nep-mac New Economics Papers
on Macroeconomics
Issue of 2015‒03‒27
sixty-nine papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Designing a New Derivation of the Subjective Discount Rate and its Application in the Czech Republic By Jiri Rotschedl
  2. Sunspot Fluctuations in Two-Sector Models: New Results with Additively-Separable Preferences By Frédéric Dufourt; Kazuo Nishimura; Alain Venditti
  3. Macroeconomic Policy and Household Economics By Wright, Randall; Dong, Mei; Sun, Ling
  4. Islamic Banking System in Afghanistan By Sameer Ahmad Mastoor;
  5. Global Prediction of Recessions By Dovern, Jonas; Huber, Florian
  6. Funding Liquidity, Market Liquidity and the Cross-Section of Stock Returns By Jean-Sébastien Fontaine; René Garcia; Sermin Gungor
  7. Industrial employment in Italy, 1911: the burden of the census data By Stefano Fenoaltea
  8. How culture matters: The impact of individual values on development By Judit Kapas
  9. Correlating Social Mobility and Economic Outcomes By Güell, Maia; Pellizzari, Michele; Pica, Giovanni; Rodríguez Mora, José Vicente
  10. EL PROBLEMA REGULATORIO EN LA DISTRIBUCIÓN GASÍFERA COLOMBIANA By Camila Andrea Jaramillo Arenas; Jeison David Montañez Estupiñan; Nathalia Montoya González
  11. The Effects of Oil Price on Turkish Economic Growth By AyÅŸen Edirneligil; Mehmet Mucuk
  12. An Overview on the Application of the Coalitional Games in Cancer Diagnosis By BIMONTE, Giovanna; SENATORE, Luigi
  13. High unemployment and a segmented labour market in South Africa: A suggested macroeconomic model By Philippe Burger; Frederick Fourie
  14. Competitive Conditions in the Turkish Banking Systems By Taner SEKMEN; Ömer AKKUÅž; Ä°lyas ÅžIKLAR
  15. Capital Structure and Profitability of Quoted Firms: The Nigerian Perspective (2000-2011) By BABATUNDE YUSUF; AKINWUNMI ONAFALUJO; KHADIJAH IDOWU; YUSUF SOYEBO
  16. Escaping Expectations-Driven Liquidity Traps: Experimental Evidence By Luba Petersen; Jasmina Arifovic
  17. Does the volatility of commodity prices reflect macroeconomic uncertainty? By Marc Joëts; Valérie Mignon; Tovonony Razafindrabe
  18. Institutional Innovation in Agriculture and Industry Sectors: A Case of Indonesia By Ahmad Erani Yustika; Rukavina Baksh Abdullah; Dita Nurul Aini
  19. An Analysis of Bitcoin By Max Kubat
  20. How Cyclical Is Bank Capital? By Haubrich, Joseph G.
  21. Effects of fiscal shocks in new EU members estimated from a SVARX model with debt feedback By Stanova, Nadja
  22. Distinguishing the Components of Household Financial Wealth: the Impact of Liabilities on Assets in Euro Area Countries By Merike Kukk
  23. The measurement of production movements: lessons from the engineering industry in Italy, 1861-1913 By Stefano Fenoaltea
  24. Portfolio Investments and Asset Prices Relationship in Turkey By Bilge Bakin; Gozde Gurgun
  25. Macroeconomic imbalances and institutional reforms in the EMU By Stefan Ederer
  26. Membership in the Euro area and fiscal sustainability - Analysis through panel fiscal reaction functions. By Piotr Ciżkowicz; Andrzej Rzońca; Rafał Trzeciakowski
  27. The role of soft factors on economic growth By Bozena Kaderabkova; Klara Cermakova; Robert Holman
  28. The relationship between dynamic price and dynamic unemployment: the case of the CE-3 and the Baltic Tigers By Luis Dumlao
  29. Learning Dynamics with Data (Quasi-) Differencing By Pei Kuang
  30. Fiscal Sustainability and Economic Growth: Case of Bulgaria By Irena Nikolova
  31. Vote buying or (political) business (cycles) as usual? By Aidt, Toke; Asatryan, Zareh; Badalyan, Lusine; Heinemann, Friedrich
  32. Financial Liberalization in the Developing Countries and Its Effect on Banking Systems and Banking Crises By Mehmet Okan TaÅŸar; SavaÅŸ Çevik
  33. Unemployment and econometric learning By Singleton, Carl; Schaefer, Daniel
  35. Do Precious Metal Prices Help in Forecasting South African Inflation? By Mehmet Balcilar; Nico Katzke; Rangan Gupta
  36. Toward robust early-warning models: A horse race, ensembles and model uncertainty By Holopainen, Markus; Sarlin , Peter
  37. Too interconnected to fail: A survey of the interbank networks literature By Hüser, Anne-Caroline
  38. The sensitivity of households to interest rate - analysis of the relationship of interest rates and the amount of loans and deposits in the Czech Republic By Jiri Rotschedl
  39. Impact of global financial crisis on healthcare expenditures in developed countries By Pawel Bialynicki-Birula
  41. The Early Growth of the Engineering Industry in Italy’s Regions By Carlo Ciccarelli; Stefano Fenoaltea
  42. Could tariffs be pro-cyclcial? By James Lake; Maia K. Linask
  43. A Way Out of the Euro Crisis: Fiscal Transfers Are Indispensable for Sustainability in a Union with Heterogeneous Members By Harashima, Taiji
  44. Price Level Stabilization: Hayek and New Keynesians By Pavel Potuzak
  45. Case Study Method Application when Studying Finance and Banking: Situation Description By Natalia Konovalova
  46. Political Risk Investing in Emerging Markets versus Economic Reality By Larisa Belinskaja; Ugne Kisielyte
  47. Forecast Combination, Non-linear Dynamics, and the Macroeconomy By Christopher Gibbs
  48. Does the volatility of commodity prices reflect macroeconomic uncertainty? By Marc Joëts; Valérie Mignon; Tovonony Razafindrabe
  49. A quantitative analysis of the u.s. housing and mortgage markets and the foreclosure crisis By Chatterjee, Satyajit; Eyigungor, Burcu
  50. The real estate market, the supply chain and credit: the effects of the great recession By Cristina Fabrizi; Raffaella Pico; Luca Casolaro; Mariano Graziano; Elisabetta Manzoli; Sonia Soncin; Luciano Esposito; Giuseppe Saporito; Tiziana Sodano
  51. The role of foreign sentiment in small open economy By Jana Juriová
  53. The measurement of production: lessons from the engineering industry in Italy, 1911 By Stefano Fenoaltea
  54. A Model for Estimation of NAIRU Extended by Demand Shocks and its Application to Business Cycle Analysis in the Labour Market in Hungary and Poland By Emilie Jasova
  55. Ownership networks and aggregate volatility By Lorenzo Burlon
  56. Interest Rate Expectations in a Model Using Leading Indicators By Miroslav Klucik
  57. Fisher Effect in Austria Causality Approach By Sami Taban; Tayfur Bayat; Ferit Önder
  58. Croissance et Investissement: retour à l'économie de l'offre ? By Landais, Bernard
  59. Balassa–Samuelson Effect in Iran By Saleh Ghavidel; Mahmoud Mahmoudzadeh; Hamideh Radfar
  60. "The Method of Endogenous Gridpoints in Theory and Practice" By Matthew N. White
  61. The Deep Historical Roots of Macroeconomic Volatility By Sam Hak Kan Tang; Charles Ka Yui Leung
  63. THE MONETARY STABILITY AFTER THE FINANCIAL CRISIS* By Diana Raluca Diaconescu; Hortensia Paula Botezatu
  64. Framework for Ex-ante Evaluation on National R&D Programs By Hyun-Kyu KANG
  65. Bargaining or efficiency within the household? The case of Italy By AINA, Carmen; MAZZOTTA, Fernanda; PARISI, Lavinia
  66. Effectiveness of Monetary Policy In Economies in Democratic Transition: Evidence from Tunisia By Guizani, Brahim
  67. Labor Market Polarization Over the Business Cycle By Christopher L. Foote; Richard W. Ryan
  68. Public Debt and Economic Growth: A Two-Sided Story By Irina Bilan; Iulian Ihnatov
  69. Weather, the Forgotten Factor in Business Cycle Analyses By Roland Döhrn; Philipp an de Meulen

  1. By: Jiri Rotschedl (University of Economics, Prague)
    Abstract: The paper deals with the derivation of the subjective discount rate and for this purpose; it introduces a new subjective discount index: Current Discount Index (CDI). The author assumes a very close relationship with the commonly known subjective discount rate (Ï). CDI is derived indirectly from the ratio of loans to deposits of households. New index is considered the aggregate variable of the subjective discount rate (Ï), of the elasticity of intertemporal substitution (1/θ) and also other unspecified psychological factors (ξ). The values of CDI in the Czech Republic suggest reasons why there was a long-term decline in household consumption during the years 2012 and 2013.
    Keywords: Subjective discount rate, subjective discount factor, consumption of households, intertemporal choice, current discount index
    JEL: E21 D91
    Date: 2014–07
  2. By: Frédéric Dufourt (Aix-Marseille UniversitÈ (Aix-Marseille School of Economics), CNRS-GREQAM & EHESS and Institut Universitaire de France); Kazuo Nishimura (RIEB, Kobe University & KIER, Kyoto University); Alain Venditti (Aix-Marseille University (Aix-Marseille School of Economics), CNRS-GREQAM, EHESS & EDHEC)
    Abstract: We analyze local indeterminacy and sunspot-driven fluctuations in the standard two-sector model with additively separable preferences. We provide a detailed theoretical analysis enabling us to derive relevant bifurcation loci and to characterize the steady-state local stability properties as a function of various structural parameters influencing the degree of increasing returns to scale, the amount of intertemporal substitution in consumption, and the elasticity of the aggregate labor supply curve. On the theoretical side, we prove the existence of both a flip and a Hopf bifurcation locus in the corresponding parameter space. We also show that local indeterminacy can be obtained under any labor supply elasticity or under an arbitrarily low elasticity of intertemporal substitution in consumption. On the empirical side, we find that indeterminacy and sunspot fluctuations are robust features of two-sector models, prevailing for most empirically plausible calibrations for these parameters.
