nep-mac New Economics Papers
on Macroeconomics
Issue of 2015‒06‒05
eighty-two papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Central bank balance sheet policies and inflation expectations By Jan Willem van den End; Christiaan Pattipeilohy
  2. Persistence vs. Reversal and Agglomeration Economies vs. Natural Resources. Regional inequality in Argentina in the first half of the twentieth century By María Florencia Aráoz; Esteban A. Nicolini
  3. Counting Biased Forecasters: An Application of Multiple Testing Techniques By Fabiana Gomez; David Pacini
  4. Macroeconomic policy and potential growth By Jérôme Creel; Maurizio Iacopetta
  5. The Intertwining of financialisation and financial instability By Jérôme Creel; Paul Hubert; Fabien Labondance
  6. Efficiency with Endogenous Information Choice By Luis Gonzalo Llosa; Venky Venkateswaran
  7. Los efectos redistributivos de la inflación. Un caso de estudio para Bolivia durante el periodo 2005-2011 By Werner L. Hernani-Limarino; Gary Mena
  8. Replicando el IPC en Bolivia: ¿La inflación de quién se está midiendo? By Gary Mena
  9. Debt into growth: How sovereign debt accelerated the first Industrial Revolution By Jaume Ventura; Hans-Joachim Voth
  10. Tribalism and Financial Development By Simplice Asongu; Oasis Kodila-Tedika
  11. The impact of financial sector development on economic growth: analysis of the financial development gap between Cameroon and South Africa By Mandiefe, Piabuo Serge
  12. Profits encourage investment, investment dampens profits, government spending does not prime the pump — A DAG investigation of business-cycle dynamics By Tapia, Jose
  13. Wall Street occupations By Ulf Axelson; Philip Bond
  14. Macroeconomic effects of consumer debt: three theoretical essays By Olivier Allain
  15. Un modelo Mundell-Fleming con economía ilegal y lavado de dinero By Slim, Sadri
  16. Comparing profit shares in value-added in four OECD countries: Towards more harmonised national accounts By Pierre-Alain Pionnier; Emmanuelle Guidetti
  17. Mismatch Shocks and Unemployment During the Great Recession By Francesco Furlanetto; Nicolas Groshenny
  18. Regional heterogeneity and monetary policy By Beraja, Martin; Fuster, Andreas; Hurst, Erik; Vavra, Joseph
  19. The wage inflation-unemployment curve at the macroeconomic level By Saglio, Sophie; lopez-villavicencio, antonia
  20. Digital waves in economics By Ledenyov, Dimitri O.; Ledenyov, Viktor O.
  21. Impact of the economic integration in the international economic structure. The case of international mergers and acquisitions of Spanish multinational firms By David de Matías Batalla
  22. Eurozona | Evaluando la capacidad predictiva del MIDAS By Diego Torres Torres
  23. Monetary and macroprudential policy with foreign currency loans By Brzoza-Brzezina, Michał; Kolasa, Marcin; Makarski, Krzysztof
  24. Macroprudential oversight, risk communication and visualization By Sarlin, Peter
  25. Una Historia Exhaustiva de la Regulación Financiera en Colombia By Tatiana A. Mora-Arbeláez; Andres J. Garcia-Bernal; Jose E. Gomez-Gonzalez; Mauricio Villamizar-Villegas
  26. The UK's Productivity Puzzle By Alex Bryson; John Forth
  27. Banks are not intermediaries of loanable funds – and why this matters By Jakab, Zoltan; Kumhof, Michael
  28. Segregated balance accounts By Garratt, Rod; Martin, Antoine; McAndrews, James J.; Nosal, Ed
  29. Optimal Monetary Policy at the Zero Lower Bound By Azariadis, Costas; Bullard, James B.; Singh, Aarti; Suda, Jacek
  30. The Possible Tragedy of Quantitative Easing: An IS-LM Approach By Kui-Wai, Li; Bharat R., Hazari
  31. Could there be a "Sub-market Interest Rate" in the IS-LM Framework? By Kui-Wai, Li
  32. Inflation, Endogenous Market Segmentation and the Term Structure of Interest Rates By Casper de Vries; Xuedong Wang
  33. Towards Adopting Inflation Targeting in Emerging Markets: The (A)symmetric Transmission Mechanism in Jordan By Noura Abu Asab; Juan Carlos Cuestas
  34. The Great Leveraging in the GIIPS Countries: Domestic Credit and Net Foreign Liabilities By Juan Carlos Cuestas; Karsten Staehr
  35. Wealth Distribution, Elasticity of Substitution, and Piketty: an anti-dual Pasinetti Economy. By Luca Zamparelli
  36. Identifying Noise Shocks: a VAR with Data Revisions By Riccardo M. Masolo; Alessia Paccagnini
  37. Indonesian Macro Policy through Two Crises By Prayudhi Azwar; Rod Tyers
  38. Income Shocks or Insurance - What Determines Consumption Inequality? By Johannes Ludwig
  39. Ready for Take-off? The Economic Effects of Regional Airport Expansion By Philipp Breidenbach
  40. Crowdsourcing of Economic Forecast – Combination of Forecasts Using Bayesian Model Averaging By Dongkoo Kim; Tae-hwan Rhee; Keunkwan Ryu; Changmock Shin
  41. Would a Free Banking System Target NGDP Growth? By Alexander William Salter; Andrew T. Young
  42. Debt into growth: how sovereign debt accelerated the first industrial revolution By Jaume Ventura; Hans-Joachim Voth
  43. International Technology Diffusion of Joint and Cross-border Patents (Revised version) By Chia-Lin Chang; Michael McAleer; Ju-Ting Tang
  44. Enhanced Gravity Model of trade: reconciling macroeconomic and network models By Assaf Almog; Rhys Bird; Diego Garlaschelli
  45. House Prices, Local Demand, and Retail Prices By Ströbel, Johannes; Vavra, Joseph
  46. Runs versus Lemons: Information Disclosure and Fiscal Capacity By Faria-e-Castro, Miguel; Martinez, Joseba; Philippon, Thomas
  47. Self-Fulfilling Debt Crises: Can Monetary Policy Really Help? By Bacchetta, Philippe; Perazzi, Elena; van Wincoop, Eric
  48. Monetary, Fiscal and Oil Shocks: Evidence based on Mixed Frequency Structural FAVARs By Marcellino, Massimiliano; Sivec, Vasja
  49. Dynamic Factor Models with Infinite-Dimensional Factor Space: Asymptotic Analysis By Forni, Mario; Hallin, Marc; Lippi, Marco; Zaffaroni, Paolo
  50. Central Bank Balance Sheets: Expansion and Reduction since 1900 By Ferguson, Niall; Schaab, Andreas; Schularick, Moritz
  51. Natural Experiments in Macroeconomics By Fuchs-Schündeln, Nicola; Hassan, Tarek
  52. Does Product Familiarity Matter for Participation? By Fuchs-Schündeln, Nicola; Haliassos, Michael
  57. FUNDING SOURCES FOR THE DEVELOPMENT OF WESTERN BALKAN COUNTRIES 2001-2012 By Slobodan Cvetanoviæ, Danijela Despotoviæ
  60. Amortization Requirements and Household Indebtedness: An Application to Swedish- Style Mortgages By Hull, Isaiah
  61. Balance-Sheet Households and Fiscal Stimulus: Lessons from the Payroll Tax Cut and Its Expiration By Claudia R. Sahm; Matthew D. Shapiro; Joel Slemrod
  62. Different Types of Central Bank Insolvency and the Central Role of Seignorage By Ricardo Reis
  63. Incorporating Anchored Inflation Expectations in the Phillips Curve and in the Derivation of OECD Measures of Equilibrium Unemployment By Elena Rusticelli; David Turner; Maria Chiara Cavalleri
  64. The stabilisation properties of immovable property taxation: Evidence from OECD countries By Hansjörg Blöchliger; Balázs Égert; Bastien Alvarez; Aleksandra Paciorek
  65. Interest rate elasticity of bank loans: The case for sector-specific capital requirements By Hense, Florian
  66. Systemic risk and macro-prudential policies: A credit network-based approach By Catullo, Ermanno; Gallegati, Mauro; Palestrini, Antonio
  67. Financal frictions and policy cooperation: a case with monopolistic banking and staggered loan contracts By Fujiwara, Ippei; Teranishi, Yuki
  68. Global financial market impact of the announcement of the ECB's extended asset purchase programme By Georgiadis, Georgios; Grab, Johannes
  69. The asymmetric effects of deflation on consumption spending: evidence from the Great Depression By Davis, J. Scott
  70. Monetary policy expectations and economic fluctuations at the zero lower bound By Doehr, Rachel; Martinez-Garcia, Enrique
  71. Bank and sovereign risk feedback loops By Erce, Aitor
  72. Monitoring the world business cycle By Camacho, Maximo; Martinez-Martin, Jaime
  73. Sustainable international monetary policy cooperation By Fujiwara, Ippei; Kam, Timothy; Sunakawa, Takeki
  74. Country-specific oil supply shocks and the global economy: a counterfactual analysis By Mohaddes, Kamiar; Pesaran, M. Hashem
  75. What drives the global interest rate By Ratti, Ronald A.; Vespignani, Joaquin L.
  76. Private news and monetary policy forward guidance or (the expected virtue of ignorance) By Fujiwara, Ippei; Waki, Yuichiro
  77. Forecasting local inflation with global inflation: when economic theory meets the facts By Duncan, Roberto; Martinez-Garcia, Enrique
  78. Policy regime change against chronic deflation? Policy option under a long-term liquidity trap By Fujiwara, Ippei; Nakazono, Yoshiyuki; Ueda, Kozo
  79. Exploring Differences in Household Debt Across Euro Area Countries and the United States By Dimitris Christelis; Michael Ehrmann; Dimitris Georgarakos
  80. WHAT CAN WE LEARN FROM REVISIONS TO THE GREENBOOK FORECASTS? By Jeff Messina; Tara M. Sinclair; Herman O. Stekler
  81. The Role of Oil Prices in the Forecasts of South African Interest Rates: A Bayesian Approach By Rangan Gupta; Kevin Kotze
  82. Characterising the South African Business Cycle: Is GDP Difference-Stationary or Trend-Stationary in a Markov-Switching Setup? By Mehmet Balcilar; Rangan Gupta; Charl Jooste; Omid Ranjbar

  1. By: Jan Willem van den End; Christiaan Pattipeilohy
    Abstract: We analyse the empirical effects of credit easing and quantitative easing on inflation expectations and exchange rates. Both monetary policy strategies are summarised in measures for composition and size of the central bank balance sheet and included in a VAR model. The empirical results show that changes in balance sheet size had positive effects on inflation expectations in Japan, while the effects where negligible in the euro area. By contrast, an increasing balance sheet size is associated with reduced short-term inflation expectations in the US and UK, pointing at negative signalling effects. Shocks to balance sheet size or composition have no substantial effects on long-term inflation expectations in the euro area, US and UK. An expanding balance sheet size is associated with an appreciation of the US dollar and a depreciation of the euro, pound sterling and Japanese yen.
    Keywords: central banks and their policies; monetary policy
    JEL: E58 E52
    Date: 2015–05
  2. By: María Florencia Aráoz; Esteban A. Nicolini
    Abstract: The economic performance of Argentina in the long run is quite usually divided in two periods: in the first one (1870-1914) we observe openness, low levels of public intervention and rapid growth in relative terms, while in the second (1914-1970) we observe relative economic slowdown together with inward looking policies and higher levels of public intervention. While there are many reconstructions of the evolution of main macroeconomic variables at a national aggregate level since the second half of the nineteenth century and many descriptions of the sectorial dimensions of this process, the available information about its provincial or regional dimensions is very scarce. In this paper we present an estimation of the GDPs of the twenty four provinces in Argentina in 1914 which is the first consistent and comparable estimation of this variable for any period before the 1950s. Our results confirm the standard view that most of the economic activity at the end of the period of the first globalization is located in the central area of the country and, in particular, in the province and city of Buenos Aires which seems to have been a quite important pole of economic activity; however, we also show that some peripheral areas in Patagonia, with very low population density, are quite affluent in per capita terms suggesting that resource abundance was an important factor to explain levels of income per capita. The comparison of the relative incomes per capita of the provinces in 1914 with the available data for 1953 suggest a remarkable stability and indicates that in this period there were no signs of reversal of income but rather persistence or even divergence.
