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on Macroeconomics |
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Issue of 2015‒09‒26
119 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Orphanides, Athanasios |
| Abstract: | The Federal Reserve’s muddled mandate to attain simultaneously the incompatible goals of maximum employment and price stability invites short-term-oriented discretionary policymaking inconsistent with the systematic approach needed for monetary policy to contribute best to the economy over time. Fear of liftoff—the reluctance to start the process of policy normalization after the end of a recession—serves as an example. Causes of the problem are discussed, drawing on public choice and cognitive psychology perspectives. The Federal Reserve could adopt a framework that relies on a simple policy rule subject to periodic reviews and adaptation. Replacing meeting-by-meeting discretion with a simple policy rule would eschew discretion in favor of systematic policy. Periodic review of the rule would allow the Federal Reserve the flexibility to account for and occasionally adapt to the evolving understanding of the economy. Congressional legislation could guide the Federal Reserve in this direction. However the Federal Reserve may be best placed to select the simple rule and could embrace this improvement on its own, within its current mandate, with the publication of a simple rule along the lines of its statement of longer-run goals. |
| Keywords: | discretion; Federal Reserve; liftoff; policy normalization; policy rules |
| JEL: | E32 E52 E58 E61 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10818&r=all |
| By: | Peter N. Ireland |
| Abstract: | This paper develops an affine model of the term structure of interest rates in which bond yields are driven by observable and unobservable macroeconomic factors. It imposes restrictions to identify the effects of monetary policy and other structural disturbances on output, inflation, and interest rates and to decompose movements in long-term rates into terms attributable to changing expected future short rates versus risk premia. The estimated model highlights a broad range of channels through which monetary policy affects risk premia and the economy, risk premia affect monetary policy and the economy, and the economy affects monetary policy and risk premia. |
| JEL: | E32 E43 E44 E52 G12 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21576&r=all |
| By: | Soldatos, Gerasimos T. |
| Abstract: | Today, the world economy is at the brink of a major recession at zero lower bound. The recession has been fomented by the underconsumption induced by (i) the increasing income inequality, which is inherent in the neoliberal policymaking followed the last third of a century, and (ii) the declining wages being brought about by the increasing globalization and hence, international competition. And, the zero lower bound has been the aftermath of continuous interest rate reductions to confront the latent recessionary trends by stimulating investment but by increasing at the same time the prices of assets, bonds, and housing inciting several kinds of “bubbles” and inhibiting investment. The policy of “quantitative easing” in the place of interest rate reductions, a surrogate only of the latter has proved to be so far, for the simple reason that the money injections involved to spur business and household demand, are channeled towards the banking system, which withholds and does not pass on the money to the public. A money gift policy in the sense of transferring money directly to the public as a permanent asset for the private sector but not liability for the public sector, activating subsequently the Pigou effect, is advocated herein to be a viable policy alternative out of the current deadlock, ceteris paribus. |
| Keywords: | Global recession, Underconsumption, Zero lower bound, Quantitative easing, Money gift/rain |
| JEL: | E20 E30 E40 E50 E60 |
| Date: | 2015–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66535&r=all |
| By: | De Koning, Kees |
| Abstract: | The three main economic philosophies (Classical, Keynesians and Monetarists) did not help in preventing the 2007-2008 U.S. financial crisis. Why not? The Classical economists focus on free markets, free of government interference and free of monopolies. They missed the point that when about $10 trillion of the funding in the U.S. housing market is based on borrowed funds, the housing market is no longer free, but depend on what happened to the borrowers. The Keynesians emphasized the need for government interference to counteract recessions by increasing government spending above tax receipts. The U.S. experience over 2008-2015 has shown the fastest growth rate of government debt for a long time, but this did not help individual households to repay their mortgages. Keynesians also believe in the control of money supply but they do not link prevailing interest rates with the affordability of such rates to individual households. The Monetarists believe that banks can and should control the supply of money. It will be clear from this paper that banks did not control their mortgage lending levels in the run up to the financial crisis. Monetarist’s emphasis is on supply level of money rather than on the ability of households to repay outstanding loans, especially those of a long-term nature, out of the incomes earned. All in all a major rethink of policies is required. Why was the financial crisis not foreseen? House price inflation based on excessive lending levels was not regarded as a threat to economic growth, contrary to the threat from cost price inflation. The latter occurs when wages growth or costs of raw materials, intermediate goods and imported goods push up inflation levels. The second reason was that it was not recognized that the supply of mortgage funds as provided by the banks and the financial markets does not necessarily match the needs (or demand) of the collective of individual households. The needs are based on population growth levels, changes in family size and changes in accommodation taste patterns. In the U.S. about 1.8 million new homes are needed every year. The needs of the collective of individual households are also based on income growth, the affordability level. The latter is especially important for lower and median income families. Wall Street thinks in terms of profitability, while Main Street thinks in terms of affordability. The third reason was that the level of the Fed’s base rate sets the funding cost base for banks. Competition for customer deposits adds an additional cost level for banks. The price setting for mortgages is a one sided process whereby banks, and indirectly the Fed, decide what to charge to their customers. As set out in this paper mortgage customers need a “dynamic stability” in their mortgage obligations, one that is linked to the annual CPI level and income growth. The paper proposes a scheme to break the link between the cost of mortgages as set by the banking sector and the mortgage interest costs paid by individual households, with the latter instead being based on the CPI level plus a margin. Such a scheme will stabilize the financial position of individual households both at high and low inflation levels. In some years a surplus will be created between what individual households pay and what the banks receive; in other years there will be a shortfall. The U.S. Treasury could accommodate such temporary surplus/shortfall as a tool for creating stable economic growth, in what could amount to a type of individuals’ quantitative easing. As a further tool for putting the collective of individual households first, rather than the financial sector, a traffic light system can be implemented to slow down the volume of mortgage lending when needed. A future financial crash linked to the housing sector can be avoided if the separation of mortgage interest charged by the banking sector and interest levels paid (based on CPI inflation levels) by the household sector is combined with the traffic light system. ‘Collective Households Economics’ may be a new variant of economic thinking. The need for funds approach is based on the different parameters for the collective individual households than the ones that rule the banking sector. It is paramount, if one wants long-term economic growth to continue, that the need for funds approach prevails. It is based on the needs of the individual household customer base, rather than on the profit levels of the financial markets. Bridges can be built! |
| Keywords: | financial crisis, Collective Household Economics, need for funds approach, separation of interest rates, traffic light system, mortgage lending system in U.S. mortgage defaults |
| JEL: | E32 E4 E43 E44 E58 E6 E61 |
| Date: | 2015–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66851&r=all |
| By: | Lorant Kaszab (Magyar Nemzeti Bank (the Central Bank of Hungary)); Ales Marsal (National Bank of Slovakia) |
| Abstract: | We introduce costly firm-entry a la Bilbiie et al. (2012) into a New Keynesian model with Epstein-Zin preferences and show that it can jointly account for a high mean value of bond and equity premium without compromising the fit of the model to first and second moments of key macroeconomic variables. In the standard New Keynesian model without entry it is easy to generate inflation risks on long-term nominal bonds when placing high coefficient on the output gap in the Taylor rule. Our model is able to generate inflation risks when the coefficient on the output gap is small. In the entry model real risks are lower and inflation risks are ceteris paribus higher than in the standard New Keynesian model without entry due to the appearance of new varieties that help households smooth their consumption better. |
| Keywords: | firm entry, zero-coupon bond, equity premium, nominal term premium, third-order approximation, New Keynesian, Epstein-Zin preferences. |
| JEL: | E13 E31 E43 E44 E62 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:mnb:wpaper:2015/1&r=all |
| By: | Yannis Dafermos (University of the West of England, Bristol) |
| Abstract: | Wynne Godley and Hyman Minsky were two macroeconomists who ‘saw the crisis coming’. This paper develops a simple macrodynamic model that synthesises some key perspectives of their analytical frameworks. The model incorporates Godley’s financial balances approach and postulates that private sector’s propensity to spend is driven by a stock-flow norm (the target net private debt-to-income ratio) that changes endogenously via a Minsky mechanism. It also includes two fiscal rules: a Maastricht-type fiscal rule, according to which the fiscal authorities adjust the government expenditures based on a target net government debt ratio; and a Godley-Minsky fiscal rule, which links government expenditures with private indebtedness following a counter-cyclical logic. The analysis shows that (i) the interaction between the propensity to spend and net private indebtedness can generate cycles and instability; (ii) instability is more likely when the propensity to spend responds strongly to deviations from the stock-flow norm and when the expectations that determine the stock-flow norm are highly sensitive to the economic cycle; (iii) the Maastricht-type fiscal rule is destabilising while the Godley-Minsky fiscal rule is stabilising; and (iv) the paradox of debt can apply both to the private sector and to the government sector. |
| Keywords: | Godley, Minsky, debt cycles, instability, fiscal rules |
| JEL: | E10 E20 E32 E62 |
| Date: | 2015–01–09 |
| URL: | http://d.repec.org/n?u=RePEc:uwe:wpaper:20151509&r=all |
| By: | Nana Kwame Akosah (Bank of Ghana) |
| Abstract: | We examine the effectiveness of monetary policy transmission mechanism in Ghana using several of statistical and econometric techniques for the period 2002M1 – 2014M12. We find monetary policy rate (MPR) to be quite effective in signaling the money market interest rates in both the short run and long run, as the effect is incomplete (that is, not one-to-one). In addition, a hierarchy of short-term money market rates in Ghana is identified as follows: Monetary Policy Rate, Treasury bill rate, Interbank rate and retail rates (preferably, lending rate), accentuating the large role played by Treasury bill interest rate in the interest rate transmission channel in Ghana. Essentially, monetary authority responds positively and contemporaneously to output and inflationary pressures. Inflation is mostly driven by interest rate shock over the medium to long term, pointing to an impact of monetary policy. In the short term, however, exchange rate shock has relatively larger influence on inflation than that emanating from interest rate. In contrast, output is largely driven by credit and assets prices shocks. This suggests that agents’ knowledge about future output prospects are immediately reflected in assets prices before impacting on output. The paper therefore supports policies that would promote strong financial and macroeconomic stability to help inure effective monetary policy transmission in Ghana. |
| Keywords: | Monetary Policy, Inflation Targeting, Transmission Mechanism, Structural Shocks. |
| JEL: | E52 E58 |
| Date: | 2015–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp14-2015&r=all |
| By: | Stephen Kaplan |
| Abstract: | Political economy theory expects that changes in macroeconomic governance are often catalyzed by institutional factors, such as partisanship or elections. I challenge and contextualize this view by incorporating the role of technocratic advisors into a domestic policymaking framework. I contend that structural and elite-level explanations are also important to understanding ideational shifts, particularly in regions like Latin America that suffer from severe economic volatility. Presidents tend to govern from the lens of their crisis past, appointing economic hawks (or mainstream economists) who embrace austerity in the shadow of inflation crises, and economic doves (heterodox economists) who drift from budget discipline following unemployment shocks. Employing an originally constructed data index, the Index of Economic Advisors, I conduct a statistical test of 16 Latin American countries from 1960 to 2011, finding support for sustained idological shifts in technocratic composition and fiscal governance, based on the nature of past shocks. |
| JEL: | B22 E31 E60 E62 E65 H30 H60 N16 O54 O57 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:gwi:wpaper:2015-13&r=all |
| By: | Alexey Vedev (Gaidar Institute for Economic Policy); Mikhail Khromov (Gaidar Institute for Economic Policy) |
| Abstract: | This paper is focused on the investigation of the model for compiling sectoral financial balances in the Russian economy in the context of the development of tools for the analysis of intersectoral financial flows. The paper is aimed at the drafting of methodological recommendations for compiling and analysis of balance of financial results as one of the element of macroanalysis method. Methodology of the research is based on the analysis of the available statistical sources and their comparison for the creation as far as it is feasible full and noncontradictory picture of the financial system of the Russian economy. |
