis including a rich modelling of fiscal policy would be appropriate for the Ministry of finance and the National Institute of Economic Research in Sweden.
    Keywords: Macroeconomic modelling; model criteria; forecast; policy analysis; semi-structural models; DSGE; BVAR; SVAR; VAR
    JEL: E00
    Date: 2015–03–05
  62. By: Nakajima, Makoto (Federal Reserve Bank of Philadelphia)
    Abstract: A life-cycle model with equilibrium default in which consumers with and without temptation coexist is constructed to evaluate the 2005 bankruptcy law reform and other counterfactual reforms. The calibrated model indicates that the 2005 bankruptcy reform achieves its goal of reducing the number of bankruptcy filings, as seen in the data, but at the cost of loss in social welfare. The creditor-friendly reform provides borrowers with a stronger commitment to repay and thus yields lower default premia and better consumption smoothing. However, those who borrow and default due to temptation or unavoidable large expenditures suffer more under the reform due to higher costs or means-testing requirement. Moreover, those who borrow due to temptation suffer from overborrowing when the borrowing cost declines. The model indicates that the negative welfare effects dominate.
    Keywords: Consumer bankruptcy; Debt; Default; Borrowing constraint; Temptation and self-control; Hyperbolic discounting; Heterogeneous agents; Incomplete markets
    JEL: D91 E21 E44 G18 K35
    Date: 2015–03–09
  63. By: De Giorgi, Giacomo (Federal Reserve Bank of New York); Gambetti, Luca
    Abstract: This paper sheds new light on the interactions between business cycles and the consumption distribution. We use Consumer Expenditure Survey data and a factor model to characterize the cyclical dynamics of the consumption distribution. We first establish that our approach is able to closely match business cycle fluctuations of consumption from the National Account. We then study the responses of the consumption distribution to total factor productivity shocks and economic policy uncertainty shocks. Importantly, we find that the responses of the right tail of the consumption distribution, mostly comprising more highly educated individuals, to shocks that drive cyclical fluctuations are larger and quicker than in other parts of the distribution. We note that the cost of business cycle fluctuations is larger than that found using aggregate consumption and that the shocks we analyze reduce consumption inequality on impact.
    Keywords: consumption; inequality; cost of business cycles; heterogeneity; aggregate shocks; structural factor model; FAVAR
    JEL: C3 D12 E21 E63
    Date: 2015–03–01
  64. By: Fernando Fernández-Rodríguez (Department of Quantitative Methods in Economics, Universidad de Las Palmas de Gran Canaria); Marta Gómez-Puig (Faculty of Economics, University of Barcelona); Simón Sosvilla-Rivero (Complutense Institute of International Studies, Universidad Complutense de Madrid)
    Abstract: This paper measures the connectedness in EMU sovereign market volatility between April 1999 and January 2014, in order to monitor stress transmission and to identify episodes of intensive spillovers from one country to the others. To this end, we first perform a static and dynamic analysis to measure the total volatility connectedness in the entire period (the system-wide approach) using a framework recently proposed by Diebold and Yilmaz (2014). Second, we make use of a dynamic analysis to evaluate the net directional connectedness for each country and apply panel model techniques to investigate its determinants. Finally, to gain further insights, we examine the time-varying behaviour of net pair-wise directional connectedness at different stages of the recent sovereign debt crisis.
    Keywords: Sovereign debt crisis, Euro area, Market Linkages, Vector Autoregression, Variance Decomposition. JEL classification:C53, E44, F36, G15
    Date: 2015–02
  65. By: Marta Gómez-Puig (Faculty of Economics, University of Barcelona); Simón Sosvilla-Rivero (Universidad Complutense de Madrid); Manish K. Singh (Faculty of Economics, University of Barcelona)
    Abstract: This study attempts to identify and trace inter-linkages between sovereign and banking risk in the euro area. To this end, we use an indicator of banking risk in each country based on the Contingent Claim Analysis literature, and 10-year government yield spreads over Germany as a measure of sovereign risk. We apply a dynamic approach to testing for Granger causality between the two measures of risk in 10 euro area countries, allowing us to check for contagion in the form of a significant and abrupt increase in short-run causal linkages. The empirical results indicate that episodes of contagion vary considerably in both directions over time and within the different EMU countries. Significantly, we find that causal linkages tend to strengthen particularly at the time of major financial crises. The empirical evidence suggests the presence of contagion, mainly from banks to sovereigns.
    Keywords: sovereign debt crisis, banking crisis, Granger-causality, time-varying approach, “distance-to-default”, euro area. JEL classification: C22, E44, G01, G13, G21
    Date: 2015–01
  66. By: Oscar Claveria (Faculty of Economics, University of Barcelona); Enric Monte (Polytechnic University of Catalunya); Salvador Torra (Faculty of Economics, University of Barcelona)
    Abstract: This study attempts to assess the forecasting accuracy of Support Vector Regression (SVR) with regard to other Artificial Intelligence techniques based on statistical learning. We use two different neural networks and three SVR models that differ by the type of kernel used. We focus on international tourism demand to all seventeen regions of Spain. The SVR with a Gaussian kernel shows the best forecasting performance. The best predictions are obtained for longer forecast horizons, which suggest the suitability of machine learning techniques for medium and long term forecasting.
    Keywords: Forecasting, support vector regressions, artificial neural networks, tourism demand, Spain JEL classification: C02, C22, C45, C63, E27, R11
    Date: 2015–01
  67. By: Fernando Fernández-Rodríguez (Universidad de Las Palmas de Gran Canaria); Marta Gómez-Puig (Faculty of Economics, University of Barcelona); Simón Sosvilla-Rivero (Universidad Complutense de Madrid)
    Abstract: This paper measures the connectedness in EMU sovereign market volatility between April 1999 and January 2014, in order to monitor stress transmission and to identify episodes of intensive spillovers from one country to the others. To this end, we first perform a static and dynamic analysis to measure the total volatility connectedness in the entire period (the system-wide approach) using a framework recently proposed by Diebold and Yilmaz (2014). Second, we make use of a dynamic analysis to evaluate the net directional connectedness for each country and apply panel model techniques to investigate its determinants. Finally, to gain further insights, we examine the timevarying behaviour of net pair-wise directional connectedness at different stages of the recent sovereign debt crisis
    Keywords: Sovereign debt crisis, Euro area, Market Linkages, Vector Autoregression, Variance Decomposition. JEL classification: C53, E44, F36, G15
    Date: 2015–01

This nep-mac issue is ©2015 by Soumitra K Mallick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.