|
on Macroeconomics |
|
Issue of 2015‒07‒18
eighty-two papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Saroj Bhattarai; Gauti B. Eggertsson; Bulat Gafarov |
| Abstract: | We present a signalling theory of Quantitative Easing (QE) at the zero lower bound on the short term nominal interest rate. QE is effective because it generates a credible signal of low future real interest rates in a time consistent equilibrium. We show these results in two models. One has coordinated monetary and fiscal policy. The other an independent central bank with balance sheet concerns. Numerical experiments show that the signalling effect can be substantial in both models. |
| JEL: | E31 E4 E42 E43 E5 E52 E62 E63 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21336&r=mac |
| By: | Jordi Galí |
| Abstract: | The unemployment rate in the euro area appears to contain a significant nonstationary component, suggesting that some shocks have permanent effects on that variable. I explore possible sources of this nonstationarity through the lens of a New Keynesian model with unemployment, and assess their empirical relevance. |
| Keywords: | wage stickiness, New Keynesian model, unemployment ‡uctuations, Phillips curve, insider-outsider model |
| JEL: | E24 E31 E32 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:837&r=mac |
| By: | Ungerer, Christoph T. (Board of Governors of the Federal Reserve System (U.S.)) |
| Abstract: | Expansionary monetary policy can increase household leverage by stimulating housing liquidity. Low mortgage rates encourage buyers to enter the housing market, raising the speed at which properties can be sold. Because lenders can resell seized foreclosure inventory at lower cost in such a hot housing market, ex-ante they are comfortable financing a larger fraction of the house purchase. Consistent with this mechanism, this study documents empirically that both the housing sales rate and loan-to-value ratios increase after expansionary monetary policy. Calibrating a New Keynesian macroeconomic model to fit the response of housing liquidity to monetary policy, the interaction between credit frictions and housing market search frictions generates endogenous movements in the loan-to-value ratio which amplify the economy's response to monetary policy. |
| Keywords: | Credit frictions; housing market; monetary policy; search frictions |
| JEL: | E32 E44 E52 R21 |
| Date: | 2015–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2015-48&r=mac |
| By: | Koichiro Kamada (Bank of Japan); Jouchi Nakajima (Bank of Japan); Shusaku Nishiguchi (Bank of Japan) |
| Abstract: | This paper investigates household inflation expectations and discusses the central bank's ability to anchor them. We use micro-data from a household survey on inflation expectations and fit a normal inverse Gaussian distribution to the data to remove the distortions included in them. The underlying distribution thus obtained is examined to characterize household inflation expectations, particularly from the term-structure point of view. The analysis indicates that long-term expectations are immune to actual price developments, while short-term expectations are easily affected by actual inflation. The paper also investigates to what extent household inflation expectations have been influenced by the Bank of Japan's policy stance. The analysis shows that the price stability target and the quantitative and qualitative monetary easing, introduced by the Bank in 2013, contributed to strengthening the anchor of inflation expectations. Nonetheless, the anchor still needs to be improved so that household expectations are invulnerable to any disturbances in actual inflation rates. |
| Keywords: | inflation expectations; term structure; expectations dispersion; inflation target; inflation anchor; quantitative and qualitative monetary easing |
| JEL: | E31 E52 E58 |
| Date: | 2015–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojwps:wp15e08&r=mac |
| By: | Ledenyov, Dimitri O.; Ledenyov, Viktor O. |
| Abstract: | The quantum macroeconomics theory is formulated for the first time, assuming that the business cycle has the discrete-time oscillations spectrum in analogy with the electronics excitations discrete-time spectrum in the Bohr’s atom model in the quantum physics. The quantum macroeconomics theory postulates that the discrete-time transitions from one level of GIP((t), GDP(t), GNP(t) to another level of GIP((t), GDP(t), GNP(t) will occur in the nonlinear dynamic economic systems at the time, when: 1) The land, labour and capital resources are added / released to the production/service processes in the form of quanta; 2) The disruptive scientific/technological/financial/social/political innovation is introduced, creating the resonance conditions necessary to amplify/attenuate the value of GIP((t), GDP(t), GNP(t), during the evolution process of the nonlinear dynamic economic system in the time domain. The authors think that the general information product on the time GIP((t), the general domestic product on the time GDP(t), and the general national product on the time GNP(t), are the discrete-time digital signals (the Ledenyov discrete-time digital waves with the Markov information) in distinction from the continuous-time signals (the Kitchin, Juglar, Kuznets, Kondratieff continuous waves), because of the discrete-time nature of the disruptive scientific/technological/financial/social/political innovations. The authors apply the quantum macroeconomics theory to research and develop a new software program for the accurate characterization and forecasting of GIP((t), GDP(t), GNP(t) dependences changes in the economies of scales and scopes in the time domain for the use by the central / commercial banks. |
| Keywords: | quantum macroeconomics theory, quantum econophysics science, dependence of general information product on time GIP(t), dependence of general domestic product on time GDP(t), dependence of general national product on time GNP(t), discrete change levels of GIP(t)/GDP(t)/GNP(t), Ledenyov discrete-time digital waves, discrete-time digital signals generators, spectrum analysis / amplitude / frequency / wavelength / period / phase of discrete-time digital signal, mixing / harmonics / nonlinearities of discrete-time digital signal, continuous-time signals, 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 E01 E10 E20 E30 E32 E37 E40 E44 E50 E58 F4 F44 F47 |
| Date: | 2015–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65566&r=mac |
| By: | Cavalieri, Duccio |
| Abstract: | This is a theoretical analysis of structural interdependence in monetary economics and of its connections with the theories of value and capital. Some recent attempts to integrate money and finance in the theory of income and expenditure – those of the ‘Stock-Flow Consistent Approach’ to macroeconomics, of ‘Modern Monetary Theory’ and of Circuit Theories – are examined. The surplus approach to the theory of value and capital is then formally considered in a model devoid of Sraffian misleading dichotomic connotations, where money plays a fundamental role and flows and stocks are coherently reconciled. In such framework, a method for measuring the unit cost of real capital is indicated and some reasons for reconsidering the traditional approaches to monetary theory and policy in a ‘late Marxian’ updated analytical perspective are highlighted. |
| Keywords: | monetary theory; monetary policy; fiscal policy; structural interdependence; Sraffian dichotomy; post-Keynesian economics; MEV. |
| JEL: | B22 E12 E44 E52 M41 |
| Date: | 2015–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65528&r=mac |
| By: | Jean-Christophe Poutineau (CREM, UMR CNRS 6211, University of Rennes 1, France); Gauthier Vermandel (CREM, UMR CNRS 6211, University of Rennes 1, France) |
| Abstract: | This paper evaluates the role of financial intermediaries on the extensive margin of activity. We build a DSGE model that combines the endogenous determination of the number of firms with financial frictions giving rise to the financial accelerator. This model is estimated on US data between 1993Q1 to 2012Q3. We get three main results. First, financial frictions play a key role as a transmission channel for monetary policy shocks to get a standard drop in the number of new firms following a restrictive monetary policy decision. Second, in contrast with real macroeconomic shocks (where investment in existing production lines and the creation of new firms move in the opposite direction), financial shocks have a cumulative eect on the two margins of activity, amplifying macroeconomic fluctuations. Third, the critical role of financial factors is mainly observed in the period corresponding to the creation of new firms. In the long run, the variance of the effective entry share is almost explained by a combination of supply shocks. |
| Keywords: | Extensive Margin; Financial Frictions; Financial Accelerator; DSGE model; Bayesian estimation |
| JEL: | E31 E32 E52 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:201510&r=mac |
| By: | Ihrig, Jane E. (Board of Governors of the Federal Reserve System (U.S.)); Meade, Ellen E. (Board of Governors of the Federal Reserve System (U.S.)); Weinbach, Gretchen C. (Board of Governors of the Federal Reserve System (U.S.)) |
| Abstract: | The Federal Reserve conducts monetary policy in order to achieve its statutory mandate of maximum employment, stable prices, and moderate long-term interest rates as prescribed by the Congress and laid out in the Federal Reserve Act. For many years prior to the financial crisis, the FOMC set a target for the federal funds rate and achieved that target through purchases and sales of securities in the open market. In the aftermath of the financial crisis, with a superabundant level of reserve balances in the banking system having been created as a result of the Federal Reserve's large scale asset purchase programs, this approach to implementing monetary policy will no longer work. This paper provides a primer on the Fed's implementation of monetary policy. We use the standard textbook model to illustrate why the approach used by the Federal Reserve before the financial crisis to keep the federal funds rate near the FOMC's target will not work in current circumst ances, and explain the approach that the Committee intends to use instead when it decides to begin raising short-term interest rates. |
| Keywords: | FOMC; Federal Reserve; liftoff; monetary policy implementation; monetary policy normalization; monetary policy tools |
| JEL: | E43 E52 E58 |
| Date: | 2015–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2015-47&r=mac |
| By: | Morais, Bernardo (Board of Governors of the Federal Reserve System (U.S.)); Peydro, Jose Luis (Universitat Pompeu Fabra); Ruiz, Claudia (World Bank) |
| Abstract: | We identify the international credit channel of monetary policy by analyzing the universe of corporate loans in Mexico, matched with firm and bank balance-sheet data, and by exploiting foreign monetary policy shocks, given the large presence of European and U.S. banks in Mexico. We find that a softening of foreign monetary policy increases the supply of credit of foreign banks to Mexican firms. Each regional policy shock affects supply via their respective banks (for example, U.K. monetary policy affects credit supply in Mexico via U.K. banks), in turn implying strong real effects, with substantially larger elasticities from monetary rates than QE. Moreover, low foreign monetary policy rates and expansive QE increase disproportionally more the supply of credit to borrowers with higher ex ante loan rates--reach-for-yield--and with substantially higher ex post loan defaults, thus suggesting an international risk-taking channel of monetary policy. All in all, the results suggest that foreign QE increases risk-taking in emerging markets more than it improves the real outcomes of firms. |
| Keywords: | Credit channel of monetary policy; financial globalization; quantitative easing (QE); credit supply; risk-taking; foreign banks. |
| JEL: | E44 E52 E58 G01 G21 G28 |
| Date: | 2015–07–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1137&r=mac |
| By: | Yasin Kursat Onder (Central Bank of Turkey); Mauricio Villamizar-Villegas (Banco de la República de Colombia) |
| Abstract: | Many central banks that have opted for monetary autonomy have also been reluctant to relinquish control over the value of their currencies. As a result, they have operated through both interest rate and foreign exchange interventions. However, in the context of the monetary trilemma, both effects can potentially offset each other. Using daily data from the Central Bank of Turkey during the period of 2002 - 2010, we study the effects of simultaneous policies by first purging the intended monetary decisions from responses to real-time macroeconomic variables, and then determining their impact on economic activity. We find that the Central Bank of Turkey adjusted its policy rate mostly in response to inflation levels relative to both the yearly target and agents’ expectations, and conducted purchases and sales of foreign currency in response to exchange rate behavior. These responses varied depending on whether interventions were pre-announced. We also find that unannounced purchases of foreign currency had a significant effect in reducing exchange rate volatility but appeared to have no effect on exchange rate changes. On the other hand, changes in the policy rate significantly affected inflation but had no discernible effect on output growth. Classification JEL: E43, E52, E58, F31 |
| Keywords: | Central bank intervention, simultaneous policies, monetary shocks, price puzzle, monetary policy trilemma, foreign exchange intervention. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:893&r=mac |