| Keywords: | Russian economy, sectoral balances |
| JEL: | E21 E41 E51 E58 G21 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:gai:wpaper:120&r=all |
| By: | Alexey Vedev (Gaidar Institute for Economic Policy) |
| Abstract: | Evolution of the Russian bank system separates into several stages in the aftermath of the 1998 systemic crisis. Each of the stages is characterized by different external parameters and direct strategies of implementation: monetary policy, funds borrowing, financial markets development. At each of the stages structure of the institutional financial flows was changing. Analysis of the development stages of the Russian economy and its financial sphere is presented not only and not so much in the context of evolution description. Each of the stages represents economic development model ( however, far from a full one). Main issue is the selection of the economic development model for Russia in the current decade. Economic development ideally should be accompanied by not structural disproportions nut, on the contrary, improvement of the structure of institutional financial flows envisaging ability of the national financial system promote sustainable development and counteract external shocks. |
| Keywords: | Russian economy, financial system, bank system, economic development |
| JEL: | E21 E41 E51 E58 G21 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:gai:wpaper:119&r=all |
| By: | Pavel Trunin (Gaidar Institute for Economic Policy); Sergey Narkevich (Gaidar Institute for Economic Policy) |
| Abstract: | 2007-2009 global financial crisis demonstrated that financial markets of major countries can be subject to the large scale system shocks. One of the manifestations of the crisis was the slump of the global trade and significant capital outflow from the emerging markets. This papers deals with the issue of the Russian ruble becoming a regional reserve currency. |
| Keywords: | Russian economy, financial crisis, reserve currency, regional reserve currency, Russian ruble |
| JEL: | E42 E44 E58 F31 F33 F36 F42 F55 G15 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:gai:wpaper:118&r=all |
| By: | Pei Kuang; Kaushik Mitra |
| Abstract: | A model of business cycles in which households do not have knowledge of the long-run growth of endogenous variables and continually learn about this growth is presented. The model features comovement and mutual reinforcement of households' growth expectations and market outcomes and suggests a critical role for shifting long-run growth expectations in business cycle fluctuations. There are important implications for estimating the output gap and the derived cyclically-adjusted fiscal budget balance computed by policy making institutions. |
| Keywords: | Trend, Expectations, Business Cycle, Output Gap, Cyclically-Adjusted Budget Balance |
| JEL: | E32 E62 D84 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:bir:birmec:15-13&r=all |
| By: | Jeremy C. Stein; Adi Sunderam |
| Abstract: | We develop a model of monetary policy with two key features: (i) the central bank has private information about its long-run target for the policy rate; and (ii) the central bank is averse to bond-market volatility. In this setting, discretionary monetary policy is gradualist, or inertial, in the sense that the central bank only adjusts the policy rate slowly in response to changes in its privately-observed target. Such gradualism reflects an attempt to not spook the bond market. However, this effort ends up being thwarted in equilibrium, as long-term rates rationally react more to a given move in short rates when the central bank moves more gradually. The same desire to mitigate bond-market volatility can lead the central bank to lower short rates sharply when publicly-observed term premiums rise. In both cases, there is a time-consistency problem, and society would be better off appointing a central banker who cares less about the bond market. We also discuss the implications of our model for forward guidance once the economy is away from the zero lower bound. |
| JEL: | E44 E52 E58 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21569&r=all |
| By: | Reichlin, Pietro |
| Abstract: | When the nominal return on all public liabilities is allowed to adjust to changing market conditions, or the central bank has access to unlimited open market operations, money growth is likely to stimulate output. This is shown in the model used by Lucas in his Nobel Prize Lecture as an example of the non neutral effects of anticipated monetary expansions. A rise in net outside assets increases households' incentives to work through a reallocation of consumption across periods. This result survives with non interest-bearing cash when the latter does not generate relevant distortions. |
| Keywords: | inflation; monetary policy |
| JEL: | E40 E41 E44 E52 E58 G10 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10819&r=all |
| By: | Mauro Napoletano (OFCE and SKEMA Business School, Sophia-Antipolis (France); Scuola Superiore Sant'Anna, Pisa (Italy)); Andrea Roventini (University of Verona (Italy); Scuola Superiore Sant'Anna, Pisa (Italy); OFCE and SKEMA Business School, Sophia-Antipolis (France)); Jean-Luc Gaffard (OFCE Sciences Po; University of Nice Sophia Antipolis, France; Skema Business School) |
| Abstract: | We build an agent-based model populated by households with heterogenous and time-varying financial conditions in order to study how fiscal multipliers can change over the business cycle and are aected by the state of credit markets. We find that deficit-spending fiscal policy dampens the effect of bankruptcy shocks and lowers their persistence. Moreover, the size and dynamics of government spending multipliers are related to the degree and persistence of credit rationing in the economy. On the contrary, in presence of balanced-budget rules, output permanently falls below pre-shock levels and the ensuing multipliers fall below one and are much lower than the ones emerging from the deficit-spending policy. Finally, we show that different conditions in the credit market significantly affect the size and the evolution of fiscal multipliers. |
| Keywords: | Fiscal multipliers, agent-based models, credit-rationing, balance-sheet recession, bankruptcy shocks |
| JEL: | E63 E21 C63 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2015-30&r=all |
| By: | Lucas Herrenbrueck (Simon Fraser University); Athanasios Geromichalos (University of California – Davis) |
| Abstract: | This essay describes a simple dynamic model of indirect asset liquidity, provides closed form solutions for real and nominal assets, and discusses properties of the solutions. Some of these are standard: assets are imperfect substitutes, asset demand curves slope down, and money is not always neutral. Other properties are more surprising: prices are flexible but appear sticky, and an increase in the supply of liquid assets can decrease welfare. Because of its simplicity, the model can be useful as a building block inside a larger model, and for teaching concepts from monetary theory. |
| Keywords: | monetary-search models, asset liquidity, asset prices, monetary policy |
| JEL: | E41 E51 E52 G12 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:sfu:sfudps:dp15-08&r=all |
| By: | Cukierman, Alex |
| Abstract: | This paper investigates the relationship between the return path to price stability and the extent of flexibility in targeting inflation under perfect reputation as well as under imperfectly anchored inflation targeting systems characterized by imperfect reputation. The first part of the paper shows that the mapping from the flexibility parameter, to the return path to price stability is generally non-unique. It discusses reasons and consequences of this non-uniqueness, and proposes several ways to address the communication and related problems that this fact creates for the conduct of monetary policy. The second part investigates the impact of reputation (defined as the weight given by the public to preannounced interim targets in forming inflationary expectations) on the speed of inflation stabilization. The main result is that higher reputation is associated with faster stabilizations at all levels of the flexibility parameter. |
| Keywords: | anchoring expectations; reputation; return to price stability |
| JEL: | E02 E31 E50 E52 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10827&r=all |
| By: | Camacho, Maximo; Leiva-Leon, Danilo; Pérez-Quirós, Gabriel |
| Abstract: | Previous studies have shown that the effectiveness of monetary policy depends, to a large extent, on the market expectations of its future actions. This paper proposes an econometric framework to address the effect of the current state of the economy on monetary policy expectations. Specifically, we study the effect of contractionary (or expansionary) demand (or supply) shocks hitting the euro area countries on the expectations of the ECB’s monetary policy in two stages. In the first stage, we construct indexes of real activity and inflation dynamics for each country, based on soft and hard indicators. In the second stage, we use those indexes to provide assessments on the type of aggregate shock hitting each country and assess its effect on monetary policy expectations at different horizons. Our results indicate that expectations are responsive to aggregate contractionary shocks, but not to expansionary shocks. Particularly, contractionary demand shocks have a negative effect on short term monetary policy expectations, while contractionary supply shocks have negative effect on medium and long term expectations. Moreover, shocks to different economies do not have significantly different effects on expectations, although some differences across countries arise. |
| Keywords: | business cycles; inflation cycles; monetary policy |
| JEL: | C22 E32 E37 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10828&r=all |
| By: | Maximo Camacho (University of Murcia); Danilo Leiva-Leon (Central Bank of Chile); Gabriel Perez-Quiros (Banco de España, Airef and CEPR) |
| Abstract: | Previous studies have shown that the effectiveness of monetary policy largely depends on market expectations about future policy actions. This paper proposes an econometric framework to address the effect of the current state of the economy on monetary policy expectations. Specifically, we study the effect of contractionary (or expansionary) demand (or supply) shocks hitting the euro area countries on the expectations about the ECB’s monetary policy in two stages. In the first stage, we construct indices of real activity and inflation dynamics for each country, based on soft and hard indicators. In the second stage, we use those indices to provide assessments of the type of aggregate shock hitting each country and assess its effect on monetary policy expectations at different horizons. Our results indicate that expectations are responsive to aggregate contractionary shocks, but not to expansionary shocks. In particular, contractionary demand shocks have a negative effect on short-term monetary policy expectations, while contractionary supply shocks have a negative effect on medium and long-term expectations. Moreover, shocks to different economies do not have significantly different effects on expectations, although some cross-country differences arise. |
| Keywords: | business cycles, inflation cycles, monetary policy |
| JEL: | E32 C22 E27 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1523&r=all |
| By: | Den Haan, Wouter; Rendahl, Pontus; Riegler, Markus |
| Abstract: | The interaction of incomplete markets and sticky nominal wages is shown to magnify business cycles even though these two features – in isolation – dampen them. During recessions, fears of unemployment stir up precautionary sentiments which induces agents to save more. The additional savings may be used as investments in both a productive asset (equity) and an unproductive asset (money). But even a small rise in money demand has important consequences. The desire to hold money puts deflationary pressure on the economy, which, provided that nominal wages are sticky, increases wage costs and reduces firm profits. Lower profits repress the desire to save in equity, which increases (the fear of) unemployment, and so on. This is a powerful mechanism which causes the model to behave differently from both its complete markets version, and a version with incomplete markets but without aggregate uncertainty. In contrast to previous results in the literature, agents uniformly prefer non-trivial levels of unemployment insurance. |
| Keywords: | business cycles; heterogeneous agents; Keynesian unemployment; magnification; propagation; search friction |
| JEL: | E12 E24 E32 E41 J64 J65 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10814&r=all |
| By: | Pablo D'Erasmo; Enrique G. Mendoza; Jing Zhang |
| Abstract: | The question of what is a sustainable public debt is paramount in the macroeconomic analysis of fiscal policy. This question is usually posed as asking whether the outstanding public debt and its projected path are consistent with those of the government's revenues and expenditures (i.e. whether fiscal solvency conditions hold). We identify critical flaws in the traditional approach to evaluate debt sustainability, and examine three alternative approaches that provide useful econometric and model-simulation tools to analyze debt sustainability. The first approach is Bohn's non-structural empirical framework based on a fiscal reaction function that characterizes the dynamics of sustainable debt and primary balances. The second is a structural approach based on a calibrated dynamic general equilibrium framework with a fully specified fiscal sector, which we use to quantify the positive and normative effects of fiscal policies aimed at restoring fiscal solvency in response to changes in debt. The third approach deviates from the others in assuming that governments cannot commit to repay their domestic debt, and can thus optimally decide to default even if debt is sustainable in terms of fiscal solvency. We use these three approaches to analyze debt sustainability in the United States and Europe after the recent surge in public debt following the 2008 crisis, and find that all three raise serious questions. |
| JEL: | E62 F34 F42 H21 H6 H87 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21574&r=all |
| By: | International Monetary Fund. Western Hemisphere Dept. |