    Keywords: regional development , inequality , Argentina , convergence , reversal
    JEL: E01 R11 R12
    Date: 2015–05
  3. By: Fabiana Gomez; David Pacini
    Abstract: We investigate the problem of counting biased forecasters among a group of unbiased and biased forecasters of macroeconomic variables. The innovation is to implement a procedure controlling for the expected proportion of unbiased forecasters that could be erroneously classified as biased (i.e., the false discovery rate). Monte Carlo exercises illustrate the relevance of controlling the false discovery rate in this context. Using data from the Survey of Professional Forecasters, we find that up to 7 out of 10 forecasters classified as biased by a procedure not controlling the false discovery rate may actually be unbiased.
    Keywords: Biased Forecasters, Multiple Testing, False Discovery Rate.
    JEL: C12 C23 E17
    Date: 2015–05–27
  4. By: Jérôme Creel (OFCE); Maurizio Iacopetta (OFCE)
    Abstract: We make the case for investigating the gap between the potential and the actual level of production, and review contributions that point to the reduced power of standard policy in- struments in presence of a prolonged gap. We also highlight di¢ culties in measuring where an economy stands relative to its potential. We review links between human capital accumulation and technology, and sketch a basic Schumpeterian model that puts at the center stage of the growth process investments in innovation and the foundation of new Örms, arguably two key sources of growth that could revitalize the faltering European Economies. The gap between the short and long run behavior is illustrated through quantitative experiments
    Date: 2015–05
  5. By: Jérôme Creel (OFCE); Paul Hubert (OFCE); Fabien Labondance (Atelier de recherche sur la politique économique et la gestion des entreprises (ARPEGE))
    Abstract: This paper aims to quantify the link between financialisation and financial instability, controlling for the financial and macroeconomic environment. Our main identification assumption is to represent these two concepts as a system of simultaneous joint data generating processes whose error terms are correlated. Based on panel data for EU countries from 1998, we test the null hypotheses that financialisation positively affects financial instability -a vulnerability effect- and that financial instability has a negative effect on financialisation -a trauma effect-, using Seemingly Unrelated Regressions and 3SLS. We find a positive causal effect of credit/GDP on non-performing loans - a vulnerability effect- in the EU as a whole, in the Eurozone, in the core of the EU but not at its periphery, and a negative effect of non-performing loans on credit/GDP - a trauma effect - in all samples. Even when relaxing our identification assumption, both opposite effects hold.
    Keywords: Financial depth; Financial instability; financial vulnerability; SUR Model
    JEL: E44 G10
    Date: 2015–05
  6. By: Luis Gonzalo Llosa; Venky Venkateswaran
    Abstract: We study the efficiency of equilibrium in a business cycle model where monopolistically competitive firms acquire costly information about aggregate fundamentals before making pricing and input decisions. We show that market power reduces the private value of information relative to its social value, causing too little investment in learning and inefficient cyclical fluctuations. Importantly, this is true even in an environment where the ex-post response to information is socially optimal. A leading example of this dichotomy between ex-post and ex-ante efficiency is an environment where firms choose labor input under uncertainty about aggregate productivity. When firms set nominal prices, on the other hand, their actions exhibit a inefficiently high sensitivity to private signals. The combination of this inefficiency in information use and market power makes the overall direction of the inefficiency in information acquisition ambiguous. Finally, we show that the standard full information policy response to market power-related distortions can reduce welfare under endogenous uncertainty. These results hold for different types of shocks (real and nominal) and for a general class of information acquisition technologies.
    Keywords: Incomplete information, Costly information, Externalities, Business cycles, Optimal policy
    JEL: D62 D82 E31 E32 E62
    Date: 2015–05
  7. By: Werner L. Hernani-Limarino (Fundación ARU); Gary Mena (Fundación ARU)
    Abstract: Este documento expone las diferencias entre los grupos de ingreso en las canastas de consumo e inflación y analiza el impacto distributivo de los episodios recientes de inflación en Bolivia. Primero se documenta la significativa heterogeneidad en las canastas de consumo según grupos de ingreso. Luego, se documenta el nivel, pegajosidad y volatilidad de cada canasta. Finalmente se analizan los efectos de la heterogeneidad de la inflación en los cambios observados en la distribución de ingresos.
    Keywords: precios, inflación, desigualdad
    JEL: E31 E64 I30
    Date: 2013–07
  8. By: Gary Mena (Fundación ARU)
    Abstract: El Índice de Precios al Consumidor (IPC) es uno de los indicadores más importantes para el análisis del desempeño de una economía. En 2007, el Instituto Nacional de Estadística de Bolivia (INE) modificó el año base para el cálculo del IPC, aspecto que desató críticas a la metodología de cálculo y manifestó posibles sesgos que introdujo en la medición del índice. El presente documento (re)construye los índices de precios general y para los subconjuntos de la población siguiendo los lineamientos del "`Manual de IPC"' de la OIT (2004) y la información pública disponible. Los resultados obtenidos muestran que: (i) el índice de precios \textbf{estimado} se aproxima razonablemente al IPC publicado por el ente oficial, (ii) las variaciones de precios afectan de manera desigual a los hogares con estructuras de consumo diferentes, (iii) los hogares de menores ingresos habrían sido los más afectados por una mayor pérdida de poder adquisitivo \emph{solamente} en 2008 y 2010.
    Keywords: Precios, inflación, diferenciada
    JEL: E31 E64
    Date: 2013–07
  9. By: Jaume Ventura; Hans-Joachim Voth
    Abstract: Why did the country that borrowed the most industrialize first? Earlier research has viewed the explosion of debt in 18th century Britain as either detrimental, or as neutral for economic growth. In this paper, we argue instead that Britain’s borrowing boom was beneficial. The massive issuance of liquidly traded bonds allowed the nobility to switch out of low-return investments such as agricultural improvements. This switch lowered factor demand by old sectors and increased profits in new, rising ones such as textiles and iron. Because external financing contributed little to the Industrial Revolution, this boost in profits in new industries accelerated structural change, making Britain more industrial more quickly. The absence of an effective transfer of financial resources from old to new sectors also helps to explain why the Industrial Revolution led to massive social change – because the rich nobility did not lend to or invest in the revolutionizing industries, it failed to capture the high returns to capital in these sectors, leading to relative economic decline.
    Keywords: crowding out, debt crises, Industrial Revolution, Ricardian equivalence, misallocation, financial repression, structural change, productivity.
    JEL: E22 E25 E62 H56 H60 N13 N23
    Date: 2015–05
  10. By: Simplice Asongu (Yaoundé/Cameroun); Oasis Kodila-Tedika (Kinshasa, Democratic Republic of Congo)
    Abstract: We assess the correlations between tribalism and financial development in 123 countries using data averages from 2000-2010. The tribalism index is used to measure tribalism whereas financial development is measured from perspectives of financial intermediary and stock market developments. The long-term variable is stock market capitalisation while short-run indicators include: private and domestic credits. We find that tribalism is negatively correlated with financial development and the magnitude of negativity is higher for financial intermediary development relative to stock market development. The findings are particularly relevant to African and Middle Eastern countries where the scourge is most pronounced.
    Keywords: Tribalism; Financial Development
    JEL: E62 H11 H20 G20 O43
    Date: 2015–05
  11. By: Mandiefe, Piabuo Serge
    Abstract: African countries are developing better economic and monetary reforms so as to gain the status of an emergent country over a certain period of time, Cameroon is not left behind, she wants to be emergent by 2035. This study seeks to verify the short-run and long-run impact of financial sector development on economic growth and also to verify the gap of financial development that separates Cameroon and an emergent country like South Africa. The vector error correction model was used, in Cameroon a long-run relationship between economic growth and financial development was noticed while for South Africa there is a short-run relationship between bank deposits and economic growth, there is also a long-run relationship between economic growth and financial development. The South African economy moves towards its long-run equilibrium faster after economic shocks thanks to its good financial developed economy. We also notice that there is a gap of 0.26, this means that for the economy of Cameroon to be emergent, the speed of long-run adjustment should increase by 0.26.
    Keywords: Economic growth, financial development, vector error correction model, Cameoon, South Africa
    JEL: E6 E63 G3
    Date: 2015–05–15
  12. By: Tapia, Jose
    Abstract: NIPA data of the US economy for the years 1929-2013 are used to test major views about the business cycle. Direct acyclic graphs (DAGs) are used for identification purposes, i.e., as tool to elucidate causal issues. Results show that (a) investment is not autonomous, as it is stimulated by profits and consumption, and damped by government spending; (b) profits are reduced by past investment; (c) government spending appears as an endogenous variable, as both business investment and profits have negative effects on it. Regularities identified in the data are sufficient to generate the cycle. Considering the results, the “regularity” of the business cycle, and the fact that profits stagnated in 2013 and declined in 2014 after growing between 2008 and 2012, it can be concluded with reasonable confidence that a recession will occur in the next few years.
    Keywords: business cycle; DAG; causality; macroeconomics;
    JEL: E30 E32 E37
    Date: 2015–05
  13. By: Ulf Axelson; Philip Bond
    Abstract: Many finance jobs entail the risk of large losses, and hard-to-monitor effort. We analyze the equilibrium consequences of these features in a model with optimal dynamic contracting. We show that finance jobs feature high compensation, up-or-out promotion and long work hours, and are more attractive than other jobs. Moral hazard problems are exacerbated in booms, even though pay increases. Employees whose talent would be more valuable elsewhere can be lured into finance jobs, while the most talented employees might be unable to land these jobs because they are “too hard to manage.”
    Keywords: investment banking; compensation contracts
    JEL: E24 G24 J31 J33 J41 M51 M52
    Date: 2015
  14. By: Olivier Allain (UPD5 Droit - Université Paris Descartes - Faculté de droit - UPD5 - Université Paris Descartes - Paris 5, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS)
    Abstract: Post-Keynesian economists have quite recently begun to draw attention to the consumer debt. However, as they omit the principal payment, they implicitly assimilate this debt as perpetual loans. The goal of this article is mainly methodological. We first develop a ‘Keynesian’ overlapping generations framework assuming that people borrow when they are young and service their debt (interests and principal) in the following periods. Defaults on the principal are also taken into account. We then analyze the theoretical properties of the equilibriums (multiplier effect, stability conditions) resulting from the introduction of this framework in three types of models that differ in regard of who are the debtors and who are the creditors: workers can borrow from capitalists (essay 1) or from their peer (essay 2); capitalists can borrow from their peer (essay 3).
    Date: 2014–12
  15. By: Slim, Sadri
    Abstract: The purpose of this paper is to present an extended version of the Mundell-Fleming model which allows a macroeconomic analysis of the effects stemming from illegal economy with money laundering on the short-term equilibrium for a small open economy. Without disregarding the FATF´s money laundering typology, we propose to differentiate the money laundering activities by the degree of crime organization, i.e. differentiating between individual, national as well as transnational crimes. According to the previous taxonomy, we postulate four channels of money laundering that enable the reintegration of illegal money, through consumption, investment, international trade and capital movements. In this context, it is shown that the multiplier effect triggered by illegal economic activities is always negative on formal GDP. However, the effect on the interest rate is subtler and depends on the structure of the given economy, which could lead to an appreciation or depreciation of the exchange rate related to the degree of capital mobility.