| By: | Felipe Serrano (Department of Applied Economics V, University of the Basque Country UPV/EHU); Amaia Altuzarra (Department of Applied Economics V, University of the Basque Country UPV/EHU) |
| Abstract: | The Global Financial Crisis has meant for developed countries to return to an economic situation similar to that experienced during the Great Recession. At the root of the crisis, again, is the financial system. Financial innovation, combined with stringent regulatory failures and with an overly loose monetary policy, allowed to expand private credit disproportionately, fuelling a speculative bubble that, when it burst, generated a demand shock that eventually turn a financial crisis into an economic crisis with lasting consequences. This work attempts to examine the economic policies implemented during the crisis. We focus exclusively on demand policies, with special attention to those implemented in the first phase of the crisis. The economic policy implemented to overcome the crisis has passed through different stages. In the first stage, the strategy was a combination of expansionary monetary and fiscal policies. In the second stage, the fiscal stimuli begin to be withdrawn, while an aggressive monetary policy to stimulate private credit through expanding the money supply is maintained. The third stage is scheduled to start in late 2014. This third phase would be characterized by the end of demand policies and the recovery of supply policies or structural adjustment policies, especially for the case of emerging economies as well as economies of southern Eurozone. |
| Keywords: | fiscal policy, monetary policy, Eurozone, emerging countries, developed countries, financial crisis |
| JEL: | E02 E52 E58 E62 |
| Date: | 2015–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:fes:wpaper:wpaper&r=mac |
| By: | Kopoin, Alexandre; Moran, Kevin; Paré, Jean-Pierre |
| Abstract: | Recent empirical evidence suggests that the state of banks’ balance sheets plays an important role in the transmission of monetary policy and other shocks. This paper presents an open-economy DSGE framework with credit market frictions and an active bank capital channel to assess issues regarding the transmission of domestic and foreign shocks. The theoretical framework includes the financial accelerator mechanism developed by Bernanke et al. (1999), the bank capital channel and the exchange rate channel. Our simulations show that the exchange rate channel plays an amplification role in the propagation of shocks. Furthermore, with these three channels present, domestic and foreign shocks have an important quantitative role in explaining domestic aggregates like output, consumption, inflation and total bank’s lending. In addition, results suggest that economies whose banks remain well-capitalized when affected by adverse shock experience less severe downturns. Our results highlight the importance of bank capital in an international framework and can be used to inform the worldwide debate over banking regulation. |
| Keywords: | Bank capital; credit channel; exchange rate channel; monetary policy. |
| JEL: | E44 E52 G21 |
| Date: | 2014–07–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65512&r=mac |
| By: | Kopoin, Alexandre |
| Abstract: | This paper studies the link between cross-border banking activities and the international propagation of real and financial shocks. We develop a two-country DSGE model with a bank capital channel and a financial accelerator, in which banks grant loans to domestic as well as to foreign firms. The model economy is calibrated to data from the U.S. and Canada. Our results suggest that following a positive technology shock and a tightening of home monetary policy, the existence of cross-border banking activities tends to amplify the transmission channel in both the domestic and the foreign country. However, cross-border banking activities tend to weaken the impact of shocks on foreign and home consumption because of the cross-border saving possibility between the two countries. Finally, our simulations suggest that under cross-border banking, correlations between macroeconomic variables of both countries become greater than in the absence of international banking activities. Overall, our results show sizable spillover effects of cross-border banking on macroeconomic dynamics and suggest cross border banking is an important source of the synchronization of business cycles between the U.S. and Canada. |
| Keywords: | Cross-border banking; bank capital, interest rate and exchange rate channels; business cycle synchronization. |
| JEL: | E44 E52 G21 |
| Date: | 2015–02–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65515&r=mac |
| By: | Giorgios Argitis (National and Kapodistrian University of Athens) |
| Abstract: | This paper points out policy suggestions for modern central banks to improve their effectiveness in terms of successfully targeting financial stability and employment. The theoretical foundations of the proposed policy suggestions rely on Minsky’s conceptualization of financial fragility and instability. It is argued that Minsky’s Financial Instability Hypothesis contextualizes how the financial structure of the effective demand and financial markets predispose to endogenous non-sustainable leverage and liability structures that result from position-making operations. We stress that Minsky advances an approach to central banking that is based on a cash-flow examination procedure to capture changes in the quality of leverage, solvency and liquidity of firms and banks that destabilize the macroeconomic system. We underline that Minsky patterns central banking and monetary policy within Ponzi financial practices and interconnections among financial institutions and financial markets. Following Minsky, we suggest discount window central banking, lender of last resort operations and targeting Ponzi finance as the most appropriate policies of modern central banks to deal with financial and macroeconomic instability. |
| Keywords: | Financial Fragility and Instability, Central Banking, Monetary Policy |
| JEL: | E12 E52 E58 G18 |
| Date: | 2015–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:fes:wpaper:wpaper90&r=mac |
| By: | Nina Dodig (Berlin School of Economics and Law and Institute for International Political Economy (IPE) Berlin, Germany); Hansjorg Herr (Berlin School of Economics and Law and Institute for International Political Economy (IPE) Berlin, Germany) |
| Abstract: | To handle the sovereign debt crisis in general and macroeconomic imbalances in particular the leading EU institutions (the Troika) adopted two broad approaches; The short-term approach is based on enhancing the Stability and Growth Pact and to impose fiscal austerity on crisis countries. The medium- to long-term strategy consists of internal devaluation via reducing wage costs. Both approaches were combined with structural adjustment programs in the spirit of the Washington Consensus. The Troika’s policy implies an asymmetric adjustment process burdening only crisis countries. They led to the shrinking of demand and output in crisis countries comparable to the Great Depression and brought the European Monetary Union to the edge of deflation. These polices must be judged as mislead increasing the risk of Japanese disease with more than one lost decade |
| Keywords: | current account imbalances, Euro area economic policies, internal devaluation, austerity |
| JEL: | E60 E62 F41 |
| Date: | 2015–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:fes:wpaper:wpaper74&r=mac |
| By: | David Laidler (University of Western Ontario) |
| Abstract: | In Canada, targeting the inflation rate was intended as a temporary measure on a journey to price-level stability, but became a well-established monetary policy regime in its own right. This paper analyses the role of the interaction of economic ideas with the experience generated by their application to policy in bringing about this outcome. In the following account, changing beliefs about the stability or otherwise of ongoing inflation, the capacity of a flexible exchange rate to create a vicious circle of depreciation and rising domestic prices, and about the roles played by the natural unemployment rate and money growth in influencing economic outcomes are emphasised. Today’s standard DSGE approach to modelling inflation targeting arrived on the scene only after the Canadian regime was well established. |
| Keywords: | Money; Monetary Policy; Inflation; Inflation-targeting; Interest Rates; Unemployment; Exchange Rate |
| JEL: | B2 E5 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:uwo:epuwoc:20151&r=mac |
| By: | Kei Imakubo (Bank of Japan); Jouchi Nakajima (Bank of Japan) |
| Abstract: | The inflation risk premium is an indicator of uncertainty about future inflation. While a positive premium on inflation risk implies more concern about the upside risk of inflation, a negative premium implies more concern about the downside risk. In Japan the inflation risk premium had been constantly negative over a period of time until the end of 2012, but turned positive in early 2013. This finding suggests that market concerns about future inflation have shifted to the upside risk along with a gradual increase in the expected inflation. |
| Keywords: | Inflation risk premia; Term premia; Term structure |
| JEL: | E31 E43 E52 G12 |
| Date: | 2015–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojlab:lab15e04&r=mac |
| By: | Anders Vredin |
| Abstract: | Experience from financial crises and central bank policies in the past decade has led to an intensified debate about the relationship between monetary policy and financial stability. Since there is no established theoretical framework for analysing the links between financial stability and monetary policy, it is very difficult to deliver precise recommendations for policy. |
| Keywords: | monetary policy, financial stability, inflation targeting, central banks, financial crisis, financial frictions |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:503&r=mac |
| By: | Stefano Micossi (Director General ASSONIME, Visiting Professor at the College of Europe) |
| Abstract: | This paper examines the policies pursued by the European Central Bank (ECB) since the inception of the euro. The ECB was originally set up to pursue price stability, with an eye also to economic growth and financial stability as subsidiary goals, once the primary goal was secured. The application of a single monetary policy to a diverse economic area has entailed a pronounced pro-cyclicality in its real economic effects on the eurozone periphery. Later, monetary policy became the main policy instrument to tackle financial instability elicited by the failure of Lehman Brothers and the sovereign debt crisis in the eurozone. In the process, the ECB emerged as the lender of last resort in the sovereign debt markets of participating countries. Persistent economic depression and deflation eventually brought the ECB into the uncharted waters of unconventional policies. That the ECB could legally perform all of these tasks bears witness to the flexibility of the TFEU and its Statute, but its tools and operating procedures were stretched to their limit. In the end, the place of the ECB amongst EU policy-making institutions has been greatly enhanced, but has entailed repeated intrusions into the broader domain of economic policies – not least because of its market intervention policies – whose consequences have yet to be ascertained. |
| Keywords: | Monetary Policy; European Central Bank; Quantitative easing; Financial and economic crisis |
| JEL: | E4 E5 F3 O52 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:coe:wpbeep:35&r=mac |
| By: | Pascal Michaillat; Emmanuel Saez |
| Abstract: | This paper extends Samuelson's theory of optimal government purchases by considering the contribution of government purchases to macroeconomic stabilization. We consider a matching model in which unemployment can be too high or too low. We derive a sufficient-statistics formula for optimal government purchases. Our formula is the Samuelson formula plus a correction term proportional to the government-purchases multiplier and the gap between actual and efficient unemployment rate. Optimal government purchases are above the Samuelson level when the correction term is positive-for instance, when the multiplier is positive and unemployment is inefficiently high. Our formula indicates that US government purchases, which are mildly countercyclical, are optimal under a small multiplier of 0.03. If the multiplier is larger, US government purchases are not countercyclical enough. Our formula implies significant increases in government purchases during slumps. For instance, with a multiplier of 0.5 and other statistics calibrated to the US economy, when the unemployment rate rises from the US average of 5.9% to 9%, the optimal government purchases-output ratio increases from 16.6% to 19.8%. However, the optimal ratio increases less for multipliers above 0.5 because with higher multipliers, the unemployment gap can be filled with fewer government purchases. For instance, with a multiplier of 2, the optimal ratio only increases from 16.6% to 17.6%. |
| JEL: | E32 E62 H21 H41 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21322&r=mac |
| By: | Sören Radde; Cristina Checherita-Westphal; Wei Cui; |