    Keywords: Indeterminacy, sunspots, two-sector model, sector-specific externalities, real business cycles
    JEL: C62 E32 O41
    Date: 2015–02
  3. By: Wright, Randall (Federal Reserve Bank of Minneapolis); Dong, Mei (University of Melbourne); Sun, Ling (Brock University)
    Abstract: Multiperson households are less reliant on cash than single people because they are more likely than singles to rely on home-based production to meet their daily needs. This conclusion, supported by recent empirical research, suggests that fiscal and monetary policies that make market-based transactions more expensive will favor the formation of households. Individuals will seek to minimize costs due to such policies by forming partnerships, whether through marriage or less-formal arrangements. Fiscal policies, such as consumption and incomes taxes, and monetary policy that raises inflation can thereby influence societal structure as well as behavior within households.
    JEL: E60
    Date: 2015–03–10
  4. By: Sameer Ahmad Mastoor (Ministry of Finance Afghanistan);
    Abstract: The banking sectors have played a vital role in Afghanistan, economic development in past one decade and Islamic banking is widely regarded as the fastest growing sector in the Middle Eastern financial services market. Billion worth of funds are now managed according to Shariah. As Islamic banking is a new concept in our country and all citizens of Afghanistan are Muslims and this document would also help other nations therefore its very import for them to know about Islamic banking and its products schemes.Islamic banking system must steer clear of interest. Theoretically speaking, there is no concept of loans and credits in Islam for financing trade, industry and agriculture except Qard Hassana and where profit and loss sharing is not feasible like interest free loans given by federal government to provincial governments for their developmental needs. Islamic banks, therefore, involve themselves in financing (short, medium, and long term) for the working capital requirements, and also contribute to the capital of an enterprise by participating in its equity. These financings are on profit and loss sharing basis. Islamic banks also mobilize resources on profit and loss sharing basis as distinct from interest payments to depositors on predetermined rates.Prohibition of interest is ordained in Islam in all forms and intent. This prohibition is strict, absolute and unambiguous. So with this reference the project titled has been conducted, based on the primary research in Maiwand Bank, (MB) and literature review and secondary data from various sources. Division has been prepared to get a better insight into the Islamic Banking practices applied by MB with reference to DAB guidelines provided to them to practice accordingly. With reference to this context, this research project is been prepared to find out customers satisfaction and awareness about Islamic banking in Afghanistan. This research project includes meaning and definition of Islamic Banking, Riba, and Islamic banking procuts such as Musharaka, Mudarabah, Murabaha, Ijarah, Salam and Istisna.
    Keywords: Islamic Banking System in Afghanistan
    JEL: E58
    Date: 2014–06
  5. By: Dovern, Jonas; Huber, Florian
    Abstract: We present evidence that global vectorautoregressive (GVAR) models produce significantly more accurate recession forecasts than country-specific time-series models in a Bayesian framework. This result holds for most countries and forecast horizons as well as for several country groups.
    Keywords: GVAR; recession forecast; QPS; probability forecast
    Date: 2015–03–17
  6. By: Jean-Sébastien Fontaine; René Garcia; Sermin Gungor
    Abstract: Following theory, we check that funding risk connects illiquidity, volatility and returns in the cross-section of stocks. We show that the illiquidity and volatility of stocks increase with funding shocks, while contemporaneous returns decrease with funding shocks. The dispersions of illiquidity, volatility and returns widen following funding shocks. Funding risk is priced, generating a returns spread of 4.25 percent (annually) between the most and least illiquid portfolios, and of 5.30 percent between the most and least volatile portfolios. Estimates are robust using mimicking portfolio returns, alternative portfolio sorts, traditional test assets, other risk factors, monthly returns or quarterly returns.
    Keywords: Asset Pricing, Financial markets
    JEL: E E4 E43 H H1 H12
    Date: 2015
  7. By: Stefano Fenoaltea
    Abstract: In Italy two censuses were taken in 1911: the usual demographic census, that contains labor-force data, and the first industrial census, that contains employment data. The two yield aggregate figures that are very far apart. The literature directly concerned with estimating industrial employment considers the industrial-census figures essentially exhaustive. In point of fact, the industrial census was self-admittedly, grossly incomplete, and its coverage of small-scale manufacturing, and construction, is particularly poor; the extant estimates badly underestimate total industrial employment, and badly distort its allocation by sector. Far better estimates of employment are obtained from the labor-force data, allowing for sector-specific unemployment and other distortions.
    Keywords: method, engineering, Italy
    JEL: E01 N13 N63
    Date: 2014
  8. By: Judit Kapas (University of Debrecen)
    Abstract: Recently, the view that culture matters for economic development has gained much ground within institutional economics; scholars have provided us with empirical evidence on the positive effect of culture on economic performance. This evidence shows, in some cases, the overwhelming effect of culture vis-à-vis that of formal institutions (Williamson 2009). In these investigations, culture is generally measured by the subjective evaluation of those answering the question “Do you think that most people can be trusted?†in the World Values Survey. However, whether an answer to this question really refers to culture has recently been doubted by a growing number of scholars, a problem which goes back to a somewhat ambiguous definition of culture. Another problematic issue here is that these empirical investigations do not rely on an economic theory concerning the effects of culture on economic performance, at least when it comes to the mechanisms through which culture may effect development.One way to overcome these shortcomings – more importantly the “black box†view of culture – is to move from general statements about culture to a narrower, and consequently more reliable dimension of culture. My argument is that Schwartz’s (2006) theory of cultural value orientations developed in cross-cultural psychology can be fruitfully used for two reasons. First, this theory relies on a priori theorizing about three basic issues that all societies confront, rather than post hoc examination of data. Secondly, it captures only one, but an unambiguous, aspect of culture: individual values.So, in this paper I argue that an analysis of individual values on economic development contributes to a clarification of the effects of culture by “unbundling†culture itself. Using individual values allows me to rely on theories of institutional economics – namely Williamson’s (2000) theory about the levels of institutions and of Boettke et al’s (2008) theory on institutional stickiness – to make hypotheses about their effects on development, and then empirically investigate them. The cross-country empirical investigation using the Schwartz Values Survey data on individual values provides evidence for the main hypothesis: individual values have no effect on development after controlling for formal institutions, and this result is different from the effect of the culture index derived from the World Values Survey and that of Hofstede’s “individualismâ€, and is very robust.
    Keywords: culture, economic development, institutions, individual values
    JEL: E02 O10
    Date: 2014–12
  9. By: Güell, Maia; Pellizzari, Michele; Pica, Giovanni; Rodríguez Mora, José Vicente
    Abstract: We apply a novel measure of intergenerational mobility (IM) developed by Güell, Rodríguez Mora, and Telmer (2014) to a rich combination of Italian data allowing us to produce comparable measures of IM of income for 103 Italian provinces. We then exploit the large heterogeneity across Italian provinces in terms of economic and social outcomes to explore how IM correlates with a variety of outcomes. We find that (i) higher IM is positively associated with a variety of “good” economic outcomes, such as higher value added per capita, higher employment, lower unemployment, higher schooling and higher openness and (ii) that also within Italy the “the Great Gatsby Curve” exists: in provinces in which mobility is lower cross-sectional income inequality is larger. We finally explore the correlation between IM and several socio-political outcomes, such as crime and life expectancy, but we do not find any clear systematic relationship on this respect.
    Keywords: cross-sectional data analysis; intergenerational mobility; Surnames
    JEL: C31 E24 R10
    Date: 2015–03
  10. By: Camila Andrea Jaramillo Arenas; Jeison David Montañez Estupiñan; Nathalia Montoya González
    Abstract: En Colombia se presenta un fuerte problema de abastecimiento de gas natural al interior del país ya que este importante recurso todavía no llega a muchas zonas del país. Se observa que el problema se da principalmente por los las fallas en la infraestructura, la cual permite la distribución y el trasporte de gas. La deficiencia en la regulación en cuanto a fijación de tarifas y la implementación del cargo de confiabilidad ha generado la no existencia de estímulos suficientes para la inversión en las estructuras necesarias que permiten el acceso al servicio a todos los ciudadanos del país.
    Keywords: Abastecimiento, distribución, infraestructura, regulación, inversión.
    JEL: L91 L51 E22
    Date: 2015–03–16
  11. By: AyÅŸen Edirneligil (Selcuk University); Mehmet Mucuk (Selcuk University)
    Abstract: Although the oil price is determined by demand and supply, it is also affected by lots of variables such as economic, political and technical conditions. On the other hand, fluctuations in oil price have also effect on macroeconomic stability. Oil price has an important role in Turkey, since Turkey is a country that has external dependency in energy sources. The purpose of this paper is to examine the effects of oil prices on Turkish economic growth. In this respect, the relationship between variables will be analyzed by using annual data between the years 1980-2013. For analyzing variables, it will be used Johansen Cointegration Test, Impulse-Response Function, and Variance Decomposition tests.
    Keywords: Oil price, Economic growth, Turkish Economy
    JEL: A10 E00 E21
    Date: 2014–10
  12. By: BIMONTE, Giovanna (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy); SENATORE, Luigi (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)
    Abstract: In this paper we describe some interesting applications of the Coalitional Game in Cancer Diagnosis. Particularly we illustrate specific studies that starting from the description of the Microarray Technology apply game theoretical tools able to improve the analysis of genes’ expression data. Indeed DNA Microarray technology has become a useful technique to develop new diagnostic tools and to identify genes’ degeneration and therapeutic targets for human cancers. Nevertheless the cooperative game theory analysis can strongly support the therapy of the diseases starting from the analysis of the genes’ behaviour. Using the coalitional games it is possible to evaluate the interactivity level of every gene according to the intricate and intrinsic interrelation among them. The coalitional games can be used as a theoretical tool that determines an index able to point out for each biological factor or variable the relevance in the production of a determined biological effect.
    Keywords: Microarray games; Cooperative games; Medical applications
    JEL: E62 H50 H62
    Date: 2014–12–30
  13. By: Philippe Burger (University of the Free State); Frederick Fourie (University of the Free State)
    Abstract: Few countries have as serious an unemployment problem as South Africa. In the period 2000-2013 the narrow (and official) unemployment rate averaged 24.1%. The broad unemployment rate (which includes the discouraged unemployed) averaged 33.4%. At the same time the informal sector is very small relative to total employment. If workers do not find employment in the formal sector, why do they become unemployed rather than enter the informal sector? To develop a theoretical model that incorporates both the segmented nature of the South African labour market and the simultaneous existence of very high unemployment, this paper draws on the dual labour market model of Bulow and Summers (1986) and the suggestion by Kingdon and Knight (2004) that barriers to entry exist into the informal sector. The result is a three-segment model comprising a primary (‘good jobs’) and secondary (‘bad jobs’) sector/segment, as well as a segment comprising the unemployed.