    Keywords: Illegal Economy, Money Laundering, Mundell-Fleming, Flexible Exchange Rate, Multiplier, Money Demand, Liquidity Preference
    JEL: E12 E26 E41 E43 F41 F43 K42 O17
    Date: 2015–05–29
  16. By: Pierre-Alain Pionnier; Emmanuelle Guidetti
    Abstract: This article gives methodological guidance on how best to compare the share of profits in value-added across countries using national accounts. Such comparisons are often based on accounts for institutional sectors such as non-financial corporations. It turns out that these are less internationally comparable than is usually assumed. The main issue is the allocation of certain types of self-employed workers to the corporations’ sector of some countries, most notably Germany and Italy. The consequence is that the measured gross operating surplus of corporations is overstated and has to be adjusted for international comparisons. If this is not feasible, it is preferable to rely on industry accounts, focus on a subset of industries and impute a labour compensation to self-employed workers for international comparisons. Profit shares in France, Germany, Italy and the United States are then much more similar than what the accounts for non-financial corporations suggest. The claim of a global increase in the profit share in the last decades is at best debatable for Germany and not backed with the evidence presented in this paper for France and Italy. It is only for the United States that we can confirm such an increase.<BR>Cet article décrit d’un point du vue méthodologique comment effectuer des comparaisons internationales du partage de la valeur ajoutée en utilisant au mieux les données de comptabilité nationale. Ces comparaisons reposent souvent sur les comptes de secteurs institutionnels, en particulier les comptes des sociétés non-financières. Or, ceux-ci sont moins comparables d’un pays à l’autre que ce que l’on pense habituellement. Le problème principal est lié à la présence de travailleurs non-salariés dans les comptes des sociétés de certains pays, notamment l’Allemagne et l’Italie. Cela conduit dans ce cas à une surestimation de l’excédent brut d’exploitation et rend nécessaire un ajustement du compte des sociétés pour les comparaisons internationales. Lorsque cet ajustement s’avère impossible à réaliser, nous recommandons d’utiliser les comptes de branches, de restreindre l’analyse à certaines branches et d’imputer une rémunération du travail aux non-salariés pour les comparaisons internationales. Les taux de marge en France, en Allemagne, en Italie et aux États-Unis sont alors plus proches que ce que suggèrent les comptes des sociétés non-financières. L’hypothèse d’une hausse tendancielle du taux de profit sur les dernières décennies est au mieux contestable pour l’Allemagne et invalidée par les données pour la France et l’Italie. C’est uniquement pour les États-Unis que nous sommes en mesure de la confirmer.
    Keywords: self-employment, national accounts, profit share, distributed income of corporations, quasi-corporations, comptes nationaux, taux de marge, revenus distribués des sociétés, non-salariés, quasi-sociétés
    JEL: E01 E25 J30
    Date: 2015–05–29
  17. By: Francesco Furlanetto; Nicolas Groshenny
    Abstract: We investigate the macroeconomic consequences of fluctuations in the effectiveness of the labor-market matching process with a focus on the Great Recession. We conduct our analysis in the context of an estimated medium-scale DSGE model with sticky prices and equilibrium search unemployment that features a shock to the matching efficiency (or mismatch shock). We find that this shock is not important for unemployment fluctuations in normal times. However, it plays a somewhat larger role during the Great Recession when it contributes to raise the actual unemployment rate by around 1.3 percentage points and the natural rate by around 2 percentage points. The mismatch shock is the dominant driver of the natural rate of unemployment and explains part of the recent shift of the Beveridge curve.
    Keywords: Search and matching frictions, Unemployment, Natural rates.
    JEL: E32 C51 C52
    Date: 2015–06
  18. By: Beraja, Martin (University of Chicago); Fuster, Andreas (Federal Reserve Bank of New York); Hurst, Erik (University of Chicago); Vavra, Joseph (University of Chicago)
    Abstract: We study the implications of regional heterogeneity within a currency union for monetary policy. We ask, first, does monetary policy mitigate or exacerbate ex-post regional dispersion over the business cycle? And second, does ex-ante regional heterogeneity increase or dampen the aggregate effects of a given monetary policy? To help answer these questions, we use detailed U.S. micro data to explore the extent to which mortgage activity differed across local areas in response to the first round of Quantitative Easing (QE1), announced in November 2008. We document that QE1 increased both mortgage activity and real spending but that its effects were smaller in parts of the country with the largest employment declines. This heterogeneous regional effect is driven by the fact that collateral values were most depressed in the regions with the largest employment declines, reducing the extent to which borrowers were able to benefit from rate decreases. We explore the implications of our empirical results for theoretical monetary policymaking using an incomplete-markets, heterogeneous-agent model of a monetary union whereby monetary policy influences local spending through collateralized lending. Preliminary results suggest that both the distributional and aggregate consequences of monetary policy depend on the joint distribution of local shocks. We find that if regions with low relative income also have depressed collateral values (as in 2008), then expansionary mon
    Keywords: monetary policy; regional inequality; quantitative easing; mortgage refinancing
    JEL: E21 E52 G21
    Date: 2015–06–01
  19. By: Saglio, Sophie; lopez-villavicencio, antonia
    Abstract: This paper tests the reduced form New Keynesian Wage Phillips Curve in several advanced countries for the 1985-2014 period. Based on this approach, we estimate wage rigidity at the aggregate level. We document that rigidity is heterogenous among our sample of countries: nominal wage rigidities are more important in the United States, while wage indexation is dominant in European Countries. We also present evidence that wage rigidity is not linked to the institutional environment at the macroeconomic level. Finally, we show that there is significant time variation in the estimated coefficients on the implied equation that is usually not taken into account in the theoretical literature.
    Keywords: wage rigidity, European Union, New keynesian Wage Phillips Curve
    JEL: C32 E24 J3 J30
    Date: 2015–06–01
  20. By: Ledenyov, Dimitri O.; Ledenyov, Viktor O.
    Abstract: The recent discovery of the Ledenyov digital waves in the economies of scale and scope led to an origination of considerable scientific interest in the modeling of new types of the discrete-time digital signals generators for the business cycles generation in the macroeconomics. Article aims: 1) to model the discrete-time digital signals generators for the business cycles generation in the macroeconomics, 2) to demonstrate the technical differences between the new model of the discrete-time digital signals generator and the existing models of the continuous-time (continuous wave) signals generators in the macroeconomics; 3) to accurately analyze the spectrum of discrete-time digital signals in the economies of scale and scope, 4) to improve the Ledenyov discrete time digital signals theory to precisely characterize the discrete time digital signals in the macroeconomics, 5) to better develop the complex software program to forecast the business cycles, going from the spectral analysis of the discrete time digital signals and the continuous time signals in the nonlinear dynamic economic system over the selected time period. The developed MicroSA software program intends: 1) to perform the spectrum analysis of the discrete-time digital signals and the continuous-time signals in the macroeconomics; 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 macroeconomics. The MicroSA can be used 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: discrete-time digital waves, discrete-time digital signals generators, spectrum analysis of discrete-time digital signals, amplitude of discrete-time digital signal, frequency of discrete-time digital signal, wavelength of discrete-time digital signal, period of discrete-time digital signal, phase of discrete-time digital signal, mixing of discrete-time digital signals, harmonics of discrete-time digital signal, nonlinearities of discrete-time digital signal, 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: E0 E00 E10 E17 E20 E22 E27 E30 E32 E37 E40 E44 E47 E50 E58 F0 F40 F41 F44 F47 O31 O33
    Date: 2015–06–02
  21. By: David de Matías Batalla (Economics and Business Administration Dept. - University of Alcala - Madrid, Spain)
    Abstract: In this paper I present the impact of new players and determinant in international business activities, which have a direct influence on international economic structure. One of the most important determinants in last decades has been international mergers and acquisitions, an important foreign direct investment that many multinational firms have used as mode of entry to international markets. This, together with the rest of foreign direct investment, make me think to extend OLI model to OLIM. On the other hand, this new modes of entry, the disintegration of the value chain, the resources and capabilities approach and the role of national institutions imply a strong economic integration, having as consequence the extension of the international production framework that Dunning provides as a framework to study the economic structure. In order to provide empirical evidence, the paper shows an analysis and results of international mergers and acquisitions realized by Spanish multinational firms, adding as complementary evidence a business case focus on Ebro Foods
    Keywords: mergers and acquisitions, foreign direct investment, eclectic paradigm, international economic structure
    JEL: E02 E60 G15 M16 M21
    Date: 2015–07
  22. By: Diego Torres Torres
    Abstract: En este documento de trabajo aplicamos el MIDAS a un amplio y diverso conjunto de datos e incorporamos los promedios bayesianos para la seleccion de variables. El resultado es que los modelos MIDAS son utiles para estimar el PIB en tiempo real. Ademas, existen ganancias en la capacidad predictiva al combinar varios modelos frente a la opcion de elegir solo uno de ellos.
    Keywords: Análisis Macroeconómico, Documento de Trabajo, Europa, Investigación, Portugal
    JEL: C51 C53 E37
    Date: 2015–05
  23. By: Brzoza-Brzezina, Michał; Kolasa, Marcin; Makarski, Krzysztof
    Abstract: In a number of countries a substantial proportion of mortgage loans is denominated in foreign currency. In this paper we demonstrate how their presence affects economic policy and agents' welfare. To this end we construct a small open economy model with housing loans denominated in domestic or foreign currency. The model is calibrated for Poland - a typical small open economy with a large share of foreign currency loans (FCL). We show that FCLs negatively affect the transmission of monetary policy. In contrast, their impact on the effectiveness of macroprudential policy is much weaker but positive. We also demonstrate that FCLs increase welfare when domestic interest rate shocks prevail and decrease it when risk premium (exchange rate) shocks dominate. Under a realistic calibration of the stochastic environment FCLs are welfare reducing. Finally, we show that regulatory policies that correct the share of FCLs may cause a short term slowdown. JEL Classification: E32, E44, E58
    Keywords: DSGE models with banking sector, foreign currency loans, monetary and macroprudential policy
    Date: 2015–04
  24. By: Sarlin, Peter
    Abstract: This paper discusses the role of risk communication in macroprudential oversight and of visualization in risk communication. Beyond the soar in data availability and precision, the transition from firm-centric to system-wide supervision imposes vast data needs. Moreover, in addition to internal communication as in any organization, broad and effective external communication of timely information related to systemic risks is a key mandate of macroprudential supervisors. This further stresses the importance of simple representations of complex data. The present paper focuses on the background and theory of information visualization and visual analytics, as well as techniques within these fields, as potential means for risk communication. We define the task of visualization in risk communication, discuss the structure of macroprudential data, and review visualization techniques applied to systemic risk. We conclude that two essential, yet rare, features for supporting the analysis of big data and communication of risks are analytical visualizations and interactive interfaces. For visualizing the so-called macroprudential data cube, we provide the VisRisk platform with three modules: plots, maps and networks. While VisRisk is herein illustrated with five web-based interactive visualizations of systemic risk indicators and models, the platform enables and is open to the visualization of any data from the macroprudential data cube. JEL Classification: G01, G15, F37, F38, F47
    Keywords: analytical visualization, interactive visualization, macroprudential oversight, risk communication, VisRisk, visualization
    Date: 2015–03
  25. By: Tatiana A. Mora-Arbeláez; Andres J. Garcia-Bernal; Jose E. Gomez-Gonzalez; Mauricio Villamizar-Villegas
    Abstract: La crisis financiera colombiana de finales de la década de 1990 causó graves traumatismos a la economía del país, pero también dejó importantes lecciones para el manejo de la política macroeconómica y la regulación financiera. Sin embargo, hoy en día no hay consenso sobre el impacto que tuvieron las medidas macro- prudenciales sobre las principales variables económicas. Esto se debe, en parte, por la ausencia de un recuento detallado de las acciones de política adoptadas por los diversos entes gubernamentales y del contexto en que estas se desarrollaron. Este artículo pretende contribuir a la literatura proporcionando un listado exhaustivo de los cambios regulatorios en el sistema financiero durante los últimos 25 años. Específicamente, nos centramos en tres grandes tópicos financieros: i) encajes bancarios, ii) derivados financieros y posición propia, y iii) riesgos de crédito, de mercado y de liquidez. Por consiguiente, el aporte principal de este trabajo es de servir como insumo de futuras evaluaciones de impacto que se realicen sobre las medidas macro-prudenciales en Colombia.
