nep-mac New Economics Papers
on Macroeconomics
Issue of 2015‒05‒22
73 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Financial Risk and Unemployment By Eckstein, Zvi; Setty, Ofer; Weiss, David
  2. Employment and the “Investment Gap”: An Econometric Model of European Imbalances By Luigi Pierfranco Campiglio
  3. What Drives US Inflation and Unemployment in the Long Run? By Antonio Ribba
  4. Negative nominal central bank policy rates: where is the lower bound? By McAndrews, James J.
  5. Greek Debt Crisis: The “@-euro” a New Possible Solution to Greek Debt Crisis By Mantalos, Panagiotis
  6. A Tractable Model of Monetary Exchange with Ex-post Heterogeneity By Guillaume Rocheteau; Pierre-Olivier Weill; Tsz-Nga Wong
  7. A Narrative Indicator of Monetary Conditions in China By Sun, Rongrong
  8. Non-Neutrality of Open-Market Operations By Benigno, Pierpaolo; Nisticò, Salvatore
  9. How Independent are the South African Reserve Bank’s Monetary Policy Decisions? Evidence from a Global New-Keynesian DSGE Model By Annari De Waal; Rangan Gupta; Charl Jooste
  10. Targeting Debt and Deficits in India: A Structural Macroeconometric Approach. By Bhanumurthy, N.R.; Bose, Sukanya; Adhikari, Parma Devi
  11. Exchange Rate Pass-Through in an Emerging Market: The Case of the Czech Republic By Jan Hájek; Roman Horváth
  12. Coordination and Crisis in Monetary Unions By Aguiar, Mark; Amador, Manuel; Farhi, Emmanuel; Gopinath, Gita
  13. Income Insurance and the Equilibrium Term-Structure of Equity By Roberto Marfè
  14. On the spectrum of oscillations in economics By Ledenyov, Dimitri O.; Ledenyov, Viktor O.
  15. Did US consumers ‘save for a rainy day’ before the Great Recession? By André K. Anundsen; Ragnar Nymoen
  16. Oil and Unemployment in a New-Keynesian Model By Verónica Acurio Vásconez
  17. Dilemma not Trilemma: The global Financial Cycle and Monetary Policy Independence By Hélène Rey
  18. Let's talk about it: what policy tools should the Fed "normally" use? By Barnes, Michelle L.
  19. What if oil is less substitutable? A New-Keynesian Model with Oil, Price and Wage Stickiness including Capital Accumulation By Verónica Acurio Vásconez
  20. Large Firm Dynamics and the Business Cycle By Carvalho, Vasco M; Grassi, Basile
  21. The global implications of diverging monetary policy settings in advanced economies By Dudley, William
  22. Dispersion of inflation expectations in the European Union during the global financial crisis By Jan Acedanski; Julia Wlodarczyk
  23. Greek Debt Crisis “An Introduction to the Economic Effects of Austerity” By Mantalos, Panagiotis
  24. Italian economic trends and labor market reforms: a 50-years overview By Paternesi Meloni, Walter; Deleidi, Matteo
  25. Monetary transmission models for bank interest rates By Laura Parisi; Igor Gianfrancesco; Camillo Gilberto; Paolo Giudici
  26. Quantity Theory of Money Redux? Will Inflation Be the Legacy of Quantitative Easing? By William R. Cline
  27. An Over-the-Counter Approach to the FOREX Market By Geromichalos, Athanasios; Jung, Kuk Mo
  28. The Impact of Trade on Labor Market Dynamics By Lorenzo Caliendo; Maximiliano Dvorkin; Fernando Parro
  29. Indexation, Monetary Accomodation and Inflation in Brazil By Eliana A. Cardoso
  30. Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence By Rey, Hélène
  31. Emergence of Sovereign Wealth Funds By Jean-Francois Carpantier; Wessel Vermeulen
  32. Indicator Based Forecasting of Business Cycles in Azerbaijan By Mammadov, Fuad; Shaig Adigozalov, Shaiq
  33. Causality between credit depth and economic growth: Evidence from 24 OECD countries By Stolbov , Mikhail
  34. Aggregate demand, idle time, and unemployment By Pascal Michaillat; Emmanuel Saez
  35. News Shocks in Open Economies: Evidence from Giant Oil Discoveries By Rabah Arezki; Valerie A Ramey; Liugang Sheng
  36. Growth Cycles in a Two-country Model of Innovation By Kunihiko Konishi
  37. Robustly Strategic Consumption-Portfolio Rules with Informational Frictions By Luo, Yulei
  38. Employment Elasticity in India and the U.S., 1977-2011: A Sectoral Decomposition Analysis By Basu, Deepankar; Das, Debarshi
  39. Maintaining Central-Bank Financial Stability under New-Style Central Banking By Robert E. Hall; Ricardo Reis
  40. Financial Flows and the International Monetary System By Evgenia Passari; Hélène Rey
  41. Financial Flows and the International Monetary System By Passari, Evgenia; Rey, Hélène
  42. Seven Principles for Managing Resource Wealth By Samuel Wills
  43. Euro Area Government Bonds—Integration and Fragmentation During the Sovereign Debt Crisis By Ehrmann, Michael; Fratzscher, Marcel
  44. Bubbles, Bluffs, and Greed By Harashima, Taiji
  45. Long-term projection of Myanmar economy by macro econometric model By Taguchi, Hiroyuki; Lar, Ni
  46. The relationship between Financial liberalization, Financial Stability and Capital Control: Evidence from a multivariate framework for developing countries By BOUKEF JLASSI, NABILA; Hamdi, Helmi
  47. Secondary Market Liquidity and the Optimal Capital Structure By Arseneau, David M.; Rappoport, David; Vardoulakis, Alexandros
  48. Trade finance and international currency By Liu, Tao
  49. A Comparison of Greece and Germany: Lessons for the Eurozone? By Hetzel, Robert L.
  50. How Do Minimum Wage Policies Affect Workers in Emerging Markets? By Albert Park
  51. Is there scientific progress in macroeconomics? The case of the NAIRU By Dany Lang; Mark Setterfield
  52. U.S. consumers' holdings and use of $100 bills By Greene, Claire; Schuh, Scott
  53. The Price of Variance Risk By Ian Dew-Becker; Stefano Giglio; Anh Le; Marius Rodriguez
  54. Forecasting Euro Area Macroeconomic Variables with Bayesian Adaptive Elastic Net By Sandra Stankiewicz
  55. The Protestant Fiscal Ethic: Religious Confession and Euro Skepticism in Germany By Adrian Chadi; Matthias Krapf
  56. U.S. consumer holdings and use of $1 Bills By Fulford, Scott L.; Greene, Claire; Murdock, William
  57. How do speed and security influence consumers' payment behavior? By Schuh, Scott; Stavins, Joanna
  58. No such thing like perfect hammer: comparing different objective function specifications for optimal control By Dmitri Blueschke; Ivan Savin
  59. Essentials of Constructive Heterodoxy: Financial Markets By Kakarot-Handtke, Egmont
  60. Why Do Cities Matter? Local Growth and Aggregate Growth By Hsieh, Chang-Tai; Moretti, Enrico
  61. Fostering economic growth in the Bronx By Dudley, William
  62. The 2011 and 2012 Surveys of Consumer Payment Choice By Schuh, Scott; Stavins, Joanna
  63. Declining trust in growing China: A dilemma between growth and socio-economic damage By Dai, Shuanping; Elsner, Wolfram
  64. Skill Biased Structural Change By Francisco J. Buera; Joseph P. Kaboski; Richard Rogerson
  65. Unia Gospodarcza i Walutowa a teoria optymalnych obszarow walutowych: proba projektowania rynku? By Michal Jarmolovic
  66. The 2011 and 2012 Surveys of Consumer Payment Choice: technical appendix By Angrisani, Marco; Foster, Kevin; Hitczenko, Marcin
  67. Artesanías y sistemas de información By Edgar Bejarano Barrera
  68. A Macroeconometric Policy Model for Brazil By Milton Assisr
  69. Dostosowania na rynku finansowym w Chinach po globalnym kryzysie finansowym By Katarzyna Glinka
  70. The Social Costs of Currency Counterfeiting By Nathan Viles; Alexandra Rush; Thomas Rohling
  71. Productivity in the slow lane?: the role of information and communications technology By Wang, J. Christina; Pearson, Alison
  72. The Local Economic Impacts of Natural Resource Extraction By James Cust; Steven Poelhekke
  73. Europe 2020 Strategy Implementation. Grouping the Countries with the Application of Natural Breaks Method By Adam P. Balcerzak

  1. By: Eckstein, Zvi; Setty, Ofer; Weiss, David
    Abstract: There is a strong correlation between the corporate interest rate (BAA rated), and its spread relative to Treasuries, and the unemployment rate. We model how interest rates and potential default rates impact equilibrium unemployment in a Diamond-Mortesen-Pissarides model. We calibrate the model using US data without targeting business cycle statistics. Volatility in the corporate interest rate can explain about 80% of the volatility of unemployment, vacancies, and market tightness. Simulating the Great Recession shows the model can account for much of the rise in unemployment. Without Fed action, unemployment would have been 6% higher.
    Keywords: business cycles; corporate interest rates; equilibrium unemployment; Great Recession; interest rate spread; search and matching models
    JEL: E22 E24 E32 E44 J41 J63 J64
    Date: 2015–05
  2. By: Luigi Pierfranco Campiglio (DISCE, Università Cattolica)
    Abstract: We specify a VEC model based on six main macroeconomic imbalances to explain the Great European Recession, in Germany, France, Spain and Italy, from 1999 to 2013, estimating their long-term relationships. We focus on employment and unemployment as the main imbalances and identify consumption and investment slumps, prompted by fiscal consolidation, as the causes and current account rebalance and low inflation as the main consequences. Our main results are the following: a) public investment is the main policy instrument which can foster employment, prompting private investment and growth, exports can only partly balance a falling domestic demand; b) the unemployment-current account trade-off is a structural constraint to a lower unemployment level; c) mild deflation set in as a consequence of the consumption slump and oil price decline; d) breaks dates for consumption and inflation thresholds are estimated; and e) Germany successfully passed through the European recession by sharply increasing its exports and reshaping its economic role.