| Abstract: | Banks in the euro area typically hold a large amount of government debt in their bond portfolios, which are valued both for their low credit risk and high liquidity. During the sovereign debt crisis, these characteristics of government debt were severely impaired in stressed euro area countries. In order to understand the transmission channels of stress from government debt markets to the real economy, we augment a standard dynamic macroeconomic model with a banking sector and a market for government debt characterized by search frictions. A sovereign solvency shock modelled as a haircut on government bonds is introduced to study the interaction of sovereign credit and liquidity risk. As banks react to this shock by rebalancing towards highly liquid short-run assets, such as central bank deposits, demand for government bonds collapses, which endogenously worsens their market liquidity. Thus, a sovereign liquidity risk channel from government bond markets to the real sector emerges. Endogenous government bond liquidity negatively affects the funding conditions of the fiscal sector, tightens financing constraints in the banking sector and lowers investment and output. The model is able to match a number of stylised facts regarding the behaviour of sovereign debt markets during the euro area sovereign debt crisis, such as depressed turnover rates and rising bid-ask spreads. |
| Keywords: | liquidity frictions; search; sovereign risk channel; sovereign-bank nexus |
| JEL: | G12 E41 E44 E63 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2015-032&r=mac |
| By: | Gorbanev, Mikhail |
| Abstract: | This paper revisits evidence of solar activity influence on the economy. We examine whether economic recessions occur more often in the years around and after solar maximums. This research strand dates back to late XIX century writings of famous British economist William Stanley Jevons, who claimed that “commercial crises” occur with periodicity matching solar cycle length. Quite surprisingly, our results suggest that the hypothesis linking solar maximums and recessions is well anchored in data and cannot be easily rejected. |
| Keywords: | business cycle, recession, solar cycle, unemployment, sunspot |
| JEL: | E32 F44 Q51 Q54 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65502&r=mac |
| By: | Fischer, Justina A.V.; Pastore, Francesco |
| Abstract: | This research note discusses the Euro crisis in Greece in light of the referendum of July the 5th. It lays out the social and political costs of a GREXIT, but also of a continuing austerity policy. It proposes a reform policy fostering growth in Greece and discusses the role of conditionality. Finally, the important role of mid-left parties is highlighted. |
| Keywords: | Europe; Euro; Greece; Germany; IMF; Monetary Union |
| JEL: | E12 E62 F15 F16 F33 F55 H12 H50 H63 O42 O43 |
| Date: | 2015–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65541&r=mac |
| By: | Anundsen, Andre K. (Norges Bank); Nymoen, Ragnar (Economic Analysis Norway - Center for Wage formation) |
| Abstract: | The `saving for a rainy day' hypothesis implies that households' saving decisions reflect that they can (rationally) predict future income declines. The empirical relevance of this hypothesis plays a key role in discussions of fiscal policy multipliers and it holds under the null that the permanent income hypothesis is true. We find mixed support for this hypothesis using time series data for the 100 largest US Metropolitan Statistical Areas, as well as aggregate macro time series, for the period 1980q1{2011q4. That is, income is more often found to predict consumption and saving than the converse. Our modus operandi is to investigate the `saving for a rainy day' hypothesis by testing (weak) exogeneity of income and consumption and by exploring the direction of Granger causality between the two series. We also give evidence that house price changes played a role in the US income and consumption dynamics, before, during and after the Great Recession. |
| Keywords: | Cointegration; Consumption; Granger causality; Permanent income hypothesis; Household saving |
| JEL: | C22 C32 C51 C52 E21 E62 |
| Date: | 2015–05–08 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:osloec:2015_011&r=mac |
| By: | de Grauwe, Paul; Gerba, Eddie |
| Abstract: | The agent-based (behavioural) model is extended to include a financial friction on the supply side. Firms finance capital purchases using external financing, but need to pay for it in advance. In addition, firm financing constraint and net worth are determined by stock market prices, which can (and will) deviate from the fundamental value. The result is that production, supply of credit and the share that firms pay to capital producers heavily depends on the stock market cycles. During phases of optimism, credit is abundant, access to production capital is easy, the cash-in-advance constraint is lax, the risks are undervalued, and production is booming. But upon reversal in market sentiment, the contraction in all these parameters is deeper and asymmetric. This is even more evident in the behavioural model since cognitive limitations of economic agents result in exacerbation of the contraction. Lastly, the behavioural model matches much of the data, including the interest rate, inflation, firm credit, firm financing spread, and bank net worth. It is also successful in matching several supply-side relations (capital-firm credit, inflation-interest rate) as well as their autocorrelations. The results from the empirical validation are favourable to the behavioural model. |
| Keywords: | supply-side,beliefs,financial frictions,model validation |
| JEL: | B41 C63 C68 E22 E23 E37 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fmpwps:45&r=mac |
| By: | AMMOURI, Bilel; TOUMI, Hassen; Zitouna, Habib |
| Abstract: | This work presents a forecasting inflation model using a monthly database. Conventional models for forecasting inflation use a small number of macroeconomic variables. In the context of globalization and dependent economic world, models have to account a large number of information. This model is the goal of recent research in the various industrialized countries as well as developing countries. With Dynamic Factors Model the forecast values are closer to actual inflation than those obtained from conventional models in the short term. In our research we devise the inflation in to “free inflation and administered inflation” and we test the performance of the DFM in different types of inflation namely administered and free inflation. We found that dynamic factors model leads to substantial forecasting improvements over simple benchmark regressions. |
| Keywords: | Inflation, PCA, VAR, Dynamic Factors Model, Kalman Filter, algorithmic EM, Space-state, forecast. |
| JEL: | C13 C22 C53 E31 |
| Date: | 2015–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65514&r=mac |
| By: | Juliane Begenau; Monika Piazzesi; Martin Schneider |
| Abstract: | This paper studies U.S. banks' exposure to interest rate and credit risk. We exploit the factor structure in interest rates to represent many bank positions in terms of simple factor portfolios. This approach delivers time varying measures of exposure that are comparable across banks as well as across the business segments of an individual bank. We also propose a strategy to estimate exposure due to interest rate derivatives from regulatory data on notional and fair values together with the history of interest rates. We use the approach to document stylized facts about the recent evolution of bank risk taking. |
| JEL: | E4 E43 E58 G0 G2 G21 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21334&r=mac |
| By: | Romain RESTOUT (Université de Lorraine, BETA) |
| Abstract: | This paper addresses the role of markup variations in the transmission process of cross-sectoral productivity differential shocks and government spending shocks to the relative price of non-tradables. The Balassa-Samuelson model based on frictionless goods markets predicts that a rise of 1% in the sectoral productivity ratio raises the relative price by 1% while changes in government spending leave the relative price unaffected. Using panel co-integration and unit root tests applied to a panel of 15 OECD economies, our empirical evidence does not support these implications. We find that a rise of 1% in relative productivity raises the relative price of non-tradables by only 0.7% and that an increase in government spending of 1% of GDP drives up the relative price by around 1%. This evidence can be successfully explained by a two-sector open economy model in which variations in the composition of demand for non-tradables give rise to endogenous changes in the markups. |
| Keywords: | Balassa-Samuelson model, Markups, Productivity, Government expenditure |
| JEL: | E20 E62 F31 F41 |
| Date: | 2013–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvre:2013032&r=mac |
| By: | Williamson, Stephen D. (Federal Reserve Bank of St. Louis) |
| Abstract: | This review essay is intended as a critical review of Humpage (2015), and it expands on the issues raised in that volume. Federal Reserve Policy during the financial crisis, and in its aftermath are addressed, along with the relationship to historical experience in the U.S. and elsewhere in the world. |
| Keywords: | Monetary policy; economic history |
| JEL: | E4 E5 N1 |
| Date: | 2015–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2015-015&r=mac |
| By: | Casey B. Mulligan |
| Abstract: | This paper measures the 2007-13 evolution of employment tax rates in the U.K. and the U.S., especially as they are influenced by changes in tax and safety net benefit rules. The magnitudes of the U.S. changes are greater, in the direction of taxing a greater fraction of the value created by employment, and primarily achieved with changes in implicit tax rates. Even though both countries implemented temporary “fiscal stimulus,” their tax rate dynamics were different: the U.S. stimulus increased rates whereas the U.K. stimulus reduced them. The U.K. later increased the tax on employment during its so-called “austerity” period. Employer-cost dynamics are also different in the two countries. The tax rates calculated in this paper are a first ingredient for cross-country comparisons of labor market and fiscal policy dynamics during and after the financial crisis. |
| JEL: | E24 H31 I38 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21358&r=mac |
| By: | Mammadov, Fuad |
| Abstract: | The major goal of this study was analyze the effect of “credibility” shocks to the dynamics of inflation persistence in 20 countries using quarterly data for the period 1980-1998. To address this topic, we used recently developed heterogeneous panel time series methods and found that central bank credibility, as inferred from the black market premium, impacted the degree of inflation persistence associated with central bank interventions and that the magnitude of this effect was correlated with the degree of central bank autonomy. |
| Keywords: | Central bank credibility, black market exchange rate, heterogeneous dynamic panel, panel VAR |
| JEL: | C13 C23 E58 |
| Date: | 2014–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65572&r=mac |
| By: | Jesus Ferreiro (Department of Applied Economics V, University of the Basque Country UPV/EHU); Catalina Galvez (Department of Applied Economics V, University of the Basque Country UPV/EHU); Ana Gonzalez (Department of Applied Economics V, University of the Basque Country UPV/EHU) |
| Abstract: | The paper studies the fiscal policies implemented in the European Union countries since the beginning of the current crisis. With this aim in mind, we have analyzed separately the expansionary fiscal policies implemented at the first stage of the crisis and the fiscal consolidation policies that became widespread at the beginning of the current crisis. The content of the national fiscal policies (discretionary measures versus built-in stabilizers, revenue-based versus expenditure-based fiscal policies, the relationship existing between the size of the fiscal impulses-adjustments and the composition of these measures) shows the significant differences between the fiscal policies implemented in the European Union countries. |
| Keywords: | European Union, fiscal policy, economic crisis. |
| JEL: | E62 E65 H62 O52 |
| Date: | 2015–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:fes:wpaper:wpaper92&r=mac |
| By: | De Pooter, Michiel (Board of Governors of the Federal Reserve System (U.S.)); Rebecca, DeSimone (Columbia Business School); Martin, Robert F. (Barclays Capital); Pruitt, Seth (Arizona State University) |
| Abstract: | In 2010, in response to an ever-worsening fiscal crisis, the ECB began purchasing sovereign debt from troubled euro-area countries through its Securities Market Programme (SMP). This program was designed to improve market functioning and restore the monetary transmission mechanism within the euro area. This paper does not test those ideals. Rather, we test whether SMP purchases systematically lowered peripheral yields and spreads. We find limited evidence of purchase effects but large announcement effects. In addition, on days in which the ECB was believed to have made large purchases, yields moved down, independent of the size of the ECB's purchases or even if the ECB conducted any purchase at all that week. In all, we conclude that the ECB's SMP influenced yields through a confidence channel rather than through any direct purchase effect. In the appendix to this paper we provide a detailed timeline of SMP purchases and market beliefs about purchase timing. |
| Keywords: | Monetary policy; interest rates; recession; European Central Bank; asset purchases; euro area |
| JEL: | E20 E43 E52 F44 |
| Date: | 2015–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1139&r=mac |
| By: | Tallman, Ellis W. (Federal Reserve Bank of Cleveland); Jacobson, Margaret M. (Indiana University) |