| Abstract: | Context and post-program performance: Macroeconomic conditions continued to improve, with the economy recording a second year of strong growth of about 6 percent, significantly higher than envisaged in the 9th Review. The fiscal balance has also been exceptionally strong, reflecting both robust tax revenues and continued strong growth of CBI budgetary fees, while the debt-to-GDP ratio has fallen more rapidly than projected, to 79 percent of GDP. A new government won elections and assumed power in February 2015, which delayed the PPM mission. Article IV: The last Article IV consultation was concluded on March 19, 2014. Current discussions focused on sustaining fiscal prudence, making progress with debt-land swaps, and boosting reform momentum following a further widening of tax exemptions and heightened uncertainty about future CBI inflows. The mission also urged the development of a plan for managing the CBI inflows, support for the regional bank strategy while continuing to strengthen bank oversight, preserving debt sustainability with a strategy for moving forward with the debt-land swap, implementing growth enhancing reforms focusing on strengthening tourism, developing cost-effective energy solutions, and improving the business environment. Post-Program Monitoring: The 36-month SBA for SDR 52.51 million (590 percent of quota) was concluded on July 27, 2014, with total withdrawals of SDR 47.37 million. Following several advance repayments, Fund credit outstanding fell to 298 percent of quota as of end-June 2015, placing St. Kitts and Nevis under Post-Program Monitoring till May 2016, absent additional early repayments. |
| Date: | 2015–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/248&r=all |
| By: | Barnett, William A.; Bhadury, Soumya; Ghosh, Taniya |
| Abstract: | Following the exchange-rate paper by Kim and Roubini (2000), we revisit the questions on monetary policy, exchange rate delayed overshooting, the inflationary puzzle, and the weak monetary transmission mechanism; but we do so for the open Indian economy. We further incorporate a superior monetary measure, the aggregation-theoretic Divisia monetary aggregate. Our paper confirms the efficacy of the Kim and Roubini (2000) contemporaneous restriction, customized for the Indian economy, especially when compared with recursive structure, which is damaged by the price puzzle and the exchange rate puzzle. The importance of incorporating correctly measured money into the exchange rate model is illustrated, when we compare models with no-money, simple-sum monetary measures, and Divisia monetary measures. Our results are confirmed in terms of impulse response, variance decomposition analysis, and out-of-sample forecasting. In addition, we do a flip-flop variance decomposition analysis, finding two important phenomena in the Indian economy: (i) the existence of a weak link between the nominal-policy variable and real-economic activity, and (ii) the use of inflation-targeting as a primary goal of the Indian monetary authority. These two main results are robust, holding across different time period, dissimilar monetary aggregates, and diverse exogenous model designs. |
| Keywords: | Monetary Policy; Monetary Aggregates; Divisia monetary aggregates; Structural VAR; Exchange Rate Overshooting; Liquidity Puzzle; Price Puzzle; Exchange Rate Puzzle; Forward Discount Bias Puzzle. |
| JEL: | C32 E51 E52 F3 F41 |
| Date: | 2015–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66800&r=all |
| By: | Boel, Paola (Sveriges Riksbank, Sweden); Waller, Christopher J. (Federal Reserve Bank of St. Louis) |
| Abstract: | We construct a monetary economy in which agents face aggregate demand shocks and hetero- generous idiosyncratic preference shocks. We show that, even when the Friedman rule is the best interest rate policy, not all agents are satiated at the zero lower bound. Thus, quantitative easing can be welfare improving since it temporarily relaxes the liquidity constraint of some agents, without harming others. Moreover, due to a pricing externality, quantitative easing may also have beneficial general equilibrium effects for the unconstrained agents. Lastly, our model suggests that it can be optimal for the central bank to buy private debt claims instead of government debt. |
| Keywords: | Money; Heterogeneity; Stabilization Policy; Zero Lower Bound; Quantitative Easing |
| JEL: | E40 E50 |
| Date: | 2015–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2015-027&r=all |
| By: | Adam, Klaus; Tzamourani, Panagiota |
| Abstract: | We study the distributional consequences of housing price, bond price and equity price increases for Euro Area households using data from the Household Finance and Consumption Survey (HFCS). The capital gains from bond price and equity price increases turn out to be concentrated among relatively few households, while the median household strongly benefits from housing price increases. The capital gains from bond price increases (relative to household net wealth) do not correlate with household net wealth (or income). Bond price increases thus leave net wealth inequality largely unchanged. In contrast, equity price increases largely benefit the top end of the net wealth (and income) distribution, thus amplify net wealth inequality. Housing price increases display a hump shaped pattern over the net wealth distribution, with the poorest and richest households benefitting least. With regard to the latter finding there exists considerable heterogeneity across Euro Area countries. |
| Keywords: | monetary policy,asset prices,net wealth distribution,inequality,household survey |
| JEL: | D14 D31 E21 E31 E52 E58 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:272015&r=all |
| By: | Svensson, Roger (Research Institute of Industrial Economics (IFN)); Westermark, Andreas (Sveriges Riksbank) |
| Abstract: | Gesell taxes on money holdings have received attention in recent decades as a way of alleviating the zero lower bound on interest rates. Less known is that such a tax was the predominant method used to generate seigniorage in large parts of medieval Europe for around two centuries. When the Gesell tax was levied, current coins ceased to be legal tender and had to be exchanged into new coins for a fee – an institution known as renovatio monetae or periodic re-coinage. This could occur as often as twice a year. Using a cash-in-advance model, prices increase over time during an issue period and falls immediately after the re-coinage date. Agents remint coins and the system generates tax revenues if the tax is su¢ ciently low, if the time period between re-coinages is su¢ ciently long, and if the probability of being penalized for using illegal coins is su¢ ciently high. |
| Keywords: | Seigniorage; Gesell tax; Periodic re-coinage: Cash-in-advance model |
| JEL: | E31 E42 E52 N13 |
| Date: | 2015–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1083&r=all |
| By: | António Afonso; João Tovar Jalles |
| Abstract: | We assess the time varying features of fiscal sustainability in the euro area via revisiting the empirical relationship between the primary budget surplus and the debt-to-GDP ratio. Focusing on a sample of 11 Euro-area countries between 1999Q1 and 2013Q4 and by means of time series analyses, we find that: i) fiscal policy seems to have been sustainable in Belgium, France, Germany and Netherlands and a Ricardian (monetary dominant) regime might have been present; ii) debt exhibited a negative response following an innovation in the budget surplus in half of the sample; iii) the time-varying coefficient model shows that the 2008-2009 global economic and financial crisis exerted a sizeable negative impact on fiscal sustainability; iv) expenditure-based fiscal rules are strong determinants of fiscal sustainability. All in all, we found some evidence against the Fiscal Theory of the Price Level. |
| Keywords: | fiscal sustainability, causality, impulse response functions, time-varying coefficients, fiscal rules, logistic model |
| JEL: | E62 H62 O52 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp132015&r=all |
| By: | Kriwoluzky, Alexander; Müller, Gernot; Wolf, Martin |
| Abstract: | Membership in a currency union is not irreversible. Expectations of exit may emerge during a sovereign debt crisis, because by exiting countries can redenominate and reduce their liabilities. This possibility alters the dynamics of sovereign debt crises. We establish this formally within a small open economy model of changing policy regimes. The model permits explosive dynamics of debt and sovereign yields inside the currency union and allows us to distinguish between exit expectations and those of an outright default. By estimating the model on Greek data, we quantify the contribution of exit expectations to the crisis dynamics during 2009-2012. |
| Keywords: | currency union; euro crisis; exit; fiscal policy; redenomination premium; regime-switching model; sovereign debt crisis |
| JEL: | E41 E52 E62 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10817&r=all |
| By: | International Monetary Fund. Asia and Pacific Dept |
| Abstract: | Context: The Philippine economy is expected to grow in line with potential, at around 6½ percent per annum. Inflation is projected to remain within the BSP’s target band (3±1 percent). The external position is strong and fiscal policy is prudent, with a declining public debt ratio. Its small, bank-centric financial system has strong buffers, and risks associated with bank-corporate-real estate linkages are currently contained. Poor infrastructure has constrained private investment and job creation. Public investment continues to be low due to weak implementation capacity despite an increase in the investment budget and progress on fiscal transparency. Investment in human capital has been raised but needs to be stepped up. Financial development and inclusion, as well as structural reforms to foster competition and diversification, are essential for inclusive growth. Risks: Tilted to the downside; tighter global financial conditions and a surge in financial volatility leading to sharp capital outflows; continuing weak budget execution; and severe El Niño conditions. |
| Date: | 2015–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/246&r=all |
| By: | Cai, Xiaoming; Den Haan, Wouter; Pinder, Jonathan |
| Abstract: | Should an unexpected change in real GNP of x% lead to an x% change in the forecasts of future GNP? The answer could be no even if GNP is a random walk. We show that US economic downturns often go together with predictable short-term recoveries and with changes in long-term GNP forecasts that are substantially smaller than the initial drop. But not always! Essential for our results is that GNP forecasts are not based on a univariate time series model, which is not uncommon. Our alternative forecasts are based on a simple multivariate representation of GNP’s expenditure components. |
| Keywords: | business cycles; forecasting; unit root |
| JEL: | C53 E32 E37 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10815&r=all |
| By: | Ricardo Álvarez Torres (Economic Research Institute of the National Autonomous University of Mexico (UNAM)); María Irma Manrique Campos (Economic Research Institute of the National Autonomous University of Mexico (UNAM)); Alejandra Fernández Hernández (Universidad Politécnica del Estado de Morelos (UPEMOR)) |
| Abstract: | The output plays one of the main roles in both theoretical: orthodox and heterodox framework. In Mexico, where was embrace, and it is still ruling, an Inflation Targeting policy, it says that the output gap determines the inflation level, hence it symbolize worthy role of the application policy. Besides the fact that, in the heterodox framework, where the aggregate demand determines the output, it in turn, affect the level of employment, etc. This paper portrays, though statistics analysis, how monetary policy affects the output in Mexican case, also to provide a contrast of the role of product into the orthodox and heterodox framework. |
| Keywords: | Monetary Policy, Output, Mexico |
| JEL: | E52 E58 O42 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:2704737&r=all |
| By: | Jaimovich, Nir; Rebelo, Sérgio; Wong, Arlene |
| Abstract: | We document two facts. First, during recessions consumers trade down in the quality of the goods and services they consume. Second, the production of low-quality goods is less labor intensive than that of high-quality goods. So, when households trade down, labor demand falls, increasing the severity of recessions. We find that the trading-down phenomenon accounts for a substantial fraction of the fall in U.S. employment in the recent recession. We study two business cycle models that embed quality choice and find that the presence of quality choice magnifies the response of these economies to real and monetary shocks. |
| Keywords: | business cycle; quality choice; recessions |
| JEL: | E2 E3 E4 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10807&r=all |
| By: | Naveen Srinivasan (Madras School of Economics); Pankaj Kumar (Indira Gandhi Institute of Development Research and Reserve Bank of India) |
| Abstract: | When it comes to measuring inflation persistence, a common practice in empirical research is to estimate univariate autoregressive moving average (ARMA) time series models and measure persistence as the sum of the estimated AR coefficients. We examine four potential sources of lag dynamics in inflation: the evolution of policymakers willingness to stabilize output, shifts in the mean inflation rate, imperfect credibility and learning and unemployment persistence. We show that the reduced-form solution for inflation in all these models have an ARMA(p,q) representation. By implication estimating a reduced-form for inflation will not be able to distinguish among these alternative hypotheses. We illustrate this using US and UK data. |
| Keywords: | Inflation Persistence; Identification; Kalman Filter |
| JEL: | E31 E52 E58 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:mad:wpaper:2015-104&r=all |
| By: | Garcia Fortuny, Judit |
| Abstract: | Many countries around the world suffer from corruption. In a monetary union, corruption varies from one country to another. It is possible corruption in one country may affect another country in a monetary union. We demonstrate that this feature has important implications in a monetary union with two asymmetric countries. Country 1 has a corrupted government while country 2 does not. Within this framework, we determine under which conditions corruption damages or benefits both countries. We find that corruption in country 1 may have a positive or negative effect on country 2. In particular, when the government of country 1 is much more concerned about public spending than output, corruption damages both countries. In addition, we investigate how country 1 could compensate country 2 for the negative externality. JEL classification: D60, D73, E52, E58, E62. Keywords: Corruption; Fiscal Policy; Monetary Policy; Monetary Union. |
| Keywords: | Corrupció, Unions monetàries, Política fiscal, Política monetària, 33 - Economia, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:urv:wpaper:2072/254374&r=all |
| By: | Jacek Suda (National Bank of Poland); Patrick Pintus (Aix-Marseille School of Economics) |