    Keywords: Historia financiera, medidas macro-prudenciales, regulación financiera, derivados cambiarios, encajes bancarios, riesgo de crédito.
    JEL: E50 F36 G10 G18
    Date: 2015–05–29
  26. By: Alex Bryson; John Forth
    Abstract: The 2008 Great Recession was notable in the UK for three things: the enormity of the output shock; the muted unemployment response; and the very slow rate of recovery. We review the literature which finds most of the decline in productivity is within sector and within firm before presenting new micro-analysis of workplace-level behaviour between 2004 and 2011 to gain insights into the processes that may have contributed to this aggregate picture. We find clear evidence of labour intensification but employers appeared incapable of turning this effort into improved workplace level productivity. Widespread pay freezes and cuts were often initiated in direct response to the recession. Workplace closure rates were little different to those experienced prior to the recession, but there is some evidence of a "cleansing" effect with poorer performing workplaces being more likely to close. There is some evidence of labour "hoarding", especially hoarding of high skilled labour: this h as had no discernible impact on the rate of innovation. There is no impact of recession on either the number of HRM practices workplaces invested in, nor their returns on those investments. There is no evidence that workplaces have benefitted from Britain's "flexible" labour market as indicated by using recruitment channels used by welfare recipients or the use of numerically flexible workers. On the contrary, workplaces with increasing unionisation appeared to benefit in terms of improved workplace performance
    Keywords: Productivity, recession
    JEL: D22 E22 E23 E24 J23 J24 J3
    Date: 2015–05
  27. By: Jakab, Zoltan (International Monetary Fund); Kumhof, Michael (Bank of England)
    Abstract: In the intermediation of loanable funds model of banking, banks accept deposits of pre-existing real resources from savers and then lend them to borrowers. In the real world, banks provide financing through money creation. That is they create deposits of new money through lending, and in doing so are mainly constrained by profitability and solvency considerations. This paper contrasts simple intermediation and financing models of banking. Compared to otherwise identical intermediation models, and following identical shocks, financing models predict changes in bank lending that are far larger, happen much faster, and have much greater effects on the real economy.
    Keywords: Banks; financial intermediation; loanable funds; money creation; loans; deposits; leverage; spreads
    JEL: E44 E52 G21
    Date: 2015–05–29
  28. By: Garratt, Rod (Federal Reserve Bank of New York); Martin, Antoine (Federal Reserve Bank of New York); McAndrews, James J. (Federal Reserve Bank of New York); Nosal, Ed (Federal Reserve Bank of Chicago)
    Abstract: This paper describes segregated balance accounts (SBAs), a concept for a new type of account that could provide increased competition for deposits, reduce system-wide balance sheet costs, and improve the transmission of monetary policy by facilitating greater pass-through of interest on excess reserves (IOER). SBAs are designed to remove credit risk by creating narrow accounts that could allow any bank to compete for money market funds. Because of increased competition, the rates paid on borrowings secured by SBAs, along with other money market rates, would likely be pushed up closer to the IOER rate and would be more tightly linked to that rate. SBAs could promote a more efficient allocation of reserves within the banking sector by shifting reserves from banks with high balance sheet costs to banks with low balance sheet costs. SBAs would not require setting an additional administered rate; IOER would be paid on the balances held in an SBA and the rate paid on the loan secured by the balances in the SBA would be competitively determined. We discuss a number of potential risks that SBAs could pose as well as further steps that would be required before SBAs could be implemented.
    Keywords: central bank; interest rate
    JEL: E40 E42 E50 E58
    Date: 2015–05–01
  29. By: Azariadis, Costas (Federal Reserve Bank of St. Louis); Bullard, James B. (Federal Reserve Bank of St. Louis); Singh, Aarti (University of Sydney); Suda, Jacek (Narodowy Bank Polski)
    Abstract: We study optimal monetary policy at the zero lower bound. The macroeconomy we study has considerable income inequality which gives rise to a large private sector credit market. Households participating in this market use non-state contingent nominal contracts (NSCNC). A second, small group of households only uses cash and cannot participate in the credit market. The monetary authority supplies currency to cash-using households in a way that changes the price level to provide for optimal risk-sharing in the private credit market and thus to overcome the NSCNC friction. For sufficiently large and persistent negative shocks the zero lower bound on nominal interest rates may threaten to bind. The monetary authority may credibly promise to increase the price level in this situation to maintain a smoothly functioning (complete) credit market. The optimal monetary policy in this model can be broadly viewed as a version of nominal GDP targeting.
    Keywords: Zero lower bound; forward guidance; quantitative easing; optimal monetary policy; life cycle economies; heterogeneous households; credit market participation; nominal GDP targeting.
    JEL: E4 E5
    Date: 2015–05–27
  30. By: Kui-Wai, Li; Bharat R., Hazari
    Abstract: The object of this paper is to demonstrate the possible risks of quantitative easing in the long run. The analysis is conducted in the conventional framework of IS-LM curves in a sequential model, which assumes that the independence of supply and demand curves does not necessarily hold. It is established that this lack of independence coupled with a very flat (or kinked) IS curve may lead to falls in income in second period as a consequence of quantitative easing. Such easing may alter the behavior of investors who get encouraged to undertake very risky and leveraged investments. Thus, short term gains may be outweighed by long term losses from quantitative easing. In some cases such easing may create bubbles in the economy, for example, in the housing and stock markets which collapse at some point in time.
    Keywords: Interest rate, quantitative easing, IS-LM framework, non-independence of supply and demand curves
    JEL: E4 E43 E5 E52
    Date: 2015–05–01
  31. By: Kui-Wai, Li
    Abstract: This paper attempts to make a case of “sub-market interest rate” using the IS-LM framework. The argument is that when the market interest rate falls below a certain level, the low cost of borrowing would invite speculative varieties or unproductive investment, which could eventually crowd out productive investment. As such, both monetary policy and fiscal policy may not be effective under certain circumstances.
    Keywords: Interest rate, IS-LM, monetary policy
    JEL: E4 E40 E43 E5 E52
    Date: 2014–05–01
  32. By: Casper de Vries (Erasmus School of Economics, Erasmus University Rotterdam, the Netherlands); Xuedong Wang (Erasmus School of Economics, Erasmus University Rotterdam, the Netherlands)
    Abstract: The term structure of interest rates does not adhere to the expectations hypothesis, possibly due to a risk premium. We consider the implications of a risk premium that arises from endogenous market segmentation driven by variable inflation rates. In the absence of autocorrelation in inflation, the risk premium is constant. If inflation is correlated, however, the risk premium becomes time varying and we can rationalize the failure of the expectations hypothesis. Indirect empirical tests of the model’s implications are provided.
    Keywords: Expectations hypothesis; Term structure; Time-Varying Risk Premia; Segmented markets; Inflation
    JEL: E43 G12
    Date: 2015–05–29
  33. By: Noura Abu Asab (Department of Economics, University of Sheffield); Juan Carlos Cuestas (Department of Economics, University of Sheffield)
    Abstract: This paper is carried out to investigate adopting inflation targeting in Jordan. The interest rate pass-through channel is assessed to underline the possibility and challenges to target inflation when a country imports the credibility of low inflation from abroad. The interest rate pass through is examined within its intermediate lag of action to shed light on the effectiveness of monetary policy. The Johansen approach is performed to estimate the long-run degree of pass-through along with the speed of adjustment to disequilibrium. The dynamic model of Hendry and Doornik (1994) is employed to connect the short-run and long-run, and to estimate the mean lag of adjustment under (a)symmetric market response. The empirical findings suggest that the interest rate pass-through in Jordan is weak and slow and the symmetric mean lags in the loan and deposit market are highly sticky. In addition, an asymmetric adjustment is found in the loan market, where banks are faster to decrease their interest rates following a change in official interest rates, the behaviour which can be explained by the collusive pricing hypothesis. Comparing the results to the two inflation targeters: New Zealand and the UK, the study suggests that Jordan has to move to a more resilient exchange rate arrangement before committing to the lite-form of inflation targeting.
    Keywords: Passthrough, monetary policy, nonlinearties, Jordan
    JEL: C32 E40
    Date: 2015–05
  34. By: Juan Carlos Cuestas (Department of Economics, University of Sheffield); Karsten Staehr (Tallinn University of Technology, Estonia)
    Abstract: This paper analyses the relationship between domestic credit and foreign capital flows in the GIIPS countries during the Great Moderation before the global financial crisis. Cointegration analyses on the pre-crisis sample reveal that domestic credit and net foreign liabilities are cointegrated for Greece, Italy, Portugal and Spain, but not for Ireland. For the first four countries the long-run coefficient is in all cases around one, suggesting a close relationship between domestic leveraging and foreign capital inflows. Estimation of VECMs shows that the adjustment to deviations from the long-run relationship takes place through changes in domestic credit for Greece and Italy, while the adjustment is bidirectional for Spain and possibly also Portugal. These results suggest that “push” factors related to foreign capital inflows were important in the pre-crisis leveraging. The deleveraging after the crisis was largely unrelated to developments in foreign capital flows.
    Keywords: leveraging, capital flows, financial crisis, cointegration
    JEL: F32 E51 E44 C32
    Date: 2015–05
  35. By: Luca Zamparelli (Sapienza, University of Rome)
    Abstract: This paper examines the evolution of wealth distribution between workers and capitalists. It shows that under competitive conditions, and when factors elasticity of substitution is high enough to ensure endogenous growth, capitalists' share of total wealth asymptotically tends to one if they have a higher propensity to save than workers. It is also shown that a tax on capital income shifts wealth distribution in workers' favor and makes any level of wealth concentration feasible.
    Keywords: Wealth distribution, elasticity of substitution, Pasinetti two-class equilibrium, Piketty
    JEL: E12 E13 E25
    Date: 2015–01
  36. By: Riccardo M. Masolo (Bank of England; Centre for Macroeconomics (CFM)); Alessia Paccagnini (Dipartimento di Economia, Metodi Quantitativi e Strategie d'Impresa (DEMS) Facoltà di Economia Università degli Studi di Milano-Bicocca)
    Abstract: We propose a new VAR identification strategy to study the impact of noise shocks on aggregate activity. We do so exploiting the informational advantage the econometrician has, relative to the economic agent. The latter, who is uncertain about the underlying state of the economy, responds to the noisy early data releases. The former, with the benefit of hindsight, has access to data revisions as well, which can be used to identify noise shocks. By using a VAR we can avoid making very specific assumptions on the process driving data revisions. We rather remain agnostic about it but make our identification strategy robust to whether data revisions are driven by noise or news. Our analysis shows that a surprising report of output growth numbers delivers a persistent and hump-shaped response of real output and unemployment. The responses are qualitatively similar but an order of magnitude smaller than those to a demand shock. Finally, our counterfactual analysis supports the view that it would not be possible to identify noise shocks unless different vintages of data are used.