    Keywords: Europe, employment, unemployment, consumption, investment, current account, inflation
    JEL: E21 E22 E24 E31 F32 O52
    Date: 2015–04
  3. By: Antonio Ribba
    Abstract: There is a growing consensus on the existence of a positive, long-run relation between inflation and unemployment in the US economy. However, the conclusion that the two variables move in the same direction at low frequencies leaves open the question of the identification of the factors - real or, alternatively, monetary - underlying this co-movement. In this paper we try to shed light on this question by adopting a structural VAR agnostic approach. The main conclusion is that in the postwar US economy an important role has been played by supply shocks in shaping the long-run evolution of unemployment. Thus, it seems that this evidence is at odds with purely monetary explanation of the co-movement between inflation and unemployment.
    Keywords: Long-run Unemployment; Inflation; Structural VARs
    JEL: E32 E62 C32
    Date: 2015–05
  4. By: McAndrews, James J. (Federal Reserve Bank of New York)
    Abstract: Remarks at the University of Wisconsin.
    Keywords: Danmarks Nationalbank (DNB); negative policy rates; quantitative easing; nominal interest rate; real interest rate; Fisher equation; currency; money illusion; negative yields; negative rates; negative interest rates; debt securities
    JEL: E58
    Date: 2015–05–08
  5. By: Mantalos, Panagiotis (Örebro University School of Business)
    Abstract: We introducing the new idea, of “@-euro” is a self-part-financiering monetary policy. This new idea, introduced more money (liquidity) to Greek state, and a system to collect taxes from the black economy. This idea, which is a possible solution to the Greek Crisis applied in a 7-years alternative Budget. The “@-euro” has two characteristics, first self-financiering and self-discipline. The produced New MTFS with exceptional positive results, with 43,00 billion surplus after that we have pay 113,00 billion Euro back to the creditors in a 7 year period. Moreover, no negative effects of austerity. There is fiscal stimulus without inflation!
    Keywords: Austerity; Government Budget; “@-euro”
    JEL: C22 E62 F33 H63 O40
    Date: 2015–04–02
  6. By: Guillaume Rocheteau; Pierre-Olivier Weill; Tsz-Nga Wong
    Abstract: We construct a continuous-time, pure currency economy with the following three key features. First, our modelled economy incorporates idiosyncratic uncertainty—households receive infrequent and random opportunities of lumpy consumption—and displays an endogenous, non-degenerate distribution of money holdings. Second, the model is tractable: properties of equilibria can be obtained analytically, and equilibria can be solved in closed form in a variety of cases. Third, it admits as a special, limiting case the quasi-linear economy of Lagos and Wright (2005) and Rocheteau and Wright (2005). We use our modeled economy to obtain new insights into the effects of anticipated inflation on individual spending behavior, the social benefits and output effects of inflationary transfer schemes, and transitional dynamics following unanticipated monetary shocks.
    JEL: E0 E41 E52
    Date: 2015–05
  7. By: Sun, Rongrong
    Abstract: In this paper, we apply the narrative approach, studying the PBC's historical records, to infer policy-makers' intentions and thereby build a time series of monetary policy indicator. We show that our narrative policy indicator is informative about economic activity. Changes in it reflect the PBC's responses to its perceptions of economic conditions. It is a good indicator of monetary policy actions. Finally, we show that compared to monetary aggregates, changes in interest rates and the required reserve ratio are more associated with changes in monetary policy, as measured by our narrative indicator, but only to a limited degree. None of them alone can be a good proxy of policy indicator.
    Keywords: the narrative-based policy indicator, quantitative policy measures, VAR, predictive power
    JEL: E52 E58
    Date: 2015
  8. By: Benigno, Pierpaolo; Nisticò, Salvatore
    Abstract: Unconventional monetary policy can have consequences for inflation and output because of income losses on central-bank balance sheet. A proposition of neutrality holds under some special monetary and fiscal policy regimes in which the treasury is ready to back central bank's losses through appropriate transfers levied as taxes on the private sector. In absence of fiscal backing, large and recurrent central bank's losses can undermine its long-run solvency and should be resolved through a prolonged increase in inflation. Small and infrequent losses are backed by future profits without any further consequences. A central bank averse to declining net worth commits to a more inflationary stance and delayed exit strategy from a liquidity trap. If fiscal policy is active, it is also desirable to reduce the duration of central bank's losses through higher inflation.
    Keywords: central bank's balance sheet; QE; unconventional monetary policy
    JEL: E40
    Date: 2015–05
  9. By: Annari De Waal (Department of Economics, University of Pretoria); Rangan Gupta (Department of Economics, University of Pretoria); Charl Jooste (Department of Economics, University of Pretoria)
    Abstract: We study the response of South African monetary policy decisions to foreign monetary policy shocks. We estimate the extent of foreign monetary policy pass-through by augmenting standard Taylor rules and comparing the results within the context of a Global New-Keynesian Dynamic Stochastic General Equilibirum (DSGE) model. The general equilibrium model captures important spill-over effects that would otherwise have been ignored in a single equation setup. The results show that the relationship between foreign monetary policy shocks and South African interest rates is complicated - South Africa does not import foreign monetary policy directly, but is still affected. Except for the U.S. an increase in foreign interest rates lead to a decrease in South African interest rates - highlighting the complex channels that monetary policy authorities have to monitor outside of its economy.
    Keywords: Monetary policy, Contagion, Global New-Keynesian DSGE model
    JEL: C20 C30 E43
    Date: 2015–05
  10. By: Bhanumurthy, N.R. (National Institute of Public Finance and Policy); Bose, Sukanya (National Institute of Public Finance and Policy); Adhikari, Parma Devi (National institute of Public Finance and Policy)
    Abstract: This study attempts to construct a consistent macroeconomic framework for India to review the macro-fiscal linkages over the 14th Finance Commission period of 2015-19. The existing NIPFP model has been reworked to add a full-fledged real sector block comprising of agriculture, industry, services and infrastructure, with the overall economy comprising of real sector block, external block, monetary block, fiscal block and macroeconomic block. The estimated model was used for policy simulations that are relevant for the 14th Finance Commission. The various scenarios include (a) shock due to 7th Pay Commission award, (b) targeting deficit and debt and (c) targeting higher growth. The results suggest that while Pay Commission award would result in slightly higher growth compared to the base case, this also results in higher inflation, fiscal-revenue deficits, current account deficit as well as higher government liability. Further simulation results suggest that expenditure switching policy, which is the core of expansionary fiscal consolidation mechanism, of increasing higher government capital expenditure and reducing the government transfers could result in higher growth with a manageable fiscal deficit of 5.3 per cent that also brings down the government (centre plus states) liability to around 60 per cent by 2019-20.
    Keywords: Fiscal consolidation ; Government debt ; Fiscal deficit ; Macroeconometric modeling ; India
    JEL: C32 E10 E17 E60 H60
    Date: 2015–05
  11. By: Jan Hájek (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic); Roman Horváth (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic; Institute for East and Southeast European Studies, Regensburg, Germany)
    Abstract: We examine exchange rate pass-through, or how domestic prices respond to exchange rate shocks, in the Czech Republic from 1998 to 2013 by employing vector autoregression models. Using the aggregate consumer price index and its sub-components, we find that the degree of passthrough is incomplete except for food prices. The peak response occurs between 9 and 13 months after the exchange rate shock. The long-term pass-through is approximately 50% at the aggregate level. The degree of pass-through is greater for tradables than for non-tradables. The results also suggest that the exchange rate pass-through becomes slower but more complete during the financial crisis experienced in period considered.
    Keywords: exchange rate pass-through, Czech Republic, inflation, vector autoregression
    JEL: E31 E52 E58 F31
    Date: 2015–04
  12. By: Aguiar, Mark (Princeton University); Amador, Manuel (Federal Reserve Bank of Minneapolis); Farhi, Emmanuel (Harvard University); Gopinath, Gita (Harvard University)
    Abstract: We study fiscal and monetary policy in a monetary union with the potential for rollover crises in sovereign debt markets. Member-country fiscal authorities lack commitment to repay their debt and choose fiscal policy independently. A common monetary authority chooses inflation for the union, also without commitment. We first describe the existence of a fiscal externality that arises in the presence of limited commitment and leads countries to over-borrow; this externality rationalizes the imposition of debt ceilings in a monetary union. We then investigate the impact of the composition of debt in a monetary union, that is the fraction of high-debt versus low-debt members, on the occurrence of self-fulfilling debt crises. We demonstrate that a high-debt country may be less vulnerable to crises and have higher welfare when it belongs to a union with an intermediate mix of high- and low-debt members, than one where all other members are low-debt. This contrasts with the conventional wisdom that all countries should prefer a union with low-debt members, as such a union can credibly deliver low inflation. These findings shed new light on the criteria for an optimal currency area in the presence of rollover crises.
    Keywords: Debt crisis; Coordination failures; Monetary union; Fiscal policy
    JEL: E40 E50 F30 F40
    Date: 2015–05–11
  13. By: Roberto Marfè
    Abstract: This paper documents that GDP, wages and dividends are co-integrated but feature term-structures of risk respectively flat, increasing and decreasing. Income insurance within the firm from shareholders to workers explains those term-structures: distributional risk smooths wages and enhances the short-run risk of dividends. A simple general equilibrium model, where labor rigidity affects dividend dynamics and the price of short-run risk, reconciles standard asset pricing facts with the term-structures of equity premium and volatility and those of macroeconomic variables, at odds in leading models. Income insurance also helps to explain dividend growth predictability, cross-sectional value premia, counter-cyclical Sharpe-ratios, and interest rates term-premia.