| Abstract: | This paper develops a simple business-cycle model in which financial shocks have large macroeconomic effects when private agents are gradually learning their uncertain environment. When agents update their beliefs about the parameters that govern the unobserved process driving financial shocks to the leverage ratio, the responses of output and other aggregates under adaptive learning are significantly larger than under rational expectations. In our benchmark case calibrated using US data on leverage, debt-to-GDP and land value-to-GDP ratios for 1996Q1-2008Q4, learning amplifies leverage shocks by a factor of about three, relative to rational expectations. When fed with actual leverage innovations observed over that period, the learning model predicts a sizeable recession in 2008-10, while its rational expectations counterpart predicts a counter-factual expansion. In addition, we show that procyclical leverage reinforces the amplification due to learning and, accordingly, that macro-prudential policies enforcing countercyclical leverage dampen the effects of leverage shocks. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:577&r=all |
| By: | Landon, Stuart (University of Alberta, Department of Economics); Smith, Constance (University of Alberta, Department of Economics) |
| Abstract: | The growth of debt and deficits in developed countries has led many states to consider the adoption of fiscal rules. There is little evidence on the benefits of different types of rules. This study uses Monte Carlo techniques to examine the impact on welfare and government spending stabilization of five types of government expenditure rules. The simulation employs a three-variable VAR estimated using data for the Canadian provinces. The use of a VAR captures the interactive effects between spending under the fiscal rule, output and revenue. The best fiscal rules reduce government expenditure volatility by about half relative to a balanced budget rule. The stabilization benefit is about twice as great for the three provinces with more resource-based and volatile revenue — Alberta, Saskatchewan and Newfoundland. Some fiscal rules lead to an unsustainable path for government debt or assets under many simulations due to an absence of feedback from the stock of debt or assets to current expenditure. We find that a simple rule, where government expenditure is based on the moving average of past government revenue, is one of the better performing rules and yields a level of expenditure stabilization and a welfare gain similar to the more complicated “debt brake” rule adopted by Switzerland and other countries. The Swiss rule requires forecasts for revenue and output, and its greater complexity may make it more difficult to implement, monitor, and communicate to the public. |
| Keywords: | fiscal rules; fiscal policy; stabilization; government spending; Canadian government; economic policy |
| JEL: | E61 E62 E63 H61 H62 H63 |
| Date: | 2015–09–11 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2015_013&r=all |
| By: | Khosravi, Taha |
| Abstract: | In this paper a methodical empirical analysis of the bank lending channel of monetary transmission in the European Union’s 10 new member states is conducted. We specifically investigate the influence of monetary policy changes on bank lending activity and if this potential influence is contingent on bank characteristics, such as banks’ size, capital, liquidity and risk factor. Panel data compiled from a large number of banks from 2004 to 2013, and dynamic panel estimation methods are used. The results indicate the existence of a bank lending channel through bank liquidity; however, while liquidity and GDP growth maintain a beneficial and substantial impact on bank loan growth, the other bank characteristics are not considered to be important factors. Additionally, there is an indication of the effect of bank risk and liquidity from 2008 to 2010. Nevertheless, the lending channel has been weakened, serving as an additional refutation of bank-specific traits in allowing banks to maintain lending activity and growth during a financial crisis. |
| Keywords: | Bank lending channel, EU-10 countries, Monetary policy transmission, Panel data. |
| JEL: | C23 E51 E52 G21 |
| Date: | 2015–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66795&r=all |
| By: | Jhuvesh Sobrun; Philip Turner |
| Abstract: | Financial conditions in the emerging markets (EMs) have become more dependent on the 'world' long-term interest rate, which has been driven down by monetary policies in the advanced economies - notably Quantitative Easing (QE) - and by several non-monetary factors. This paper analyses some new mechanisms that link global long-term rates to monetary policy and to domestic bank lending in the EMs. Understanding these mechanisms could help EM central banks prepare for the exit from QE and higher (and perhaps divergent) policy rates in advanced economies. Although monetary policy in the EMs has continued to be guided by domestic objectives, it has nevertheless lost some traction. Difficult trade-offs now confront central banks. |
| Keywords: | Exit from QE, long-term interest rate, emerging market economies, bond markets |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:508&r=all |
| By: | Angana Banerji; Bergljot Barkbu; James John; Tidiane Kinda; Sergejs Saksonovs; Hanni Schoelermann; Tao Wu |
| Abstract: | The momentum for structural reforms is waning in the euro area at a time when even faster progress is needed to boost productivity and growth, achieve real economic convergence, and improve the resilience of the monetary union. What can the European Union (EU) institutions do to bridge this divide? This paper argues for greater simplicity, transparency and accountability in the EU governance framework for structural reforms. Our three interrelated proposals—“outcome-based†benchmarking; better use of existing EU processes to strengthen oversight and reduce discretion; and improved financial incentives—could help advance reforms. Ex post monitoring by an independent EU-level “structural council†and ex ante policy innovation by national productivity councils could strengthen accountability and ownership. Deeper governance reforms should be considered in the medium-term with a view toward a greater EU role in promoting convergence. |
| Keywords: | Fiscal reforms;Euro Area;European Economic and Monetary Union;Institutional framework;Structural reform, European economic governance, European Union |
| Date: | 2015–09–11 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/201&r=all |
| By: | International Monetary Fund. Middle East and Central Asia Dept. |
| Abstract: | Context: Over the past two decades, Kazakhstan has successfully harnessed its oil resources to bolster economic growth, increase buffers, and reduce poverty. However, in the face of recent large and likely long-lasting external shocks?lower oil prices, Russia slowdown, and corollary exchange rate (ER) movements (ruble depreciation, dollar appreciation)—growth has decelerated rapidly, financial conditions have tightened, and pressures on the balance of payments and exchange rate have built up. The shocks have also increased financial sector vulnerabilities, where nonperforming loans (NPLs), while declining significantly, remain high, and rising balance sheet risks and tight exchange rate management, have put further drag on banks’ lending and economic activity. Nevertheless, more recently, and in response to reduced currency pressures and reduced spreads, the authorities successfully tapped the international capital markets and widened the ER band. Focus of consultation and key recommendations: The consultation focused on calibrating the policy response to address Kazakhstan’s near-term challenges and long-term goals of becoming a dynamic emerging market economy. Principally, there is need to (i) identify credible medium-term fiscal consolidation measures to ensure sustainability; (ii) introduce greater exchange rate flexibility to help the economy absorb current and future external shocks; (iii) bolster financial sector resilience to limit adverse spillovers back to the real sector; and (iv) implement structural reforms to ensure durable growth and shared prosperity. Previous consultation: During the 2014 Article IV Consultation, Directors stressed the importance of restoring confidence in the post-devaluation environment and further strengthening the policy frameworks to bolster the economy’s resilience to shocks. Specifically, Directors (i) urged appropriate supervisory actions to enforce the NPL ceilings effectively, while ensuring adequate provisions; (ii) highlighted the need to speed up the introduction of a new policy interest rate instrument; (iii) stressed the need to enhance fiscal coverage and integration into a consistent macro-fiscal framework; and (iv) noted the priority of strengthening human capital and institutions, and lowering the role of the state in the economy. Since then, the authorities’ resolute efforts on lowering NPLs have begun to pay off, and important early steps have been taken to enhance monetary policy operations, ER flexibility, and communication. Progress in bolstering the fiscal policy framework, however, has been slow. The authorities have also embarked on an ambitious structural reform program and recently completed negotiations to join the WTO within 2015. |
| Date: | 2015–09–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/241&r=all |
| By: | José Ramón García; Valeri Sorolla |
| Abstract: | With the standard Diamond-Mortensen-Pissarides labor market with frictions we analyze when there is more employment with individual wage setting compared to collective wage setting, using a wage equation generated by the standard total surplus sharing rule. Using a Cobb-Douglas production function we findnd that if the bargaining power of the individual is high compared to the bargaining power of the union there is more unemployment with individual wage setting and the opposite is also true. When the individual worker and the union have the same bargaining power, if the cost of open a vacancy is high enough, there is more unemployment with individual wage setting. Finally, for a constant marginal product of labor production function AL, when the individual worker and the union have the same bargaining power, individual bargaining produces more unemployment. |
| Keywords: | Matching Frictions, Unemployment, Individual and Collective Wage Setting. |
| JEL: | E24 O41 |
| Date: | 2015–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:aub:autbar:953.15&r=all |
| By: | Sami Ben Naceur; Amr Hosny; Gregory Hadjian |
| Abstract: | Dollarization rates in the Caucasus and Central Asia (CCA) region are among the highest in the world, with adverse consequences for macroeconomic stability, monetary policy transmission, and financial sector development. Using dynamic panel data models, we find that foreign exchange deposits and loans in the CCA are mainly driven by volatile inflation and exchange rates, low financial depth, and asymmetric exchange rate policies biased toward depreciation. Although there is no unique formula for success, empirical studies and cross-country experiences suggest that credible monetary and exchange rate frameworks, low and stable inflation, and deep domestic financial markets are essential ingredients of any de-dollarization strategy. In implementation, policymakers need to consider proper sequencing of policies, effective communication as well as risks from potential financial disintermediation and instability, and/or capital flight. |
| Date: | 2015–09–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/203&r=all |
| By: | Vincent Yao (Fannie Mae); Tomasz Piskorski (Columbia University); Amit Seru (University of Chicago); Benjamin Keys (University of Chicago) |
| Abstract: | This paper investigates the impact of lower mortgage rates on household balance sheets and other economic outcomes during the housing crisis. We use proprietary loan-level panel data matched to consumer credit records using borrowers' Social Security numbers, which allows for accurate measurement of the effects. Our main focus is on borrowers with agency loans, which constitute the vast majority of U.S. mortgage borrowers. Using a difference-in-differences framework that exploits variation in the timing of rate resets of adjustable rate mortgages with different fixed-rate periods, we find that a sizable decline in mortgage payments ($150 per month on average) induces a significant drop in mortgage defaults, an increase in new financing of durable consumption (auto purchases) of more than 10% in relative terms, and an overall improvement in household credit standing. We identify important heterogeneity in the ability of monetary policy to stimulate households' consumption: Low-wealth borrowers are especially responsive to reductions in mortgage payments, while credit-constrained households use more than 70% of their increased liquidity to deleverage, dampening their consumption response. These findings also qualitatively hold in a sample of less-prevalent borrowers with private non-agency loans. We then use regional variation in mortgage contract types to explore the impact of lower mortgage rates on broader economic outcomes. Regions more exposed to mortgage rate declines saw a relatively faster recovery in house prices, increased durable (auto) consumption, and increased employment growth, with responses concentrated in the non-tradable sector. Our findings have implications for the pass-through of monetary policy to the real economy through mortgage contracts and household balance sheets. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:705&r=all |
| By: | Raphael Schoenle (Brandeis University); Ernesto Pasten (Banco Central de Chile, Toulouse School of Economics) |
| Abstract: | In a quantitative rational inattention model, monetary non-neutrality quickly vanishes as rms price more goods while monetary non-neutrality is strong in a single-product setting under otherwise identical conditions. This result is due to (1) economies of scope that arise naturally in the multi-product setting, where processing information is costly but using already internalized information is free, and (2) good-specic shocks that account for a nonzero fraction of the within-rm dispersion of log price changes, which we document in U.S. data. As a consequence, as rms price more goods, they shift attention from good-specic to common shocks, such as monetary shocks. Aggregate prices then respond much faster to monetary shocks due to strategic complementarity. |
| Keywords: | rational inattention, multi-product rms, monetary non-neutrality |
| JEL: | E3 E5 D8 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:brd:wpaper:91&r=all |
| By: | Mavroeidis, Sophocles; Plagborg-Moller, Mikkel; Stock, James H. |