    Keywords: Noise Shocks, Data Revisions, VAR, Impulse-Response Functions
    JEL: E3 C1 D8
    Date: 2015–05
  37. By: Prayudhi Azwar; Rod Tyers
    Abstract: Indonesia’s open, developing economy fielded shocks due to the Asian financial crisis (AFC) and the global financial crisis (GFC) quite differently. Although the origins of both crises were external, during the AFC the coincidence of financial contagion with domestic political upheaval saw the Indonesian economy collapse. By contrast, during the decade-later GFC, when most nations slumped into recession the Indonesian economy slowed but did not recess, achieving real growth of 6.1% (2008) and 4.5% (2009) and recording one of the world’s best performances for the period. This paper reviews these events and employs numerical modelling of stylized AFC and GFC shocks to show that some of the contrast stems from differences in the states of the global economy during the crises and the compositions of the external shocks in each case. This said, both shocks have capital flight elements and it is shown that the key policy responses include floating the exchange rate and fiscal expansions that are, where necessary, money financed. There is, nonetheless, evidence of evolution in Indonesian macroeconomic policy making between the crises that allowed its strong performance to be sustained.
    Keywords: Indonesia, External shocks, Financial crises, Exchange rates Macroeconomic policy
    JEL: E32 E44 E43 E58 F43 F47 N25
    Date: 2015–05
  38. By: Johannes Ludwig
    Abstract: Contrary to the implications of economic theory, consumption inequality in the US did not react to the increases in income inequality during the last three decades. This paper investigates if a change in the type of income inequality - from permanent to transitory - or a change in the ability to insure income shocks is responsible for this. A measure of household consumption is imputed into the Panel Study of Income Dynamics to create panel data on income and consumption for the period 1980-2010. The minimum distance investigation of covariance relationships shows that both explanations work together: the share of transitory shocks increases over time, but the capability to insure permanent and transitory shocks to income also improves. Together, these phenomena can explain the lack of an increase in consumption inequality.
    Keywords: Consumption inequality; income inequality; consumption insurance
    JEL: D12 D31 E21
    Date: 2015–04
  39. By: Philipp Breidenbach
    Abstract: This paper analyzes whether the expansion of regional airports in Germany caused positive spillover effects on the surrounding economies, exploiting the deregulation of the European aviation market as a quasi-experiment. Such potential spillovers are often used as an argument for the substantial annual subsidies to airports. Previous evaluations often suffer from the problem of reverse causality, since investment decisions are based on the economic conditions of the region. By contrast, the aviation deregulation under the Single European Market-initiative provides an exogenous incentive for investing in the expansion of existing regional airports. A difference-in-differences approach is used to estimate the causal effects of this expansion on regional growth. The results are sobering, though, as there is no evidence for any positive spillover effects.
    Keywords: Banking union; currency union; default; shock absorber; two-tier reinsurance system
    JEL: E42 E50 F3 G21
    Date: 2015–04
  40. By: Dongkoo Kim; Tae-hwan Rhee; Keunkwan Ryu; Changmock Shin
    Abstract: Economic forecasts are quite essential in our daily lives, which is why many research institutions periodically make and publish forecasts of main economic indicators. We ask (1) whether we can consistently have a better prediction when we combine multiple forecasts of the same variable and (2) if we can, what will be the optimal method of combination. We linearly combine multiple linear combinations of existing forecasts to form a new forecast (“combination of combinations”), and the weights are given by Bayesian model averaging. In the case of forecasts on Germany’s real GDP growth rate, this new forecast dominates any single forecast in terms of root-mean-square prediction errors.
    Keywords: Combination of forecasts; Bayesian model averaging
    JEL: E32 E37
    Date: 2015–03
  41. By: Alexander William Salter (Berry College, Department of Economics); Andrew T. Young (West Virginia University, College of Business and Economics)
    Abstract: Building on Selgin (1994), we develop a simple model of free banking and study the system’s effects on familiar macroeconomic variables. We show a free banking system does in fact stabilize nominal income in response to aggregate demand shocks. However, in the event of an aggregate supply shock, a free banking system instead stabilizes inflation, engaging in mildly procyclical behavior. We conclude by calling for a broader study of nominal income targeting and free banking in the tradition of ‘monetary constitutionalism’ (Yeager 1962; White et al. 2014) to ascertain whether this result, while almost certainly not the best of all ossible worlds, is in fact the best of all probable worlds.
    Keywords: Central banking, free banking, inflation, monetary constitution, nominal income targeting
    JEL: E02 E32 E42 E52 P16
    Date: 2015–05
  42. By: Jaume Ventura; Hans-Joachim Voth
    Abstract: Why did the country that borrowed the most industrialize first? Earlier research has viewed the explosion of debt in 18th century Britain as either detrimental, or as neutral for economic growth. In this paper, we argue instead that Britain’s borrowing boom was beneficial. The massive issuance of liquidly traded bonds allowed the nobility to switch out of low-return investments such as agricultural improvements. This switch lowered factor demand by old sectors and increased profits in new, rising ones such as textiles and iron. Because external financing contributed little to the Industrial Revolution, this boost in profits in new industries accelerated structural change, making Britain more industrial more quickly. The absence of an effective transfer of financial resources from old to new sectors also helps to explain why the Industrial Revolution led to massive social change – because the rich nobility did not lend to or invest in the revolutionizing industries, it failed to capture the high returns to capital in these sectors, leading to relative economic decline.
    Keywords: Crowding out, debt crises, Industrial Revolution, Ricardian equivalence, misallocation, financial repression, structural change, productivity
    JEL: E22 E25 E62 H56 H60 N13 N23
    Date: 2015–05
  43. By: Chia-Lin Chang (Department of Applied Economics, Department of Finance, National Chung Hsing University, Taiwan); Michael McAleer (Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam and Tinbergen Institute, The Netherlands, Department of Quantitative Economics, Complutense University of Madrid, and Institute of Economic Research, Kyoto University.); Ju-Ting Tang (Department of Applied Economics National Chung Hsing University, Taiwan.)
    Abstract: With the advent of globalization, economic and financial interactions among countries have become widespread. Given technological advancements, the factors of production can no longer be considered to be just labor and capital. In the pursuit of economic growth, every country has sensibly invested in international cooperation, learning, innovation, technology diffusion and knowledge. In this paper, we use a panel data set of 40 countries from 1981 to 2008 and a negative binomial model, using a novel set of cross-border patents and joint patents as proxy variables for technology diffusion, in order to investigate such diffusion. The empirical results suggest that, if it is desired to shift from foreign to domestic technology, it is necessary to increase expenditure on R&D for business enterprises and higher education, exports and technology. If the focus is on increasing bilateral technology diffusion, it is necessary to increase expenditure on R&D for higher education and technology.
    Keywords: International Technology Diffusion, Exports, Imports, Joint Patent, Cross-border Patent, R&D, Negative Binomial Panel Data.
    JEL: F14 F21 O30 O57 E30 E31 E52 C22 F15
    Date: 2013
  44. By: Assaf Almog; Rhys Bird; Diego Garlaschelli
    Abstract: The bilateral trade relations between world countries form a complex network, the International Trade Network (ITN), which is involved in an increasing number of worldwide economic processes, including globalization, integration, industrial production, and the propagation of shocks and instabilities. Characterizing the ITN via a simple yet accurate model is an open problem. The classical Gravity Model of trade successfully reproduces the volume of trade between two connected countries using known macroeconomic properties such as GDP and geographic distance. However, it generates a network with an unrealistically homogeneous topology, thus failing to reproduce the highly heterogeneous structure of the real ITN. On the other hand, network models successfully reproduce the complex topology of the ITN, but provide no information about trade volumes. Therefore macroeconomic and network models of trade suffer from complementary limitations but are still largely incompatible. Here, we make an important step forward in reconciling the two approaches, via the introduction of what we denote as the Enhanced Gravity Model (EGM) of trade. The EGM combines the maximum-entropy nature of network models with the established econometric structure of the Gravity Model. Using a single, unified and principled mechanism that is transparent enough to be generalized to other economic networks, the EGM allows trade probabilities and trade volumes to be separately controlled via any combination of dyadic and country-specific macroeconomic variables. We show that the EGM successfully reproduces both the topology and the weights of the ITN, finally reconciling the conflicting approaches. Moreover, it provides a general and simple theoretical explanation for the failure of economic models that do not explicitly focus on network topology: namely, their lack of topological invariance under a change of units.
    Date: 2015–06
  45. By: Ströbel, Johannes; Vavra, Joseph
    Abstract: We use detailed micro data to document a causal response of local retail price to changes in house prices, with elasticities of 15%-20% across housing booms and busts. Notably, these price responses are largest in zip codes with many homeowners, and non-existent in zip codes with mostly renters. We provide evidence that these retail price responses are driven by changes in markups rather than by changes in local costs. We then argue that markups rise with house prices, particularly in high homeownership locations, because greater housing wealth reduces homeowners’ demand elasticity, and firms raise markups in response. Consistent with this explanation, shopping data confirms that house price changes have opposite effects on the price sensitivity of homeowners and renters. Our evidence has implications for monetary, labor, and urban economics, and suggests a new source of markup variation in business cycle models.
    Keywords: business cycle; demand elasticity; household shopping; housing wealth; markup; retail prices
    JEL: E12 E21 E31 E32 E52 R22
    Date: 2015–05
  46. By: Faria-e-Castro, Miguel; Martinez, Joseba; Philippon, Thomas
    Abstract: We characterize the optimal use of information disclosure and fiscal backstops during financial crises. In our model, financial crises force governments to choose between runs and lemons. Revealing information about banks’ assets reduces adverse selection in credit markets, but it can also create inefficient runs on weak banks. A fiscal backstop mitigates this risk and allows the government to pursue a high disclosure strategy. A government with a strong fiscal position is more likely to run informative stress tests than a government with a weak fiscal position. As a result, such a government is also less likely to rely on outright bailouts.
    Keywords: bailouts; credit guarantees; deposit insurance; fiscal backstop; stress tests
    JEL: E5 E6 G1 G2
    Date: 2015–05
  47. By: Bacchetta, Philippe; Perazzi, Elena; van Wincoop, Eric
    Abstract: This paper examines quantitatively the potential for monetary policy to avoid self-fulfilling sovereign debt crises. We combine a version of the slow-moving debt crisis model proposed by Lorenzoni and Werning (2014) with a standard New Keynesian model. We consider both conventional and unconventional monetary policy. Under conventional policy the central bank can preclude a debt crisis through inflation, lowering the real interest rate and raising output. These reduce the real value of the outstanding debt and the cost of new borrowing, and increase tax revenues and seigniorage. Unconventional policies take the form of liquidity support or debt buyback policies that raise the monetary base beyond the satiation level. We find that generally the central bank cannot credibly avoid a self-fulfilling debt crisis. Conventional policies needed to avert a crisis require excessive inflation for a sustained period of time. Unconventional monetary policy can only be effective when the economy is at a structural ZLB for a sustained length of time.
    Keywords: long-term debt; Monetary policy; Sovereign debt crises
    JEL: E52 E60 F34
    Date: 2015–05
  48. By: Marcellino, Massimiliano; Sivec, Vasja
    Abstract: Large scale factor models have been often adopted both for forecasting and to identify structural shocks and their transmission mechanism. Mixed frequency factor models have been also used in a reduced form context, but not for structural applications, and in this paper we close this gap. First, we adapt a simple technique developed in a small scale mixed frequency VAR and factor context to the large scale case, and compare the resulting model with existing alternatives. Second, using Monte Carlo experiments, we show that the finite sample properties of the mixed frequency factor model estimation procedure are quite good. Finally, to illustrate the method we present three empirical examples dealing with the effects of, respectively, monetary, oil, and fiscal shocks.