    Keywords: term structure of equity, income insurance, dividend strips, distributional risk, equilibrium asset pricing
    JEL: D53 E24 E32 G12
    Date: 2015
  14. By: Ledenyov, Dimitri O.; Ledenyov, Viktor O.
    Abstract: Article 1) researches the spectrum of different time dependent oscillations of economic variables in the economics, 2) introduces the notion of the Ledenyov discrete time signals in the economics for the first time, 3) proposes the Ledenyov discrete time signals theory in the nonlinear dynamic economic system for the first time, 4) describes the developed software program to forecast the business cycles, going from the spectral analysis of the discrete time signals and the continuous time signals in the nonlinear dynamic economic system over the selected time period. Authors show that 1) the discrete time signals and 2) the continuous time signals may be present in the spectrum of the different oscillations of the economic variables in the economies of scale and scope. We assume that 1) the discrete time signals, and 2) the continuous time signals may have the information money fields in agreement with the Ledenyov theory on the information money fields of the cyclic oscillations of the economic variables in the nonlinear dynamic economic system. We developed the MicroSA software program 1) to analyze the spectrum analysis of the cyclic oscillations of the economic variables in the nonlinear dynamic economic system, including the discrete time signals and the continuous time signals; 2) to make the computer modeling and to forecast the business cycles, going from the spectral analysis of the discrete time signals and the continuous time signals in the nonlinear dynamic economic system, for applications by a) the central banks with the purpose to make the strategic decisions on the monetary policies, financial stability policies, and b) the commercial/investment banks with the aim to make the business decisions on the minimum capital allocation, countercyclical capital buffer creation, and capital investments.
    Keywords: spectrum analysis of economic oscillations, discrete-time signals, continuous-time (continuous wave) signals, information money field of cyclic oscillation, generation of discrete-and continuous- time signals, amplitude of cyclic oscillation, frequency of cyclic oscillation, wavelength of cyclic oscillation, period of cyclic oscillation, phase of cyclic oscillation, mixing of cyclic oscillations, harmonics of cyclic oscillation, nonlinearities of cyclic oscillation, Juglar fixed investment cycle, Kitchin inventory cycle, Kondratieff long wave cycle, Kuznets infrastructural investment cycle, econophysics, econometrics, nonlinear dynamic economic system, economy of scale and scope, macroeconomics.
    JEL: C50 E0 E30 E32 E37
    Date: 2015–05–14
  15. By: André K. Anundsen (Norges Bank (Central Bank of Norway)); Ragnar Nymoen (Economic Analysis Norway - Center for Wage formation and University of Oslo)
    Abstract: The 'saving for a rainy day' hypothesis implies that households' saving decisions reflect that they can (rationally) predict future income declines. The empirical relevance of this hypothesis plays a key role in discussions of fiscal policy multipliers and it holds under the null that the permanent income hypothesis is true. We find mixed support for this hypothesis using time series data for the 100 largest US Metropolitan Statistical Areas, as well as aggregate macro time series, for the period 1980q1-2011q4. That is, income is more often found to predict consumption and saving than the converse. Our modus operandi is to investigate the 'saving for a rainy day' hypothesis by testing (weak) exogeneity of income and consumption and by exploring the direction of Granger causality between the two series. We also give evidence that house price changes played a role in the US income and consumption dynamics, before, during and after the Great Recession.
    Keywords: Cointegration, Consumption, Granger causality, Permanent income hypothesis, Household saving
    JEL: C22 C32 C51 C52 E21 E62
    Date: 2015–05–08
  16. By: Verónica Acurio Vásconez (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: The effects of oil shocks in inflation and growth have been widely discussed in the literature, however few have focused on the impact of oil price increases on unemployment. In order to shed some light on this problem, this paper develops a medium scale Dynamic Stochastic General Equilibrium model (DSGE) that allows for oil utilization in production and consumption as in Acurio-Vásconez (2015); unemployment as in Mortensen & Pissarides (1994); and staggered nominal wage contracting as in Gertler & Trigari (2009). It then analyzes the effects of oil price increases on the economy. The model recovers most of the well-known stylized facts observed after the oil shock in the 2000s'. A sensitivity analysis shows that the reduction of the bargaining power of households to negotiate wage contracts reduces the impact of an oil shock in unemployment, without affecting negatively GDP. However, it also shows that the reduction of bargaining power, together with wage flexibility strongly reduces the increase in unemployment after an oil shock, but causes a decrease in real wages, which reduces household income and affects GDP
    Keywords: New-Keynesian model; DSGE; oil; CES; Match & Search Models; Unemployment
    JEL: D58 E24 E32 Q43
    Date: 2015–05
  17. By: Hélène Rey
    Abstract: There is a global financial cycle in capital flows, asset prices and in credit growth. This cycle co‐moves with the VIX, a measure of uncertainty and risk aversion of the markets. Asset markets in countries with more credit inflows are more sensitive to the global cycle. The global financial cycle is not aligned with countries’ specific macroeconomic conditions. Symptoms can go from benign to large asset price bubbles and excess credit creation, which are among the best predictors of financial crises. A VAR analysis suggests that one of the determinants of the global financial cycle is monetary policy in the centre country, which affects leverage of global banks, capital flows and credit growth in the international financial system. Whenever capital is freely mobile, the global financial cycle constrains national monetary policies regardless of the exchange rate regime. For the past few decades, international macroeconomics has postulated the “trilemma”: with free capital mobility, independent monetary policies are feasible if and only if exchange rates are floating. The global financial cycle transforms the trilemma into a “dilemma” or an “irreconcilable duo”: independent monetary policies are possible if and only if the capital account is managed. So should policy restrict capital mobility? Gains to international capital flows have proved elusive whether in calibrated models or in the data. Large gross flows disrupt asset markets and financial intermediation, so the costs may be very large. To deal with the global financial cycle and the “dilemma”, we have the following policy options: ( a) targeted capital controls; (b) acting on one of the sources of the financial cycle itself, the monetary policy of the Fed and other main central banks; (c) acting on the transmission channel cyclically by limiting credit growth and leverage during the upturn of the cycle, using national macroprudential policies; (d) acting on the transmission channel structurally by imposing stricter limits on leverage for all financial intermediaries.
    JEL: E5 F02 F33 G15
    Date: 2015–05
  18. By: Barnes, Michelle L. (Federal Reserve Bank of Boston)
    Abstract: During the onset of a very severe financial and economic crisis in 2008, the federal funds rate reached the zero lower bound (ZLB). With this primary monetary policy tool therefore rendered ineffective, in November 2008 the Federal Reserve started to use its balance sheet as an alternative policy tool when it began the large-scale asset purchases. Now attention is turning to how the Fed should transition back to a more conventional monetary policy stance. Largely missing from these discussions about the Fed's "exit strategy" is a consideration that perhaps it should retain, not discard, the balance sheet tools. Since the Dodd-Frank Act (DFA) has added maintaining financial stability to the Fed's existing dual mandate to achieve maximum sustainable employment in the context of price stability, it might be beneficial to have several tools to achieve multiple policy objectives. An additional consideration is that some of these tools may be needed to stem future crises as a result of the DFA's new limitations on how the Fed can provide liquidity under such adverse circumstances. In an effort to spur a broader debate, this brief discusses what is known and knowable regarding the effectiveness of balance sheet tools and examines four primary arguments for keeping these as part of the Fed's toolkit.
    JEL: E52 E58 G01 G12
    Date: 2014–12–29
  19. By: Verónica Acurio Vásconez (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: The recent literature on fossil energy has already stated that oil is not perfectly substitutable to other inputs, considering fossil fuel as a critical production factor in different combinations. However, the estimations of substitution elasticity are in a wide range between 0.004 and 0.64. This paper addresses this phenomenon by enlarging the DSGE model developed in Acurio-Vásconez et al. (2015) by changing the Cobb-Douglas production and consumption functions assumed there, for composite Constant Elasticity of Substitution (CES) functions. Additionally, the paper introduces nominal wage and price rigidities through a Calvo setting. Finally, using Bayesian methods, the model is estimated on quarterly U.S. data over the period 1984:Q1-2007:Q3 and then analyzed. The estimation of oil's elasticity of substitution are 0.14 in production and 0.51 in consumption. Moreover, thanks to the low substitutability of oil, the model recovers and explains four well-known stylized facts after the oil price shock in the 2000's: the absent of recession, coupled with a low persistent increase in inflation rate, a decrease in real wages and a low price elasticity of oil demand in the short run. Furthermore, ceteris paribus, the reduction of nominal wage rigidity amplifies the increase in inflation and the decrease in consumption. Thus in this model more wage flexibility does not seem to attenuate the impact of an oil shock
    Keywords: New-Keynesian model; DSGE; oil; CES; stickiness; oil substitution
    JEL: D58 E32 E52 Q43
    Date: 2015–05
  20. By: Carvalho, Vasco M; Grassi, Basile
    Abstract: Do large firm dynamics drive the business cycle? We answer this question by developing a quantitative theory of aggregate fluctuations caused by firm-level disturbances alone. We show that a standard heterogeneous firm dynamics setup already contains in it a theory of the business cycle, without appealing to aggregate shocks. We offer a complete analytical characterization of the law of motion of the aggregate state in this class of models – the firm size distribution – and show that the resulting closed form solutions for aggregate output and productivity dynamics display: (i) persistence, (ii) volatility and (iii) time-varying second moments. We explore the key role of moments of the firm size distribution – and, in particular, the role of large firm dynamics – in shaping aggregate fluctuations, theoretically, quantitatively and in the data.