| Abstract: | We review the main identification strategies and empirical evidence on the role of expectations in the New Keynesian Phillips curve, paying particular attention to the issue of weak identification. Our goal is to provide a clear understanding of the role of expectations that integrates across the different papers and specifications in the literature. We discuss the properties of the various limited-information econometric methods used in the literature and provide explanations of why they produce conflicting results. Using a common dataset and a flexible empirical approach, we find that researchers are faced with substantial specification uncertainty, as different combinations of various a priori reasonable specification choices give rise to a vast set of point estimates. Moreover, given a specification, estimation is subject to considerable sampling uncertainty due to weak identification. We highlight the assumptions that seem to matter most for identification and the configuration of point estimates. We conclude that the literature has reached a limit on how much can be learned about the New Keynesian Phillips curve from aggregate macroeconomic time series. New identification approaches and new datasets are needed to reach an empirical consensus. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:hrv:faseco:22795845&r=all |
| By: | Henry Ngongo (UEA) |
| Abstract: | This study aims to identify the leading of inflation indicators of monetary policy in DRC. The results reveal that the most relevant inflation indicators usually come from the monetary origin than the real sector. Variance decomposition analyzes place in the foreground the rate of exchange, the money supply and the public consumption like the most relevant indicators. In order to achieve its goal of price stability and to support a strong economic growth, the intermediate objective of the Central Bank baseded on the controle of the money supply seems to be less relevant. Relates to a high level of the dollarization, the central bank will be able to adopt either the strategy of nominal anchoring of the rate of exchange, this calls the return of the fixed exchange regime or to adopt a strategy of inflation targeting is to restore the credibility of the monetary policy |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1509.06504&r=all |
| By: | Federici, Daniela; Saltari, Enrico; Wymer, Clifford |
| Abstract: | In this paper we present a non-linear model where ICT sector is endogenized. In the model there are two intermediate goods: a traditional good produced by capital and labor and the ICT good produced by innovative capital and skilled labor. The final good is obtained combining the two intermediate goods. The model is specified and estimated as continuous-time general disequilibrium framework. Our main results are the following. We find that the elasticity of substitution of the aggregate sector has a value intermediate between that of the ICT sector and that of the traditional sector, since the input complementarity is tighter in the former than in the latter. Moreover, in all the sectors elasticities are well below 1. As for the traditional sector, whose share is predominant in the production of the final good, the input complementarity helps explain most of the labour share decline of Italian economy as a consequence of the slowdown in the growth of capital intensity. In the ICT sector, technological progress, both in the form of capital augmenting and capital bias, showed a decline over the sample period with an obvious negative consequence on the global evolution of the technical progress. The results about the dynamics of the two intermediate sectors allows to interpret the "Italian paradox" of an industrial structure marked by an increasing weight of the traditional sector. |
| Keywords: | Nested CES production function; Elasticity of substitution; Endogenous technical progress and ICT technical change; Disequilibrium model; Continuous-time econometrics. |
| JEL: | C51 E22 E23 O41 |
| Date: | 2015–09–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66723&r=all |
| By: | International Monetary Fund. Western Hemisphere Dept. |
| Abstract: | Economic outlook: St. Vincent and the Grenadines’ economic recovery from the global economic crisis has been curbed by a series of significant natural disasters, while rehabilitation and reconstruction costs have pushed current account and fiscal deficits higher. After an estimated 1.1 percent growth rate in 2014, growth is projected to pick up modestly to 2.1 percent in 2015 on a pickup in tourism, agriculture and enhanced implementation of much-needed rehabilitation and reconstruction projects. Risks to short term growth are to the downside due to uncertainty about the authorities’ capacity to implement fully the needed development projects. In the medium term, growth has upside potential as the completion of the new international airport may have a larger-than-projected impact on tourism, with significantly larger than average natural disasters a downside risk. Policy Challenges: A stronger medium-term fiscal consolidation effort will be critical to build much needed fiscal space, not least in case of future natural disasters. Measures to ensure fiscal sustainability include improving the efficiency of revenue collection, eliminating domestic arrears, and reducing current spending as a share of GDP. Structural reforms, to ease the costs of doing business and increase agricultural productivity, are critical to improving competitiveness and ensuring medium-term growth and current account sustainability. Improving resilience to adverse weather events will help reduce tail risks to growth and fiscal sustainability. Policy response to past advice: The authorities have made some progress in implementing policies previously outlined. Tax compliance has improved significantly and an arrears monitoring and management system has been developed. Progress has been limited on rationalizing tax exemptions and limiting transfers to state-owned enterprises. |
| Keywords: | Article IV consultation reports;Economic growth;Fiscal policy;Fiscal consolidation;Climatic changes;Fiscal reforms;Economic indicators;Press releases;St. Vincent and the Grenadines; |
| Date: | 2015–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/259&r=all |
| By: | Monica Billio (University Ca’ Foscari of Venice; Italy); Roberto Casarin (University Ca’ Foscari of Venice; Italy); Francesco Ravazzolo (BI Norwegian Business School, and Norges Bank, Norway); Herman K. van Dijk (Erasmus University Rotterdam, the Netherlands) |
| Abstract: | Interconnections between Eurozone and United States booms and busts and among major Eurozone economies are analyzed using a Panel Markov-Switching VAR model. The model accommodates changes in low and high data frequencies and incorporates endogenous time-varying transition matrices of country-specific Markov chains. These country-specific Markov chains depend on their own past history and the history of other chains, thus allowing for interconnections between cycles, and an endogenous common Eurozone cycle is derived by aggregating the country-specific cycles. The model is estimated using a simulation based Bayesian approach in which an efficient multi-move sampling algorithm is defined to draw time-varying Markov-switching chains. Using industrial production growth and credit spread data for all countries, several empirical results have emerged. Recession, slow gro wth and expansion are empirically identified as three regimes with slow growth becoming persistent in the Eurozone in recent years different from the US. The Eurozone and the US regimes appear not fully synchronized, with evidence of more recessions in the Eurozone. Second, turning point analysis indicates larger synchronization at the beginning of the Great Financial Crisis: this shock affects the US first, leading the Eurozone cycle, and spreads then rapidly among these economies. Third, amplification effects influence recession probabilities for Eurozone countries when shocks occur. The evidence is different for the US where this reinforcement does not exist. In recent years there are more imbalances among regimes in Eurozone countries. Fourth, a credit shock results in substantial negative industrial production growth for several months in Germany, Spain and the US. |
| Keywords: | Bayesian Modelling; Panel VAR; Markov-switching; International Business Cycles; Interaction mechanisms |
| JEL: | C11 C15 C53 E37 |
| Date: | 2015–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20150111&r=all |
| By: | Hanif, Muhammad Nadim; Malik, Muhammad Jahanzeb |
| Abstract: | This study compares the forecasting performance of various models of inflation for a developing country estimated over the period of last two decades. Performance is measured at different forecast horizons (up to 24 months ahead) and for different time periods when inflation is low, high and moderate (in the context of Pakistan economy). Performance is considered relative to the best amongst the three usually used forecast evaluation benchmarks – random walk, ARIMA and AR(1) models. We find forecasts from ARDL modeling and certain combinations of point forecasts better than the best benchmark model, the random walk model, as well as structural VAR and Bayesian VAR models for forecasting inflation for Pakistan. For low inflation regime, upper trimmed average of the point forecasts out performs any model based forecasting for short period of time. For longer period, use of an ARDL model is the best choice. For moderate inflation regime different ways to average various models’ point forecasts turn out to be the best for all inflation forecasting horizons. The most important case of high inflation regime was best forecasted by ARDL approach for all the periods up to 24 months ahead. In overall, we can say that forecasting performance of different approaches is state dependent for the case of developing countries, like Pakistan, where inflation is occasionally high and volatile. |
| Keywords: | Inflation, Forecast Evaluation, Random Walk model, AR(1) model, ARIMA model, ARDL model, Structural VAR model, Bayesian VAR model, Trimmed Average |
| JEL: | C52 E31 E37 |
| Date: | 2015–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66843&r=all |
| By: | Al-Jarhi, Mabid |
| Abstract: | Islamic finance has several comparative advantages over conventional finance. Since they are related to efficiency, stability and other macroeconomic benefits, they cannot be easily internalized by Islamic bankers. Islamic bankers have no incentive to stick to the Islamic finance paradigm and instead tend to mimic conventional finance. Regulation is therefore required to modify their behavior in order to allow the Islamic finance industry to enjoy its advantages. This paper attempts to modify the economic theory of bank regulations towards that aim. |
| Keywords: | Islamic banking, Islamic finance, Islamic monetary and financial economics, regulations banking, finance |
| JEL: | E4 E5 E6 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66744&r=all |
| By: | Oliver Holtemöller; S. Mallick |
| Abstract: | This paper investigates a perception in the political debates as to what extent poor countries are affected by price movements in the global commodity markets. To test this perception, we use the case of India to establish in a standard SVAR model that global food prices influence aggregate prices and food prices in India. To further analyze these empirical results, we specify a small open economy New-Keynesian model including oil and food prices and estimate it using observed data over the period from 1996Q2 to 2013Q2 by applying Bayesian estimation techniques. The results suggest that big part of the variation in inflation in India is due to cost-push shocks and, mainly during the years 2008 and 2010, also to global food price shocks, after having controlled for exogenous rainfall shocks. We conclude that the inflationary supply shocks (cost-push, oil price, domestic food price and global food price shocks) are important contributors to inflation in India. Since the monetary authority responds to these supply shocks with a higher interest rate which tends to slow growth, this raises concerns about how such output losses can be prevented by reducing exposure to commodity price shocks and thereby achieve higher growth. |
| Keywords: | commodity prices, food prices, New-Keynesian macroeconometric model, inflation, India, structural vector autoregressive model |
| JEL: | C32 E31 Q02 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:15-15&r=all |
| By: | Antoine Le Riche (AMSE - Aix-Marseille School of Economics - EHESS - École des hautes études en sciences sociales - Centre national de la recherche scientifique (CNRS) - Ecole Centrale Marseille (ECM) - AMU - Aix-Marseille Université, GAINS - University of Maine); Francesco Magris (LEO - François Rabelais University of Tours) |
| Abstract: | We study a two-sector OLG economy in which a share of old age consumption expenditures must be paid out of money balances and we appraise its dynamic features. We first show that competitive equilibrium is dynamically efficient if and only if the share of capital on total income is large enough while a steady state capital per capita above its Golden Rule level is not consistent with a binding liquidity constraint. We thus focus on the gross substitutability in consumption and on dynamic efficiency assumptions and show that, gathered together, they ensure the local determinacy of equilibrium and, as a consequence, rule out sunspot fluctuations. In addition, we prove that the unique steady state may change its stability from a saddle configuration to a source one (undergoing a flip bifurcation) for a capital intensive investment good as well as for a capital intensive consumption good, when the elasticity of the interest rate is set low enough. However, when the investment good is not too capital intensive, the flip bifurcation turns out to be compatible with high elasticities of the interest rate too. Analogous results within dynamic efficiency are found in the non-monetary model, the existence of a flip bifurcation requiring now a capital intensive investment good. Eventually, under dynamic inefficiency, in the non-monetary economy local indeterminacy may instead appear, either through a Hopf bifurcation or through a flip one, and its scope improves as soon as the consumption good becomes more and more capital intensive. |
| Keywords: | overlapping generations,two-sector,money demand,dynamic efficiency,equilibrium dynamics |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01199654&r=all |
| By: | Dmitriy Sergeyev (Bocconi University); Neil Mehrotra (Brown University) |
| Abstract: | The labor market recovery since the end of the Great Recession has been characterized by a marked decline in labor market turnover. In this paper, we provide evidence that the housing crisis and financial nature of the Great Recession account for this decline in job flows. We exploit MSA-level variation in job flows and housing prices to show that a decline in housing prices diminishes job creation and lagged job destruction. Moreover, we document differences across firm size and age categories, with middle-sized firms (20-99 employees) and new and young firms (firms less than 5 years of age) most sensitive to a decline in house prices. We propose a quantitative model of firm dynamics with collateral constraints, calibrating the model to match the distribution of employment by firm size and age. Financial shocks in our firm dynamics model depresses job creation and job destruction and replicates the empirical pattern of the sensitivity of job flows across firm age and size categories. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:520&r=all |