    Keywords: Unemployment; Segmented labour market; South Africa
    JEL: E24 E26 J01
    Date: 2014–10
  14. By: Taner SEKMEN (EskiÅŸehir Osmangazi University); Ömer AKKUÅž (Anadolu University); Ä°lyas ÅžIKLAR (Anadolu University)
    Abstract: In this paper, we investigate competition in Turkish banking sector over the period 2003– 2012. In order to understand the competitive condition in Turkish banking sector, we use the well-known Panzar-Rosse model based on a nonstructural estimation of the H-statistic by employing the quarterly panel data set. The emprical evidences indicate that the Turkish banking sector operates under conditions of monopolistic competition. Therefore, although there have been growing structural changes in the Turkish banking sector since 2000s, there is no remarkable change in the market structure of the Turkish banking sector as compared to previous studies and it can still be characterized by the monopolistic competition.
    Keywords: Competition, Panzar-Rosse Model, Turkish Banking Sector, H-Statistic
    JEL: A10 D40 E44
    Date: 2014–06
    Abstract: The study investigates the relationship between capital structure and profitability of conglomerate, consumer goods, and financial services firms quoted in Nigeria Stock Exchange. In this paper, the sample data collected from the ten randomly selected firms among the three industries were from 2000 to 2011. This comprises a sample size of 120 used for the study. The study used Return on Asset (ROA) and Return on Equity (ROE) as performance proxies. In addition, debt equity ratio (DER) and debt asset ratio (DAR) were used as capital structure proxies. The relationship between the performance and capital structure proxies were analysed using correlation coefficient and regression techniques. According to the results, the relationship between capital structure (both DER and DAR) and return on asset (ROA) is not significant across all firms except for 7up and Nestle. It also shows an insignificant relationship between return on equity (ROE) and DAR. However, there is a significant relationship in almost all firms between return on equity and debt to equity. This justifies that a highly geared firm tends to have high profitability. Moreover, the nature of the industry also determines the effect of capital structure on their profitability. In the financial firms, there is a negative significant relationship between return on equity and debt to assets ratio. In the conglomerate firms, there is also a negative relationship between return on assets (ROA) and debt to equity ratio however not significant. This explains that highly geared firms have significant relationship with return on equity while insignificant with return on assets. The study recommends that firms that want to maximise shareholders wealth should increase their leverage while firms that ensure stakeholders performance should increase their assets. Conclusively, a mix of the firms’ leverage and assets at an appropriate ratio will be considered a good capital structure for the firms.
    Keywords: Equity, Debt, Asset, Returns, Capital structure, Firm profitability
    JEL: G30 G20 E44
    Date: 2014–06
  16. By: Luba Petersen (Simon Fraser University); Jasmina Arifovic (Simon Fraser University)
    Abstract: Can monetary or fiscal policy stabilize expectations in a liquidity trap? We study expectation formation near the zero lower bound using a learning-to-forecast laboratory experiment. Monetary policy targets inflation around a constant or state-dependent target. Subjects’ expectations significantly over-react to stochastic aggregate demand shocks and historical information leading many economies to experience severe deflationary traps. Neither quantitative nor qualitative communication of inflation targets reduce the duration or severity of economic crises. A stronger initial recovery of fundamentals or supplementary anticipated fiscal stimulus stabilizes expectations and increases the speed of macroeconomic recovery.
    Keywords: experimental macroeconomics, monetary policy, expectations, zero lower bound, learning to forecast, communication
    JEL: C92 E2 E52 D50 D91
    Date: 2015–03–14
  17. By: Marc Joëts; Valérie Mignon; Tovonony Razafindrabe
    Abstract: This paper analyzes the impact of macroeconomic uncertainty on a large sample of 19 commodity markets. We rely on a robust measure of macroeconomic uncertainty based on a wide range of monthly macroeconomic and financial indicators, and we estimate a structural threshold VAR (TVAR) model to assess whether the effect of macroeconomic uncertainty on commodity price returns depends on the degree of uncertainty. Our findings show that whereas the safe-haven role of precious metals is confirmed, agricultural and industrial markets are highly sensitive to the variability and the level of macroeconomic uncertainty, respectively. In addition, we show that the recent 2007-09 recession has generated an unprecedented episode of high uncertainty in numerous commodity markets that is not necessarily accompanied by a subsequent volatility in the corresponding prices, highlighting the relevance of our uncertainty measure in linking uncertainty to predictability rather than to volatility.
    Keywords: macroeconomic uncertainty, commodity prices, threshold vector autoregressive model.
    JEL: Q02 E32 C32
    Date: 2015
  18. By: Ahmad Erani Yustika (Supervisory Board of Bank Indonesia); Rukavina Baksh Abdullah (Lecturer at the Faculty of Agriculture – University of Tadulako); Dita Nurul Aini (Researcher at the ECORIST (The Economic Reform Institute))
    Abstract: The experts believe that the institutions factor is the successful key of the country (Robinson and Acemoglu, 2012). In the economic development point of view, institutional change as same as important with institutional design itself. Institutional change is the permanent process that will always happen. In the institutional change process, institutional innovation is one of the important thing. Institutional innovation is very important because it will accelerate the economic activities and contribute the economic value-added. The institutional innovation process is begun from build-up institutional environment, networking development, institutional arrangement, institutional change, and institutional innovation as the last process. In Indonesia, recently, the economic sector need to be developed institutional innovation are agriculture and industry sectors because both sectors absorb many labour, create value-added, and increasing income (middle-low level of income); therefore the poverty problem, unemployment, and income inequality can be solved. Institutional innovation that is needed in agriculture sector are the development of market information system, the transformation of agriculture to agro-industry, the method of collective plant, the programme of land reform, and the market preparing. While, the institutional innovation in industry sector are strengthening value-added economy, bureaucracy reform, development of new industrial cluster, expansion of export market, and deepening of production process and technology.
    Keywords: institutions, institutional innovation, agriculture sector, industry sector
    JEL: E02
    Date: 2014–10
  19. By: Max Kubat (University of Economics, Prague)
    Abstract: In spite of the fact that a lot of virtual currencies have been created in recent years, bitcoin is the best known from all of them and regularly reported in the news. Currency without identified creator is appreciated by its user for non-centralized running, without any chance of governments to influence the money supply. The advantages of bitcoin, such as very quick payments worldwide, stop of inflations caused by governments trying to solve their own problems or high level of transactions privacy are widely mentioned. The aim of the article is not to describe the technical issue of bitcoin and explain how this system works, because it has been widely explained in other articles. The aim is focusing on economic aspects of bitcoin, the technical aspects are mentioned only if necessary. For accomplishing the aim the article is split in three parts. The first part is dedicated to answering the question “What is bitcoin?â€. It examines whether bitcoin complies with theoretical, empirical and law definition of money. The law definition of money compliance is done for Czech, German and EU law in general, but attitudes of US and Chinese governments are also mentioned. According to the findings, bitcoin cannot be easily considered as money. The second part is focused on monetary aspects of bitcoin. It analyses the question, “What would mean for an economy to accept bitcoin as legal tender?â€. In the case of single economy the money supply would be completely out of control of government and due to easy way of bitcoin transferring, money supply could be increased and decreased quickly. In the case of global economy, deflation and its impacts would be inevitable. The third part concentrates on bitcoin banking. No possibility of bitcoin lending does not mean the end of banking industry, but would probably lead to a significant change in how it works.
    Keywords: Bitcoin; definition of money; money supply, banking
    JEL: E41 E42
    Date: 2014–10
  20. By: Haubrich, Joseph G. (Federal Reserve Bank of Cleveland)
    Abstract: The alleged pro-cyclicality of bank capital (high in good times, low in bad) has received some blame for the recent financial crisis. Others blame the countercyclicality of capital regulations: too low in high times and too high in bad. To address this problem, Basel III has introduced countercyclical capital buffers for large banks. But just how cyclical is bank capital? We look at the question from several vantage points, using both detailed recent data on risk-weighted assets and several sources of annual data going back to 1834. To help understand the historical data, we provide a short summary of capital concepts and regulation from early America to the present.
    JEL: E32 G21 G28 N20
    Date: 2015–03–19
  21. By: Stanova, Nadja
    Abstract: This paper analyses in a VAR framework with debt feedback effects of fiscal policy over 1999q1-2013q4 in five Central and East European economies: Slovakia, Czech republic, Hungary, Slovenia and Lithuania. The results are compared to two alternative specifications, a model without debt feedback, and a model with debt within the linear VAR. Omitting the debt feedback would affect the magnitude and sign of the impulse response coefficients, especially those of GDP, government revenue and interest rate. Simulated out-of-sample debt paths are stabilised if debt feedback is included, but strongly explosive otherwise.
    Keywords: fiscal policy, structural VAR, debt dynamics, endogenous debt feedback, impulse response functions, historical decomposition of times series, meta-analysis, CEE countries, new EU member states
    JEL: C32 E37 E62 H63
    Date: 2015–03
  22. By: Merike Kukk (Tallinn University of Technology)
    Abstract: This paper studies the interdependence of households’ financial assets and liabilities in European countries. Most studies treat household liabilities as negative assets and relate households’ decisions to their net wealth. However, the components of net wealth, i.e. financial liabilities, financial assets and real assets are very heterogeneous across households. The assumption of similar consumption behaviour among households with the same net wealth but different wealth components is implausible. This paper raises another question, namely whether households consider their indebtedness when they make decisions about their financial assets. The implication of household indebtedness for household behaviour is an important topic as household debt volumes have increased markedly in developed countries over the last three decades. There is a long list of research about household borrowing and the financial vulnerability of indebted households, but there has been less discussion about whether and how indebtedness affects households’ behaviour beyond their borrowing decisions. The indebtedness has implications for households’ consumption behaviour as well as for their choices regarding financial assets. There is a lack of empirical evidence on the effect of indebtedness on households’ financial asset holdings in the middle of a recession. This paper sheds more light on the relationship between liabilities and financial asset holdings. The paper uses data from the recently introduced Household Finance and Consumption Sur-vey. The paper uses the first wave of the HFCS, which was implemented in 2009-2010 in 13 euro area countries. A system of equations for financial liabilities and financial assets is esti-mated while allowing for endogeneity of the two wealth components. Furthermore, selection bias issues are addressed by estimating the control equation for the selection model of debt ownership. The results suggest that households’ liabilities impact households’ financial assets negatively while no significant effect was found from financial assets to liabilities. The nega-tive impact of liabilities on financial assets remains after controls for the debt service burden and for saving to pay back debt are included. The results are confirmed by a large number of robustness tests. The findings provide empirical evidence for the theoretical assumption that credit markets reduce the holdings of financial assets of households. The results posit that increasing volumes of household debt are followed by lower incentives to keep financial assets. It is particularly important to understand how households’ liabilities affect their other financial decisions as the penetration of debt and the volumes of debt have increased.