    Keywords: aggregate fluctuations; firm size distribution; large firm dynamics; random growth
    JEL: E32 L11
    Date: 2015–05
  21. By: Dudley, William (Federal Reserve Bank of New York)
    Abstract: Panel Remarks at the Sixth High Level Conference on the International Monetary System: Monetary Policy Challenges in a Changing World, Zurich, Switzerland.
    Keywords: emerging market economies (EMEs); normalization; lift-off; unconventional monetary policy; transparency; global capital flows; foreign exchange; financial asset prices
    JEL: E58
    Date: 2015–05–12
  22. By: Jan Acedanski (University of Economics in Katowice); Julia Wlodarczyk (University of Economics in Katowice)
    Abstract: Inflation expectations, both their median and dispersion, are of a great importance to the effectiveness of monetary policy. The goal of this paper is to examine the impact of the global financial crisis on dispersion of inflation expectations in the European Union. Using European Commission’s survey data, we find that in the early phase of the crisis the dispersion dropped rapidly but then, after Lehman Brothers’ collapse, the trend reversed and these fluctuations cannot be explained by movements of inflation rates and other commonly used factors. We also observe that, in the new European Union member states, the initial drop of the dispersion was weaker whereas the subsequent rise was stronger as compared to the old member states.
    Keywords: inflation expectations, survey data, global financial crisis, European Union
    JEL: C33 C42 D84 E31
    Date: 2015–05
  23. By: Mantalos, Panagiotis (Örebro University School of Business)
    Abstract: We trace the reasons for the negative development of Greek government debt from 1980 to 2014 by studying the deficits of the Greek state under the same period. We also see the Greek debt under the different political regimes. We briefly describe the two bailout programs for Greece and finally we name the amount and Euro states that own the Greek loans. The negative effects of austerity are about 22% less GDP and total household and government consumption and monthly wages; finally, the unemployment rate grew 21%.
    Keywords: Austerity; Consumption; Deficit; Greek Debt Crisis; GDP; Unemployment
    JEL: C22 E62 F33 H63 O40
    Date: 2015–04–02
  24. By: Paternesi Meloni, Walter; Deleidi, Matteo
    Abstract: This paper aims to investigate the Italian economic development from 1960 to the present day, performing an analysis of meaningful economic trends and relating them to the implementation of major labor market reforms. For this purpose, we observe the dynamics of main macroeconomic variables related to growth, income distribution and employment. Especially, we focus on different theoretical approaches explaining labor productivity trend, and on Classical theory of distribution.
    Keywords: economic growth, productivity, real wages, labor share, market labour, Italian economy.
    JEL: E24 O47
    Date: 2014
  25. By: Laura Parisi (Department of Economics and Management, University of Pavia); Igor Gianfrancesco (Banco di Desio e della Brianza, Risk Management Division); Camillo Gilberto (Banca Monte dei Paschi di Siena); Paolo Giudici (Department of Economics and Management, University of Pavia)
    Abstract: Monetary policies, either actual or perceived, cause changes in monetary interest rates. These changes impact the economy through financial institutions, which react to changes in the monetary rates with changes in their administered rates, on both deposits and lendings. The dynamics of administered bank interest rates in response to changes in money market rates is essential to examine the impact of monetary policies on the economy. Chong et al. (2006) proposed an error correction model to study such impact, using data previous to the recent financial crisis. In this paper we examine the validity of the model in the recent time period, characterised by very low monetary rates. The current state of close-to-zero interest rates is of particular relevance, as it has never been studied before. Our main contribution is a novel, more parsimonious, model and a predictive performance assessment methodology, which allows to compare it with the error correction model. We also contribute to the literature on interest rate risk modelling proposing a forward looking method to allocate on-demand deposits to non-zero time maturity bands, according to the predicted bank rates.
    Keywords: Error Correction Model, Forecasting Bank Rates, Monte Carlo predictions, Interest Rate Risk models
    JEL: C15 C20 E47 G32
  26. By: William R. Cline (Peterson Institute for International Economics)
    Abstract: Since the onset of the Federal Reserve's unconventional program of large scale asset purchases, known as quantitative easing (QE), some economists and financial practitioners have feared that the consequent buildup of the Fed’s balance sheet could lead to a large expansion of the money supply, and that such an increase could cause a sharp rise in inflation. So far fears about induced inflation have not been validated. This Policy Brief examines the basis for the original concerns about inflation in terms of the classic quantity theory of money, which holds that inflation occurs when the money supply expands more rapidly than warranted by increases in real production. The Brief first reviews the US experience and shows that whereas rapid money growth might have been a plausible explanation of inflation in the 1960s through the early 1980s, subsequent data have not supported such an explanation. It then shows that the quantity theory of money has not really been put to the test after the Great Recession, because a sharp increase in banks’ excess reserves and corresponding sharp decline in the “money multiplier” has meant that the rise in the Federal Reserve’s balance sheet has not translated into increased money available to the public in the usual fashion. The most likely aftermath of quantitative easing remains one of benign price behavior. However, if nascent inflationary conditions materialize, the Federal Reserve will need to manage adroitly the large amounts of banks’ excess reserves that have accumulated as a consequence of QE in order to limit inflationary pressures.
    Date: 2015–05
  27. By: Geromichalos, Athanasios; Jung, Kuk Mo
    Abstract: The FOREX market is an over-the-counter market (in fact, the largest in the world) characterized by bilateral trade, intermediation, and significant bid-ask spreads. The existing international macroeconomics literature has failed to account for these stylized facts largely due to the fact that it models the FOREX as a standard Walrasian market, therefore overlooking some important institutional details of this market. In this paper, we build on recent developments in monetary theory and finance to construct a dynamic general equilibrium model of intermediation in the FOREX market. A key concept in our approach is that immediate trade between ultimate buyers and sellers of foreign currencies is obstructed by search frictions (e.g., due to geographic dispersion). We use our framework to compute standard measures of FOREX market liquidity, such as bid-ask spreads and trade volume, and to study how these measures are affected both by macroeconomic fundamentals and the FOREX market microstructure. We also show that the FOREX market microstructure critically affects the volume of international trade and, consequently, welfare. Hence, our paper highlights that modeling the FOREX as a frictionless Walrasian market is not without loss of generality.
    Keywords: FOREX market, over-the-counter markets, search frictions, bargaining, monetary-search models
    JEL: D4 E31 E52 F31
    Date: 2015
  28. By: Lorenzo Caliendo; Maximiliano Dvorkin; Fernando Parro
    Abstract: We develop a dynamic labor search model where production and consumption take place in spatially distinct labor markets with varying exposure to domestic and international trade. The model recognizes the role of labor mobility frictions, goods mobility frictions, geographic factors, and input-output linkages in determining equilibrium allocations. We show how to solve the equilibrium of the model without estimating productivities, reallocation frictions, or trade frictions, which are usually difficult to identify. We use the model to study the dynamic labor market outcomes of aggregate trade shocks. We calibrate the model to 38 countries, 50 U.S. states and 22 sectors and use the rise in China's import competition to quantify the aggregate and disaggregate employment and welfare effects on the U.S. economy. We find that China's import competition growth resulted in 0.6 percentage point reduction in the share of manufacturing employment, approximately 1 million jobs lost, or about 60% of the change in the manufacturing employment share not explained by a secular trend. Overall, China's shock increases U.S. welfare by 6.7% in the long-run and by 0.2% in the short-run with very heterogeneous effects across labor markets.
    JEL: E24 F16 J62 R13 R23
    Date: 2015–05
  29. By: Eliana A. Cardoso
    Date: 2015–01
  30. By: Rey, Hélène
    Abstract: There is a global financial cycle in capital flows, asset prices and in credit growth. This cycle co-moves with the VIX, a measure of uncertainty and risk aversion of the markets. Asset markets in countries with more credit inflows are more sensitive to the global cycle. The global financial cycle is not aligned with countries’ specific macroeconomic conditions. Symptoms can go from benign to large asset price bubbles and excess credit creation, which are among the best predictors of financial crises. A VAR analysis suggests that one of the determinants of the global financial cycle is monetary policy in the centre country, which affects leverage of global banks, capital flows and credit growth in the international financial system. Whenever capital is freely mobile, the global financial cycle constrains national monetary policies regardless of the exchange rate regime.
    Keywords: international finance; monetary policy; trilemma
    JEL: E5 F3
    Date: 2015–05
  31. By: Jean-Francois Carpantier; Wessel Vermeulen
    Abstract: This paper tests the theoretically founded hypothesis that the surge of SWF establishments is determined by three main factors: 1) the existence of natural resources profits, 2) the government structure and 3) the ability to invest usefully in the domestic economy.We test this hypothesis on a sample of 20 countries that established an SWF in the period 1998-2008 by comparing them to the roughly 100 countries that did not set up a fund in the same period. We find evidence for all three factors. The results suggest that SWFs tend to be established in countries that run an autocratic regime and have difficulties finding suitable opportunities for domestic investments. We do not find the net foreign asset position of a country to be similarly related to the explanatory variables, indicating that the establishment of an SWF is distinct from a national accounting result. We argue that our results indicate that it is relevant to study how an SWF interacts with the domestic economy and government policy.
    Keywords: Sovereign Wealth Fund, Institutions, natural resources
    JEL: E21 E62 F39 G23 H52
    Date: 2014
  32. By: Mammadov, Fuad; Shaig Adigozalov, Shaiq
    Abstract: This paper has attempted to construct leading indicator systems and based on that to predict future contraction period of the Azerbaijan non-oil economy using more than 100 publicly available economic and financial data. Our results show plausible and significant performance of composite leading indicator system with average leading time of 7.2 months. We found that between January of 2000 and May of 2014, there were 6 turning points in Azerbaijan non-oil economy, consisting of three peaks and three troughs corresponding three expansion and four contraction periods. It turns out that the average duration of expansion and contraction phases is 43 and 10 month, respectively. Based on selected leading indicators we constructed composite indicator is found to be able to predict all the six turning points. Using dynamic probit model we estimated contraction probability of non-oil output gap for the future period. Out-of-sample as well as in-sample forecast performance suggest that the leading indicator systems have significant predictive power and could be used as a useful tool for economic forecasting.