| By: | Akinci, Ozge (Federal Reserve Bank of New York); Chahrour, Ryan (Boston College) |
| Abstract: | We show that a model with imperfectly forecastable changes in future productivity and an occasionally binding collateral constraint can match a set of stylized facts about “sudden stop” events. “Good” news about future productivity raises leverage during times of expansion, increasing the probability that the constraint binds, and a sudden stop occurs, in future periods. The economy exhibits a boom period in the run-up to the sudden stop, with output, consumption, and investment all above trend, consistent with the data. During the sudden stop, the nonlinear effects of the constraint induce output, consumption, and investment to fall substantially below trend, as they do in the data. |
| Keywords: | news shocks; sudden stops; leverage; boom-bust cycle |
| JEL: | E32 F41 F44 G15 |
| Date: | 2015–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:738&r=all |
| By: | Tsz-Nga Wong (Bank of Canada); Pierre-Olivier Weill (UCLA); Guillaume Rocheteau (University of California, Irvine) |
| Abstract: | We construct a tractable model of monetary exchange with search and bargaining that features a non-degenerate distribution of money holdings in which one can study the short-run and long-run effects of changes in the money supply. While money is neutral in the long run, an unanticipated, one-time, money injections in a centralized market with flexible prices and unrestricted participation generates an increase in aggregate real balances and aggregate output, a decrease in the rate of return of money, and a redistribution of output and consumption levels across agents in the short run. Moreover, the initial impact on the price level is non-monotonic with the size of the money injection, e.g., small injections can lead to a deflation followed by inflation. We also study repeated money injections and show they can lead to higher output and higher welfare. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:793&r=all |
| By: | Christopher G. Gibbs; Mariano Kulish |
| Abstract: | We study disinflations under imperfect credibility of the central bank. Imperfect credibility is modeled as the extent to which agents rely on adaptive learning to form expectations. Lower credibility increases the mean, variance, and skewness of the distribution of sacrifice ratios. When credibility is low, disinflationary policies become very costly for adverse realizations of the shocks. Even if the impact of an announcement decreases with lower credibility, pre-announcing a disinflation reduces the sacrifice ratio. Additionally, disinflationary policies implemented after a period of below trend inflation lead to lower sacrifice ratios. Opportunistic disinflations are desirable when credibility is low. |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2015-36&r=all |
| By: | Bauer, Anja (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]) |
| Abstract: | "Using high-quality administrative data, I analyze workers' opportunity costs of reallocation across occupations by measuring the additional time spent in unemployment before being hired in a new occupation. Furthermore, I inspect the wage changes after reallocation and find that workers who change occupations through unemployment face wage losses. Interpreted through the lens of islands models in the spirit of Lucas/Prescott (1974), these findings are counterintuitive because workers would only reallocate when they can recoup the costs of reallocation through wage gains. To shed some light on the question of what other factors may drive reallocation, I further investigate whether other economic conditions of an occupation might be more important in the worker's decision to reallocate. I assess whether the workers direct their search across markets with respect to job finding rates and job separation rates and labor market tightness, finding that they play no decisive role." (Author's abstract, IAB-Doku) ((en)) |
| JEL: | E24 J62 J64 |
| Date: | 2015–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:201526&r=all |
| By: | Balasubramanyan, Lakshmi (Federal Reserve Bank of Cleveland); Craig, Ben R. (Federal Reserve Bank of Cleveland); Thomson, James B. (University of Akron); Zaman, Saeed (Federal Reserve Bank of Cleveland) |
| Abstract: | We examine how a combination of credit market and asset quality information can jointly be used in assessing bank franchise value. We find that expectations of future credit demand and future asset quality explain contemporaneous bank franchise value, indicative of the feedback in credit market information and its consequent impact on bank franchise value. |
| Keywords: | bank franchise value; asset quality; credit demand; information; expectations |
| JEL: | E52 G01 G28 |
| Date: | 2015–09–18 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:1515&r=all |
| By: | Pierre-Richard Agénor; Pengfei Jia |
| Abstract: | This paper studies the performance of time-varying capital controls on cross-border bank borrowing in an open-economy, dynamic stochastic general equilibrium model with credit market frictions and imperfect capital mobility. The model is calibrated for a middle-income country and is shown to replicate the main stylized facts associated with a fall in world interest rates (capital inflows, real appreciation, credit boom, asset price pressures, and output expansion). A capital controls rule, which is fundamentally macroprudential in nature, is defined in terms of either changes in bank foreign borrowing or cyclical output. An optimal, welfare-maximizing rule is established numerically. The analysis is then extended to solve jointly for optimal countercyclical reserve requirements and capital controls rules. These instruments are complements in the sense that both are needed to maximize welfare. However, a more aggressive reserve requirement rule (which responds to the credit-output ratio) also induces less reliance on capital controls. Thus, at the margin, countercyclical reserve requirements and capital controls are partial substitutes in maximizing welfare. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:man:cgbcrp:212&r=all |
| By: | Dirk Krueger; Alexander Ludwig |
| Abstract: | In this paper we compute the optimal tax and education policy transition in an economy where progressive taxes provide social insurance against idiosyncratic wage risk, but distort the education decision of households. Optimally chosen tertiary education subsidies mitigate these distortions. We highlight the quantitative importance of general equilibrium feedback effects from policies to relative wages of skilled and unskilled workers: subsidizing higher education increases the share of workers with a college degree thereby reducing the college wage premium which has important redistributive benefits. We also argue that a full characterization of the transition path is crucial for policy evaluation. We find that optimal education policies are always characterized by generous tuition subsidies, but the optimal degree of income tax progressivity depends crucially on whether transitional costs of policies are explicitly taken into account and how strongly the college premium responds to policy changes in general equilibrium. |
| JEL: | E62 H21 H24 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21538&r=all |
| By: | Salahodjaev, Raufhon |
| Abstract: | This article empirically investigates the effect of intelligence on inflation, using data from 122 countries, over the period 1990 – 2013. The findings suggest strong evidence for the hypothesis that intelligence is negatively linked to inflation. This paper documents that on average, when national IQ increases from the level of El Salvador (78 points) to that of Malaysia (91.7 points), the long run inflation decreases by 27 percent. In particular, the negative effect of intelligence on inflation is stronger in countries with low levels of democracy. The negative impact of national IQ remains robust when controlled for potential determinants of inflation. |
| Keywords: | inflation; IQ; intelligence; democracy; cross-country |
| JEL: | E31 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66882&r=all |
| By: | Mete Kilic; Jessica A. Wachter |
| Abstract: | What is the driving force behind the cyclical behavior of unemployment and vacancies? What is the relation between job creation incentives of firms and stock market valuations? This paper proposes an explanation of labor market volatility based on time-varying risk, modeled as a small and variable probability of an economic disaster. A high probability of a disaster implies greater risk and lower future growth, which lowers the incentives of firms to invest in hiring. During periods of high disaster risk, stock market valuations are low and unemployment rises. The risk of a disaster generates a realistic equity premium, while time- variation in the disaster probability generates the correct magnitude for volatility in vacancies and unemployment. The model can thus explain the comovement of unemployment and stock market valuations present in the data. |
| JEL: | E24 E32 G12 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21575&r=all |
| By: | Gopinath, Gita; Kalemli-Ozcan, Sebnem; Karabarbounis, Loukas; Villegas-Sanchez, Carolina |
| Abstract: | Following the introduction of the euro in 1999, countries in the South experienced large capital inflows and low productivity. We use data for manufacturing firms in Spain to document a significant increase in the dispersion of the return to capital across firms, a stable dispersion of the return to labor across firms, and a significant increase in productivity losses from misallocation over time. We develop a model of heterogeneous firms facing financial frictions and investment adjustment costs. The model generates cross-sectional and time-series patterns in size, productivity, capital returns, investment, and debt consistent with those observed in production and balance sheet data. We illustrate how the decline in the real interest rate, often attributed to the euro convergence process, leads to a decline in sectoral total factor productivity as capital inflows are misallocated toward firms that have higher net worth but are not necessarily more productive. We conclude by showing that similar trends in dispersion and productivity losses are observed in Italy and Portugal but not in Germany, France, and Norway. |
| Keywords: | Capital Flows; Dispersion; Europe; Misallocation; Productivity |
| JEL: | D24 E22 F41 O16 O47 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10826&r=all |
| By: | Anwar, Dr. Mumtaz; Shabbir, Dr. Ghulam; Shahid, M. Hassam; Samreen, Wajiha |
| Abstract: | Potato figures among the principal crop in Pakistan. This paper describes the determinants of potato prices in Punjab, Pakistan. Annual data for the period 1998-2014 were analyzed to identify factors affecting the prices of potato. Results indicated that temperature and world oil prices were significantly affecting price. Seasonal variation of prices are also analyzed in this paper. This paper also use ARIMA and ARMA model to forecast the prices. These results suggest that temperature increase above the limit will lead to increase in prices and support prices also. |
| Keywords: | Whole sale potato prices, pricing factors, Seasonal Variation, determinants of potato, ARIMA & ARMA, forecasting. |
| JEL: | E3 E31 E37 |
| Date: | 2015–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66678&r=all |
| By: | Canova, Fabio; Ferroni, Filippo; Matthes, Christian |
| Abstract: | The paper studies how parameter variation affects the decision rules of a DSGE model and structural inference. We provide diagnostics to detect parameter variations and to ascertain whether they are exogenous or endogenous. Identification and inferential distortions when a constant parameter model is incorrectly assumed are examined. Likelihood and VAR-based estimates of the structural dynamics when parameter variations are neglected are compared. Time variations in the financial frictions of a Gertler and Karadi's (2010) model are studied. |
| Keywords: | endogenous variations; misspecification; Structural model; time varying coefficients |
| JEL: | C10 E27 E32 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10803&r=all |
| By: | Dupor, William D. (Federal Reserve Bank of St. Louis) |
| Abstract: | This paper analyzes the impact of within-state military spending and national military spending on a state's employment. I estimate that, while within-state spending increases that state's employment (i.e., a positive local effect), an increase in national military spending ceteris paribus decreases employment in the state (i.e., a negative spillover effect). The combined local and spillover effects imply an aggregate employment effect that is close to zero. The estimates are consistent with a resource reallocation explanation: Persons take jobs in or move to a state with increased military spending, but they leave when increased out-of-state military spending creates opportunities elsewhere. I find support for this interpretation based on estimates of population changes by demographic groups in response to spending shocks. |
| Keywords: | Fiscal policy; local fiscal multipliers; spillovers |
| JEL: | E62 |
| Date: | 2015–09–18 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2015-026&r=all |
| By: | Michal Moszynski (Nicolaus Copernicus University, Poland) |
| Abstract: | The scientific objective of this study is an attempt to clarify the institutional aspects of the functioning of the labour market in Germany that are relevant to the response to the crisis of 2008-2009. After a brief review of the selected institutions in Germany in comparison to the OECD countries, the labour market reforms undertaken in the period between 2002 and 2007 will be discussed. Then, selected on the basis of literature studies, institutional buffers of the labour market mitigating shocks are examined with particular emphasis on the instruments of internal flexibility, social partners’ behaviour and institutional connections of labour markets with other domains of economic order. The elements of institutional framework are subject to qualitative analysis backed up by available official statistical data. |
| Keywords: | crisis, Germany, labour market institutions, employment, unemployment |
| JEL: | E24 H12 J52 A11 A14 B16 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no160&r=all |
| By: | Troy Matheson |