| Abstract: | The Federal Reserve System failed to prevent the collapse of intermediation during the Great Depression (1929-1933) and took action as if it was unaware of policies that should have been taken in the event of widespread bank runs. The National Banking Era panics and techniques to alleviate them should have been useful references for how to alleviate a financial crisis. We suggest that the overwhelming effort to finance World War I combined with a perspective held by contemporary Federal Reserve officials that the central bank legislation was sufficient to overcome financial crises are key reasons why the historical experiences were overlooked. |
| Keywords: | Crisis prevention; liquidity provision; Federal Reserve Act |
| JEL: | E58 E61 N22 |
| Date: | 2015–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:1510&r=mac |
| By: | Tomiyuki Kitamura (Bank of England); Ichiro Muto (Bank of Japan); Ikuo Takei (Bank of Japan) |
| Abstract: | We estimate interest rate pass-through in the loan market using an individual bank-based panel dataset from Japan. Previous studies using data from European countries have presented a number of common findings, including that banks with a high proportion of relationship lending tend to set lower pass-through. In this respect, we have obtained similar results using a dataset for Japan going back to the early 2000s. We further examine the influence of borrowing firms' balance sheet characteristics on loan interest rate pass-through, and find that these factors are also important determinants for pass-through dispersion. However, we also find that after the recent global financial crisis, even banks with a high proportion of relationship lending have largely lowered loan interest rates by raising pass-through, and that pass-through has not necessarily been determined in accordance with borrowing firms' balance sheet characteristics. These results differ from those of recent studies on European countries. Possible background factors explaining this change are that (i) pressure to lower loan interest rates has risen due to extensive monetary easing and greater lending competition among banks, while Japan's banking system as a whole has maintained its resilience in the post-crisis period; (ii) demand for bank loans has increased substantially due to disruptions in the market for alternative funding sources, such as commercial paper and corporate bonds; and (iii) public measures to increase bank loans have been broadly introduced in Japan. |
| Keywords: | Loan Interest Rate; Pass-Through; Relationship Lending; Financial Crisis |
| JEL: | E43 E44 G21 |
| Date: | 2015–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojwps:wp15e06&r=mac |
| By: | Arora, Vipin |
| Abstract: | The author argues that the economic benefits of low gasoline prices for the U.S. economy have fallen substantially since the reemergence of America as a major oil producer. The old rule-ofthumb that a 10% fall in the oil price raises inflation-adjusted U.S. GDP by 0.2% is too large - the impact on economic activity should be closer to zero, and may even be negative if consumption grows slowly. The reasons for this change are straightforward, if underappreciated: (i) the value of oil production accounts for a larger share of the U.S. economy; and (ii) consumers are not spending the windfall like they used to because of higher debt levels, limited access to credit, slow wage growth, and an older population. |
| Keywords: | oil price,economic activity,input-output,consumption |
| JEL: | C67 E20 E60 Q43 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201548&r=mac |
| By: | Askenazy, Philippe (Paris School of Economics); Erhel, Christine (University of Paris 1 Panthéon-Sorbonne) |
| Abstract: | Since 2008, France experiences a sharp productivity slowdown. Both output per hour and total factor productivity are particularly deceptive in the market economy. This recent trend contrasts with the acceleration of productivity during the previous crisis in the 1990's and the continuous increase during the following decade. This text provides the first comprehensive exploration of this puzzling break. The direct impacts of the Great Recession on industry composition or reallocation of capital are not significant suspects for a slowdown occurring across business activities. Labour market mechanisms are better candidates. On the one hand, the French labour market policy has massively boosted the creation of low-productive jobs including very-short term employees and self-employed workers. On the other hand, firms, which benefit from massive tax cuts, have hoarded their high-skilled workforce. In addition, the spread of innovative HRM incentives, e.g. employee shareholding, seems to have turned productivity more sensitive to the business cycle (and especially to the fall of stock markets). |
| Keywords: | productivity slowdown, France, labour market policies, recession |
| JEL: | O40 J20 D20 E24 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9188&r=mac |
| By: | Harald Badinger (Department of Economics, WU Vienna); Aurélien Fichet de Clairfontaine (Department of Economics, WU Vienna); Wolf Heinrich Reuter (Department of Economics, WU Vienna) |
| Abstract: | This paper investigates the relationship between countries' fiscal balances and current accounts with an emphasis on the role of fiscal rules. The direct effect of fiscal policy on the current account via aggregate (import) demand is potentially amplified by indirect effects, materializing through interest rate effects and inter-generational transfers that reduce savings. On the other hand, the implied positive relation between fiscal and external balances is potentially attenuated by offsetting changes in savings through Ricardian equivalence considerations. We expect this attenuation effect to be stronger in countries with more stringent fiscal rules and test this hypothesis using a panel of 73 countries over the period 1985-2012. As previous studies we find a positive effect of fiscal balances on the current account, supporting the twin deficit hypothesis. However, the effect of fiscal balances on the current account depends on the stringency of fiscal (budget balance or debt) rules in place; it is reduced by one third on average and virtually eliminated for countries with the most stringent fiscal rules. |
| Keywords: | Twin Deficits, Fiscal Policy, Fiscal Rules, Current Account |
| JEL: | E62 F32 F41 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp196&r=mac |
| By: | Michal Franta |
| Abstract: | A small-scale vector autoregression (VAR) is used to shed some light on the roles of extreme shocks and non-linearities during stress events observed in the economy. The model focuses on the link between credit/financial markets and the real economy and is estimated on US quarterly data for the period 1984–2013. Extreme shocks are accounted for by assuming t-distributed reduced-form shocks. Non-linearity is allowed by the possibility of regime switch in the shock propagation mechanism. Strong evidence for fat tails in error distributions is found. Moreover, the results suggest that accounting for extreme shocks rather than explicit modeling of non-linearity contributes to the explanatory power of the model. Finally, it is shown that the accuracy of density forecasts improves if non-linearities and shock distributions with fat tails are considered. |
| Keywords: | Bayesian VAR, density forecasting, fat tails, non-linearity |
| JEL: | C11 C32 E44 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2015/04&r=mac |
| By: | Bhattacharya, Rudrani (National Institute of Public Finance and Policy); Sen Gupta, Abhijit (Asian Development Bank) |
| Abstract: | Average food inflation in India during the period 2006-2013 was one of the highest among emerging market economies, and nearly double the inflation witnessed in India during the previous decade. In this paper, we analyse the behaviour and determinants of food inflation in India. We find that both demand and supply factors have contributed to the recent surge in food inflation in India. On the demand side, we test the often-cited hypothesis that rising per capita income and diversification of Indian diets has raised the demand for high-value food products and thereby added to inflationary pressures. We find that rise in demand, relative to the supply of a commodity, results in upward pressure in commodity prices. Moreover, rise in prices of key inputs, minimum support prices and fiscal deficits have also impacted the prices of various commodities. Agricultural wage inflation is found to be a universal driver of food commodities inflation, as well as the aggregate food inflation. The contribution of agricultural wages has increased significantly in the post-NREGA era. Our analysis indicates limited role of fuel and international prices. Finally, results suggest significant pass-through effects from food to non-food and to the headline inflation. |
| Keywords: | Food Inflation ; Engel Curves ; QUAIDS Model ; SVEC Model ; India |
| JEL: | E31 E37 Q11 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:15/151&r=mac |
| By: | Hiroaki Miyamoto (University of Tokyo) |
| Abstract: | The share of non-regular employment has been increasing in many developed countries during the past two decades. The objective of this paper is to study a cause of the upward trend in non-regular employment by focusing on productivity growth. Data from Japan shows that productivity growth reduces both unemployment and the proportion of non-regular workers to total employed workers. In order to study the impact of long-run productivity growth on unemployment and non-regular employment, I develop a search and matching model with disembodied technological progress and two types of jobs, regular and non-regular jobs. The numerical analysis demonstrates that faster growth reduces the share of non-regular employment and the unemployment rate, which is consistent with empirical facts. |
| Keywords: | Growth, Unemployment, Non-regular employment, Search and matching model |
| JEL: | E24 J64 O40 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:kch:wpaper:sdes-2015-20&r=mac |
| By: | Piero Pasotti (University of Siena); Alessandro Vercelli (University of Siena) |
| Abstract: | This paper aims to assess to what extent the contributions of Kindleberger to the explanation and control of financial crises may still be a source of valuable insights for the present. Kindleberger had the great merit, to be shared with Minsky, of having resumed in the early 1970s, after an eclipses of more than two decades, the investigation on the intrinsic instability of credit and its impact on financial crises. Though his pure model may be considered less pregnant than that of Minsky, it extends its scope to the international and political aspects of financial crises. In addition Kindleberger provides a powerful support to the model by rooting it in the empirical evidence systematically investigated since the early 18th century. The application of Kindleberger’s model has been successfully extended, with the collaboration of Aliber, also to the financial crises occurred after the publication of his major book (Kindleberger, 1978). This paper argues that Kindleberger’s insights are still invaluable to understand the subprime crisis and the ensuing Great recession and to design the institutions and policies necessary to resume a sustainable path of economic progress. |
| Keywords: | Kindleberger, Financial Crises, International Lender of Last Resort |
| JEL: | B26 E52 E58 F33 F34 |
| Date: | 2015–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:fes:wpaper:wpaper104&r=mac |
| By: | Malcolm Sawyer (University of Leeds) |
| Abstract: | The first major theme is the trends in the processes of financialisation reviewing quantitative and qualitative features of those trends, covering both industrialised and emerging economies. The ways in which the processes of financialisation impact on and interacts with the real sector are discussed with particular reference to the empirical evidence. In this, the financial development—economic growth relations are explored, and whether positive relationship between the two has declined and perhaps reversed in recent decades. There are other ways through which financialisation (particularly in the guise of ownership by the financial sector of the corporate sector and the pursuit of shareholder value) sets the framework for a wide range of decisions taken by corporations including investment and employment. In section 4 the focus is on the ways in which the financial sector could be changed and developed which could be more conducive to supporting sustainable development and high levels of employment and human development. The thrust of the argument is the need to develop diverse financial institutions with a variety of ownership forms whose primary functions are the savings—investment linkages, and to enable funds to flow in a more socially beneficial manner not solely governed by profit calculations of the financial sector. |
| Keywords: | financialisation, economic development, human development, employment, financial structures |
| JEL: | E2 E44 G20 O16 |
| Date: | 2015–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:fes:wpaper:wpaper93&r=mac |
| By: | Eugene N. White |