    Keywords: Business cycles, Dating, Turning points, Forecasting, Probit Model
    JEL: C25 C53 E32
    Date: 2014–10–10
  33. By: Stolbov , Mikhail (BOFIT)
    Abstract: Causality between the ratio of domestic private credit to GDP and growth in real GDP per capita is investigated in a country-by-country time-series framework for 24 OECD economies over the period 1980–2013. The proposed threefold methodology to test for causal linkages integrates (i) lag-augmented VAR Granger causality tests, (ii) Breitung-Candelon causality tests in the frequency domain, and (iii) testing for causal inference based on a fully modified OLS (FMOLS) approach. For 12 of 24 countries in the sample, the three tests yield uniform results in terms of causality presence (absence) and direction. Causality running from credit depth to economic growth is found for the UK, Australia, Switzerland, and Greece. The findings lend no support to the view that financial development shifts from a supply-leading to demand-following pattern as economic development proceeds. The aggregate results mesh well with the current discussion on “too much finance” and disintermediation effects. However, idiosyncratic country determinants also appear significant.
    Keywords: causality; economic growth; financial development; FMOLS; frequency domain
    JEL: C22 E44 G21 O16
    Date: 2015–04–30
  34. By: Pascal Michaillat; Emmanuel Saez
    Abstract: This article develops a model of unemployment fluctuations. The model keeps the architecture of the general-disequilibrium model of Barro and Grossman (1971) but takes a matching approach to the labor and product markets instead of a disequilibrium approach. On the product and labor markets, both price and tightness adjust to equalize supply and demand. Since there are two equilibrium variables but only one equilibrium condition on each market, a price mechanism is needed to select an equilibrium. We focus on two polar mechanisms: fixed prices and competitive prices. When prices are fixed, aggregate demand affects unemployment as follows. An increase in aggregate demand leads firms to find more customers. This reduces the idle time of their employees and thus increases their labor demand. This in turn reduces unemployment. We combine the predictions of the model and empirical measures of product market tightness, labor market tightness, output, and employment to assess the sources of labor market fluctuations in the United States. First, we find that product market tightness and labor market tightness fluctuate a lot, which implies that the fixed-price equilibrium describes the data better than the competitive-price equilibrium. Next, we find that labor market tightness and employment are positively correlated, which suggests that the labor market fluctuations are mostly due to labor demand shocks and not to labor supply or mismatch shocks. Last, we find that product market tightness and output are positively correlated, which suggests that the labor demand shocks mostly reflect aggregate demand shocks and not technology shocks.
    JEL: E10 E24 E30 J2 J64
    Date: 2015–05
  35. By: Rabah Arezki; Valerie A Ramey; Liugang Sheng
    Abstract: This paper explores the effect of news shocks on the current account and other macroeconomic variables using worldwide giant oil discoveries as a directly observable measure of news shocks about future output ̶ the delay between a discovery and production is on average 4 to 6 years. We first present a two-sector small open economy model in order to predict the responses of macroeconomic aggregates to news of an oil discovery. We then estimate the effects of giant oil discoveries on a large panel of countries. Our empirical estimates are consistent with the predictions of the model. After an oil discovery, the current account and saving rate decline for the first 5 years and then rise sharply during the ensuing years. Investment rises robustly soon after the news arrives, while GDP does not increase until after 5 years. Employment rates fall slightly for a sustained period of time.
    Keywords: news shocks, current account, saving, investment, employment, oil, discovery
    JEL: E00 F3 F4
    Date: 2015
  36. By: Kunihiko Konishi (Graduate School of Economics, Osaka University)
    Abstract: This study examines growth cycles in a simple discrete-time two-country model of in- novation. In this setting, we find that there are two key driving forces that give rise to cycles. They are perfect international capital mobility and perfect international knowledge spillovers. In addition, this study shows that the opening of trade can create cycles in both countries, whereas pretrade equilibrium in each country initially jumps to the steady state. That is, our results are characteristic of an open-economy framework.
    Keywords: Two-country model, Cycles, Innovation
    JEL: E32 F44 O41
    Date: 2015–05
  37. By: Luo, Yulei
    Abstract: This paper provides a tractable continuous-time constant-absolute-risk averse (CARA)-Gaussian framework to explore how the interactions of fundamental uncertainty, model uncertainty due to a preference for robustness (RB), and state uncertainty due to information-processing constraints (rational inattention or RI) affect strategic consumption-portfolio rules and precautionary savings in the presence of uninsurable labor income. Specifically, after solving the model explicitly, I compute and compare the elasticities of strategic asset allocation and precautionary savings to risk aversion, robustness, and inattention. Furthermore, for plausibly estimated and calibrated model parameters, I quantitatively analyze how the interactions of model uncertainty and state uncertainty affect the optimal share invested in the risky asset, and show that they can provide a potential explanation for the observed stockholding behavior of households with different education and income levels.
    Keywords: Robustness, Model Uncertainty, Rational Inattention, Uninsurable Labor Income, Strategic Asset Allocation, Precautionary Savings
    JEL: E21 G00 G11
    Date: 2015
  38. By: Basu, Deepankar (Department of Economics, University of Massachusetts); Das, Debarshi (Department of Humanities and Social Sciences, Indian Institute of Technology, Guwahati)
    Abstract: This paper analyses the phenomenon of jobless growth in India and the US through the lens of employment elasticity. Analytical results are derived for decompositions of both the level and change of aggregate employment elasticity in terms of sectoral elasticities, relative growth and employment shares. Estimates of these decompositions are presented with employment and output data from relevant sources for both economies. In India, the agricultural sector was the key determinant of both the level and change of aggregate elasticity till the early 2000s. In USA, services is the most important determinant of the level of, but manufacturing remains an important driver of changes in, aggregate employment elasticity.
    Keywords: employment; output; elasticity
    JEL: E2 E24
    Date: 2015
  39. By: Robert E. Hall; Ricardo Reis
    Abstract: Since 2008, the central banks of advanced countries have borrowed trillions of dollars from their commercial banks in the form of interest-paying reserves and invested the proceeds in portfolios of risky assets. We investigate how this new style of central banking affects central banks' solvency. A central bank is insolvent if its requirement to pay dividends to its government exceeds its income by enough to cause an unending upward drift in its debts to commercial banks. We consider three sources of risk to central banks: interest-rate risk (the Federal Reserve), default risk (the European Central Bank), and exchange-rate risk (central banks of small open economies). We find that a central bank that pays dividends equal to a standard concept of net income will always be solvent---its reserve obligations will not explode. In some circumstances, the dividend will be negative, meaning that the government is making a payment to the bank. If the charter does not provide for payments in that direction, then reserves will tend to grow more in crises than they shrink in normal times. To prevent this buildup, the charter needs to provide for makeup reductions in payments from the bank to the government. We compute measures of the financial strength of central banks at the end of 2013, and discuss how different institutions interact with quantitative easing policies to put these banks in less or more danger of instability. We conclude that the risks to financial stability are real in theory, but remote in practice today.
    JEL: E42 E58
    Date: 2015–05
  40. By: Evgenia Passari; Hélène Rey
    Abstract: We review the findings of the literature on the benefits of international financial flows and find that they are quantitatively elusive. We then present evidence on the existence of a global cycle in gross cross border flows, asset prices and leverage and discuss its impact on monetary policy autonomy across different exchange rate regimes. We focus in particular on the effect of US monetary policy shocks on the UK's financial conditions.
    JEL: E5 F3
    Date: 2015–05
  41. By: Passari, Evgenia; Rey, Hélène
    Abstract: We review the findings of the literature on the benefits of international financial flows and find that they are quantitatively elusive. We then present evidence on the existence of a global cycle in gross cross border flows, asset prices and leverage and discuss its impact on monetary policy autonomy across different exchange rate regimes. We focus in particular on the effect of US monetary policy shocks on the UK's financial conditions.
    Keywords: financial integration; monetary policy
    JEL: E5 F3
    Date: 2015–05
  42. By: Samuel Wills
    Abstract: This paper studies how capital-scarce countries should manage volatile resource income. Existing literature recommends that capital-scarce countries invest domestically, but that volatile resource income should be saved in a foreign sovereign wealth fund. I reconcile these by combining a stochastic model of precautionary savings with a deterministic model of a capital-scarce resource exporter. I show that capital-scarce countries should still establish a Volatility Fund, but it should be relatively smaller than in capital-abundant countries. The fund should be built before anticipated windfalls, partially invested domestically, and used as a source of income rather than a buffer against temporary shocks. To do so I develop a parsimonious framework that nests a variety of existing results as special cases, which are presented in seven principles. The first three apply to capital-abundant countries:i) Smooth consumption using a Future Generations Fund; ii) Build a Volatility Fund quickly, then leave it alone; and iii) Invest to stabilise the real exchange rate.The remaining four apply to capital-scarce countries: iv) Finance consumption and investment with oil; v) Use a temporary Parking Fund to improve absorption, vi)Invest part of the Volatility Fund domestically; and vii) Support private investment.