    Keywords: household debt, household wealth, financial assets, liabilities, financial vulnerability
    JEL: D14 E21 D12
    Date: 2014–05
  23. By: Stefano Fenoaltea
    Abstract: In the literature the (Italian) engineering industry is seen as one that transformed metal into machines; its time path is inferred from that of its consumption of metal. Newly recovered evidence indicates that far more metal was turned into (traditional) hardware than into (modern) machines. Machine production grew rapidly from a very small base: metal consumption fails to capture this change in the product mix, and understates the growth of new production at constant prices. Moreover, maintenance activity was in general as significant as new production. Maintenance was labor-intensive rather than metal-intensive, trend-dominated rather than cyclical, and relatively larger, next to new production, in 1861 than in 1913: metal consumption overstates the growth rate of the industry’s total product at constant prices, and much overstates its cyclical volatility. Technical progress was negligible in maintenance, but rapid in new production: constant-price-weighted physical measures fail to capture productivity growth, and even late-weighted series overstate the growth of the industry’s real product. These results are not tied to conditions peculiar to pre-War Italy: the new estimates presented here pave the way for emending, or at least reevaluating, the engineering-industry product series reconstructed for other times or places.
    Keywords: method, engineering, Italy
    JEL: E01 N13 N63
    Date: 2014
  24. By: Bilge Bakin (Yildirim Beyazit University, Business School, Department of Banking and Finance); Gozde Gurgun (Central Bank of the Republic of Turkey)
    Abstract: This study aims to investigate the linkage between portfolio investments and asset prices in Turkey for the period of September 2008-December 2013. The accommodative policies implemented in advanced economies in order to cope with the global crisis and fragilities in the global financial system have led to considerable volatility in capital flows. Capital flows towards emerging economies have been volatile, particularly to those with large external financing needs such as Turkey. This situation has created risk of macroeconomic and financial instability in these economies. Accordingly, this paper examines the effects of portfolio investments on the main financial assets such as equity market, exchange rate and interest rates in Turkey. Toda and Yamamoto (1995) method and generalized impulse response analysis have been utilized in this study. It is found that portfolio investments have a considerable and steady impact on the exchange rate. However, severe impacts of portfolio flows are not observed on the stock market and interest rates in the long run.
    Keywords: Capital Flows, Portfolio Investments, Asset Prices, Turkey
    JEL: E44 F30 F40
    Date: 2014–06
  25. By: Stefan Ederer
    Abstract: The paper summarises the channels and mechanisms which lead to the emergence of macroeconomic imbalances in the EMU before, in and after the crisis of 2008/09. It focuses on the role of the specific institutional setting of the EMU in these developments and outlines the key reforms which are necessary to eliminate the imbalances and prevent them from re-emerging.
    Keywords: EMU, macroeconomic imbalances, European economic policy
    JEL: E02 E52 E62 F32 F33 F42
    Date: 2015–03
  26. By: Piotr Ciżkowicz (Warsaw School of Economics); Andrzej Rzońca (Warsaw School of Economics); Rafał Trzeciakowski (Warsaw School of Economics)
    Abstract: We estimate various panel fiscal reaction functions, including those of main categories of general government revenue and expenditure for 12 Euro area member states over the 1970-2013 period. We find that in the peripheral countries where sovereign bond yields decreased sharply in the years 1996-2007, fiscal stance ceased to respond to sovereign debt accumulation. This was due to lack of sufficient adjustment in government non-investment expenditure and direct taxes. In contrast, in the core member states ,which did not benefit from yields’ convergence related to the Euro area establishment, responsiveness of fiscal stance to sovereign debt increased during 1996-2007. It was achieved mainly through pronounced adjustments in government non-investment expenditure. Our findings are in accordance with predictions of theoretical model by Aguiar et al. (2014) and are robust to various changes in modelling approach.
    Keywords: fiscal reaction function, sovereign bond yields’ convergence, fiscal adjustment composition.
    JEL: C23 E62 F34 H63
    Date: 2015–01
  27. By: Bozena Kaderabkova (University of Economics, Economic Faculty); Klara Cermakova (University of Economics, Economic Faculty); Robert Holman (University of Economics, Economic Faculty)
    Abstract: Former growth theories did not give a satisfactory answer to stimuli of economic growth and possibilities of sustainable growth. An important contribution to the economic growth theories was given by research in institutional economics. Today formal and informal institutions such as rule of law, habits, religion or corruption, are considered by many authors very significant for economic growth. This paper is based on findings of The Heritage Foundation and on Economic freedom index, which identifies four groups of institutional factors Rule of law (Property rights, Freedom from corruption), Limited government (Government spending, Fiscal freedom), Regulatory efficiency ( Business freedom, Labor freedom, Monetary freedom), Open markets( Ttrade freedom, Financial freedom, Investment freedom). This study is focused on the relationship between religion and economic growth. The impact of different religions is measured by regression and correlation analysis within each of the four groups.
    Keywords: economic growth, institutions, formal and informal factors of economic growth
    JEL: E02 O43
    Date: 2014–12
  28. By: Luis Dumlao (Ateneo de Manila University)
    Abstract: Convention specifies the relationship between price and unemployment in terms of the Phillips curve (PC) where inflation and the rate of unemployment are correlated. This paper argues that the relationship is ambiguous. In the aggregate supply (AS) curve, price and output are both in levels at a given time. But in the PC, price represented by inflation is its change through time while unemployment represented by its rate is frozen at a given time. This paper uses a variant of the PC that is more consistent with the relationship between price and output as depicted in the AS curve. In the variant specification, price as represented by inflation and unemployment as represented by the rate of change in the level of unemployment net of employment are both changes through time. The relationship between price and unemployment using convention and its variant is tested on Poland, the Czech Republic, Hungary, Estonia, Latvia, Lithuania and the pooled data. The Expectations Augmented (EA) is able to track a negative relation between inflation and unemployment better than the New Keynesian (NK) is able. Within the EA runs, the convention is able to track the same negative relation better than the variant, but one has to be cautious given the implied results.
    Keywords: Employment, Unemployment, Inflation, Central Europe
    JEL: E24 E31
    Date: 2014–05
  29. By: Pei Kuang
    Abstract: The paper studies learning with data (quasi-)differencing where agents need to (quasi-)difference data and then use an otherwise standard least squares learning procedure. It (1) establishes that the E-stability Principle is still valid for analyzing the convergence of the learning with (quasi-) differencing data process to the Rational Expectations Equilibrium (REE), (2) provides new perspectives on the stability of the Rational Expectations bubble solutions, and equilbrium selection under adaptive learning, (3) demonstrates the importance of consideringagents' uncertainty and learning about the long-run growth of endogenous variables in dynamic macroeconomic models, (4) provides recommendations and a caveat on addressing model misspecifications in econometric practice, and (5) showslearning with (quasi-) differencing data helps understand some salient features of fluctuations in asset prices, inflation and aggregate economic activities.
    Keywords: Expectations, Convergence, Long-Run Growth, Serial Correlation, Bubbles, Underparameterization
    JEL: D83 D84 E30
    Date: 2014–11
  30. By: Irena Nikolova (New Bulgarian University)
    Abstract: The fiscal sustainability is one of the important issues of the financial and fiscal policy of a country. However, that is not enough for its economic development and for improving the living standard where a higher level of economic growth is needed in order to achieve them. The crucial point is how to increase the economic growth and at the same time to preserve the fiscal sustainability in the short and long run. The purpose of the paper is to present and analyze the budget practices in Bulgaria and to review the opportunities for economic growth and future economic development. The analysis is prepared within the horizon of the European Union up to 2020 and the EU funding is examined as one of the budget instruments as well.
    Keywords: fiscal sustainability, economic growth, Europe 2020, EU funds absorption, budget policy
    JEL: E62 F15 F30
    Date: 2014–12
  31. By: Aidt, Toke; Asatryan, Zareh; Badalyan, Lusine; Heinemann, Friedrich
    Abstract: We provide new evidence on the short-run effect of elections on monetary aggregates. We study month-to-month fluctuations in the growth rate of M1 in a sample of 85 low and middle income democracies from 1975 to 2009. The evidence shows an increase in the growth rate of M1 during election months of about one tenth of a standard deviation. A similar effect can neither be detected in established OECD democracies nor in the months leading up to the election. The effect is larger in democracies with many poor and uneducated voters, and in Sub-Saharan Africa and in East-Asia and the Pacific. We show that the election month monetary expansion is demand driven and can be best explained by systemic vote buying. Systemic vote buying requires significant amounts of cash to be disbursed right before elections. The finely timed increase in M1 that we observe in the data is consistent with this. The timing is inconsistent with a monetary cycle aimed at creating an election time boom and it cannot be, fully, accounted for by other possible explanations.
    Keywords: political business cycles,vote buying,monetary economics
    JEL: D72 E51 O10
    Date: 2015
  32. By: Mehmet Okan TaÅŸar (Selcuk University, Faculty of Economics and Administrative Sciences); SavaÅŸ Çevik (Selcuk University, Faculty of Economics and Administrative Sciences)
    Abstract: Financial deregulations or financial liberalization can be referred to a variety of changes in the law which allows financial institutions more freedom in how they compete. Whether deregulations are beneficial or harmful to the economy has been widely debated.This paper investigates the effect of financial globalization on the incidence of systemic bank crises in developing countries by using measures of the financial openness. The liberalization trend in the global scale starting with the Washington Consensus has been influential on financial markets and the banking sector. Financial liberalization and uncontrolled expansion of international capital movements has led to the diversification and acceleration of the global financial crisis. Thus, “financial deregulations†which offered as a solution to the debt crisis experienced in the 1980s has led to a new financial crisis in 2010's. An increase in foreign debt liabilities contributes to an increase in the incidence of crises, but foreign direct investment and portfolio equity liabilities have also the opposite effect. This paper discusses how financial liberalization could contribute to financal crises and macroeconomic instabilitiy in the developing countries. For this aim, we analyze empirically a database from developing countries to test the effect of financial openness on macroeconomic indicators. As the dependent variable, we use a variable which take the value of one in the year of a banking crisis. To estimate the indicators of financial crises, main explanatory variables which are employed in the specifications are financial openness, current account balances, exchange rate regime, inflation, trade openness and percent change in GDP. In the introduction to this paper examines the process of liberalization. Second part; banking system and its features are analyzed during the Global financial Crisis. In the third section the historical development of financial crisis and measure of financial liberalization are discussed.In the final part of the paper of financial liberalization and financial crisis the relationship between macro-economic indicators are examined.