| Abstract: | During the 1920-1921 recession, the Federal Reserve Bank of Atlanta resisted the deflationary policy sanctioned by the Federal Reserve Board and pursued by other Reserve banks. By borrowing gold reserves from other Reserve banks, it facilitated a reallocation of liquidity to its district during the contraction. Viewing the collapse of the price of cotton, the dominant crop in the region, as a systemic shock to the Sixth District, the Atlanta Fed increased discounting and enabled capital infusions to aid its member banks. The Atlanta Fed believed that it had to limit bank failures to prevent a fire sale of cotton collateral that would precipitate a general panic. In this previously unknown episode, the Federal Reserve Board applied considerable pressure on the Atlanta Fed to adhere to its policy and follow a simple Bagehot-style rule. The Atlanta Fed was vindicated when the shock to cotton prices proved to be temporary, and the Board conceded that the Reserve Bank had intervened appropriately. |
| JEL: | E58 G01 N12 N22 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21341&r=mac |
| By: | Robert A. Blecker |
| Abstract: | Empirical studies have found mixed results regarding whether various countries have wage-led or profit-led demand regimes based on a variety of econometric methodologies. However, most of the previous literature has paid too little attention to the time dimension of this distinction. This paper argues that demand is more likely to be profit led (or, at least, more weakly wage led) in the short run and more likely to be wage led (or more strongly wage led) in the long run, because the positive effects of higher profits (lower labor costs) on investment and net exports are likely to be strongest in the short run, while the positive effects of a higher wage share on consumption are likely to be stronger in the long run. In fact, most of the studies that have found profit-led results have used methodologies that (either intentionally or unintentionally) emphasize short-run cyclical relationships. An examination of correlations in the raw data for the US economy over different time horizons illustrates the plausibility of output and growth being profit led in the short run and wage led in the long run. |
| JEL: | E12 E32 D33 F43 N12 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:amu:wpaper:2015-05&r=mac |
| By: | Daron Acemoglu; Ufuk Akcigit; William Kerr |
| Abstract: | The propagation of macroeconomic shocks through input-output and geographic networks can be a powerful driver of macroeconomic fluctuations. We first exposit that in the presence of Cobb-Douglas production functions and consumer preferences, there is a specific pattern of economic transmission whereby demand-side shocks propagate upstream (to input-supplying industries) and supply-side shocks propagate downstream (to customer industries) and that there is a tight relationship between the direct impact of a shock and the magnitudes of the downstream and the upstream indirect effects. We then investigate the short-run propagation of four different types of industry-level shocks: two demand-side ones (the exogenous component of the variation in industry imports from China and changes in federal spending) and two supply-side ones (TFP shocks and variation in knowledge/ideas coming from foreign patenting). In each case, we find substantial propagation of these shocks through the input-output network, with a pattern broadly consistent with theory. Quantitatively, the network-based propagation is larger than the direct effects of the shocks. We also show quantitatively large effects from the geographic network, capturing the fact that the local propagation of a shock to an industry will fall more heavily on other industries that tend to collocate with it across local markets. Our results suggest that the transmission of various different types of shocks through economic networks and industry interlinkages could have first-order implications for the macroeconomy. |
| JEL: | E32 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21344&r=mac |
| By: | Heather D. Gibson; Stephen G. Hall,; George S. Tavlas |
| Abstract: | We quantify the linkages among banks’ equity performance and indicators of sovereign stress by using panel GMM to estimate a three-equation system that examines the impact of sovereign stress, as reflected in both sovereign spreads and sovereign ratings, on bank share prices. We use data for a panel of five euro-area stressed countries. Our findings indicate that a long-run recursive relationship between sovereigns and banks operated during the euro-area crisis. Specifically, for the five crisis countries considered shocks to sovereign spreads fed-through to sovereign ratings, which affected commercial banks’ equity-prices. Our results also point to the importance of using levels of equity prices -- rather than rates of return -- in measuring banks’ performance. The use of levels allows us to derive the determinants of long-run equity prices. |
| Keywords: | euro-area financial crisis; sovereign-bank linkages; banks’ performance; banking stability |
| JEL: | E3 G01 G14 G21 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:15/13&r=mac |
| By: | Marc-Andre Letendre; Joel Wagner |
| Abstract: | We add agency costs as in Carlstrom and Fuerst (1997) into a two-country, two-good international business cycle model. In our model changes in the relative price of investment arise endogenously. Despite the fact that technology shocks are uncorrelated across countries the relative price of investment is positively correlated across countries in our model, much as it is in detrended US-Europe data. We also find that financial frictions tend to increase the volatility of the terms of trade and the international correlations of consumption, hours worked, output and investment. We then compare this model to an alternative model that also includes risk shocks a la Christiano et al. (2014). We use credit spread data (for the US) to calibrate the AR(1) process for risk shocks. We find that risk shocks are too small to significantly impact the model's dynamics. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2015-09&r=mac |
| By: | Mario Holzner (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Zusammenfassung Aufwind im Westen der MOSOEL In den mittel-, ost- und südosteuropäischen Ländern (MOSOEL) klafft der Ausblick für das Wirtschaftswachstum auch weiterhin auseinander für die meisten der neuen EU-Mitgliedstaaten (NMS) wird eine langsame Beschleunigung des BIP-Wachstums beginnend mit diesem Jahr erwartet. Für 2015 soll das Wachstum durchschnittlich auf 3% ansteigen, um 0,2 Prozentpunkte mehr als im Vorjahr. Die Erholung erfolgt um ein Jahr früher als erwartet. Wesentlicher Faktor ist die bessere Entwicklung in der Eurozone. Auch am Westbalkan wird eine (wenn auch weniger dynamische) Verbesserung der Wachstumsaussichten für die gesamte Prognoseperiode 2015-2017 erwartet. Die wirtschaftliche Entwicklung 2015 in Weißrussland, Kasachstan, Russland und der Ukraine wird düster ausfallen und zum Teil noch schlechter sein als bisher erwartet. Für diese Länder sind die mittelfristigen Wirtschaftsaussichten auch mit substantiellen Risiken behaftet. Insgesamt sollte aber das verstärkte Wachstum in den MOSOEL für die österreichische Wirtschaft als Nachfrageimpuls dienen. Insbesondere die NMS sind für Österreich von zunehmender Bedeutung. English Summary Western CESEE countries in the ascendant The outlook for GDP growth in the Central, East and Southeast Europe (CESEE) region remains divergent we expect a gradual acceleration of GDP growth for most of the EU’s new Member States (NMS) starting this year. For 2015 growth is expected to increase to 3% on average, by 0.2 pp more as compared to last year. The recovery comes a year earlier than expected mainly based on favourable developments in the euro area. In the Western Balkans growth prospects will also improve over the whole forecast period 2015-2017, though slightly less dynamically. Growth performance in Belarus, Kazakhstan, Russia and Ukraine in 2015, however, will be dismal and partly worse than expected; the medium-term outlook for these countries is also fairly uncertain with considerable downside risks. Overall though, we should expect stronger CESEE growth to act as a demand stimulus for the Austrian economy. The NMS in particular are of increasing importance for Austria. |
| Keywords: | macroeconomic analysis, international trade, competitiveness, consumption, investment, savings, global financial crisis |
| JEL: | E20 F34 G01 O52 O57 P24 P27 P33 P52 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:wii:ratpap:rpg:2015-07&r=mac |
| By: | De Pooter, Michiel (Board of Governors of the Federal Reserve System (U.S.)); Martin, Robert F. (Board of Governors of the Federal Reserve System (U.S.)); Pruitt, Seth (Arizona State University) |
| Abstract: | To "ensure depth and liquidity," the European Central Bank in 2010 and 2011 repeatedly intervened in sovereign debt markets through its Securities Markets Programme. These purchases provide a unique natural experiment for testing the effects of large-scale asset purchases on risk premia arising from liquidity concerns. To explore how official intervention influences liquidity premia, we develop a search-based asset-pricing model. Consistent with our model's predictions, we find statistically and economically significant stock and flow effects on sovereign bonds' liquidity premia in response to official purchases. |
| Keywords: | Securities Markets Programme; European Central Bank; bond; liquidity risk; search and matching |
| JEL: | D83 E43 E58 G12 |
| Date: | 2015–07–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1138&r=mac |
| By: | Devlin-Foltz, Sebastian (Board of Governors of the Federal Reserve System (U.S.)); Sabelhaus, John (Board of Governors of the Federal Reserve System (U.S.)) |
| Abstract: | Large swings in aggregate household-sector spending, especially for big ticket items such as cars and housing, have been a dominant feature of the macroeconomic landscape in the past two decades. Income and wealth inequality increased over the same period, leading some to suggest the two phenomena are interconnected. Indeed, there is supporting evidence for the idea that heterogeneity in economic shocks and spending are connected, most notably in studies using local-area geography as the unit of analysis. The Survey of Consumer Finances (SCF) provides a household-level perspective on changes in wealth, income, and spending across different types of families. The SCF confirms that inequality is indeed increasing in recent decades, and the data provide support for the proposition that shocks to income and wealth are indeed related to large swings in spending across and within birth cohorts. However, the economic shocks associated with the Great Recession and changes in spending and debt to income ratios are widespread, and inconsistent with a narrow focus on the experiences and changes in behavior of particular (especially low- and modest-income) households. |
| Keywords: | Consumption; lifecycle; synthetic cohort |
| JEL: | C80 D10 E20 |
| Date: | 2015–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2015-49&r=mac |
| By: | Combes, Jean Louis; Minea, Alexandru; YOGO, Thierry; Mustea, Lavinia |
| Abstract: | In spite of the rapidly growing research on fiscal multipliers over the recent years, little evidence has been so far accumulated in developing and emerging economies. This paper investigates the nature and the size of fiscal multipliers in Central and Eastern European Countries (CEEC). Unlike most of existing literature, we draw upon a panel vector error correction model, which appropriately captures the common long-term path of CEEC, while allowing for different short-run dynamics, in an integrated setup. Our main results show that the spending multiplier is positive, but low on average. Moreover, its sign,significance and magnitude vary across CEEC. Finally, both impulse and cumulative fiscal multipliers are sensitive to a wide range of CEEC characteristics, including the exchange rate regime, the level of economic development,the fiscal stance, and the openness degree. |
| Keywords: | Central and Eastern European Countries; fiscal multipliers; panel vector error correction model |
| JEL: | E6 O1 P35 |
| Date: | 2015–04–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65623&r=mac |
| By: | Adrian Chadi (Institute for Labour Law and Industrial Relations in the EU, University of Trier); Matthias Krapf (Université de Lausanne) |
| Abstract: | During the European sovereign debt crisis, most countries that ran into fiscal trouble had Catholic majorities, whereas countries with Protestant majorities were able to avoid fiscal problems. Survey data show that, within Germany, views on the euro differ between Protestants and Non-Protestants, too. Among Protestants, concerns about the euro have, compared to Non-Protestants, increased during the crisis, and significantly reduce their subjective wellbeing only. We use the timing of survey interviews and news events in 2011 to account for the endogeneity of euro concerns. Emphasis on moral hazard concerns in Protestant theology may, thus, still shape economic preferences. |
| Keywords: | protestantism, euro crisis, subjective wellbeing, media coverage |
| JEL: | E00 I31 L82 Z12 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:iaa:dpaper:201507&r=mac |
| By: | Lancia, Francesco (University of Vienna); Russo, Alessia (Dept. of Economics, University of Oslo) |
| Abstract: | This paper presents a dynamic politico-economic theory of fiscal policy to explain the simultaneous existence of public education and pensions in modern democracies. The driving force of the model is the intergenerational conflict over the allocation of the public budget. Successive generations of voters choose fiscal policies through repeated elections. The political power of elderly voters creates the motive for adults to support public investment in the human capital of future generations, since it expands future pension possibilities. We characterize the Markov perfect equilibrium of the voting game in a small open economy. The equilibrium can reproduce qualitative and quantitative features of intergenerational fiscal policies in modern economies. |