    Keywords: Natural resources, oil, volatility, precautionary saving, capital scarcity, anticipation
    JEL: D81 D91 E21 F34 H63 O13 Q32 Q33
    Date: 2015
  43. By: Ehrmann, Michael; Fratzscher, Marcel
    Abstract: The paper analyzes the integration of euro area sovereign bond markets during the European sovereign debt crisis. It tests for contagion (i.e., an intensification in the transmission of shocks across countries), fragmentation (a reduction in spillovers) and flight-to-quality patterns, exploiting the heteroskedasticity of intraday changes in bond yields for identification. The paper finds that euro area government bond markets were well integrated prior to the crisis, but saw a substantial fragmentation from 2010 onward. Flight to quality was present at the height of the crisis, but has largely dissipated after the European Central Bank’s (ECB’s) announcement of its Outright Monetary Transactions (OMT) program in 2012. At the same time, Italy and Spain became more interdependent after the OMT announcement, providing our only evidence of contagion. While this suggests that countries have been effectively ring-fenced, and Italy and Spain benefited from the joint reduction in yields following the OMT announcement, the high current degree of fragmentation poses difficult challenges for policy-makers, since it leads to an unequal transmission of the ECB’s monetary policy to the various countries.
    Keywords: contagion; ECB; European crisis; fragmentation; high-frequency data; identification; integration; policy; sovereign debt
    JEL: E5 F3 G15
    Date: 2015–05
  44. By: Harashima, Taiji
    Abstract: A rational bubble cannot theoretically exist if people have infinite horizons. This paper shows that a bubble-like phenomenon can be generated by a “bluff” even if people are rational and have infinite horizons. A bluff is defined as the behavior of an agent who pretends to possess private information to gain profits, particularly (false or misleading) information that the representative household’s rate of time preference (RTP RH) has changed. An alternative definition of the representative household indicates that households must ex ante generate an expected RTP RH to behave optimally, but the expected RTP RH has to be generated based on beliefs about the RTP RH. Bluffers exploit the opportunities derived from the fragile nature of the expected RTP RH. The driving force behind bluffs is greed because bluffers do not work hard to gain profits by producing and selling better goods and services more cheaply, but by disseminating contaminated information, or acting in such a way to mislead people into believing the expected RTP RH has changed.
    Keywords: Bubble; Bluff; Greed; Time preference; The representative household; The financial supervision
    JEL: E32 E44 G14
    Date: 2015–05–15
  45. By: Taguchi, Hiroyuki; Lar, Ni
    Abstract: The purpose of this chapter is to investigate the long-term growth prospects of Myanmar economy under such scenarios as intensifying investment and improving total factor productivity (TFP), to represent demand-management policies necessary to sustain its long-term economic growth, to provide strategic implications on the prerequisites to achieve an optimal growth path, and also to represent the sectoral breakdowns for GDP and labor projections. For these purpose, we construct a simple macro-econometric model as shown in Appendix 1 in detail, and conduct sectoral breakdowns by the methodology of using Thailand input-output tables.
    Keywords: Long-term projection, Myanmar, macro econometric model
    JEL: E17 O53
    Date: 2015–03
  46. By: BOUKEF JLASSI, NABILA; Hamdi, Helmi
    Abstract: We analyze the dynamic relationship between financial liberalization and financial stability for a panel of 25 developing countries during the period 1986-2010. The empirical study employs the Toda and Yamamoto's (1995) procedure to test for the Granger no-causality between the six variables of our study including: credit-to-GDP ratio, deposit to credit ratio, net interest margin , bank supervision, Liberalization measured by kaopen and capital control proxied by the Quinn index (2007). The results show a first bidirectional causal relationship between financial stability and deposit to credit ratio, a second one between financial stability and capital control and a third one between financial stability and liberalization.
    Keywords: Liberalization, capital control, Developing countries, Toda and Yamamoto
    JEL: E58 G0 G01 G28
    Date: 2015
  47. By: Arseneau, David M. (Board of Governors of the Federal Reserve System (U.S.)); Rappoport, David (Board of Governors of the Federal Reserve System (U.S.)); Vardoulakis, Alexandros (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: We present a model where endogenous liquidity generates a feedback loop between secondary market liquidity and firms' financing decisions in primary markets. The model features two key frictions: a costly state verification problem in primary markets, and search frictions in over-the-counter secondary markets. Our concept of liquidity depends endogenously on illiquid assets put up for sale relative to the resources available for buying those assets in the secondary market. Liquidity determines the liquidity premium, which affects issuance in the primary market, and this effect feeds back into secondary market liquidity by changing the composition of investors' portfolios. We show that the privately optimal allocations are inefficient because investors and firms fail to internalize how their behavior affects secondary market liquidity. These inefficiencies are established analytically through a set of wedge expressions for key efficiency margins. Our analysis provide s a rationale for the effect of quantitative easing on secondary and primary capital markets and the real economy.
    Keywords: Capital structure; market liquidity; quantitiative easing; secondary markets
    JEL: E44 G18 G30
    Date: 2015–05–12
  48. By: Liu, Tao
    Abstract: The determinants of international currency received a lot of academic attention since great recession, especially given China's intention to internationalize RMB. Recent empirical studies in history and international economics confi�rmed the importance of �nancial market development in this process. To provide micro-foundation for such observation, I built a two-country monetary search model with �nancial friction. Trade takes a long time, and the lack of trust makes importer and exporter rely on bank-intermediated �nance. The choice of international currency is related with terms of trade, monetary policy, and �nancial market development. The eff�ect of monetary policy on international trade di�ffers according to currency regime. Related topic such as size eff�ect and capital account liberalization is also discussed.
    Keywords: International currency; RMB internationalization; monetary search
    JEL: E42 F33 F41
    Date: 2015–05–14
  49. By: Hetzel, Robert L. (Federal Reserve Bank of Richmond)
    Abstract: During the Great Recession and its aftermath, the economic performance of Greece and Germany diverged sharply with persistent high unemployment in Greece and low unemployment in Germany. A common explanation for this divergence is the assumption of an unsustainable level of debt in Greece in the years after the formation of the Eurozone while Germany maintained fiscal discipline. This paper reviews the experience of Greece and Germany since the creation of the Eurozone. The review points to the importance of monetary factors, especially the intensification of the recession in Greece starting in 2011 derived from the price-specie flow mechanism described by David Hume.
    JEL: E50
    Date: 2015–04–15
  50. By: Albert Park (Department of Economics, Hong Kong University of Science and Technology; Division of Social Science, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology)
    Abstract: Prof. Albert Park, Director of HKUST IEMS, Chair Professor at HKUST's Division of Social Science, and Professor at HKUST's Department of Economics, reviews the efficacy of minimum wage policies across BRICS countries–i.e. Brazil, Russia, India, China, and South Africa–highlighting their success or lackthereof as related to critical factors such as labor market coverage, policy enforcement, minimum wage level as compared to mean wages, and others. Prof. Park notes that while minimum wage policies in BRICS countries generally increase wages at the bottom end of the wage distribution, their impact on employment and wealth inequality is less defined. The impact of such minimum wage policies closely tied to the levels of policy compliance and enforcement in each country. For example, in China, India, and South Africa–where enforcement is relatively high–minimum wages have had marked positive effects on labor markets (serving as a sort of "lighthouse effect")–while in Russia and Brazil such regulations may have increased employment in informal labor markets.
    Keywords: minimum wage policy, emerging markets, China, Russia, South Africa, Brazil, India, BRICS, minimum wage enforcement, minimum wage compliance
    JEL: E24 J31 J41
    Date: 2015–04
  51. By: Dany Lang (Centre d’Economie de Paris Nord (CEPN), Université de Paris 13, Sorbonne Paris Cité); Mark Setterfield (Department of Economics, New School for Social Research)
    Abstract: We address the question posed in the title of this paper by investigating recent developments in the literature that estimates the NAIRU. A necessary condition for the existence of a NAIRU is dynamic homogeneity: the Phillips curve should be homogenous of degree one in lagged and/or expected inflation. But contemporary approaches to estimating the NAIRU typically assume rather than test for dynamic homogeneity, thus assuming (rather than testing for) the existence of a NAIRU. We argue that these developments remove the NAIRU from the domain of testable hypotheses and transform the concept into an article of faith. This does not constitute scientific progress.
    Keywords: NAIRU, dynamic homogeneity, hysteresis, testable hypothesis
    JEL: E10 B41 C12
    Date: 2015–05
  52. By: Greene, Claire (Federal Reserve Bank of Boston); Schuh, Scott (Federal Reserve Bank of Boston)
    Abstract: Conventional wisdom asserts that $100 bills are often associated with crime and foreign cash holdings, leading some commentators to call for their elimination; in light of this proposal, it is useful to examine the legal, domestic use of cash. This report uses new data from the 2012 Diary of Consumer Payment Choice (DCPC) to evaluate consumer use of $100 bills as a means of payment.
    Keywords: money demand; currency denominations; $100 bill; Diary of Consumer Payment Choice
    JEL: D14 E41
    Date: 2014–11–25
  53. By: Ian Dew-Becker; Stefano Giglio; Anh Le; Marius Rodriguez
    Abstract: In the period 1996-2014, the average investor in the variance swap market was indifferent to news about future variance at horizons ranging from 1 month to 14 years. It is only purely transitory and unexpected realized variance that were priced. These results present a challenge to most structural models of the variance risk premium, such as the intertemporal CAPM, recent models with Epstein-Zin preferences and long-run risks, and models where institutional investors have value-at-risk constraints. The results also have strong implications for macro models where volatility affects investment decisions, suggesting that investors are not willing to pay to hedge shocks in expected economic uncertainty.