    Keywords: Financial deregulations, financial openness, banking crisis, global financial crisis,
    JEL: G01 F43 E44
    Date: 2014–10
  33. By: Singleton, Carl; Schaefer, Daniel
    Abstract: We apply well-known results of the econometric learning literature to a standard RBC model with unemployment. The unique REE is always expectationally stable with decreasing gain learning, and this result is robust to over-parametrisation of the econometric model relative to the minimum state variable form used by agents (Strong E-stability). And so, from this perspective, the assumption of rational expectations in the Mortensen-Pissarides is not unreasonable. Using a parametrisation with UK data, simulations suggest that the implied rate of convergence to the rational expectations equilibrium (REE) with least squares learning is however slow. The cyclical response of unemployment to structural shocks is muted under learning, and a parametrisation which guarantees root-t convergence is generally not consistent with attempts to match the observed volatility of labour market data using the standard model.
    Keywords: Real business cycle, unemployment, adaptive learning, expectational stability
    JEL: D83 E24 E32 J64
    Date: 2015–02–19
  34. By: Lucian Ciprian Crisan (Faculty of Economics and Business Administration)
    Abstract: Stress testing has become an essential and very prominent tool in the analysis of financial sector stability and development of financial sector policy. Starting with 2010 stress test led by the Committee of European Banking Supervisors (CEBS), and reinforced by 2011 stress test and the bank recapitalization exercise led by the European Banking Authority (EBA), the output of EU wide stress tests has been viewed as essential information on the health of the system.The purpose of this paper is to highlight the main elements considered by the EBA and European Central Bank (ECB) in creating the model of the stress test. At the same time it will highlight how the recent financial crisis has influenced the introduction of these decisions in order to stabilize the banking system. The vision of a future banking union will reshape and resize the entire European system profile. Applying stress test will lead to a healthy and robust banking system even if a new potential crises will come.
    Keywords: Banking Union, Stress test, financial crisis, Challenge, Basel philosophy
    JEL: E60 F50
    Date: 2014–10
  35. By: Mehmet Balcilar (Department of Economics, Eastern Mediterranean University); Nico Katzke (Department of Economics, University of Stellenbosch); Rangan Gupta (Department of Economics, University of Pretoria)
    Abstract: In this paper we test whether the key metals prices of gold and platinum significantly improve inflation forecasts for the South African economy. We also test whether controlling for conditional correlations in a dynamic setup, using bivariate Bayesian-Dynamic Conditional Correlation (B-DCC) models, improves inflation forecasts. To achieve this we compare out-of-sample forecast estimates of the B-DCC model to Random Walk, Autoregressive and Bayesian VAR models. We find that for both the BVAR and BDCC models, improving point forecasts of the Autoregressive model of inflation remains an elusive exercise. This, we argue, is of less importance relative to the more informative density forecasts. For this we find improved forecasts of inflation for the B-DCC models at all forecasting horizons tested. We thus conclude that including metals price series as inputs to inflation models leads to improved density forecasts, while controlling for the dynamic relationship between the included price series and inflation similarly leads to significantly improved density forecasts.
    Keywords: Bayesian VAR, Dynamic Conditional Correlation, Density forecasting, Random Walk, Autoregressive model
    JEL: C11 C15 E17
    Date: 2015
  36. By: Holopainen, Markus (RiskLab Finland at Arcada University of Applied Sciences, Helsinki, Finland); Sarlin , Peter (Goethe University, Center of Excellence SAFE, Department of Economics, Hanken School of Economics, Helsinki, cRiskLab Finland at Arcada University of Applied Sciences, Helsinki, Finland)
    Abstract: This paper presents first steps toward robust early-warning models. We conduct a horse race of conventional statistical methods and more recent machine learning methods. As early-warning models based upon one approach are oftentimes built in isolation of other methods, the exercise is of high relevance for assessing the relative performance of a wide variety of methods. Further, we test various ensemble approaches to aggregating the information products of the built early-warning models, providing a more robust basis for measuring country-level vulnerabilities. Finally, we provide approaches to estimating model uncertainty in early-warning exercises, particularly model performance uncertainty and model output uncertainty. The approaches put forward in this paper are shown with Europe as a playground.
    Keywords: financial stability; early-warning models; horse race; ensembles; model uncertainty
    JEL: C43 E44 F30 G01 G15
    Date: 2015–03–04
  37. By: Hüser, Anne-Caroline
    Abstract: The banking system is highly interconnected and these connections can be conveniently represented as an interbank network. This survey presents a systematic overview of the recent advances in the theoretical literature on interbank networks. We assess our current understanding of the structure of interbank networks, of how network characteristics affect contagion in the banking system and of how banks form connections when faced with the possibility of contagion and systemic risk. In particular, we highlight how the theoretical literature on interbank networks offers a coherent way of studying interconnections, contagion processes and systemic risk, while emphasizing at the same time the challenges that must be addressed before general results on the link between the structure of the interbank network and financial stability can be established. The survey concludes with a discussion of the policy relevance of interbank network models with a special focus on macro-prudential policies and monetary policy.
    Keywords: interbank networks,systemic risk,contagion,banking,macro-prudential policy
    JEL: G21 E44 D85 G18 G01
    Date: 2015
  38. By: Jiri Rotschedl (University of Economics, Prague)
    Abstract: This paper deals with the relationship of short-term and long-term interest rates and the amount of deposits and loans of households. The aim is to demonstrate the relationship between interest and Current Discount Index (CDI). CDI expresses the growth rate of the ratio of loans to deposits of households. Author’s assumption is: increasing interest rates will reduce loans and increase savings. In the paper are savings considered to be identical with deposits in bank accounts. The results of the analysis show that households do not respond to changes in interest rates relative to the amount of loans and the amount of savings.
    Keywords: Interest Rate, Loans, Savings, Households, Current Discount Index
    JEL: D14 E29 E43
    Date: 2014–10
  39. By: Pawel Bialynicki-Birula (Cracow University of Economics)
    Abstract: Current financial crisis, branded as global, has severely affected economies of developed countries. Revenue drops, high deficits and debt forced actions taken in many countries to seek savings and changes of socio-economic structures. This paper concerns the issue of consequences of the downturn for healthcare sector in developed countries. It aims at obtaining answers to questions concerning the course of adjustments with respect to financing health expenditures, and, in particular, scale and rate of their possible reduction in the situations of high-pressure from public finances. In order, the issues of trends in basic economic parameters at the time of crisis, and then the volumes and tendencies for respective categories of healthcare expenditures have been discussed. Determinants of creation of new health care policy instruments on international scale involving implementation of rescue (bailout) programs in countries affected by the crisis have been discussed.
    Keywords: financial crisis, financing healthcare, healthcare systems, health policy
    JEL: H51 E60 G01
    Date: 2014–07
  40. By: Mehmet Mucuk (Selcuk University); Mustafa Tahir Demirsel (Selcuk University); Ä°brahim Erem Åžahin (Selcuk University)
    Abstract: With the globalization process, economic, commercial and technologic boundaries have become uncertain and in this way capital transfer has been possible between different countries. Capital transfers which is realized through short term foreign portfolio investment and foreign direct investment are very important especially for the countries of which national savings are inadequate. This study examines the long run relationship between foreign portfolio investment and economic growth for Turkish economy over the period 1990-2012 within framework of cointegration. The cointegration test findings indicate that there is no relationship between these variables in the long run. According to this result, foreign portfolio investments should not only support consumption but also should be used in more productive areas.
    Keywords: Foreign portfolio investments, Economic growth, Turkish economy, Cointegration
    JEL: A10 E00 F30
    Date: 2014–10
  41. By: Carlo Ciccarelli; Stefano Fenoaltea
    Abstract: The reconstruction of the historical national accounts for post-Unification Italy is proceeding. The national time series most recently compiled are those for the all-important engineering industry; this paper presents their regional counterparts. The engineering industry is very unevenly documented in the historical sources. Data abound for the shipbuilding and railway-vehicles industries, where public procurement, subsidies, and regulation produced a regular stream of reports; the national and regional estimates for these two sectors have been presented elsewhere. This paper presents the complementary regional estimates for the other, poorly documented components of the engineering industry, and the resulting regional aggregates. The regional engineering-industry estimates, like their national counterparts, distinguish the fabricated-metal (hardware) industry, three general-equipment industries (shipbuilding, railwayvehicles, and the residual, covering other metal vehicles, agricultural and industrial machinery, and structural components), two precision-equipment industries (precision instruments; clocks and watches), and the precious-metal-products industry. For all but the last maintenance activity is distinguished from new production. At Unification Italy’s engineering industry was dominated by the fabricated-metal industry, in essence the manufacture and maintenance of tools and other hardware by traditional smiths. The general-equipment industry then involved little more than (wood) shipbuilding; but it grew rapidly, and overtook the fabricated-metal industry early in the twentieth century. The precision-engineering and precious-metal-products industries were ever relatively small. The estimated regional value added series are collected in Table 1. Again like their national counterparts, these series are all at 1911 prices, in essence physical quantity series weighted by unit value added in 1911. This is the best that can be done with the evidence so far recovered; as has been pointed out elsewhere, with respect to the proper measures at a constant price level they suffer from two distortions that must be kept in mind. The minor one is that the use of constant prices tends to overstate industry’s growth, though less so with late-year prices used here than with earlyyear prices (which is the only kernel of truth in the widely misunderstood "Gerschenkron effect"); the major one is that as one goes back in time the weight of technologically stagnant production (maintenance, save for ships and railway vehicles) is increasingly overstated next to that of technologically progressive production (ship and railway vehicle maintenance, all new production). The regional series allocate the corresponding national totals with sector- and activityspecific regional value added shares. In general, and with the exceptions noted below, these are estimated initially for 1911, using the labor-force data in that year’s demographic census, and the (partial) data on employment and power in use, by shop size, in the contemporaneous industrial census. The regional maintenance value added (and employment) shares are then extrapolated to 1861-1913, using the sector-specific indicators recalled below. Regional new production shares are then estimated initially for the further benchmark years 1871, 1881, and 1900, using the census labor force data net of estimated employment in maintenance (and assuming that the differences in value added per new-production worker calculated in 1911 were less marked in earlier years); in the other years, finally, the estimated shares of new production are obtained by simple (linear) extrapolation or interpolation.