| Abstract: | Global financial conditions are poised to tighten further as the global recovery proceeds. While monetary policy normalization should be a healthy global development as growth continues to recover in advanced economies, financial spillovers seen during the taper episode—which started with the announcement in May 2013 of possible tapering of U.S. asset purchases—hint at potential challenges for Brazil. The Fed’s communications related to normalization have improved significantly since the taper episode and, at present, a rise in Fed Funds rate in 2015 is widely anticipated by markets—arguably the most widely anticipated tightening of monetary policy in history. While Brazil could benefit from tighter global financial conditions associated with improved global prospects, bouts of heightened uncertainty about the future course of monetary policy cannot be ruled out. Thus, the correct diagnosis of the underlying reasons behind tighter global financial conditions remains crucially important for Brazil. Adverse spillovers can be mitigated by strengthening policy frameworks and fundamentals. |
| Date: | 2015–09–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/194&r=all |
| By: | Riffat, Nisma; Munir, Kashif |
| Abstract: | This study investigates the existence of non-linear relationship between debt and economic growth in South Asia and explored the channels through which debt has its nonlinear impact on the growth of economy. Panel data on four South Asian countries over the period of 1991 to 2013 utilized and fixed effect model employed for estimation. The results suggest that there is nonlinear relationship between debt and economic growth in South Asian countries and the channels through which debt transmits impact into the economy are private investment, public investment and total factor productivity. The government should stimulate the revenue generation and reduce its huge current expenditures. Reducing debt accumulation alone will not rectify the problem unless the supplementary macroeconomic policies are made sound. By removing political constraints, macroeconomic imbalances, improving governance, reducing dependency on foreign aids and eliminating structural distortions, the problem of debt can be resisted. |
| Keywords: | Debt, Economic Growth, Investment, Total Factor Productivity, South Asia |
| JEL: | C23 H6 O47 |
| Date: | 2015–09–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66830&r=all |
| By: | Ratna Sahay; Martin Cihak; Papa N'Diaye; Adolfo Barajas; Srobona Mitra; Annette Kyobe; Yen Nian Mooi; Reza Yousefi |
| Abstract: | Using several recently available global datasets, this Staff Discussion Note examines macroeconomic effects of financial inclusion. It finds significant benefits to economic growth from financial inclusion, but the benefits diminish as financial inclusion and depth become large. Broadening access to credit can compromise economic and bank stability in countries with weak bank supervision. Other forms of financial inclusion—such as access to and use of bank accounts, branches, and ATMs—do not hurt stability, and can be promoted extensively. The note finds that gaps in financial inclusion are associated with economic inequality, but the association appears relatively weak. |
| Keywords: | Financial services;Household credit;Business enterprises;Inclusive growth;Financial sector;Financial stability;financial inclusion, economic growth, economic stability, financial stability, gender, inequality |
| Date: | 2015–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfsdn:15/17&r=all |
| By: | Bekiros, Stelios D.; Cardani, Roberta; Paccagnini, Alessia; Villa, Stefania |
| Abstract: | Recently there has been an increasing awareness on the role that the banking sector can play in macroeconomic activity, especially within the context of the DSGE literature. In this work, we present a DSGE model with financial intermediation as in Gertler and Karadi (2011). The estimation of the shocks and of the structural parameters shows that time-variation can be crucial in the empirical analysis. As DSGE modeling fails to take into account inherent nonlinearities of the economy, we introduce a novel time-varying coefficient state-space estimation method for VAR processes, for homoskedastic and heteroskedastic error structures (TVP-VAR). We conduct an extensive empirical exercise to compare the out-of-sample forecastability of the DSGE model versus standard ARs, VARs, Bayesian VARs and TVP-VARs. We find that the TVP-VAR provides the best forecasting performance for the series of GDP and net worth of financial intermediaries for all steps-ahead, while the DSGE model with the incorporation of a banking sector outperforms the other specifications in forecasting inflation and the federal funds rate at shorter horizons. |
| Keywords: | DSGE, Extended Kalman Filter, Financial Frictions, Banking Sector |
| JEL: | C11 C13 E37 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2015/04&r=all |
| By: | Velauthapillai, Jeyakrishna |
| Abstract: | Obwohl die Idee der makroökonomischen Perspektive der Regulierung des Banken- und Finanzmarktes bereits in den 1970er und 1980er Jahren entstand, hat dieser Ansatz erst durch die Immobilien- und Finanzkrise dieses Jahrhunderts große Bedeutung erlangt. Aufgrund mangelnder Erfahrungen der Industrieländer mit dieser Art der Regulierung gibt es in den letzten Jahren große Bestrebungen sowohl auf nationaler als auch auf internationaler Ebene einen geeigneten Politikrahmen zu entwickeln und die Operationalisierung dieser Politik voranzutreiben. Dieser Aufsatz gibt einen Überblick über die Literatur, die sich mit der makroprudenziellen Regulierung auseinandersetzt und liefert eine Einführung in die wichtigsten relevanten Aspekte dieser Politik. |
| Keywords: | makroprudenzielle Regulierung,Finanzstabilität,Banken- und Finanzmarkt,regulatorische Politik |
| JEL: | G21 G28 E52 E58 E44 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:116781&r=all |
| By: | Manmohan Singh |
| Abstract: | In recent years, many money and repo rates in the United States have been between zero and 25 basis points. As Fed’s liftoff approaches, the question of the level of these rates (and the markets that determine them) becomes increasingly important. The paper discusses (i) whether the Fed can control short–term rates as it starts to tighten; and (ii) what are the advantages and disadvantages of using asset sales versus a large reverse repo program (RRP). A large RRP by the Fed will deprive the financial system of the money pool (i.e., GSEs and money market funds) as the Fed will directly absorb the money on to its balance sheet. This will rust the financial plumbing that connects the money pool to collateral suppliers. Some asset sales may be preferred to a large RRP as this will result in a market-determined repo rate and will allow the Fed to reach its monetary policy liftoff objectives with minimal footprint on market plumbing. We also discuss cost of issuing short tenor T-bills relative to a large RRP in a rising rate environment. |
| Date: | 2015–09–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/202&r=all |
| By: | International Monetary Fund. African Dept. |
| Abstract: | All but one performance criteria were met at end-April 2015 and structural benchmarks were largely completed, some with delays. However, there was non-observance of the continuous performance criterion on the ceiling on gross credit to government by Bank of Ghana (BoG) in April by a small margin and the indicative targets on inflation and social protection spending were missed, the latter because of a very slight delay in some spending. |
| Date: | 2015–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/245&r=all |
| By: | Mirko Abbritti (​University of Navarra); Salvatore Dell'Erba (International Monetary Fund); ​Antonio Moreno (University of Navarra); Sergio Sola (International Monetary Fund) |
| Abstract: | This paper introduces global factors within a FAVAR framework in an empirical affine term structure model. We apply our method to a panel of international yield curves and show that global factors account for more than 80 percent of term premia in advanced economies. In particular they tend to explain long-term dynamics in yield curves, as opposed to domestic factors which are instead more relevant to short-run movements. We uncover the key role for global curvature in shaping term premia dynamics. We show that this novel factor precedes global economic and financial instability. In particular, it coincides with immediate expectations of permanent expansionary monetary policy during the recent crisis |
| Date: | 2014–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:una:unccee:wp0114&r=all |
| By: | Guvenen, Fatih (Federal Reserve Bank of Minneapolis); Kuruscu, Burhanettin (University of Toronto); Tanaka, Satoshi (University of Queensland); Wiczer, David (Federal Reserve Bank of St. Louis) |
| Abstract: | What determines the earnings of a worker relative to his peers in the same occupation? What makes a worker fail in one occupation but succeed in another? More broadly, what are the factors that determine the productivity of a worker-occupation match? In this paper, we propose an empirical measure of skill mismatch for a worker-occupation match, which sheds light on these questions. This measure is based on the discrepancy between the portfolio of skills required by an occupation and the portfolio of abilities possessed by a worker for learning those skills. This measure arises naturally in a dynamic model of occupational choice and human capital accumulation with multidimensional skills and Bayesian learning about one’s ability to learn these skills. In this model, mismatch is central to the career outcomes of workers: it reduces the returns to occupational tenure, and it predicts occupational switching behavior. We construct our empirical analog by combining data from the National Longitudinal Survey of Youth 1979 (NLSY79), the Armed Services Vocational Aptitude Battery (ASVAB) on workers, and the O*NET on occupations. Our empirical results show that the effects of mismatch on wages are large and persistent: mismatch in occupations held early in life has a strong negative effect on wages in future occupations. Skill mismatch also significantly increases the probability of an occupational switch and predicts its direction in the skill space. These results provide fresh evidence on the importance of skill mismatch for the job search process. |
| Keywords: | Skill mismatch; Match quality; Mincer regression; ASVAB; O*NET; Occupational switching |
| JEL: | E24 J24 J31 |
| Date: | 2015–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmwp:729&r=all |
| By: | Ferreira Sequeda, Maria (ROA, Maastricht University); de Grip, Andries (ROA, Maastricht University); Van der Velden, Rolf (ROA, Maastricht University) |
| Abstract: | Several studies have shown that employees with temporary contracts have lower training participation than those with permanent contracts. 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 20 OECD countries using unique data from the recent PIAAC survey. Using a 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 suggest that temporary employment need not be dead-end jobs. Instead, temporary jobs of high learning content could be a stepping stone towards permanent employment. However, our results also suggest that labour market segmentation in OECD countries occurs within temporary employment due to the distinction between jobs with low and high learning opportunities. |
| Keywords: | temporary contracts, informal learning, training, human capital investments |
| JEL: | E24 J24 J41 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9322&r=all |
| By: | 阿部, 修人; 稲倉, 典子; 遠田, 敏生; 外木, 暁幸 |
| Abstract: | 本稿は阿部・稲倉・遠田・外木(2015)のコンパニオン論文であり、本論で展開され ている数式展開の補論、および詳細な統計表を掲載する。 |
| Keywords: | 生計費指数, 物価指数, 代替の弾力性, POSデータ, CES |
| JEL: | E31 C43 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:hit:rcesrs:dp15-7&r=all |
| By: | International Monetary Fund. African Dept. |
| Abstract: | The Republic of Congo has been hit hard by the oil price shock. Fiscal and current account balances deteriorated in 2014 reflecting increased government spending and lower oil prices. Corrective measures are now being taken. Private sector activity is held back by infrastructure gaps, a difficult business climate, and a shallow financial system. Growth and spending have yet to translate into significant reductions in poverty and progress in this area lags peers. Persistent inequality could be a source of instability. |
| Keywords: | Article IV consultation reports;Economic growth;Fiscal policy;Government expenditures;Fiscal reforms;Financial management;Banking sector;Economic indicators;Balance of payments statistics;Debt sustainability analysis;Staff Reports;Press releases;Republic of Congo; |
| Date: | 2015–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/263&r=all |
| By: | International Monetary Fund. European Dept. |
| Abstract: | The broad-based GDP growth supported by public investment, improved credit and labor market conditions, and robust exports is expected to moderate in the near term. Domestic political uncertainties and the crisis in Greece constitute significant downside risks. Fiscal policy space built up in pre-crisis years has largely been depleted. Rebuilding policy space and buffers to preserve macroeconomic and financial stability is a priority now. |
| Date: | 2015–09–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/242&r=all |
| By: | 阿部, 修人; 稲倉, 典子; 遠田, 敏生; 外木, 暁幸 |
| Abstract: | POSデータに基づき、新商品の影響を加味しながら生計費指数(COLI, True Cost of Living Index)および様々な物価指数を計測した。具体的には、CES型効用関数を仮定し 、代替の弾力性を様々な方法で試みた上で、各種指数を作成、比較した。その結果、多く の指数の動きは、2007年から2013年までの間はほぼ同一であり、計測手法に依存 しない結果となった。しかしながら、財の登場、消滅の効果を考慮するFeenstra (1994)型のCOLIは、弾力性の推定値によっては全期間において非常に大きな変 動を記録し、特に2013年以降に不自然な動きとなった。これは、CESという関数形 をPOSデータに直接利用する際には慎重に扱う必要があることを示唆する。一方、容量 単価を用いた価格指数もまた、2013年までは他の指数とほぼ同じ動きとなるが、それ 以降は上昇し、人々の物価上昇に関する意識調査と同様の動きとなり、2013年以降の 価格変動は、それまでと異なるメカニズムが働いていることを示唆している。 |
| Keywords: | 生計費指数, 物価指数, 代替の弾力性, POSデータ, CES |