    Keywords: estimation; identification; impulse response function; mixed frequency data; Structural FAVAR; temporal aggregation
    JEL: C32 C43 E32
    Date: 2015–05
  49. By: Forni, Mario; Hallin, Marc; Lippi, Marco; Zaffaroni, Paolo
    Abstract: Factor models, all particular cases of the Generalized Dynamic Factor Model (GDFM) introduced in Forni, Hallin, Lippi and Reichlin (2000), have become extremely popular in the theory and practice of large panels of time series data. The asymptotic properties (consistency and rates) of the corresponding estimators have been studied in Forni, Hallin, Lippi and Reichlin (2004). Those estimators, however, rely on Brillinger's dynamic principal components, and thus involve two-sided filters, which leads to rather poor forecasting performances. No such problem arises with estimators based on standard (static) principal components, which have been dominant in this literature. On the other hand, the consistency of those static estimators requires the assumption that the space spanned by the factors has finite dimension, which severely restricts the generality afforded by the GDFM. This paper derives the asymptotic properties of a semiparametric estimator of the loadings and common shocks based on one-sided filters recently proposed by Forni, Hallin, Lippi and Zaffaroni (2015). Consistency and exact rates of convergence are obtained for this estimator, under a general class of GDFMs that does not require a finite-dimensional factor space. A Monte Carlo experiment corroborates those theoretical results and demonstrates the excellent performance of those estimators in out-of-sample forecasting.
    Keywords: Consistency and rates.; Generalized dynamic factor models.; High -dimensional time series.; One-sided representations of dynamic factor models.; Vector processes with singular spectral density
    JEL: C0 C01 E0
    Date: 2015–05
  50. By: Ferguson, Niall; Schaab, Andreas; Schularick, Moritz
    Abstract: In this paper we study the evolution of central banks’ balance sheets in 12 advanced economies since 1900. We present a new dataset assembled from a wide array of historical sources. We find that balance sheet size in most developed countries has fluctuated within rather clearly defined bands relative to output. Historically, clusters of big expansions and contractions of balance sheets have been associated with periods of geopolitical or financial crisis. This explains the co-movement between the size of central bank balance sheets and public debt levels in the past century. Relative to the size of the financial sector, moreover, central bank balance sheets had shrunk dramatically in the three decades preceding the global financial crisis. By that yardstick, their recent expansion partly marks a return to earlier levels. Some of the recent increase could therefore prove to be permanent if the financial sector maintains permanently higher liquidity ratios.
    Keywords: balance sheets; central banks; financial sector; monetary policy; public debt
    JEL: E31 E52 E58 N10
    Date: 2015–05
  51. By: Fuchs-Schündeln, Nicola; Hassan, Tarek
    Abstract: A growing literature relies on natural experiments to establish causal effects in macroeconomics. In diverse applications, natural experiments have been used to verify underlying assumptions of conventional models, quantify specific model parameters, and identify mechanisms that have major effects on macroeconomic quantities but are absent from conventional models. We discuss and compare the use of natural experiments across these different applications and summarize what they have taught us about such diverse subjects as the validity of the Permanent Income Hypothesis, the size of the fiscal multiplier, and about the effects of institutions, social structure, and culture on economic growth. We also outline challenges for future work in each of these fields, give guidance for identifying useful natural experiments, and discuss the strengths and weaknesses of the approach.
    Keywords: Civic Capital; Fiscal Multiplier; Institutions; Multiple Equilibria; Networks; Permanent Income Hypothesis; Social Structure; Social Ties; Trust
    JEL: C1 C9 E21 E62 H31 O11 O14 O43 O50
    Date: 2015–05
  52. By: Fuchs-Schündeln, Nicola; Haliassos, Michael
    Abstract: Household access to financial products is often conditioned on previous use. However, banning access when learning is possible may be discriminatory or counter-productive. The ‘experiment’ of German reunification (exogenously) offered to East Germans unconditional access to (exogenously) unfamiliar capitalist products. Controlling for characteristics, East Germans participated immediately, were as likely to use unfamiliar risky securities as West Germans, and more likely to use consumer debt, without signs of regret. Our results suggest that mistakes of unfamiliar households can be prevented by a knowledgeable and well-incentivized financial sector and by interaction with familiar peers. This implies that regulation should refocus on the financial sector rather than on prohibiting individuals to gain familiarity with financial products.
    Keywords: consumer credit; familiarity; financial literacy; household debt; household finance; investor protection; regulation; stockholding
    JEL: E21 G11
    Date: 2015–05
  53. By: Zoran Stefanovic, Branislav Mitrovic (University of Niš, Faculty of Economics)
    Abstract: In the last four decades there is a renewed interest within the economic theory for the institutional structures. Numerous, multiple and often unpredictable effects of institutions on economic process are differently reflected among the leading schools of economic analysis. Certainly, in this sense, the greatest attention should be given to the stream of economic thought known as institutional economics. This heterogeneous research orientation today is already clearly differentiated on Veblenian and the new institutional economics. The paper will make, in the light of its recorded achievements and the subjects of interest of its main protagonists, a general insight into the new institutional economics.
    Keywords: neoclassical economics, institutions, new institutional economics, property rights, transaction costs,
    JEL: B31 B41 B52 D21 D86 E02 N01
    Date: 2015–01
  54. By: Igor Mladenovic, Jelena Mladenovic (University of Niš, Faculty of Economics)
    Abstract: The processing sector in Serbia has not managed to consolidate even after more than a quarter century since the breakup of the former Yugoslavia. Food production in Serbia shares the fate of the entire production sector, as its integral part. Despite this fact, food production is more and more seen as the opportunity for increasing employment and the level of economic activity in Serbia. Especially after the introduction of EU sanctions by Russia, advocates of export of food products as the development opportunities for Serbia are growing louder. This made us pose the research question relating to whether economic growth in the area of food production has effects on employment level in Serbia? In searching for the answer to this question, we constructed a sample of the 20 largest food producers in Serbia and investigated the correlation between the level of economic activity in these companies and the number of their employees. We did the same for the 20 largest manufacturers in Slovenia and Croatia, and tested the hypothesis about the food production as the development opportunity.
    Keywords: the food production sector, employment, economic activity and the regression model
    JEL: J23 E24
    Date: 2015–01
  55. By: Dragana Petkovic, Jadranka Djurovic-Todorovic, Ljiljana Prole (University of Niš, Faculty of Economics)
    Abstract: This paper analyses the fluctuation of interest on the public debt, as one of the oldest kinds of transfers which is closely related to the indebtedness of the state. The analysis of the expenditure dynamics for interest on public debt covers the period between 2003 and 2013. The goal of this research is to point out the efficiency of the activity of the economic policy within the analyzed period based on the relative changes in the transfer volume and the structure of the interest repayment, as well as to make certain projections for the future. Based on the analysis conducted, it was concluded that the fall of economic activity in 2009 had a significant effect on debt, which caused a drastic increase of the interest repayment transfers in the following years.
    Keywords: public debt interest, indices, growth rates
    JEL: E63
    Date: 2015–01
  56. By: Rajko Bukviæ, Radica Pavlovic (Geographical Institute “Jovan Cvijiæ”, Belgrade; Megatrend University Belgrade, Faculty of Business Studies, Pozarevac)
    Abstract: Paper considers the characteristics of contemporary dominant neoclascical economic theory and theie relation to economic development. It was showed that it, with presumptions of the same value and significance of all economic activities, and borderless power of selfregulated market, not have possibilities and force to explain factors of economic development, genesis and widening of poverty, as in one separate country as in international relations. As new paradigm, that should to change neoclascical, it is emphasized Other canon, that is on many centuries tradition and biological metaphors grounded. That dates back to the Renessaince, was proved through experience of the now developed economies, through the use of policies that in contemporary world are vorbidden for the underdeveloped coutries, while the developed that use. Contrary to neoclassical policies, realized in (neo)liberal politics of Washington consensus, that lead to deindustrialization, policies of the Other canon, on policies like Marshall plan grounded, lead contrary to industrialization as the condition to leave the underdeveloped countries from crisis and poverty. Change of neoclassical economic paradigm in this sense is the condition for the growth of the quality of macroeconomic education and should to ensure better understanding of economic problems and processes.
    Keywords: Neoclassical economics, Other canon, industrialization, neoliberalism, Washington consensus, Marshall plan
    JEL: E13 O10 P27
    Date: 2014–10
  57. By: Slobodan Cvetanoviæ, Danijela Despotoviæ (University of Niš, Faculty of Economics, University of Kragujevac, Faculty of Economics)
    Abstract: TResearch included six Western Balkan countries (Albania, Bosnia and Herzegowina, Macedonia, Serbia, Montenegro, and Croatia) in the period 2001-2012. The analysed data entailed economic growth rate, saving shares, investments and current account deficit in gross domestic product and especially the data about the dynamics of direct foreign investments in the given time frame. The conclusion reached is that one of the necessary requirements for economic growth of the countries in this region in the forthcoming period is growing share of national sources, that is to say growing share of domestic savings in gross domestic product. Especially since it is well-known that foreign funding sources in the form of foreign direct investments in privatization of state-owned companies have nearly disappeared.
    Keywords: financing development, domestic funding sources, foreign funding sources, Western Balkan, economic crisis
    JEL: E20 O10
    Date: 2014–10
  58. By: Ivan Bozoviæ, Jelena Bozoviæ (University of Priština, Faculty of Economics, University of Priština, Faculty of Economics)
    Abstract: Economic recession which nowadays has affected economies in the majority of countries, starting with the most developed ones, whilst other countries record negative economic performance in the form of a more significant slowing down of economic growth, raised the question of its overcoming, both among the economic policy creators and among macroeconomic theoreticians. Economic policy measures, which should contribute to the finalization of negative economic movements and reverse them, are primarily oriented towards encouragement of aggregate demand, and in macroeconomics they are known as Keynesian economics. It is quite certain that the causes, and even more the consequences, of incidence and overcoming of economic crisis in the world will always remain to be the main topic of discussion among the entire community, and particularly among academic community. It happens very frequently that economists identify mortgage loans crises as the main nucleus of creating the economic crises, failing thereby almost every time to point out to the dark side i.e. the immoral side of the banks and other financial institutions responsible for granting bad loans. The intention of this paper is to point to the main causes of incidence and spreading of world economic crises. The paper also points towards a very important role and significance of the Keynesian economic theory in overcoming the consequences of such crises and struggle against economic depression.
    Keywords: economic crisis, neo-liberalism, interventionism, Keynesian theory, economic recovery
    JEL: E2 E12 E13 E44
    Date: 2014–10
  59. By: Gordana Mrdak, Rade Knezeviæ (High School of Applied Studies in Vranje, Facultyof Business Studies and Law, Union University „Nikola Tesla“, Belgrade)
    Abstract: The market is the market of production factors land, labor and capital. Factors of production have its price. For a country pays rent, wages for work of a capital interest. In the capital market, there are two sizes: K - capital stock and K '- the interest rate. Bearer of the offer here is the lender, the borrower and the holder of the demand. Capital is the money you invest in the elements of the production process and has the ability to be at the end of the production process increase.
    Keywords: market land and natural resources, capital, labor market
    JEL: O11 O47 E20
    Date: 2014–10
  60. By: Hull, Isaiah (Research Department, Central Bank of Sweden)
    Abstract: Since the mid-1990s, many OECD countries have experienced a substantial in- crease in household indebtedness. Sweden, in particular, has seen indebtedness rise from 90% of disposable income in 1995 to 172% in 2014. The Swedish Financial Supervisory Authority (FSA) has identi ed mortgage amortization requirements as a potential instrument for reducing indebtedness; and has drafted guidelines that will intensify the rate and duration of amortization. In this paper, I charac- terize Swedish-style mortgage contracts, which dier substantially from U.S.-style contracts. I then evaluate the policy changes in an incomplete markets model with three types of debt and a novel mortgage contract speci cation that is cali- brated to match Swedish micro and macro data. I nd that intensifying the rate and duration of amortization is largely ineective at reducing indebtedness in a realistically-calibrated model. In the absence of implausibly large re nancing costs or tight restrictions on the maximum debt-service-to-income ratio, the policy im- pact is small in aggregate, over the lifecycle, and across employment statuses. These results may be relevant for other OECD countries, such as Norway and Canada, that have also not seen a reduction in house prices or indebtedness since the 2007 nancial crisis.