    Keywords: engineering, Italy, regions
    JEL: E01 N63 N93
    Date: 2014
  42. By: James Lake (Southern Methodist University); Maia K. Linask (University of Richmond)
    Abstract: Conventional wisdom says that tariffs are counter-cyclical. This paper analyzes the relationship between business cycles and applied tariffs using a disaggregated product-level panel dataset covering 72 countries between 2000 and 2011. Strikingly, and counter to conventional wisdom, we find that tariffs are pro-cyclical. This pro- cyclicality is driven by the pre-Great Recession tariff-setting behavior of developing countries on products not subject to temporary trade barriers and does not depend on the importer's perception of the global business cycle or whether the tariff is bound. Results are robust to controlling for variables emphasized in recent literature as important determinants of tariff setting.
    Keywords: Applied tariff, bound tariffs, binding overhang, tariff water, business cycle
    JEL: F13 F14 E32
    Date: 2015–02
  43. By: Harashima, Taiji
    Abstract: This paper theoretically examines a way out of the euro crisis based on a model of inflation acceleration and differentials. The conclusion is that, unless more advantaged states (e.g., Germany) systematically transfer a necessary amount of money to less advantaged states (e.g., Greece) in every period, the euro area cannot necessarily reach equilibrium where all heterogeneous states achieve optimality. In this case, fiscal transfers are not a tool of risk-sharing or a buffer against asymmetric shocks; rather, they are indispensable for escaping from indefinite disparity acceleration within a union consisting of heterogeneous member states. Such fiscal transfers should not be viewed as alms for the less advantaged states but as a right these states should justly assert. The model indicates that the lack of a fiscal transfer mechanism inevitably generates inflation differentials and huge current account imbalances among member states. As a result, although relatively more advantaged member states obtain “extra” benefits from the euro, less advantaged member states eventually lose most of their capital ownership and their economies are devastated.
    Keywords: The euro; Monetary union; Inflation; Inflation differential; Current account imbalance; Fiscal transfer; Time preference
    JEL: E31 E58 E63 F33 N14 O52
    Date: 2015–04–02
  44. By: Pavel Potuzak (University of Economics, Prague)
    Abstract: The doctrine of price level stabilization is one of the most important building blocks in modern macroeconomics. In 1920s and 1930s, Friedrich August von Hayek presented a theory that challenged this monetary-policy regime. Hayek stressed that attempts to stabilize the price level in the situation of a growing natural output might cause serious injection effects leading the economy to a boom-bust cycle. This article compares the Hayek theory with the New Keynesian doctrines. A simple graphical model is used to elucidate differences between the two theories. It is suggested that a declining price level might be a normal response of the price system in the expanding economy because the New Keynesian arguments stressing price rigidities may be of lower significance when the deflation in prices is caused by technological progress.
    Keywords: Price level stabilization, business cycle, natural rate of interest
    JEL: E42 B25 B53
    Date: 2014–12
  45. By: Natalia Konovalova (Riga International School of Economics and Business Administration (RISEBA))
    Abstract: The methods of situation analysis are used more and more in the learning process in present time. Case study method takes an important place in teaching of students. When studying such subject matters as corporate finance and banking, the decision and discussion of case study becomes an effective method of assimilation of the gained knowledge, allows students to concentrate on the arisen real problem from practical activities, independently to study it, and then to offer possible versions of its decision. One of important problems in the financial and bank sphere is existence of outstanding debts which demand creation of provisions, and, therefore, increase banks’ expenses. It negatively affects financial result of commercial banks, and banks either receive less profit, or sustain losses. On the other hand, borrowers who freely obtained the credits during the pre-crisis period faced a problem of insolvency and can't fulfill the obligations for payment of the credit. It generates a problem, both in the sphere of corporate finance, and in the banking sector. Therefore considering really arisen problem situation between bank and the borrower, students are to have preliminary knowledge of the analysis of financial statements of the enterprise, skills of calculation and an assessment of financial performance (liquidity, financial stability, business activity, profitability). Besides, students need to possess skills of bank management to estimate correctly a situation in the bank, to have skills of credit policy implementation, of provision creation on the overdue credits, as well as to make decisions on restructuring of the credits.The purpose of the academic research is demonstration of the concrete problem situation which has arisen between bank and the borrower in the period of financial crisis, and the offer of possible versions of the solution of an exit from the created problem situation. In article the long-term period of cooperation of the borrower and bank (2004 - 2013) is considered, stages of their interaction during the pre-crisis period, the period of crisis and during the post-crisis period are described. Therefore for the decision of this case study students are to have skills in the sphere of economy, the financial analysis, corporate finance, banking and bank management.
    Keywords: Case study method, Banking, Management, Corporate finance, Students’ skills
    JEL: G21 E49
    Date: 2014–10
  46. By: Larisa Belinskaja (Vilnius University, Faculty of Economics); Ugne Kisielyte (Vilnius University, Faculty of Economics)
    Abstract: Investment risk†is always accompanied with “returnâ€, it is one of the most important aspects to evaluate when doing business by private firms or making new decision on overseas investments by governments. According to the report “World Investment and political Risk†provided by the Multilateral Investment Guarantee Agency, investors keep ranking political risk as a prime obstacle for investments into developing markets (Multilateral Investment Guarantee Agency, 2014). The term “emerging markets†originally brought into fashion in the 1980’s by the World Bank economist Antoine van Agtmael. Emerging markets are the world’s fastest growing economies, contributing to a great deal of the world’s explosive growth of trade. By 2020, the five biggest emerging markets’ share of world output will double to 16.1 percent from 7.8 percent in 1992 (Marr & Reynard, 2010). Since the year 2000 share of emerging economies in global GDP (in Purchasing Power Parity) has increased from 37 percent to 50 percent in 2013 (Boumphrey & Bevis, 2013). They are critical participants in the world’s major political, economic, and social affairs and are seeking a larger voice in international politics and a bigger slice of the global economic pie. Recently some events such as Arab Spring, a conflict between Russia and Ukraine, and protests in Brazil against corn upt spending when organizing the World Football championship have increased political risk in those markets. As a result, the issues of political risk analyzed in this article are currently relevant. The aim of the article is to research political risk and its influence on business investments in emerging markets as well as the methods to evaluate such risk precisely as much as possible. This article begins with the introduction to theories relevant for the analysis of the topic. It also presents the political risk and its influences on operations in a emerging market. Then the case study is presented with food industry is chosen for analysis and with application to Russian-Lithuanian situation after Russia has put the sanctions on import of food products (vegetables, meat, fish, milk and dairy products) from the EU member states, Australia, the US, Canada and Norway for a year.
    Keywords: political risk, emerging markets, investment decisions, food industry
    JEL: E22 F14 F59
    Date: 2014–12
  47. By: Christopher Gibbs (School of Economics, UNSW Business School, UNSW)
    Abstract: This paper introduces the concept of a Forecast Combination Equilibrium to model boundedly rational agents who combine a menu of different forecasts using insights from the forecasting literature to mimic the behavior of actual forecasters. The equilibrium concept is consistent with rational expectations under certain conditions, while also permitting multiple, distinct, self-fulfilling equilibria, many of which are stable under least squares learning. The equilibrium concept is applied to a simple Lucas-type monetary model where agents engage in constant gain learning. The combination of multiple equilibria and learning is sufficient to replicate some key features of in ation data, such as time-varying volatility and periodic bouts of high in ation or deflation in a model that experiences only i.i.d. random shocks.
    Keywords: Forecast Combination, Adaptive Learning, Expectations, Dynamic Predictor Selection, Inflation, Forecast Combination Puzzle
    JEL: E17 E31 C52 C53
    Date: 2015–02
  48. By: Marc Joëts; Valérie Mignon; Tovonony Razafindrabe
    Abstract: This paper analyzes the impact of macroeconomic uncertainty on a large sample of 19 commodity markets. We rely on a robust measure of macroeconomic uncertainty based on a wide range of monthly macroeconomic and financial indicators, and we estimate a structural threshold VAR (TVAR) model to assess whether the effect of macroeconomic uncertainty on commodity price returns depends on the degree of uncertainty. Our findings show that whereas the safe-haven role of precious metals is confirmed, agricultural and industrial markets are highly sensitive to the variability and the level of macroeconomic uncertainty, respectively. In addition, we show that the recent 2007-09 recession has generated an unprecedented episode of high uncertainty in numerous commodity markets that is not necessarily accompanied by a subsequent volatility in the corresponding prices, highlighting the relevance of our uncertainty measure in linking uncertainty to predictability rather than to volatility.
    Keywords: Macroeconomic Uncertainty;Commodity Prices;Threshold Vector Autoregressive Model
    JEL: Q02 E32 C32
    Date: 2015–03
  49. By: Chatterjee, Satyajit (Federal Reserve Bank of Philadelphia); Eyigungor, Burcu (Federal Reserve Bank of Philadelphia)
    Abstract: We present a model of long-duration collateralized debt with risk of default. Applied to the housing market, it can match the homeownership rate, the average foreclosure rate, and the lower tail of the distribution of home-equity ratios across homeowners prior to the recent crisis. We stress the role of favorable tax treatment of housing in matching these facts. We then use the model to account for the foreclosure crisis in terms of three shocks: overbuilding, financial frictions, and foreclosure delays. The financial friction shock accounts for much of the decline in house prices, while the foreclosure delays account for most of the rise in foreclosures. The scale of the foreclosure crisis might have been smaller if mortgage interest payments were not tax deductible. Temporarily higher inflation might have lowered the foreclosure rate as well.