    JEL: E44 G12
    Date: 2015–05
  54. By: Sandra Stankiewicz (Department of Economics, University of Konstanz, Germany)
    Abstract: I use the adaptive elastic net in a Bayesian framework and test its forecasting performance against lasso, adaptive lasso and elastic net (all used in a Bayesian framework) in a series of simulations, as well as in an empirical exercise for macroeconomic Euro area data. The results suggest that elastic net is the best model among the four Bayesian methods considered. Adaptive lasso, on the other hand, shows the worst forecasting performance. Lasso is generally better then adaptive lasso, but worse than adaptive elastic net. The differences in the performance of these models become especially large when the number of regressors grows considerably relative to the number of available observations. The results point to the fact that the ridge regression component in the elastic net is responsible for its improvement in forecasting performance over lasso. The adaptive shrinkage in some of the models does not seem to play a major role, and may even lead to a deterioration of the performance.
    Keywords: Elastic net, Lasso, Bayesian, Forecasting
    JEL: C11 C22 C53
    Date: 2015–05–13
  55. By: Adrian Chadi; Matthias Krapf
    Abstract: During the European sovereign debt crisis, most countries that ran into fiscal trouble had Catholic majorities, whereas countries with Protestant majorities were able to avoid fiscal problems. Survey data show that, within Germany, views on theeuro differ between Protestants and Non-Protestants, too. Among Protestants, concerns about the euro have, compared to Non-Protestants, increased during the crisis, and significantly reduce their subjective wellbeing only. We use the timing of survey interviews and news events in 2011 to account for the endogeneity of euro concerns. Emphasis on moral hazard concerns in Protestant theology may, thus, still shape economic preferences.
    Keywords: Protestantism, euro crisis, subjective wellbeing, media coverage
    JEL: E00 I31 L82 Z12
    Date: 2015
  56. By: Fulford, Scott L. (Boston College); Greene, Claire (Federal Reserve Bank of Boston); Murdock, William (Harvard University)
    Abstract: Small denominations play a special role in a payments ecosystem because they facilitate exchange for small-value goods and services. This report examines the $1 bill holdings of adults in the United States using data from the Diary of Consumer Payments Choice (DCPC). Simply knowing the number of $1 bills in circulation is not useful for understanding consumers' actions, since many of these bills are held by merchants. The costs and benefits to the consumer of carrying $1 bills have been largely ignored in the policy discussion of the costs of switching from dollar notes to dollar coins. Knowing the facts about U.S. adult consumers' holdings of $1 bills represents a first step toward gaining an understanding of these costs and benefits to consumers.
    Keywords: money demand; currency denominations; $1 bill; Diary of Consumer Payment Choice
    JEL: D14 E41
    Date: 2015–01–01
  57. By: Schuh, Scott (Federal Reserve Bank of Boston); Stavins, Joanna (Federal Reserve Bank of Boston)
    Abstract: The Federal Reserve Financial Services (FRFS) strategic plan for 2012-2016 named improvements in the end-to-end speed and security of the payment system as two of its policy initiatives. End-to-end in this context means that for the first time end-users are explicitly included. Earlier versions of the strategy plan were circulated for public comment, and the feedback received by FRFS specifically identified a need for further research. This brief draws upon new data from the 2013 Survey of Consumer Payment Choice and employs econometric modeling and simulation to complement FRFS-commissioned market research on end users' preferences. The authors' approach relies on revealed preference to incorporate insight into consumers' actual behavior, not just their attitudes, and their models employ a two-stage technique, estimating, first, the influence of the simulated improvements in speed and in security on the adoption of the payment instruments considered, and, second, the influence on the choice of which of the adopted payment instruments to use. The final version of the strategic plan is currently under discussion by Federal Reserve policymakers, so all the policies and strategies discussed in this brief are preliminary.
    JEL: D12 D14 E58
    Date: 2015–02–05
  58. By: Dmitri Blueschke (Klagenfurt University, Austria); Ivan Savin (Friedrich Schiller University Jena)
    Abstract: The linear-quadratic (LQ) optimization is a close to standard technique in the optimal control framework. LQ is very well researched and there are many extensions for more sophisticated scenarios like nonlinear models. Usually, the quadratic objective function is taken as a prerequisite for calculating derivative-based solutions of optimal control problems. However, it is not clear whether this framework is so universal as it is considered. In particular, we address the question on whether the objective function specification and the corresponding penalties applied, are well suited in case of a large exogenous shock an economy can experience because of, e.g., the European debt crisis. While one can still efficiently minimize quadratic deviations in state and control variables around policy targets, the economy itself has to go through a period of turbulence with economic indicators, such as unemployment, inflation or public debt, changing considerably over time. In this study we test four alternative designs of the objective function: a least median of squares based approach, absolute deviations, cubic and quartic objective functions. The analysis is performed based on a small-scale model of the Austrian economy and finds that there is a certain trade-off between quickly finding optimal solution using the LQ technique (reaching defined policy targets) and accounting for alternative objectives, such as limiting volatility in the economic performance.
    Keywords: Differential evolution, nonlinear optimization, optimal control, least median of squares, cubic optimization, quartic optimization
    JEL: C54 C61 E27 E61 E63
    Date: 2015–05–04
  59. By: Kakarot-Handtke, Egmont
    Abstract: What stands before all eyes as failed Orthodoxy is ultimately caused by the wrong answer to Mill's Starting Problem. It is now pretty obvious that one cannot put utility maximization, equilibrium, well-behaved production functions, ergodicity or any other physical or psychological or sociological or behavioral assumption into the premises. No way leads from such premises to the explanation of how the actual market economy works. The logical consequence is to discard them. Having first secured a superior formal starting point, the present paper addresses the question of how the various types of financial markets emerge from the elementary monetary circuit.
    Keywords: new framework of concepts; structure-centric; Law of Supply and Demand; Profit Law; IOU; complementarity of retained profit and saving; securities; bonds; common stock; mortgages; consumer financing
    JEL: B49 B59 E19 G00
    Date: 2015–05–17
  60. By: Hsieh, Chang-Tai; Moretti, Enrico
    Abstract: We study how growth of cities determines the growth of nations. Using a spatial equilibrium model and data on 220 US metropolitan areas from 1964 to 2009, we first estimate the contribution of each U.S. city to national GDP growth. We show that the contribution of a city to aggregate growth can differ significantly from what one might naively infer from the growth of the city’s GDP. Despite some of the strongest rate of local growth, New York, San Francisco and San Jose were only responsible for a small fraction of U.S. growth in this period. By contrast, almost half of aggregate US growth was driven by growth of cities in the South. We then provide a normative analysis of potential growth. We show that the dispersion of the conditional average nominal wage across US cities doubled, indicating that worker productivity is increasingly different across cities. We calculate that this increased wage dispersion lowered aggregate U.S. GDP by 13.5%. Most of the loss was likely caused by increased constraints to housing supply in high productivity cities like New York, San Francisco and San Jose. Lowering regulatory constraints in these cities to the level of the median city would expand their work force and increase U.S. GDP by 9.5%. We conclude that the aggregate gains in output and welfare from spatial reallocation of labor are likely to be substantial in the U.S., and that a major impediment to a more efficient spatial allocation of labor are housing supply constraints. These constraints limit the number of US workers who have access to the most productive of American cities. In general equilibrium, this lowers income and welfare of all US workers.
    Keywords: cities; economic growth
    JEL: E00 R1
    Date: 2015–05
  61. By: Dudley, William (Federal Reserve Bank of New York)
    Abstract: Remarks at the 17th Annual Bronx Bankers Breakfast, Bronx, New York.
    Keywords: Community development financial institutions (CDFIs); Bronx
    JEL: E66
    Date: 2015–05–08
  62. By: Schuh, Scott (Federal Reserve Bank of Boston); Stavins, Joanna (Federal Reserve Bank of Boston)
    Abstract: In 2012, the number of consumer payments did not change significantly from 2010 as the economy settled into steady expansion following the financial crisis and recession. After increasing by 28 percent from 2008 to 2010, cash payments by consumers fell back by 10 percent from 2010 to 2012, while the share of cash payments dropped for a third straight year to 26.8 percent. However, the number and dollar value of cash withdrawals and the dollar value of cash holdings by consumers increased in 2012. Credit and charge card payments by consumers, which declined in 2009, rebounded further, increasing by 14 percent from 2010 to 2012. The steady trend decline in paper check payments by consumers continued. Debit cards and cash continued to account for the two largest shares of consumer payments in 2012 (29.9 and 26.8 percent, respectively), but the credit share reached 21.6 percent—surpassing its highest level recorded in the SCPC in 2008. The 2011 and 2012 SCPC include methodological improvements to the measurement of prepaid cards and mobile banking and payments. In 2012, 52 percent of consumers had at least one type of prepaid card, up slightly from 2011; also in 2012, 36 percent of consumers used mobile banking and 18 percent made a mobile payment. The 2008–2012 SCPC contains results that may help researchers and policymakers identify potential indirect effects of Regulation II (the Durbin Amendment) on consumers and may help to inform the Federal Reserve’s new strategic plan for the payment system.
    JEL: D12 D14 E42
    Date: 2014–09–29
  63. By: Dai, Shuanping; Elsner, Wolfram
    Abstract: Declining general trust has become a serious social issue in China in recent years. This paper attempts to understand and analyze this social phenomenon from a social interaction perspective. Based on a repeated prisoners´ dilemma game on networks, it finds that the evolution of general trust is dependent on changes of the social interaction structure, and the increases of both social and spatial distance may explain a decrease of the levels of cooperation and general trust. In addition, we find that the traditional Chinese family and clan networks culture has an ambiguous effect on general trust, and simple reactive social "homing behavior" might be critical for China´s future economic development. In order to recover the general trust level, a major strategic option for China, and for fast growing countries in economic transition in general, is to (re-)develop appropriate network structures and properties, as our model indicates.