    Keywords: Mortgages; Amortization; Heterogeneous Agents; Incomplete Markets; Financial Regulation
    JEL: E44 G21 R21
    Date: 2015–04–01
  61. By: Claudia R. Sahm; Matthew D. Shapiro; Joel Slemrod
    Abstract: Balance-sheet repair drove the response of a significant fraction of households to fiscal stimulus following the Great Recession. By combining survey, behavioral, and time-series evidence on the 2011 payroll tax cut and its expiration in 2013, this papers identifies and analyzes households who smooth debt repayment. These “balance-sheet households” are as prevalent as “permanent-income households,” who smooth consumption in response to the temporary tax cut, and outnumber “constrained households,” who temporarily boost spending. The asymmetric spending response of balance-sheet households poses challenges to standard models, but nonetheless appears important for understanding individual and aggregate responses to fiscal stimulus.
    JEL: C83 E21 E62 H31
    Date: 2015–05
  62. By: Ricardo Reis
    Abstract: A central bank is insolvent if its plans imply a Ponzi scheme on reserves so the price level becomes infinity. If the central bank enjoys fiscal support, in the form of a dividend rule that pays out net income every period, including when it is negative, it can never become insolvent independently of the fiscal authority. Otherwise, this note distinguishes between intertemporal insolvency, rule insolvency, and period insolvency. While period and rule solvency depend on analyzing dividend rules and sources of risk to net income, evaluating intertemporal solvency requires overcoming the difficult challenge of measuring the present value of seignorage.
    JEL: E42 E58 E59
    Date: 2015–05
  63. By: Elena Rusticelli; David Turner; Maria Chiara Cavalleri
    Abstract: Inflation has become much less sensitive to movements in unemployment in recent decades. A common explanation for this change is that inflation expectations have become better anchored as a consequence of credible inflation targeting by central banks. In order to evaluate this hypothesis, the paper compares two competing empirical specifications across all OECD economies, where competing specifications correspond to the ‘former’ and ‘new’ specification for deriving measures of the unemployment gap which underlie the OECD’s Economic Outlook projections. The former OECD specification can be characterised as a traditional ‘backward-looking’ Phillips curve, where current inflation is partly explained by an autoregressive distributed lag process of past inflation representing both inertia and inflation expectations formed on the basis of recent inflation outcomes. Conversely, the new approach adjusts this specification to incorporate the notion that inflation expectations are anchored around the central bank’s inflation objective. The main finding of the paper is that the latter approach systematically out-performs the former for an overwhelming majority of OECD countries over a recent sample period. Relative to the backward-looking specification, the anchored expectations approach also tends to imply larger unemployment gaps for those countries for which actual unemployment has increased the most. Moreover, the anchored expectations Phillips curve reduces real-time revisions to the unemployment gap, although these still remain uncomfortably large, in the case of countries where there have been large changes in unemployment.<P>Intégrer des anticipations ancrées d'inflation à la courbe de Phillips pour le calcul de mesures du chômage d'équilibre<BR>L'inflation est devenue beaucoup moins sensible aux fluctuations du chômage au cours des dernières décennies. Une explication couramment avancée à cet égard, est que l'ancrage des anticipations d'inflation s'est amélioré. Ni cette explication ni l'approche économétrique retenue ne sont nouvelles, mais un des apports de ce document tient au fait que nous y utilisons deux spécifications économétriques différentes pour l'ensemble des économies de l'OCDE, celles-ci correspondant à l'« ancienne » et à la « nouvelle » spécifications employées pour calculer les mesures de l'écart de chômage sur lesquelles reposent les prévisions des Perspectives économiques de l'OCDE. L'ancienne spécification employée par l'OCDE peut être caractérisée comme une courbe de Phillips « rétrospective » classique, suivant laquelle l'inflation est expliquée en partie à l'aide d'un modèle autorégressif à retards échelonnés appliqué à l'inflation antérieure, représentant à la fois l'inertie de l'inflation et les anticipations d'inflation formées sur la base des récents résultats d'inflation. Inversement, la nouvelle approche consiste à ajuster cette spécification de manière à intégrer la notion que les anticipations d'inflation sont ancrées aux alentours de l'objectif d'inflation de la banque centrale. La principale conclusion de ce document est que la nouvelle approche donne systématiquement de meilleurs résultats que l'ancienne pour une écrasante majorité de pays de l'OCDE sur une période d'observation récente. Par rapport à la spécification rétrospective, l'approche fondée sur les anticipations ancrées tend également à mettre en évidence des écarts de chômage plus importants pour les pays où le taux de chômage effectif a le plus augmenté. En outre, la courbe de Phillips fondée sur des anticipations ancrées réduit les révisions en temps réel de l'écart de chômage, même si celles-ci restent d'une ampleur préoccupante, dans le cas des pays où le chômage a fortement varié.
    Keywords: Phillips curve, equilibrium unemployment, Anchored expectations, real-time revisions, anticipations ancrées, révisions en temps réel, chômage d’équilibre, courbe de Phillips
    JEL: C22 E24 E31 J64
    Date: 2015–05–28
  64. By: Hansjörg Blöchliger; Balázs Égert; Bastien Alvarez; Aleksandra Paciorek
    Abstract: This paper contributes to the scarce literature on the macroeconomic effects of property taxes, in particular on the relationships between property taxes, house prices and the wider economy. The paper first estimates a fiscal reaction function which analysis the reaction of property tax revenues to house prices. It then analyses a house price reaction function looking at the relation of how house prices react to changes in property taxes. For a set of OECD countries, the results suggest that property taxes tend to be a-cyclical or slightly pro-cyclical. They provide a stable revenue source for sub-central governments but do not stabilise the economy. The results also suggest that an increase in property tax revenues or in the tax revenue-to-GDP share slows down house price increases and that higher property taxation tends to reduce house price volatility.<P>Les propriétés stabilisatrices de la fiscalité des biens immobiliers : Données relatives aux pays de l'OCDE<BR>Ce document vient compléter les rares travaux publiés sur les effets macroéconomiques des impôts immobiliers, en particulier sur la relation entre la fiscalité immobilière, les prix des logements et l'économie dans son ensemble. Nous estimons d'abord une fonction de réaction budgétaire permettant d'analyser la réaction des recettes d'impôts immobiliers aux variations des prix des logements. Nous analysons ensuite une fonction de réaction des prix des logements, permettant de déterminer comment réagissent les prix des biens immobiliers d'habitation aux variations des impôts immobiliers. Pour un ensemble de pays de l'OCDE, les résultats obtenus laissent à penser que les impôts immobiliers tendent à être acycliques ou légèrement procycliques. Ils constituent une source de recettes stables pour les administrations infranationales mais ne stabilisent pas l'économie. Les résultats obtenus laissent également à penser qu'une hausse des recettes d'impôts immobiliers ou du ratio recettes fiscales/produit intérieur brut (PIB) a pour effet de ralentir les augmentations des prix des logements, et qu'une fiscalité immobilière plus lourde tend à réduire la volatilité des prix des logements.
    Keywords: immovable property tax, stabilisation, housing market, marchés du logement, stabilisation, fiscalité des biens immobiliers
    JEL: E32 H50 H60
    Date: 2015–05–29
  65. By: Hense, Florian
    Abstract: Empirical credit demand analysis undertaken at the aggregate level obscures potential behavioral heterogeneity between various borrowing sectors. Looking at disaggregated data and analyzing bank loans to non-financial companies, to financial companies, to households for consumption and for house purchases separately with respect to a common set of macroeconomic determinants may facilitate more accurate empirical relationships and more reliable insights for economic policy. Using quarterly Euro area panel data between 2003 and 2013, empirical evidence for heterogeneity in borrowing behavior across sectors and the credit cycle with respect to interest rates, output and house prices is found. The results motivate sector-specific, counter-cyclical capital requirements.
    Keywords: bank loans,disaggregation,interest rate elasticity,macro-prudential tools
    JEL: E44 E51 E52
    Date: 2015
  66. By: Catullo, Ermanno; Gallegati, Mauro; Palestrini, Antonio
    Abstract: Assessing systemic risk and defining macro-prudential policies aiming at reducing economic system vulnerability have been at the center of the economic debate of the last years. Credit networks play a crucial role in diffusing and amplifying local shocks, following the network-based financial accelerator approach (Delli Gatti et al., 2010; Battiston et al., 2012), we constructed an agent based model reproducing an artificial credit network populated by heterogeneous firms and banks. Calibrating the model on a sample of firms and banks quoted on Japanese stock-exchange mar- kets from 1980 to 2012, we try to define both early warning indicators of crises and policy precautionary measures based on the analysis of the endogenous dynamics of credit network connectivity.
    Date: 2015
  67. By: Fujiwara, Ippei (Keio University and Australian National University); Teranishi, Yuki (Keio University)
    Abstract: Do financial frictions call for policy cooperation? This paper investigates the implications of simple financial frictions, monopolistic banking together with staggered loan contracts, for monetary policy in open economies in the linear quadratic (LQ) framework. Welfare analysis shows that policy cooperation improves social welfare in the presence of such financial frictions. There also exist long-run gains from cooperation in addition to these by jointly stabilizing inefficient fluctuations over the business cycle, that are usually found in models with price rigidities. The Ramsey optimal steady states differ between cooperation and noncooperation. Such gains from cooperation arise irrespective of the existence of international lending or borrowing.
    JEL: E50 F41
    Date: 2015–04–01
  68. By: Georgiadis, Georgios (European Central Bank); Grab, Johannes (European Central Bank)
    Abstract: We estimate the impact of the ECB’s announcement of the extended asset purchase programme (EAPP) on 22 January 2015 on global equity prices, bond yields and the euro exchange rate. We find that the EAPP announcement benefited global financial markets by boosting equity prices in the euro area and the rest of the world. At the same time, the EAPP announcement caused a depreciation of the euro vis-à-vis advanced and emerging market economy currencies. Comparing the EAPP to previous ECB announcements of unconventional monetary policies, the main channel of transmission of the EAPP announcement to global financial markets was through signalling—the ECB convincingly conveying to market participants that its future monetary policy stance will remain accommodative—rather than through improving confidence (as was the case for the OMT) or through portfolio re-balancing (as for the SMP). Similarly, in contrast to the OMT and the SMP announcements the signaling channel also played a major role for the domestic financial market impact of the EAPP. Cross-country heterogeneities in the global financial market spillovers from the EAPP announcement were linked to differences in economies’ financial openness, exchange rate regime, trade and financial integration with the euro area and their attractiveness for carry trades.
    JEL: E52 E58 G15
    Date: 2015–03–01
  69. By: Davis, J. Scott (Federal Reserve Bank of Dallas)
    Abstract: Does expected deflation lead to a fall in consumption spending? Using data for U.S. grocery store sales and department store sales from 1919 to 1939, this paper shows that expected price changes have asymmetric effects on consumption spending. Department store sales (durable consumption) react negatively to the expectation of falling prices, but grocery store sales (non-durable consumption) do not react to expected price changes.
    JEL: E20 N10
    Date: 2015–02–01
  70. By: Doehr, Rachel (Claremont McKenna College); Martinez-Garcia, Enrique (Federal Reserve Bank of Dallas)
    Abstract: Using a panel of survey‐based measures of future interest rates from the Survey of Professional Forecasters, we study the dynamic relationship between shocks to monetary policy expectations and fluctuations in economic activity and inflation. We propose a smallscale structured recursive vector autoregression (VAR) model to identify the macroeconomic effects of changes in expectations about monetary policy. Our results show that when interest rates are away from the zero‐lower bound, a perception of higher future interest rates leads to a significant rise in current measures of inflation and a rise in economic activity. However, when interest rates approach zero, the effect on economic activity is the opposite, with significant but lagged decreases in economic activity following an upward revision to expected future interest rates. The impact of changes in expectations about monetary policy is robust when we control for other features of the transmission mechanism (e.g., long‐term interest rates, quantitative easing, exchange rate movements and even oil price shocks). Our findings also show that monetary policy expectations contribute up to 34 percent to the variability of economic activity (and 24 percent on inflation) while policy rates are fixed at the zero‐lower bound. This evidence points to the importance of managing monetary policy expectations (forward guidance) as a crucial policy tool for stimulating economic activity at the zero‐lower bound.