    Keywords: Leverage; Foreclosures; Mortgage crisis
    JEL: E21 E32 E44 G21 H24
    Date: 2015–03–01
  50. By: Cristina Fabrizi; Raffaella Pico; Luca Casolaro; Mariano Graziano; Elisabetta Manzoli; Sonia Soncin; Luciano Esposito; Giuseppe Saporito; Tiziana Sodano (Bank of Italy)
    Abstract: The supply chain of the real estate sector accounts for one fifth of Italian GDP; its importance for the banking system is even greater: lending to this sector accounts for more than one third of total loans to the private sector. The crisis in the construction and real estate sector started even before the global financial crisis of 2008 and hit firms in the sector and the banks that finance them. The fall in turnover and profitability has greatly increased the economic and financial vulnerability of firms, undermining their ability to repay their debt, particularly, in the case of large and highly leveraged firms. Due to the increase of loans classified as bad debts, the banking system has tightened conditions on new loans to this sector
    Keywords: Real estate cycle, trades, quotes, construction companies and real estate services, bank loans
    JEL: E01 G21 L74 L85 R21 R31
    Date: 2015–03
  51. By: Jana Juriová (VÅ B - Technical University of Ostrava)
    Abstract: The role of foreign sentiment is researched for explaining macroeconomic fluctuations in small open economy. The main goal is to find out whether the domestic variables react significantly to the shocks in the foreign sentiment. For this purpose a structural vector autoregression model is constructed for the Czech Republic and the Slovak Republic including relations between foreign environment and domestic variables. Both small open economies considered are highly dependent on foreign demand from euro area. Therefore the foreign development is represented by real GDP in euro area and alternatively is explored the possibility to replace foreign real GDP by economic sentiment indicator of euro area as sentiment indicators are available in advance. The impact of foreign shocks is examined by impulse response functions on the following domestic variables – real gross domestic product, consumer prices and effective exchange rate against euro area trading partners. The study confirms that foreign economic sentiment can be used for explaining fluctuations of domestic variables of a small open economy.
    Keywords: economic sentiment indicator, structural vector autoregression, variance decomposition, impulse response functions
    JEL: C51 E32
    Date: 2014–12
  52. By: Bruno Rocha; Solomos Solomou
    Abstract: This paper examines the time-profile of the impact of systemic banking crises on GDP and industrial production using a panel of 24 countries over the inter-war period and compares this to the post-war experience of these countries. We show that banking crises have effects that induce medium-term adjustments on economies. Focusing on an eight-year horizon, it is clear that the negative effects of systemic banking crises last over the entirety of this time-horizon. The effect has been identified for GDP and industrial production. The adverse effect on the industrial sector stands out as being substantially larger in magnitude relative to the macroeconomic effect. Comparing the results across long-run historical periods for the same selection of countries and variables identifies some differences that stand out: the short term macroeconomic impact effects are much larger in the post-war period, suggesting that the propagation channels of shocks operate at a faster pace in the more recent period. Moreover, the time-profile of effects differs, suggesting that modern policies may be modulating the temporal shape of the response to banking crises shocks. However, the broad magnitude of the adverse effect of banking crises remains comparable across these time periods.
    Keywords: Local projections, Banking crises, Financial crises, Economic History, Inter-war.
    JEL: E6 N0 N2 G01
    Date: 2015–03–19
  53. By: Stefano Fenoaltea
    Abstract: This paper presents the second-generation estimates for the Italian engineering industry in 1911, a year documented both by the customary demographic census, and the first industrial census. The first part of this paper uses the census data to estimate the industry’s value added, sector by sector; the second further disaggregates each sector by activity, and estimates the value added, employment, physical product, and metal consumption of each one. A third, concluding section dwells on the dependence of cross-section estimates on time-series evidence. Three appendices detail the specific algorithms that generate the present estimates; a fourth, a useful sample of firm-specific data.
    Keywords: method, engineering, Italy
    JEL: E01 N13 N63
    Date: 2014
  54. By: Emilie Jasova (University of Economics)
    Abstract: Article seeks to extend the Standard Gordon's " Triangle " model with demand shocks. The demand shocks are represented by a newly derived Current discount indicator (CDI). The recession on the labour market in Hungary and Poland was influenced by the growth of future consumption preferences of consumers. Negative gaps of unemployment increased during the recession only in Hungary. Short period subsequent boom in Hungary is linked with excessive pessimism of consumers what reduced unemployment positive gap and shortened the period with positive gape. In Poland the negative vision of future development in the economy resulted in shortening the period of boom. Policymakers should create more positive expectations and prevent to transfer negative emotions on the labour market.
    Keywords: Unemployment gap, psychological factor, Kalman Filter, Phillips Curve, NAIRU
    JEL: E24 E32 E37
    Date: 2014–07
  55. By: Lorenzo Burlon (Bank of Italy)
    Abstract: We study how aggregate volatility is influenced by the propagation of idiosyncratic shocks across firms through the network of ownership relations. We use detailed data on cross-holdings as well as the relevant balance sheet information for almost the entire universe of Italian limited liability firms over the period 2005-2013. We first document that the ownership network matters for the correlation of firms' sales. Then, we construct a model where firms are linked through ownership relations and have limited access to credit markets. We characterize the aspects of the network structure that are important for the dynamics of the economy. A calibration to the key features of the Italian economy shows that the volatility implied by the model may account for a sizeable percentage of actual GDP fluctuations. Lastly, we conduct a counterfactual exercise to isolate the role played by the network structure itself in the propagation of idiosyncratic shocks at the aggregate level.
    Keywords: ownership networks, firms, financial frictions, business cycles
    JEL: E32 C68 D58
    Date: 2015–03
  56. By: Miroslav Klucik (VSB – Technical University Ostrava, Faculty of Economics)
    Abstract: The basic assumption on which leading indicators are built is the common movement of macroeconomic variables representing the aggregate business cycle, giving information on turning points for different macroeconomic variables over time. Indicators passing through the turning points with few months lead prior to aggregate macroeconomic variables are thus used as a prognostic tool. Basic principles of the lead can be supported by a simple model of short-term equilibrium of a representative firm in a dynamic environment according to decisions about production depending on expectations. The model incorporates the formation of expectations in a market environment by propagation of sentiment between heterogeneous agents with limited rationality. When incorporating expectations about the real interest rate, seen as a so-called prime mover according to the OECD classification of leading indicators, it is possible to track the impact of signals of monetary policy authorities on propagation of waves of optimism and pessimism on the market. The monetary policy authority may cause herd behaviour, while the more far the expectations are set from the actual policy applied, the more difficulties experience firms when returning to the equilibrium. The sentiment simulations imply the use of the model for business cycle short-term forecasting by using alternative assumptions about future expectations of firms. This way new foundation are set for a different type of model using leading indicators meeting the criticism of measurement without theory by Koopmans from 1947, and for using the model to assess the impact of economic policies.
    Keywords: leading indicators, heterogenous agents, expectations, monetary policy
    JEL: E32 D21 D84
    Date: 2014–12
  57. By: Sami Taban (Osmangazi University); Tayfur Bayat (İnönü University); Ferit Önder (KahramanmaraÅŸ Sütçü İmam University)
    Abstract: In this study, we aim to investigate relationship between interest rate and consumer price index in Austria by using quarterly data belonging 1990:Q1 to 2013:Q4.period in the context of Fisher (1930) hypothesis. We employ linear unit root test and causality tests. according to linear Granger causality test, there is no causal relationship between the variables in Austria. So the time domain causality analyses imply that Fisher’s hypothesis is not valid in Austria. Forth, frequency domain causality test results imply bi-directional causality while the Fisher effect is valid in the short run. Also the causality runs from inflation rate to interest rate in the long run. At the end of analysis, results imply that Fisher effect is not validity for Austria in this period.
    Keywords: Fisher Effect, Interest Rate, Inflation Rate, Causality
    JEL: C22 E43 E58
    Date: 2014–07
  58. By: Landais, Bernard
    Abstract: In a enlarged néoclassical growth theory tradition, we presents the links between economic growth and investment. We argue that the business investment is both the main signal and cause of a new growth "potential". We study what are the main determinants of investment and show why and how its value is becoming too low in European countries (and specialy in France). Entrepreneurship spirit looks very important and has to be restaured by supply-side and societal reforms.
    Keywords: Investment-Growth-Supply-Side-Societal Reforms
    JEL: E1 E13 O4 O43
    Date: 2015–03–23
  59. By: Saleh Ghavidel (Firoozkooh Branch, Islamic Azad University, Firoozkooh, Iran); Mahmoud Mahmoudzadeh (Firoozkooh Branch, Islamic Azad University, Firoozkooh, Iran); Hamideh Radfar (Firoozkooh Branch, Islamic Azad University, Firoozkooh, Iran)
    Abstract: Deviations from purchasing power parity because a deviation of productivity is Balassa–Samuelson effect. The Balassa–Samuelson effect depends on inter-country differences in the relative productivity of the tradable and non-tradable sectors. According to this hypothesis, Imai (2010) make a model and measurement Balassa–Samuelson effect in Japan during 1970-1955 when exchange rate in Japan is fixed. In this paper we measurement Balassa–Samuelson effect in Iran economic. The result shows that Balassa–Samuelson effect in Iran is -2.1. Then devaluation of the national currency in Iran according to Balassa–Samuelson effect would be equal to 2.1 in annual, while devaluation of the national currency in Iran 13% in a year.
    Keywords: Balassa–Samuelson effect; purchasing power parity; productivity gap; tradable and non-tradable sectors
    JEL: D24 E31 F31
    Date: 2014–10
  60. By: Matthew N. White (Department of Economics, University of Delaware)
    Abstract: The method of endogenous gridpoints (ENDG) significantly speeds up the solution to dynamic stochastic optimization problems with continuous state and control variables by avoiding repeated computations of expected outcomes while searching for optimal policy functions. While the method has been used in specific settings with one endogenous state dimension and one control, it has never been characterized for use in n-dimensional models. Using a general theoretical framework for dynamic stochastic optimization problems, I formalize the method of endogenous gridpoints and present conditions for the class of models that can be solved using ENDG. The framework is applied to several example models to show the breadth of problems for which endogenous gridpoints can be used. Further, I provide an interpolation technique for non-rectilinear grids that allows ENDG to be used in n-dimensional problems in an intuitive and computationally educient way. Relative to the traditional approach, the method of endogenous gridpoints with non-linear grid interpolation" solves a benchmark 2D model 7.0 to 7.8 times faster than the traditional solution method.