| Keywords: | Intergenerational conflict; Markov perfect equilibrium; pension; public education; repeated voting; small open economy |
| JEL: | D72 E62 H23 H30 H53 |
| Date: | 2015–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:osloec:2015_001&r=mac |
| By: | Agovino, Massimiliano; Ferrara, Maria |
| Abstract: | The aim of this paper is to investigate the effects of an increase in civilian disability pensions on key macroeconomic variables. In particular, the focus is on consumption of households with at least one disabled member. The analysis is performed simulating a DSGE model using Italian data. The exercise is implemented through a reduction of public spending. Results show that an increase of 0.1% of civilian disability pensions ensures that households with disabled member exit from poverty status and also generates an increase of their consumption. Moreover, we observe a positive indirect effect on consumption of households without disabled member. |
| Keywords: | Disabilità, Povertà, Politica fiscale |
| JEL: | E62 I14 J14 |
| Date: | 2015–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65616&r=mac |
| By: | Andreas Bachmann; Kaspar Wüthrich |
| Abstract: | This paper proposes a method for the welfare analysis of pay-as-you-go social security systems. We derive a formula for the welfare consequences of a permanent marginal change in the payroll tax rate that is valid under weak assumptions about the deep structure of the economy. Our approach requires neither a full specification of preferences and technology, nor knowledge of the individual savings behavior. Instead of parameterizing and calibrating the deep model structure, we implement our formula based on reduced form estimates of a VAR model. We apply our method to evaluate the social security system in the United States. |
| Keywords: | social security system; overlapping generations; optimal payroll taxes; welfare analysis; reduced form VAR |
| JEL: | E62 H55 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp1507&r=mac |
| By: | Blom, Erica (affiliation not available); Cadena, Brian C. (University of Colorado, Boulder); Keys, Benjamin J. (Harris School, University of Chicago) |
| Abstract: | This paper examines the relationship between individuals' personal exposure to economic conditions and their investment choices in the context of human capital. Focusing on bachelor's degree recipients, we find that birth cohorts exposed to higher unemployment rates during typical schooling years select majors that earn higher wages, that have better employment prospects, and that more often lead to work in a related field. Much of this switching behavior can be considered a rational response to differences in particular majors' labor market prospects during a recession. However, higher unemployment leads to other meaningful changes in the distribution of majors. Conditional on changes in lifetime expected earnings, recessions encourage women to enter male-dominated fields, and students of both genders pursue more difficult majors, such as STEM fields. These findings imply that the economic environment changes how students select majors, possibly by encouraging them to consider a broader range of possible degree fields. Finally, in the absence of this compensating behavior, we estimate that the average estimated costs of graduating in a recession would be roughly ten percent larger. |
| Keywords: | college major, business cycle, human capital investment, STEM majors, gender differences |
| JEL: | E32 I23 J22 J24 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9167&r=mac |
| By: | Michael C. Burda; Katie Genadek; Daniel S. Hamermesh; |
| Abstract: | Using the American Time Use Survey (ATUS) 2003-12, we estimate time spent by workers in non-work while on the job. Non-work time is substantial and varies positively with the local unemployment rate. While the average time spent by workers in non-work conditional on any positive non-work rises with the unemployment rate, the fraction of workers who report time in non-work varies pro-cyclically, declining in recessions. These results are consistent with a model in which heterogeneous workers are paid efficiency wages to refrain from loafing on the job. That model correctly predicts relationships of the incidence and conditional amounts of non-work with wage rates and measures of unemployment benefits in state data linked to the ATUS, and it is consistent with observed occupational differences in non-work. |
| Keywords: | time use, non-work, loafing, shirking, efficiency wage, labor productivity |
| JEL: | J22 E24 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2015-033&r=mac |
| By: | Andreas A. Papandreou (National and Kapodistrian University of Athens) |
| Abstract: | The objective of this paper is to consider the potential implications of the recent financial and economic crisis on the transition to a low carbon economy. This is unavoidably an exercise in tenuous conjectures given both our proximity to the still unfolding crisis, and the inherent complexity, confusing and highly contested nature of global scale crisis. It is also difficult because our understanding of major energy transitions are still very much in thier infancy, not to mention the unprecedented nature of a transition to a sustainable energy system. The paper begins with a breif review of the Great Recession, considers what lessions can be drawn from past energy transitions and the potential ways that crises, socio-economic transitions and sustainability might be linked. The historical relationship between past recessions and C)2 emissions is presented along with where we stand with respect to meeting mitigation targets. The Great Recession coincided with a relative peak in climate action and the rise of a Green Growth narrative that provides some hope of a joint attack on climate change and economic malaise. This paper will briefly review the idea of Green Growth and Green Keynesianism and look at the evidence on the extent and effectiveness of green demand stimulus following the Great Recession. The paper will argue that despite some early hope and some worthy global developments on the renewables front, public and political priorities shifted dramatically so that on balance the Great Recession can be associated with a 'policy peak' and a lost opportunity to propel the low carbon transition. Moreover, it raises concerns that the continued fragility of the economic recovery will further delay the needed transition. |
| Keywords: | Financial crisis, Great Recession, climate change policy, carbon prices, Green Growth, Green New Deal, socio-economic transitions, low carbon economy. |
| JEL: | E62 G01 O13 Q38 Q43 Q48 Q54 Q58 |
| Date: | 2015–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:fes:wpaper:wpaper88&r=mac |
| By: | Corinne Luu |
| Abstract: | The NZ economy has performed well over the past few years, having achieved relatively strong GDP and employment growth. However, some constraints to sustaining this momentum beyond the short term are emerging in the fields of skills, housing and urban infrastructure. Skills shortages have risen most in construction trades and management occupations. Housing shortages are most severe in Auckland, reflecting supply constraints in the face of population increases. As a result, prices are rising, reducing affordability. Urban infrastructure, particularly for road transportation, is also strained. In this respect, policy has a role to play in expanding economic capacity by reducing supply-side constraints and fostering productivity growth. At times New Zealand’s fiscal policy has been expansionary during upturns. Ensuring that permanent spending or tax cuts are implemented in a sustainable manner would encourage the strong fiscal position that New Zealand needs to meet potentially large macroeconomic shocks and long-run ageing-related costs. This Working Paper relates to the 2015 OECD Economic Review of New Zealand (www.oecd.org/newzealand/economic-survey-new-zealand.htm)<P>Pérenniser la croissance en Nouvelle-Zélande<BR>L’économie néo-zélandaise a enregistré de bons résultats durant ces dernières années, et le PIB tout comme l’emploi ont bénéficié de taux de croissance relativement élevés. Toutefois, cette dynamique pourrait être contrariée à moyen terme par plusieurs difficultés émergentes en matière de compétences, de logement et d’infrastructures urbaines. Les pénuries de compétences affectent principalement les métiers de la construction et les fonctions d’encadrement. Le déficit de logements est avant tout marqué à Auckland, en raison des contraintes pesant sur l’offre de logements et de l’accroissement démographique. Les prix sont donc tirés à la hausse tandis que les possibilités d’accéder au logement diminuent. Les infrastructures, notamment les réseaux routiers, présentent également des insuffisances. À cet égard, les politiques publiques peuvent contribuer à accroître les capacités économiques, en réduisant les contraintes sur le versant de l’offre, et en favorisant les gains de productivité. Par le passé, la Nouvelle-Zélande a suivi une politique budgétaire expansionniste durant certaines phases de reprise économique. Il convient de s’assurer de la viabilité financière à long terme de toute mesure entraînant des dépenses budgétaires ou fiscales permanentes, afin que la Nouvelle-Zélande se trouve dans une situation budgétaire solide lui permettant de faire face à d’éventuels chocs macroéconomiques d’importance et d’assumer, à plus long terme, les coûts liés au vieillissement de sa population. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de la Nouvelle-Zélande 2015 (www.oecd.org/fr/nouvellezelande/etude-e conomique-nouvelle-zelande.htm). |
| Keywords: | fiscal policy, infrastructure, immigration, housing prices, saving, urban planning, labour market, fiscal councils |
| JEL: | E21 G28 H54 H6 J2 J61 R31 R4 R52 |
| Date: | 2015–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1247-en&r=mac |
| By: | Bharadwaj, Prashant (University of California, San Diego); Lundborg, Petter (Lund University); Rooth, Dan-Olof (Linnaeus University) |
| Abstract: | This paper shows that health is an important determinant of labor market vulnerability during large economic crises. Using data on adults during Sweden's unexpected economic crisis in the early 1990s, we show that early and later life health are important determinants of job loss after the crisis, but not before. Adults who were born with worse health (proxied by birth weight) and those who experience hospitalizations (and especially so for mental health related issues) in the pre-crisis period, are much more likely to lose their jobs and go on unemployment insurance after the crisis. These effects are concentrated in the private sector that happened to be more affected by the crisis. The results hold while controlling for individual education and occupational sorting prior to the crisis, and for controlling for family level characteristics by exploiting health differences within twin pairs. We conclude that poor health (both in early life and as adults) is an important indicator of vulnerability during economic shocks. |
| Keywords: | early life, birth weight, economic crises, shocks, unemployment |
| JEL: | I10 I18 J65 E32 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9174&r=mac |
| By: | Carmen M. Reinhart |
| Abstract: | Some of the best-known papers of Carlos F. Díaz Alejandro were about Latin America’s crises in the 1980s and 1930s. I will show data, figures and evidence here about the crises in the advanced economies 30 years later that fit the same narrative. His unadulterated words aptly describe modern problems across geographical borders and, in this case, income levels. This attests to his timeless insight and understanding. Because some of the observations he made have general applicability to the study of recurring patterns across crises, I have taken the liberty to label these as lessons. |
| JEL: | B26 E5 E6 F3 G01 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21350&r=mac |
| By: | Martin Kaae Jensen; Stephen G. Hall,; George S. Tavlas |
| Abstract: | Distributional comparative statics is the study of how individual decisions and equilibrium outcomes vary with changes in the distribution of economic parameters (income, wealth, productivity, distortions, information, etc.). This paper develops tools to address such issues. Central to the developments is a new condition called quasi-concave differences which implies concavity of the policy function in optimization problems. The results are used to show how Bayesian equilibria respond to increased individual uncertainty (less precise private signals); and to derive conditions for concavity of policy functions in general stochastic dynamic programming problems. The latter generalizes Carroll and Kimball (1996) to models with borrowing constraints in the spirit of Aiyagari (1994). |
| Keywords: | Distributional comparative statics, concave policy functions, income distribution, inequality, uncertainty, Bayesian games, dynamic stochastic general equilibrium models, arg max correspondence. |
| JEL: | C61 D80 D90 E20 I30 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:15/14&r=mac |
| By: | Ferreira Sequeda M.T.; Grip A. de; Velden R.K.W. van der (GSBE) |