    JEL: E30 E32 E43 E52
    Date: 2015–05–01
  71. By: Erce, Aitor (European Stability Mechanism)
    Abstract: Measures of Sovereign and Bank Risk show occasional bouts of increased correlation, setting the stage for vicious and virtuous feedback loops. This paper models the macroeconomic phenomena underlying such bouts using CDS data for 10 euro-area countries. The results show that Sovereign Risk feeds back into Bank Risk more strongly than vice versa. Countries with sovereigns that are more indebted or where banks have a larger exposure to their own sovereign, suffer larger feedback loop effects from Sovereign Risk into Bank Risk. In the opposite direction, in countries where banks fund their activities with more foreign credit and support larger levels of non-performing loans, the feedback from Bank Risk into Sovereign Risk is stronger. According to model estimates, financial rescue operations can increase feedback effects from bank risk into sovereign risk. These results can be useful for the official sector when deciding on the form of financial rescues.
    JEL: E58 G21 G28 H63
    Date: 2015–02–01
  72. By: Camacho, Maximo (University of Murcia and BBVA Research); Martinez-Martin, Jaime (Bank of Spain)
    Abstract: We propose a Markov-switching dynamic factor model to construct an index of global business cycle conditions, to perform short-term forecasts of world GDP quarterly growth in real time and to compute real-time business cycle probabilities. To overcome the real-time forecasting challenges, the model accounts for mixed frequencies, for asynchronous data publication and for leading indicators. Our pseudo real-time results show that this approach provides reliable and timely inferences of the world quarterly growth and of the world state of the business cycle on a monthly basis.
    JEL: C22 E27 E32
    Date: 2015–02–01
  73. By: Fujiwara, Ippei (Keio University and Australian National University); Kam, Timothy (Australian National University); Sunakawa, Takeki (University of Tokyo)
    JEL: E52 F41 F42
    Date: 2015–04–01
  74. By: Mohaddes, Kamiar (University of Cambridge); Pesaran, M. Hashem (University of Southern California)
    Abstract: This paper investigates the global macroeconomic consequences of country-specific oilsupply shocks. Our contribution is both theoretical and empirical. On the theoretical side, we develop a model for the global oil market and integrate this within a compact quarterly model of the global economy to illustrate how our multi-country approach to modelling oil markets can be used to identify country-specific oil-supply shocks. On the empirical side, estimating the GVAR-Oil model for 27 countries/regions over the period 1979Q2 to 2013Q1, we show that the global economic implications of oil-supply shocks (due to, for instance, sanctions, wars, or natural disasters) vary considerably depending on which country is subject to the shock. In particular, we find that adverse shocks to Iranian oil output are neutralized in terms of their effects on the global economy (real outputs and financial markets) mainly due to an increase in Saudi Arabian oil production. In contrast, a negative shock to oil supply in Saudi Arabia leads to an immediate and permanent increase in oil prices, given that the loss in Saudi Arabian production is not compensated for by the other oil producers. As a result, a Saudi Arabian oil supply shock has significant adverse effects for the global economy with real GDP falling in both advanced and emerging economies, and large losses in real equity prices worldwide.
    JEL: C32 E17 F44 F47 O53 Q43
    Date: 2015–05–01
  75. By: Ratti, Ronald A. (University of Western Sydney); Vespignani, Joaquin L. (University of Tasmania)
    Abstract: In this paper we study the drivers of global interest rate. Global interest rate is defined as a principal component for the largest developed and developing economies’ discount rates (the US, Japan, China, Euro area and India). A structural global factor-augmented error correction model is estimated. A structural change in the global macroeconomic relationships is found over 2008:09-2008:12, but not pre or post this GFC period. Results indicate that around 46% of movement in central bank interest rates is attributed to changes in global monetary aggregates (15%), oil prices (13%), global output (11%) and global prices (7%). Increases in global interest rates are associated with reductions in global prices and oil prices, increases in trade-weighted value of the US dollar, and eventually to reduce global output. Increases in oil prices are linked with increase in global inflation and global output leading to global interest rate tightening indicated by increases in central bank overnight lending rates.
    JEL: E44 E50 Q43
    Date: 2015–05–01
  76. By: Fujiwara, Ippei (Keio University and Australian National University); Waki, Yuichiro (University of Queensland)
    Abstract: How should monetary policy be designed when the central bank has private information about future economic conditions? When private news about shocks to future fundamentals is added to an otherwise standard new Keynesian model, social welfare deteriorates by the central bank’s reaction to or revelation of such news. There exists an expected virtue of ignorance, and secrecy constitutes optimal policy. This result holds when news are about cost-push shocks, or about shocks to the monetary policy objective, or about shocks to the natural rate of interest, and even when the zero lower bound of nominal interest rates is taken into account. A lesson of our analysis for a central bank’s communication strategy is that Delphic forward guidance that helps the private sector form more accurate forecasts of future shocks can be undesirable and the central bank should instead aim to communicate its state-contingent policy.
    JEL: E30 E40 E50
    Date: 2015–04–01
  77. By: Duncan, Roberto (Ohio University); Martinez-Garcia, Enrique (Federal Reserve Bank of Dallas)
    Abstract: This paper provides both theoretical insight as well as empirical evidence in support of the view that inflation is largely a global phenomenon. First, we show that inflation across countries incorporates a significant common factor captured by global inflation. Second, we show that in theory a role for global inflation in local inflation dynamics emerges over the business cycle even without common shocks, and under flexible exchange rates and complete international asset markets. Third, we identify a strong "error correction mechanism" that brings local inflation rates back in line with global inflation which explains the relative success of inflation forecasting models based on global inflation (e.g., Ciccarelli and Mojon (2010). Fourth, we argue that the workhorse New Open Economy Macro (NOEM) model of Martínez-García and Wynne (2010) can be approximated by a finiteorder VAR and estimated using Bayesian techniques to forecast domestic inflation incorporating all relevant linkages with the rest of the world. This NOEM-BVAR provides a tractable model of inflation determination that can be tested empirically in forecasting. Finally, we use pseudo-out-of-sample forecasts to assess the NOEM-BVAR at different horizons (1 to 8 quarters ahead) across 17 OECD countries using quarterly data over the period 1980Q1-2014Q4. In general, we find that the NOEM-BVAR model produces a lower root mean squared prediction error (RMSPE) than its competitors—which include most conventional forecasting models based on domestic factors and also the recent models based on global inflation. In a number of cases, the gains in smaller RMSPEs are statistically significant. The NOEM-BVAR model is also accurate in predicting the direction of change for inflation, and often better than its competitors along this dimension too.
    JEL: E31 F41 F42 F47
    Date: 2015–04–01
  78. By: Fujiwara, Ippei (Keio University and Australian National University); Nakazono, Yoshiyuki (Yokohama City University); Ueda, Kozo (Waseda University)
    Abstract: This paper evaluates the role of the first arrow of Abenomics in guiding public perceptions on monetary policy stance through the management of expectations. In order to end chronic deflation, a policy regime change must be perceived by economic agents. Analysis using the QUICK survey system (QSS) monthly survey data shows that the reaction of monetary policy to inflation has been declining since the mid 2000s, implying intensified forward guidance well before Abenomics. However, Japan seems to have moved closer to a long-term liquidity trap, where even long-term bond yields are constrained by the zero lower bound. Estimated changes in perceptions are not abrupt enough to satisfy Sargent's (1982) criteria for a regime change. This poses a serious challenge to central banks: what is an effective policy option left under the long-term liquidity trap?
    JEL: E47 E50 E60
    Date: 2015–03–01
  79. By: Dimitris Christelis; Michael Ehrmann; Dimitris Georgarakos
    Abstract: We use internationally comparable household-level data for ten euro area economies and the United States to investigate cross-country differences in debt holdings and the potential of debt overhang. U.S. households have the highest prevalence of both collateralized and non-collateralized debt, hold comparatively large amounts of loans outstanding, and face a higher debt-service burden. These differences are mainly attributed to the U.S. economic environment, which appears to be more conducive to both types of debt. For instance, differences in the economic environment between the United States and the median European country explain more than 85% of the overall difference in the prevalence of debt holdings. Even though U.S. households have higher income and financial wealth than their European counterparts, their debt burden remains comparatively elevated, primarily because a given level of collateral translates into a higher prevalence of collateralized debt, and larger amounts of it, in the United States. This suggests that U.S. households are relatively more vulnerable to adverse shocks.
    Keywords: Credit and credit aggregates; Econometric and statistical methods; International topics
    JEL: D12 E21 G11
    Date: 2015
  80. By: Jeff Messina (The George Washington University); Tara M. Sinclair (The George Washington University); Herman O. Stekler (The George Washington University)
    Abstract: Although there have been many evaluations of the Fed Greenbook forecasts, we analyze them in a different dimension. We examine the revisions of these forecasts in the context of fixed event predictions to determine how new information is incorporated in the forecasting process. This analysis permits us to determine whether there was an underutilization of information. There is no evidence of forecast smoothing, but rather that the revisions were sometimes in the wrong direction.
    Keywords: Federal Reserve; Forecast Evaluation; Forecast Revisions
    JEL: C5 E2 E3
    Date: 2014–06
  81. By: Rangan Gupta (Department of Economics, University of Pretoria); Kevin Kotze (School of Economics, University of Cape Town, Rondebosch, 7700, South Africa)
    Abstract: This paper considers whether the use of real oil price data can improve upon the forecasts of the interest rate in South Africa. We employ various Bayesian vector autoregressive (BVAR) models that make use of various measures of oil prices and compare the forecasting results of these models with those that do not make use of this data. The real oil price data is also disaggregated into positive and negative components to establish whether this would improve upon the forecasting performance of the model. The full dataset includes quarterly measures of output, consumer prices, ex- change rates, interest rates and oil prices, where the initial in-sample extends from 1979q1 to 1997q4. We then perform rolling estimations and one- to eight-step ahead forecasts over the out-of-sample period 1998q1 to 2014q4. The results suggest that models that includes information relating to oil prices outperform the model that does not include this in- formation, when comparing their out-of-sample properties. In addition, the model with the positive component of oil price tends to perform bet- ter than other models over the short to medium horizons. Then lastly, the model that includes both the positive and negative components of the oil price, provides superior forecasts at longer horizons, where the im- provement is large enough to ensure that it is the best forecasting model on average. Hence, not only do real oil prices matter when forecasting interest rates, but the use of disaggregate oil price data may facilitate additional improvements.
    Keywords: Interest rate, oil price, forecasting, South Africa
    JEL: C32 C53 E43 E47 Q41
    Date: 2015–05
  82. By: Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus , via Mersin 10, Turkey; Department of Economics, University of Pretoria, Pretoria, 0002, South Africa.); Rangan Gupta (Department of Economics, University of Pretoria); Charl Jooste (Department of Economics, University of Pretoria); Omid Ranjbar (Ministry of Industry, Mine and Trade, Tehran, Iran)
    Abstract: We test for a unit root in de-trended GDP in a two-state Markov switching specification using a modified Augmented Dickey-Fuller test. Our results show that a first difference GDP specification is preferred over the de-trended specification. In addition, the null of difference-stationary GDP cannot be rejected. By implication, shocks to GDP are permanent which validates specifying trend GDP with a stochastic component -something that is inherently assumed in a number of research papers that estimate potential GDP growth and that model GDP in general equilibrium specifications.
    Keywords: Markov-switching, difference-stationary, trend-stationary
    JEL: C22 C25 E32
    Date: 2015–05

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