    Keywords: economic transition,growth and development,migration,trust,games on networks,China
    JEL: B52 C72 D01 D02 D30 E24 O17 O43 O53 P21 Z10
    Date: 2015
  64. By: Francisco J. Buera; Joseph P. Kaboski; Richard Rogerson
    Abstract: We document for a broad panel of advanced economies that increases in GDP per capita are associated with a shift in the composition of value added to sectors that are intensive in high-skill labor. It follows that further development in these economies leads to an increase in the relative demand for skilled labor. We develop a two-sector model of this process and use it to assess the contribution of this process of skill-biased structural change to the rise of the skill premium in the US, and a broad panel of advanced economies, over the period 1977 to 2005. We find that these compositional demands account for between 25 and 30% of the overall increase of the skill premium due to technical change.
    JEL: E02 J2
    Date: 2015–05
  65. By: Michal Jarmolovic (Jagiellonian University)
    Abstract: Praca ma na celu poszukiwanie odpowiedzi na pytanie, czy koncepcja Europejskiej Unii Gospodarczej i Walutowej (UGW) i jej wdrazanie maja spojne fundamenty teoretyczne. Takze probuje sie odpowiedziec na pytanie czy projekt UGW mozna spostrzegac jako probe projektowania rynku. Temat ten zostal podjety z powodu kryzysu finansowego i instytucjonalnego w strefie euro, ktorego skutkiem byl rosnacy eurosceptyzm. Niniejsza praca pokazuje, ze teoria Optymalnych Obszarow Walutowych (OOW, ang. Optimal Currency Area, OCA) nie odegrala wiekszej roli az do lat 90-tych. Rozwoj klasycznej teorii OOW nie skutkowal wypracowaniem jednego zestawu kryteriow koniecznych optymalnego obszaru. Wynikiem tego bylo odejscie od poszukiwania takowych i przejscie do rachunku kosztow i korzysci z integracji. W rezultacie teoria OOW nie miala znacznego wplywy na UGW. Brak wyksztalcenia dobrych regul i instytucji dla projektu integracji mowi o projekcie UGW jako malo udanej probie projektowania europejskiego rynku na prace, dobra, uslugi i kapital.
    Keywords: Optymalny obszar walutowy, OOW, Strefa Euro, UGW
    JEL: E42 F15 F33
    Date: 2015–05
  66. By: Angrisani, Marco (University of Southern California); Foster, Kevin (Federal Reserve Bank of Boston); Hitczenko, Marcin (Federal Reserve Bank of Boston)
    Abstract: This document serves as the technical appendix to the 2011 and 2012 Surveys of Consumer Payment Choice. The Survey of Consumer Payment Choice (SCPC) is an annual study designed primarily to study the evolving attitudes to and use of various payment instruments by consumers over the age of 18 in the United States. The main report, which introduces the survey and discusses the principal economic results, can be found on In this data report, we detail the technical aspects of the survey design, implementation, and analysis.
    JEL: D12 D14 E4
    Date: 2014–10–01
  67. By: Edgar Bejarano Barrera
    Abstract: El documento sobre las Artesanías y los Sistemas de Información busca destacar el argumento de que la construcción de un sistema de información no es un proceso exclusivamente técnico sino que el mismo exige una profundización y una fundamentación conceptual, necesarias para la mejor comprensión de la realidad objetivo pero también para la identificación y selección de las temáticas, categorías y variables que van a integrar el sistema. Persiguiendo ese propósito, inicialmente se hacen valiosas precisiones sobre el significado y alcances de la información económica y la economía de la información, así como sobre ciertas categorías vitales en la práctica artesanal, para luego centrarse en los retos que emergen para el sistema de información cuando intenta representar una realidad heterogénea en sus expresiones, agentes y prácticas; atomizada, informal y además afectada por políticas y sucesos en abierto conflicto con lo que tradicionalmente se ha entendido está en la esencia de la actividad artesanal.
    Keywords: Artesanías, Sistemas de Información, Señales, Cadena de Valor.
    JEL: D82 E26 Z10
    Date: 2014–08–11
  68. By: Milton Assisr
    Date: 2015–01
  69. By: Katarzyna Glinka (Cracow University of Economics)
    Abstract: Celem artykulu jest przedstawienie ewolucyjnych zmian, jakie zaszly na rynku finansowym w Chinach, a ktorych katalizatorem byly zaburzenia na globalnym rynku finansowym. Zmiany te byly wynikiem zarowno dzialan antykryzysowych ze strony polityki makroekonomicznej podjetych na poczatku kryzysu, jak i odpowiedzia na polityke luzowania ilosciowego w USA i strefie euro (czyli rosnaca podaz pieniadza trafiajaca rowniez na rynek finansowy w Chinach). Przy obecnie funkcjonujacym systemie kursu walutowego (kierowany kurs plynny), polityka Chin wobec przeplywow kapitalowych stara sie z jednej strony maksymalizowac korzysci wynikajace z naplywu kapitalu zagranicznego, z drugiej natomiast minimalizowac ryzyko zwiazane z gwaltownymi zmianami w kierunkach przeplywu kapitalu. Konsekwencja takiego podejscia jest strategia bardzo stopniowej liberalizacji obrotow kapitalowych, ktorej towarzyszy bardzo duze zaangazowanie panstwa na rynku finansowym. Przedstawione w opracowaniu konkretne rozwiazania w tym zakresie wskazuja na specyfike tej strategii. Liberalizacje krajowego rynku finansowego poprzedza bowiem liberalizacja rynku offshore (w Hongkongu). Taka strategia pozwala Chinom na podejmowanie przedsiewziec ukierunkowanych na internacjonalizacje wlasnej waluty, bez znaczacego otwarcia sie na przeplywy kapitalowe. W opracowaniu dominuje analiza opisowa.
    Keywords: kryzys finansowy, rynki finansowe, internacjonalizacja waluty
    JEL: E58 F33 G01
    Date: 2015–05
  70. By: Nathan Viles (Reserve Bank of Australia); Alexandra Rush (Reserve Bank of Australia); Thomas Rohling (Reserve Bank of Australia)
    Abstract: Currency counterfeiting is costly for society. Law enforcement agencies allocate substantial resources to deter, detect and prosecute counterfeiting operations, households and businesses suffer a direct loss to counterfeiters and undertake costly prevention measures, and central banks spend considerable resources upgrading and improving the security of banknotes. Without these prevention efforts, there is a risk that the public could lose confidence in the currency and reduce its use relative to more costly payment alternatives. This paper examines the social costs of counterfeiting in Australia. First, we provide some statistics on counterfeiting domestically and compare Australia's experience with some other economies internationally. We find that the direct costs of counterfeiting in Australia are relatively low when compared with other economies, but that there can be substantial deadweight costs associated with prevention efforts and losses of confidence in the currency. Second, we focus on quantifying the effect of a loss of confidence in the currency. To do this, we estimate a structural vector autoregression using the Australian data. In response to a positive one standard deviation counterfeiting shock, the demand for banknotes declines and the use of credit cards and bank deposits increase. These results are consistent with the presence of substitution effects. Using a scenario to quantify the real resource costs associated with these substitution effects, our estimates suggest that an increase in counterfeiting of around A$140 000, spread over ten years, leads to a total increase in social costs of A$7.0 million. Although the statistical uncertainty implied in the model and scenario estimates is large, the results suggest that there are significant pay-offs from efforts to prevent and deter counterfeiting activity in Australia.
    Keywords: currency counterfeiting; social cost; structural vector autoregression
    JEL: C32 E42
    Date: 2015–05
  71. By: Wang, J. Christina (Federal Reserve Bank of Boston); Pearson, Alison (Federal Reserve Bank of Boston)
    Abstract: As the current recovery matures in the United States, evidence is mounting that total factor productivity (TFP), the typical measure of technological change, has moved back into the slow lane. This study uses industry data to explore the extent to which the acceleration in TFP in the late 1990s and early 2000s and the subsequent deceleration are attributable to unmeasured investment by firms to take full advantage of the new capabilities made possible by information and communications technology (ICT).
    Keywords: productivity: TFP; MFP; information technology; ICT; intangible capital
    JEL: E23
    Date: 2014–12–22
  72. By: James Cust; Steven Poelhekke
    Abstract: Whether it is fair to characterize natural resource wealth as a curse is still debated. Most of the evidence derives from cross-country analyses, providing cases both for and against a potential resource curse. Scholars are increasingly turning to within-country evidence to deepen our understanding of the potential drivers, and outcomes, of resource wealth effects. Moving away from cross-country studies offers new perspectives on the resource curse debate, and can help overcome concerns regarding endogeneity. Therefore, scholars are leveraging datasets which provide greater disaggregation of economic responses and exogenous identification of impacts. This paper surveys the literature on these studies of local and regional effects of natural resource extraction. We discuss data availability and quality, recent advances in methodological tools, and summarize the main findings of several areas of research. These include the direct impact of natural resource production on local labor markets and welfare, the effects of government spending channels resulting from mining revenue, and regional spillovers. Finally, we take stock of the state of the literature and provide suggestions for future research.
    Keywords: survey, mining, Dutch disease, identification, spillovers
    JEL: D81 D91 E21 F34 H63 O13 Q32 Q33
    Date: 2015
  73. By: Adam P. Balcerzak (Nicolaus Copernicus University)
    Abstract: In the year 2015 the European Union reaches the five year period of Europe 2020 strategy implementation. Thus, the aim of the research is to group the European countries based on the level of fulfillment aims of the strategy with the application of natural breaks method. Special consideration was given to the results of New Member States of European Union. As a result in the first part of empirical research a ranking of EU countries with application of zero unitarization method for the year 2004, 2008 and 2013 was made. Based on the rankings the countries were grouped in five classes with natural breaks method. The analysis showed that in spite of economic difficulties in Europe after global financial crisis, from the year 2004 till the year 2013 New Member States had made an important progress in the implementation of Europe 2020 strategy.
    Keywords: Europe 2020 strategy, multivariate analysis, zero unitarization method, natural breaks method
    JEL: C00 E61 O52
    Date: 2015–05

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