| Abstract: | Several studies have shown that employees with temporary contracts have a lower training participation than those who have a contract of indefinite duration. There is however no empirical literature on the difference in informal learning on-the-job between permanent and temporary workers. In this paper, we analyse this difference across twenty OECD countries using unique data from the recent PIAAC survey. Using an instrumented control function model with endogenous switching, we find that workers in temporary jobs engage in informal learning more intensively than their counterparts in permanent employment, although the former are, indeed, less likely to participate in formal training activities. In addition, we find evidence for complementarity between training and informal learning for both temporary and permanent employees. Our findings then suggest that temporary employment need not be dead-end jobs. Instead, temporary jobs with high learning content could be a stepping stone towards permanent employment. However, our results also suggest that labour market segmentation in OECD countries actually occurs within temporary employment due to the distinction between jobs with low and high learning opportunities. |
| Keywords: | Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Human Capital; Skills; Occupational Choice; Labor Productivity; Labor Contracts; |
| JEL: | E24 J24 J41 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2015021&r=mac |
| By: | Gabriele Camera (Chapman University, University of Basel); Marco Casari (University of Bologna, IZA); Stefania Bortolotti (University of Cologne) |
| Abstract: | We develop a novel theoretical and experimental framework to study adoption and use of cash versus electronic payments in retail transactions. The design allows us to assess the behavioral impact of sellers’ service fees and buyers’ rewards from using electronic payments. In the experiment, buyers and sellers faced a coordination problem, independently choosing a payment method before trading. Sellers readily adopted electronic payments but buyers did not. Eliminating service fees or introducing rewards significantly increased adoption and use of electronic payments. Buyers’ economic incentives played a pivotal role in the diffusion of electronic payments but cannot fully explain their adoption choices. |
| Keywords: | money, coordination, pricing, transactions |
| JEL: | E1 E4 E5 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:15-13&r=mac |
| By: | Giuseppe Marotta |
| Abstract: | Leaving the Eurozone, as proposed by a referendum in Italy, would fail to reach the promised objectives of higher growth and larger citizens’ say in economic policy, given the economic, legal ad geopolitical constraints for the country . |
| Keywords: | Euro trilemma, Euro-exit, referendum, EMU. |
| JEL: | E40 E61 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:mod:modena:1506&r=mac |
| By: | Bouoiyour, Jamal; Selmi, Refk |
| Abstract: | To the mass public, Bitcoin is well known since its creation by its extreme volatility. However, Bitcoin’s declining fluctuations since the start 2015 has revived our attention to assess whether there is a coming Bitcoin market phase. Using an optimal GARCH model on daily data, we show that the volatility of Bitcoin price decreases notably when comparing the periods [December 2010-June 2015] and [January 2015-June 2015]. During the first interval, the Threshold- GARCH estimates reveal that there is a great duration of persistence and thus tends to follow a long memory process. For the second period, the chosen specification (Exponential-GARCH) displays less volatility persistence. Despite this remarkable volatility’s decrease, we cannot argue that Bitcoin market is mature, since the degree of asymmetry remains strong; Specifically, Bitcoin is likely to be driven by negative rather than positive shocks. |
| Keywords: | Bitcoin; volatility; optimal GARCH model. |
| JEL: | E3 E30 F3 |
| Date: | 2015–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65580&r=mac |
| By: | Christos N. Pitelis (National and Kapodistrian University of Athens); Ilias Anthopoulos (National and Kapodistrian University of Athens); Eleni E. N. Piteli (University of Sussex) |
| Abstract: | The aim of this paper is to map out possible scenarios of international financial development and supra-national governance, and identify opportunities for positive engagement by the EU and emerging countries. Additionally, it examines the prospects for international monetary relations and charts the possible roles of the US and the EU, G8, G20, multilateral credit institutions (e.g., IMF and World Bank) as well as the role of China and sovereign wealth fund countries (e.g., in the Middle East) in future monetary and financial relations. It proposes an alternative form of supra-national governance which Europe could champion, that is simultaneously more inclusive and potentially beneficial to Europe. |
| Keywords: | global engagement, supra-national governance, sustainable wealth creation |
| JEL: | E5 |
| Date: | 2015–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:fes:wpaper:wpaper95&r=mac |
| By: | Mario Tonveronachi (Ragnar Nurkse School of Innovation and Governance, Tallinn University of Technology) |
| Abstract: | After the crisis, the leading international political actors realized that to reaffirm the global nature of finance a new balance was necessary, where the revision and hardening of regulatory standards had to go hand in hand with new mechanisms capable of soothing national fears. In the banking industry, the new balance mainly concerns three elements: a revision of the Basel framework, a novel mechanism of crisis resolution for the SIBs and the introduction of structural measures. We show that a tension exists between fully restoring global finance and erecting national safeguards. This implies redrafting the axiom of the level playing field, previously based on the harmonization of rules. Despite the goal of designing for the entire Union a single rulebook and supervisory handbook, different national reactions to the crisis and the widening and deepening of regulation have sharpened inside the EU existing differences. While countries adhering to the banking union are sailing towards enhanced harmonization, the other EU member countries obtained relevant national discretion to be inserted in the new directives and regulations. The EU is thus not fully escaping the general tendency to leave single jurisdictions to deal with cross-border banking by judging the equivalence of results, not by the compliance with specific rules. |
| Keywords: | G20, FSB, BCBS, EU, banking regulation, banking union, structural regulation |
| JEL: | E44 F3 F53 G15 G18 |
| Date: | 2015–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:fes:wpaper:wpaper96&r=mac |
| By: | Stefano Fenoaltea |
| Abstract: | This paper is the sixth section of Italian Industrial Production, 1861 1913: A Statistical Reconstruction (in progress). It documents the derivation, from the historical sources, of the 26 time series that trace the physical product of the engineering industry, of the corresponding estimates of value added per unit at 1911 prices, and of the further 19 series that trace the industry’s maintenance activity. The shipbuilding and rail-guided-vehicles industries are well documented. The naval-construction series are built up from micro-data, the merchant-construction series from production data; maintenance is indexed by the corresponding fleets, allowing for trade in the maintenance of merchant vessels. The rail-guided-vehicle new production series are built up from abundant data on units acquired, converting these to weight and deducting imports; maintenance is indexed by the weight of the stocks in service (and, in the case of railway vehicles, annual mileage). The rest of the industry is poorly documented. The new production of fabricated metal goods, general equipment, and precision equipment is estimated, together with the corresponding maintenance, using census data to document the composition of the industry at periodic benchmarks, stock (and usage) indices to track maintenance, trade data to document the short-term movements of the various markets for new goods, and aggregate metal consumption as an overall constraint. |
| Keywords: | method, manufacturing, Italy |
| JEL: | E01 N13 N63 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:419&r=mac |
| By: | Calabria, Alejandro A.; Rottenschweiler, Sergio |
| Abstract: | The creation of employment and its formalization is, undoubtedly, a controversial and relevant topic in Argentina. At present, a law project on this subject is under debate: "Promoting Registered Employment and Labor Fraud Prevention", whose aim is to promote employment and/or formalization of new employees, primarily in micro, small and medium-sized enterprises, through the reduction of employer contributions. This decrease in public incomes should be compensated by other sources in order not to affect severely the financing of social security. This paper discusses the contribution that small and medium-sized enterprises to the social security system and examines the impact of the reduction of employer contributions to the financing of social security. |
| Keywords: | Creación de empleo; PyMEs; impacto fiscal |
| JEL: | E62 H25 H32 J38 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65527&r=mac |
| By: | Emmanuelle Taugourdeau (CNRS, Paris School of Economics, CES, ENS Cachan); Abderrahmane Ziad (CREM, UMR CNRS 6211, Normandy University, University of Caen Basse-Normandie) |
| Abstract: | This paper analyzes the tax competition mechanisms in a context of commodity trade. We show that the trade market equilibrium may restore the efficiency of the public good provision when agents from different countries have symmetric preferences. Asymmetry in preferences implies over or underprovision in public goods depending on the degree of asymmetry between countries. In both cases, the price adjustment leaves the capital stock unchanged so that the stock of capital is not affected by the taxes. Finally, we show that the centralized choice does not systematically restore the efficiency of the public good provision. |
| Keywords: | Tax competition, Nash equilibrium, Interregional Trade |
| JEL: | H21 H41 E62 F12 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:201507&r=mac |
| By: | Nelson Manzano (Instituto de Estudios Sociales y Económicos (IESE), Universidad Mayor de San Simon) |
| Abstract: | En la agenda pública de la sociedad cochabambina en 2015 se encuentran instalados un conjunto diverso de temáticas y problemáticas, que por transcurrir un periodo electoral son presentadas y/o expuestas a manera de propaganda por representantes políticos - oficialistas y opositores- para mostrar las cosas que se hicieron o las que no se pudieron hacerse durante los últimos años y de qué eventualmente deberían solucionarse. En este contexto, no obstante, existen determinadas preocupaciones que son -de alguna maneracompartidas con la sociedad civil cochabambina, donde destaca la referida a la marcada tendencia de enfriamiento de la economía departamental de Cochabamba respecto a otras economías departamentales, durante la última década; principalmente respecto a economías departamentales que incorporan ámbitos metropolitanos, tal cual ocurre con la economía del departamento de Cochabamba, respecto a las economías de los departamentos de La Paz y Santa Cruz de la Sierra. Sin embargo, debido a que el análisis de la producción en una economía genera sinergias si se lo analiza en forma combinada con la situación laboral -por actuar como indicador natural de la eficacia y eficiencia de las políticas económicas y sociales- es importante iniciar el presente análisis a partir de la constatación de que en el departamento de Cochabamba -y principalmente, en sus ámbitos urbanos- es recurrente durante los últimos años, la presencia de altas tasas de desempleo, pero sobre todo, la persistencia histórica de altos niveles de precariedad laboral, que verifican la existencia de evidentes problemas en el componente laboral de la producción, pero sobre todo la necesidad real de un abordaje conjunto de estas dos categorías analíticas, para efectos de integrarlas en una misma problemática y una eventual solución compartida. |
| Keywords: | Producción, Empleo, Cochabamba |
| JEL: | E01 J21 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:adv:wpaper:201505&r=mac |
| By: | Elish Kelly (Economic and Social Research Institute, Dublin); Seamus McGuinness (Economic and Social Research Institute, Dublin); Philip J. O'Connell (Geary Institute for Public Policy, University College Dublin); Alberto González Pandiella (OECD, Paris); David Haugh (OECD, Paris) |
| Abstract: | Much research has been undertaken to study the effects of the Great Recession on overall labour market dynamics, but less is known about the impact on immigrants and how it has evolved over the business cycle. Understanding how immigrants were affected is particularly important for Ireland given the important role migrants play in the labour market. This paper attempts to fill this gap by identifying the labour market impact of the Great Recession on immigrants compared to natives and how this relationship has evolved since the downturn. In particular, we compare both groups’ likelihood of being employed and their risk of unemployment pre (2006), at the start of (2008) and during the depth of the employment crisis (2010 and 2012), and as the economy begun to recover (2014). In our analyses, we separately identify the impact of the recession on immigrants who have gained Irish citizenship through naturalisation, from those that retained their country of birth nationality. The main findings of the paper are twofold: i) The employment penalty suffered by immigrant workers, relative to native workers, increased significantly over the Irish recession and subsequent recovery. Differences in labour market outcomes between immigrants and natives were accentuated by the recession, when the employment penalty was the highest. The penalty narrowed in the recovery, although it remains higher than before the crisis; ii) The more recent evolution of the employment penalty appears to be related to a composition effect, as many refugee immigrants with weak labour market attachment became naturalised citizens during the recession. This suggests that the difficulties that some immigrants experience in the labour market would be under-estimated without taking due account of naturalisation processes, as is done in this paper for the first time in Ireland. |