    Keywords: Dynamic models, numerical solution, endogenous gridpoint method, non-linear grid interpolation, endogenous human capital, durable goods
    JEL: C61 C63 E21
    Date: 2015
  61. By: Sam Hak Kan Tang (Business School, University of Western Australia); Charles Ka Yui Leung (Department of Economics and Finance, City University of Hong Kong)
    Abstract: We present cross-country evidence that a country’s macroeconomic volatility, measured either by the standard deviation of output growth or the occurrence of trend-growth breaks, is significantly affected by the country’s historical variables. In particular, countries with longer histories of state-level political institutions experience less macroeconomic volatility in post-war periods. In addition, we show that political instability, discretionary fiscal policy, financial underdevelopment, and a lack of foreign direct investment are the main mechanisms by which state history affects the macroeconomic volatility of modern states.
    Date: 2014
  62. By: Maruska Vizek (Institute of Economics Zagreb); Marina Tkalec (Institute of Economics Zagreb)
    Abstract: Although theoretical models describing the influence of tourism on welfare of the host economy suggest that increase in prices is a direct outcome of intensified tourism activity, so far this outcome has not been put to the empirical test. Therefore, we use panel data models on a data set covering EU new member states and candidate countries (Montenegro and Turkey) in order to investigate the relationship between tourism dependence and the price level. Along with modeling the overall price level, we also separately model the price level of consumer goods, price level of consumer services, and price level of goods and services associated with tourism consumption (hotels and restaurants, recreation and culture, transportation, and food and beverages). Thereby, we control for other factors that commonly influence the price level of an economy, such as income, productivity, trade openness, money and fiscal dominance. Our results suggest that a dominant tourism sector increases the overall price level in the economy. This effect is however much stronger for prices of consumer services, in particular for prices of recreation and culture and hotel and restaurants.
    Keywords: price level, tourism activity, panel data models, small open economies, European Union.
    JEL: C33 E31 L83
    Date: 2014–07
  63. By: Diana Raluca Diaconescu (West University of Timisoara, Faculty of Economics and Businesses Administration); Hortensia Paula Botezatu (West University of Timisoara, Faculty of Economics and Businesses Administration)
    Abstract: Great inflation observed during the period 1965-1984 is the event final monetary (monetary climate the event) in the twentieth century (Meltzer, 2005). Three types of explanations have been developed - all highlighting the importance of monetary policy:• Defects in the institutional and governance at origin sitting temporal incoherence (Barro – Gordon model);• Monetary policy errors committed in an unconscious: it would have been too lax, or because the authorities have overestimated potential output growth (Orphanides, 2003) or because there has been insufficient attention to anchor expected inflation (Clarida , Gali and Gertler, 1999); However, combined with a sharp drop in productivity undoubtedly led to accelerating inflation persistence (Collard and Dallas, 2007);• Monetary policy errors committed in a conscious, namely the adoption by the authorities of a non-monetary approach to inflation; this is the result of an analysis of the experience of the United Kingdom and the United States (Nelson, 2005; DiCecio and Nelson, 2009).Inflation dynamics has seen a change in the early eighties, with the change that had profound monetary policy. After the Volcker experience, central bank reaction to inflation shocks became more aggressive. In this context, central banks have not hesitated to increase real interest rates to prevent triggering an inflationary spiral and the emergence of second round effects. For example, a sudden drop in inflation in the United States in the early eighties could be explained by EDF aggressive response to inflation shocks combined with lesser technological shocks (Carlström, and Paustian Fuerst, 2009).
    Keywords: Monetary stability, financial stability, supervision, macro prudential policies
    JEL: E52 E50 E49
    Date: 2014–10
  64. By: Hyun-Kyu KANG (Korea Institute of Science & Technology Evaluation and Planning)
    Abstract: In order to enhance the efficiency of the fiscal management on research and development (R&D) programs, since 2008 the Korean government has applied the preliminary feasibility study (PFS) to newly proposed national R&D programs of which total budget exceeding about $50 million including about $30 million or more in government subsidy. For maintaining the consistency of evaluation, the PFS standard guideline on R&D program was published in 2011. Even after the publication of the first edition of the standard guideline, the development and application of new analytical methods on R&D program plans are being carried out on an ongoing basis. Recently it is studied to publish the revised edition of the standard guideline which contains new analysis methodologies and approaches. In this paper, I will explain the standard guideline of which revision is being carried out. In the PFS on new national R&D program plans, 3 major criteria are applied to measure comprehensively effects in aspects of technology, policy, and economy induced by R&D program. In the revised edition of the standard guideline, the part that was improved mainly, is the analysis method for the technological feasibility analysis. In feasibility analysis on policy and economic feasibility analysis, small changes such as correction and reinforcement of contents were conducted. As an important tool to draw issues from the proposed R&D program plan, we developed the logic model for the PFS. Also, we modified the questionnaire for R&D logic analysis and it consists of 11 questions. The 2nd edition of the standard guideline is planned to be published at the end of 2014
    Keywords: Preliminary feasibility study, Ex-ante evaluation, National R&D program, Standard guideline, Logic model
    JEL: D81 E62 O32
    Date: 2014–10
  65. By: AINA, Carmen (Università degli Studi del Piemonte Orientale); MAZZOTTA, Fernanda (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy); PARISI, Lavinia (CELPE - Centre of Labour Economics and Economic Policy, University of Salerno - Italy)
    Abstract: Two aspects play a role in the household decision-making, the efficiency and the bargaining power’s argument. The crucial difference between the two approaches is the expected influence of personal and partners’ wage. To investigate which of the two models hold, in the Italian context, we estimate an ordered probit model for five aspects of household decision-making. We use the Italian questionnaire of Statistics on Income and Living Conditions (It-Silc) 2010 as it provides a module on intra-household sharing of resources. Results show that in strategic control decisions, where the power argument should dominate the efficiency approach (i.e. decisions on durable goods, savings and other important decisions) the spouse/partner with higher wage is the household decision maker. For decision regarding executive management (i.e. decision on everyday shopping), the efficiency argument holds.
    Keywords: Financial management; Intra-household bargaining; Household production; Gender differences; Intra-household decision power; Family economics
    JEL: D13 E21 G11 J12
    Date: 2014–12–30
  66. By: Guizani, Brahim
    Abstract: This paper aims to contribute to the meager literature on monetary policy effectiveness in Tunisia especially after the revolution of January 2011; a period during which the country entered a delicate democratization transition. On the basis of a monthly data of several macroeconomic variables during the period from 2000 through 2013 a Vector Error Correction (VEC) model is estimated. The VEC-generated impulse response functions show that the monetary policy stance, as measured by the short-term interest rate, has become increasingly more effective on real output and prices during the post-revolution period; i.e., (2011 – 2013) than the previous period; i.e., (2000 – 2010). The variance decomposition analysis not only confirms these findings but also it points out an increasing role to the real output in price variation during the political transitional period. This might be attributed to the increasing volatile environment that characterized this period, which perturbed the aggregate supply and exacerbated the aggregate demand. Another no less important finding uncovered by the model is the amplification and acceleration of the exchange rate pass-through during the transitional period with respect the pre-revolution period.
    Keywords: monetary policy, Vector Error Correction Model, impulse response function, variance decomposition, Exchange rate Pass-Through.
    JEL: E52 E58
    Date: 2015–03–20
  67. By: Christopher L. Foote; Richard W. Ryan
    Abstract: Job losses during the Great Recession were concentrated among middle-skill workers, the same group that over the long run has suffered the most from automation and international trade. How might long-run occupational polarization be related to cyclical changes in middle-skill employment? We find that middle-skill occupations have traditionally been more cyclical than other occupations, in part because of the volatile industries that tend to employ middle-skill workers. Unemployed middle-skill workers also appear to have few attractive or feasible employment alternatives outside of their skill class, and the drop in male participation rates during the past several decades can be explained in part by an erosion of middle-skill job opportunities. Taken together, these results imply that a formal labor market model relating polarization to middle-skill employment fluctuations should include industry-level employment effects and a labor force participation margin as well as pure job-search considerations. The results thus provide encouragement for a growing literature that integrates "macro-labor" search models with "macro-macro" models featuring differential industry cyclicalities and convex preferences over consumption and leisure.
    JEL: E24 J22 J23 J24 J62 J63 J64
    Date: 2015–03
  68. By: Irina Bilan (\); Iulian Ihnatov (\)
    Abstract: The recent European sovereign debt crisis proved public debt issues should not be easily approached. While, prior to the crisis, public debt was of little concern in most of the developed European countries, as there had been no recent episodes of sovereign default, the crisis revived longtime forgotten memories. It once again proved that, although at different debt levels, just like the developing countries the developed ones should fear high public debts and that public debt is almost always a two-sided story: although public indebtedness can promote economic growth, especially when debt resources are used for financing public investment expenditure, when the debt is very high it can negatively affect economic growth.Against this background, in this paper we aim to study the relationship between public debt and economic growth for a panel of 33 European countries (28 European Union Member States and 5 candidate countries to European accession) over the period 1990-2011. More specifically, we investigate if there is evidence of a non-linear (quadratic) relationship, both for the entire European countries group and for the developed and developing countries subgroups. The main sources of data are World Bank’s World Development Indicators and International Monetary Fund’s World Economic Outlook and Historical Public Debt datasets.The results of our study confirm the existence of a „U inverted†relationship, with a maximum debt threshold of about 94% of GDP. After this threshold public debt is expected to negatively affect the economic growth rate, due to higher interest rates, fear of public debt unsustainability and severe budgetary consolidation measures. However, this threshold is found to be more than twice lower in developing European countries compared to the developed ones, as the former enjoy lower credibility, higher vulnerability to shocks and depend more on external capital transfers.
    Keywords: public debt, economic growth, public policy, developed European countries, developing European countries
    JEL: H63 E60 O40
    Date: 2014–12
  69. By: Roland Döhrn; Philipp an de Meulen
    Abstract: In periods of unusual weather, forecasters face a problem of interpreting economic data: Which part goes back to the underlying economic trend and which part arises from a special weather effect? In this paper, we discuss ways to disentangle weather-related from business cycle-related influences on economic indicators. We find a significant influence of weather variables at least on a number of monthly indicators. Controlling for weather effects within these indicators should thus create opportunities to increase the accuracy of indicator-based forecasts. Focusing on quarterly GDP growth in Germany, we find that the accuracy of the RWI short term forecasting model improves but advances are small and not significant.
    Keywords: Weather; short term forecasting; bridge equations; forecast accuracy
    JEL: C53 E37
    Date: 2015–02

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