| Date: | 2015–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:ucd:wpaper:201513&r=mac |
| By: | Jean-François FAGNART (Université Saint-Louis Bruxelles, CEREC); Marc GERMAIN (Université de Lille 3, Equippe) |
| Abstract: | Nous introduisons le concept d’empreinte carbone dans un modèle d’offre globale et demande globale avec formation imparfaitement concurrentielle des prix et des salaires et en examinons les propriétés de l’équilibre en présence d’une politique climatique. Nous étudions deux instruments possibles de cette politique, une taxe carbone ou un quota de permis de pollution. Nous montrons qu’à court terme, la politique climatique (ou son durcissement) constitue à la fois un choc d’offre globale négatif et, ceteris paribus, un choc de demande globale positif. Elle provoque donc des effets inflationnistes mais a un impact ambigu sur l’activité économique, l’emploi, le chômage. Ce n’est que dans une économie avec des rigidités nominales suffisantes que la politique climatique stimulera – sous certaines conditions – l’activité à court terme. Dans tous les cas de figure, elle pèsera négativement sur les salaires réels. Nous étudierons encore les interactions entre la politique climatique et les politiques macroéconomiques traditionnelles de demande (stimulus budgétaire ou monétaire) et d’offre (baisse des cotisations sociales). Les effets multiplicateurs de ces politiques sont influencés par l’existence d’une d’une politique climatique et diffèrent selon l’instrument choisi (Taxe ou permis). |
| Keywords: | Offre et demande globale, Politique climatique, Taxe carbone, permis de pollution |
| JEL: | E10 E60 Q58 |
| Date: | 2014–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvre:2014012&r=mac |
| By: | Stefano Fenoaltea |
| Abstract: | This paper is the fifth section of Italian Industrial Production, 1861 1913: A Statistical Reconstruction (in progress). It documents the derivation, from the historical sources, of the four time series that trace the physical product of the ferrous-metals industry, of the further 12 series that trace the physical product of the non-ferrous-metals industries, and of the corresponding estimates of value added per unit at 1911 prices. The pig iron and rail series are taken almost directly from the sources; the semi-finished wrought iron and steel series extensively corrects the figures in the sources over the later decades, and is estimated from the apparent consumption of pig and scrap, allowing for cast iron, over the early ones; the cast iron series is estimated by interpolating widely separated benchmarks on the assumption that the ratio of cast iron to wrought iron and steel in final consumption followed a smoothly declining path. The non-ferrous-metal ingot production series are taken relatively directly from the sources; the corresponding semi-finished-metal series are typically estimated from the apparent consumption of ingot and scrap metal. |
| Keywords: | method, manufacturing, Italy |
| JEL: | E01 N13 N63 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:416&r=mac |
| By: | Stefano Fenoaltea |
| Abstract: | This paper is the third section of Italian Industrial Production, 1861 1913: A Statistical Reconstruction (in progress). It documents the derivation, from the historical sources, of the eight time series that trace the physical product of the kiln-products industry, of the further two series that trace the physical product of processed marble on the one hand, and of other materials on the other, and of the corresponding estimates of value added per unit at 1911 prices. The marble series is based on the apparent consumption of block marble; the others are based on a few benchmarks, interpolated and extrapolated primarily on the basis of construction movements. |
| Keywords: | method, extractive industries, Italy |
| JEL: | E01 N13 N53 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:414&r=mac |
| By: | Stefano Fenoaltea |
| Abstract: | This paper is the tenth section of Italian Industrial Production, 1861 1913: A Statistical Reconstruction (in progress). It documents the derivation, from the historical sources, of the eight time series that trace the product of the utilities industries, and of the corresponding estimates of value added per unit at 1911 prices. The electric utilities are relatively well documented by data on capacity and utilization; separate series trace the production (and distribution) of thermal power on the one hand and hydraulic power on the other. The production of the gas utilities is tracked by separate series for gas, coke, and tar. Data are abundant from the 1890s; the estimates for the earlier years are anchored by an early benchmark, but otherwise largely interpolated. The water utilities are represented by separate series for the exceptional Apulian aqueduct, the other aqueducts, and the local distribution systems. The real product of the Apulian aqueduct, still incomplete, is tracked by the embodied capital. The real product of the other aqueducts is tracked by their equivalent ton-kilometers (the square root of the yield, to allow for economies of scale, times length), estimated from cross-section evidence that includes construction dates. The real product of the local nets is measured by their length (augmented to allow for wells and cisterns), itself reconstructed from sporadic local data. |
| Keywords: | method, utilities, Italy |
| JEL: | E01 N13 N63 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:421&r=mac |
| By: | Stefano Fenoaltea |
| Abstract: | This paper is the second section of Italian Industrial Production, 1861 1913: A Statistical Reconstruction (in progress). It documents the derivation, from the historical sources, of the 27 time series that trace the physical product of the (abundantly documented) mining industry, of the further five series that trace the physical product of the (largely undocumented) quarrying industry, and of the corresponding estimates of value added per unit at 1911 prices. The quarrying output estimates are derived from the likely consumption of those materials by downstream industries; they are accordingly tied to domestic construction movements, rather than assumed to have followed the path of the documented component of the industry (the production of marble, which was largely exported). The unit value added estimates are presented in two versions: one is the conventional measure, which fails exceptionally to exclude the value of the principal raw material consumed by extractive activity, that is, the valuable stuff under ground; the other is the correct measure of the sector’s industrial value added, using the same definitions as are used for all other industries. |
| Keywords: | method, extractive industries, Italy |
| JEL: | E01 N13 N53 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:413&r=mac |
| By: | Marek Urbaniak (Poznan University of Economics); Ricardo Paes Mamede (ISCTE - Lisbon University Institute) |
| Abstract: | This article represents an attempt to empirically explore the effects of the current financial crisis on R&D and innovation across the European countries and aims to contribute to the knowledge on the impact of the financial crisis on the financing of R&D and innovation in Europe. Using macro data, we investigate the statistics on financing R&D and innovation by sectors of performance and sources of funds. A direct effect of the crisis on R&D and innovation expenditure during the crisis is compared with the pre-crisis period. We demonstrate that the EU member states have improved their innovative activities over the 2004–2012 period. This article makes an attempt at filling in the gaps in analyses of the influence that the financial crisis exerts on the financing of R&D and innovation. It is a contribution to the debate regarding the impact of the financial crisis in Europe on the volume and structure of innovation financing by sectors of the economy. |
| Keywords: | financing innovation activities, R&D and innovation expenditures |
| JEL: | G01 E23 O31 O43 O52 |
| Date: | 2015–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:fes:wpaper:wpaper83&r=mac |
| By: | Dimitri Blueschke (Alpen-Adria Universität Klagenfurt, Austria); Viktoria Blüschke-Nikolaeva (Alpen-Adria Universität Klagenfurt, Austria); Ivan Savin (Chair of Microeconomics, Friedrich Schiller University Jena, Germany, and Chair for Economic Policy, Karlsruhe Institute of Technology, Germany, and Bureau d'Economie Theorique et Appliquee, France) |
| Abstract: | We propose a meta-heuristic approach for solving nonlinear dynamic tracking games. In contrast to more 'traditional' methods based on linear-quadratic (LQ) techniques, this derivative-free method is very flexible (e.g. to introduce inequality constraints). The meta-heuristic is applied to a three-player dynamic game and tested versus derivative-dependent method in approximating Nash solution in different game specifications. We demonstrate the superiority of the proposed approach in identifying Nash equilibria, where LQ methods are not applicable. |
| Keywords: | Dynamic games, Nash equilibrium, Differential Evolution |
| JEL: | C61 C63 C72 C73 E61 |
| Date: | 2015–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2015-011&r=mac |
| By: | Petar Vujanovic |
| Abstract: | Indonesia has a very good record of poverty reduction, having halved its incidence over the past two decades. Nevertheless, almost 30 million people still live below the national poverty line, mostly in rural areas and in certain provinces. In order to make further progress in lifting these people out of poverty and economic vulnerability, policy needs to focus on generating strong, inclusive and sustainable growth. Pro-poor growth can assist in the process of economic convergence by facilitating the migration of workers out of the low-productivity agricultural sector into the industry and services sectors. By putting in place the right fundamentals, such as a well-designed and inclusive education system, efficient infrastructure and a stable macroeconomic environment, Indonesia will have decades of strong growth ahead by virtue of economic convergence with frontier countries. This has the potential to lift millions more out of poverty without exacerbating income inequality. Moreover, it will set Indonesia up for the next phase of innovation-driven growth that will propel it into the ranks of high income countries. While existing poverty reduction programmes have become increasingly effective, more resources are required, and efficiency could be further enhanced, especially through better targeting. The distribution of income has become markedly more unequal over the past decade and needs to be kept in mind when formulating growth policies. This Working Paper relates to the 2015 OECD Economic Survey of Indonesia (www.oecd.org/eco/surveys/economic-survey-indonesia.htm)<P>Des politiques en faveur d'une croissance inclusive et durable en Indonésie<BR>L’Indonésie a obtenu de très bons résultats en matière de réduction de la pauvreté, dont l’incidence a été divisée par deux au cours des vingt dernières années. Néanmoins, presque 30 millions d’Indonésiens vivent toujours en dessous du seuil national de pauvreté, dont la majorité dans des zones rurales et dans certaines provinces. Pour qu’il soit possible de continuer à aider ces populations à sortir de la pauvreté et de la vulnérabilité économique, l’action publique doit viser en priorité à susciter une croissance forte, inclusive et durable. L’instauration d’une croissance favorable aux pauvres peut rendre plus aisé le processus de convergence économique en facilitant le redéploiement des travailleurs du secteur agricole, à faible productivité, vers l’industrie et les services. Pour autant qu’elle mette en place les fondamentaux adéquats, comme un système éducatif bien conçu et inclusif, des infrastructures efficientes et un environnement macroéconomique stable, l’Indonésie aura devant elle des décennies de forte croissance en vertu de la convergence économique avec les pays frontières. Une telle évolution a le potentiel d’aider des millions de personnes à sortir de la pauvreté sans accentuer les inégalités de revenus. De plus, l’Indonésie sera ainsi bien placée pour aborder la phase suivante, celle de la croissance tirée par l’innovation, lui permettant ainsi de se hisser aux rangs des pays à haut revenu. Par ailleurs, les programmes existants de réduction de la pauvreté sont devenus de plus en plus efficaces, mais des ressources supplémentaires sont nécessaires, et l’efficacité pourrait être encore améliorée, notamment grâce à un meilleur ciblage. La distribution des revenus est devenue sensiblement plus inégale au cours de la dernière décennie et il conviendra de ne pas perdre cet élément de vue lors de la formulation des politiques en faveur de la croissance. |
| Keywords: | productivity, education, convergence, sustainable growth, middle-income trap, income distribution, inclusive growth, inequality |
| JEL: | A20 D63 E25 H53 H54 H55 I20 I31 I38 |
| Date: | 2015–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1246-en&r=mac |