| JEL: | E31 C43 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:hit:rcesrs:dp15-6&r=all |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | Norway’s financial system coped well with the global financial crisis and has further increased buffers to deal with potential shocks, but significant financial imbalances have also built up since then. Favorable macroeconomic conditions in recent years have helped maintain financial stability. However, the prolonged period of low interest rates and high oil prices have fueled credit and asset price growth, leading to higher vulnerabilities. The housing market is estimated to be overvalued by 25–60 percent, and, at about 220 percent, the household debt-to-disposable income ratio is among the highest in the world. To finance this increase in lending to households, banks have relied extensively on wholesale funding. At the same time, Norway’s close regional and global interconnectedness is a source of potential spillover risks. Stress tests suggest that under severe macroeconomic shocks banks and life insurers could face important but manageable capital shortfalls. A combination of severe shocks—including protracted low oil prices and a sharp contraction in house prices—could result in an aggregate capital shortfall for banks of up to 4.6 percent of GDP over five years. This requires continued action to ensure adequate capital buffers, including through discretionary requirements under Pillar II of the capital framework. Norwegian banking groups also face liquidity gaps in domestic currency and are exposed to maturity mismatches and rollover risks, due to their reliance on currency swaps. Insurers’ solvency ratios would decline sharply under a combination of severe shocks under the Solvency II framework, although the rule for the transition to Solvency II would significantly reduce the immediate need for insurers to raise capital. The Financial Supervisory Authority of Norway (FSA) should continue to constrain dividend distribution by weakly capitalized insurance institutions and ensure that the insurance businesses of conglomerates are adequately capitalized on a solo basis. |
| Date: | 2015–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/252&r=all |
| By: | Soren Radde (European Central Bank); Wei Cui (University College London) |
| Abstract: | We endogenize asset liquidity in a dynamic general equilibrium model with search frictions on asset markets. In the model, asset liquidity is tantamount to the ease of issuance and resaleability of private financial claims, which is driven by investors' participation on the search market. Limited funding ability of private claims creates a role for liquid assets, such as government bonds or fiat money, to ease funding constraints. We show that liquidity and asset prices can positively co-move. When the capacity of the asset market to channel funds to entrepreneurs deteriorates, investment drops while the hedging value of liquid assets increases. Our model is thus able to match the liquidity hoarding observed during recessions, together with the dynamics of key macro variables. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:546&r=all |
| By: | Rahul Anand; Eswar Prasad |
| Abstract: | In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We analyze this result in the context of developing economies, where a large proportion of households are credit constrained and the share of food expenditures in total consumption expenditures is high. We develop an open economy model with incomplete financial markets to show that headline inflation targeting improves welfare outcomes. We also compute the optimal price index, which includes a positive weight on food prices but, unlike headline inflation, assigns zero weight to import prices. |
| Date: | 2015–09–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/205&r=all |
| By: | George Hall (Brandeis University); Adam Copeland (Federal Reserve Bank of New York); Louis Maccini (Johns Hopkins University) |
| Abstract: | We study the impact of interest rates changes on both the demand and supply of new light vehicles in an environment where consumers and manufacturers face their own interest rates. An increase in the consumers’ interest rate raises their cost of financing and thus lowers the demand for new vehicles. An increase in the manufacturers’ interest rate raises their cost of holding inventories. Both channels have equilibrium e↵ects that are amplified and propagated over time through inventories, which serve as a way to both smooth production and facilitate greater sales at a given price. Through the estimation of a dynamic stochastic market equilibrium model, we find evidence of both channels at work and of the important role played by inventories. A temporary 100 basis-point increase in both interest rates causes vehicle production to fall 12 percent and sales to fall 3.25 percent at an annual rate in the short run. |
| Keywords: | interest rates, automobiles, inventories, Bayesian maximum likelihood |
| JEL: | E44 G31 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:brd:wpaper:94&r=all |
| By: | McGrattan, Ellen R. (Federal Reserve Bank of Minneapolis) |
| Abstract: | In its “Statement on Longer-Run Goals and Monetary Policy Strategy,” the Federal Open Market Committee (Federal Reserve Board of Governors, 2014) summarizes its two main objectives: to mitigate (i) deviations of inflation from its longer-run goal and (ii) deviations of employment from the Federal Open Market Committee’s assessment of its maximum level. In the case of employment, the statement acknowledges that “the maximum level ... is largely determined by nonmonetary factors,” which is why the FOMC sets no fixed goal for the employment level. It instead depends on the Committee’s “assessment.” In this paper, I investigate the link between monetary policy and employment using predictions of current monetary theory. The results show that even with the extraordinary monetary accommodation provided by the Fed since 2008, theory predicts only a small impact of monetary policy on employment. Other research suggests that to understand what does impact employment levels and hours worked, economic theory should be modified to account for factors that impact labor-leisure decisions. |
| Date: | 2015–09–23 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmep:15-7&r=all |
| By: | Martinez-Miera, David; Repullo, Rafael |
| Abstract: | We present a model of the connection between real interest rates, credit spreads, and the structure and the risk of the banking system. Banks intermediate between entrepreneurs and investors, and choose the monitoring intensity on entrepreneurs' projects. We characterize the equilibrium for a fixed aggregate supply of savings, showing that safer entrepreneurs will be funded by nonmonitoring (shadow) banks and riskier entrepreneurs by monitoring (traditional) banks. We also show that a savings glut reduces interest rates and spreads, increases the relative size of the shadow banking system and the probability of failure of the traditional banks. The model provides a framework for understanding the emergence of endogenous boom and bust cycles, as well as the procyclical nature of the shadow banking system, the existence of countercyclical risk premia, and the low levels of interest rates and spreads leading to the buildup of risks during booms. |
| Keywords: | bank monitoring; banking crises; boom and bust cycles; credit spreads; financial stability; real interest rates; savings glut; shadow banks |
| JEL: | E44 G21 G23 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10830&r=all |
| By: | Efrem Castelnuovo (University of Padova); Giovanni Caggiano (University of Padova); Giovanni Pellegrino (University of Verona) |
| Abstract: | We employ a parsimonious nonlinear Interacted-VAR to examine whether the real effects of uncertainty shocks are greater when the economy is at the Zero Lower Bound. Our results show that the contractionary effects of uncertainty shocks are statistically larger when the ZLB is binding, with differences that are economically important. Such differences are shown not to be driven by the contemporaneous occurrence of the Great Recession. These fi?ndings lend support to recent theoretical contributions on the interaction between uncertainty shocks and the stance of monetary policy. |
| Keywords: | Uncertainty shocks, Nonlinear Structural Vector AutoRegressions, Interacted VAR, Generalized Impulse Response Functions, Zero Lower Bound. |
| JEL: | C32 E32 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0200&r=all |
| By: | International Monetary Fund. African Dept. |
| Abstract: | A decade–long hydrocarbon boom has led to a fast rise of average incomes and spurred a large scaling up of investment spending on infrastructure, although progress on social indicators has been slow. With hydrocarbon extraction shifting into a trend decline in the context of weak oil prices outlook and still high capital spending, the fiscal position has weakened and fiscal buffers diminished. |
| Keywords: | Article IV consultation reports;Economic growth;Hydrocarbons;Fiscal policy;Infrastructure;Nonoil sector;Banking sector;Economic indicators;Balance of payments statistics;Debt sustainability analysis;Staff Reports;Press releases;Equatorial Guinea; |
| Date: | 2015–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/260&r=all |
| By: | Nikola Mirkov; Andreas Steinhauer |
| Abstract: | We conducted a simple, anonymous survey at the beginning of 2014, asking around 200 economists worldwide to reveal their inflation expectations, conditional on either Ben Bernanke or Janet Yellen being the chair of the Board of Governors of the Federal Reserve. We use the change in the Fed's leadership to focus attention on the difference in conditional expectations, while we are interested in the distribution of those expectations. The outcome of the survey shows that a significant share of respondents revealed asymmetric inflation expectations and that the deviation from symmetry is sizeable. Nonetheless, individual asymmetry in forecasts appears to be irrelevant for the aggregate distribution, as the number of respondents who factor in excess inflation broadly matches the number of those who gave more weight to disinflationary outcomes. The aggregate distribution we obtain is largely comparable to the outcome of the Survey of Professional Forecasters for the first quarter of 2014. |
| Keywords: | inflation expectations, subjective probability distributions |
| JEL: | C42 E31 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:snb:snbwpa:2015-10&r=all |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | Credit growth, household debt, property prices and banks’ wholesale funding are important systemic concerns. Key sources of cyclical systemic risk include the strength of mortgage lending (the credit-to-GDP ratio and the household debt-to-disposable income ratio both stand at around 200 percent), and the strong rise in, and overvaluation of, house prices (house prices are believed to be overvalued by some 20–60 percent). In the structural dimension, systemic risk arises primarily from the heavy dependence of Norwegian banks on wholesale funding. Low interest rates may be fuelling credit and asset price growth, while the main macroeconomic vulnerability is falling oil prices. |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/257&r=all |
| By: | Bullard, James B. (Federal Reserve Bank of St. Louis) |
| Abstract: | During an event in Nashville, Tenn., St. Louis Fed President James Bullard discussed the case for monetary policy normalization, noting that the FOMC's objectives for unemployment and inflation have essentially been met but policy settings remain far from normal. He said that, even during normalization, the Fed's highly accommodative policy will be putting upward pressure on inflation, encouraging continued improvement in labor markets, and providing the best contribution to global growth that the Fed can provide. |
| Date: | 2015–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:248&r=all |
| By: | International Monetary Fund. European Dept. |
| Abstract: | Israel came through the crisis relatively well, and unemployment has continued to fall to multi-decade lows. But policy makers are confronted with several challenges. The fiscal deficit remains stubbornly high, leaving limited buffers to respond to shocks. Inflation is negative—well below the Bank of Israel’s (BOI) target—but housing prices continue to rise, posing financial sector risks. Labor productivity is low and the gap relative to the US is widening. And income inequality is among the highest across all advanced countries. |
| Keywords: | Article IV consultation reports;Fiscal policy;Fiscal reforms;Monetary policy;Financial sector;Macroprudential Policy;Housing prices;Economic indicators;Balance of payments statistics;Debt sustainability analysis;Staff Reports;Press releases;Israel; |
| Date: | 2015–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/261&r=all |
| By: | Antoine Le Riche (AMSE - Aix-Marseille School of Economics - EHESS - École des hautes études en sciences sociales - Centre national de la recherche scientifique (CNRS) - Ecole Centrale Marseille (ECM) - AMU - Aix-Marseille Université, GAINS - University of Maine); Francesco Magris (LEO - François Rabelais University of Tours) |
| Abstract: | We study an infinite horizon economy with a representative agent whose utility function includes consumption, real balances and leisure. Real balances enter the utility function pre-multiplied by a parameter reflecting the inverse of the degree of financial market imperfection, i.e. the inverse of the transaction costs justifying the introduction of money in the utility function. When labor is supplied elastically, indeterminacy arises through a transcritical and a flip bifurcation, for degree of financial imperfection arbitrarily close to zero. Similar results are observed when labor is supplied inelastically: indeterminacy occurs through a flip bifurcation for values of the degree of financial imperfection unbounded away from zero. We also study the existence and the multiplicity of the steady states. |
| Keywords: | bifurcations,indeterminacy,market imperfections,money demand |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01199652&r=all |
| By: | Gautier Marti (Ecole Polytechnique [Palaiseau] - Ecole Polytechnique, Hellebore Capital Management); Philippe Very (Hellebore Capital Management); Philippe Donnat (Hellebore Capital Management) |
| Abstract: | This paper presents a pre-processing and a distance which improve the performance of machine learning algorithms working on independent and identically distributed stochastic processes. We introduce a novel non-parametric approach to represent random variables which splits apart dependency and distribution without losing any information. We also propound an associated metric leveraging this representation and its statistical estimate. Besides experiments on synthetic datasets, the benefits of our contribution is illustrated through the example of clustering financial time series, for instance prices from the credit default swaps market. Results are available on the website www.datagrapple.com and an IPython Notebook tutorial is available at www.datagrapple.com/Tech for reproducible research. |
| Date: | 2015–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01196883&r=all |
| By: | Venky Venkateswaran (New York University); Laura Veldkamp (NYU Stern); Julian Kozlowski (New York University) |
| Abstract: | In the wake of the great recession,many economists explored new sources of business cycle fluctuations, such as news, sentiment or uncertainty shocks. But these theories have difficulty explaining why post-recession output would remain below trend long after many commonly used measures of uncertainty recovered to their pre-crisis levels. We propose a business cycle model where new information has persistent effects on real output. In our model, firms do not know the true distribution of economic shocks. Each period, they observe a new shock realization and re-estimate its distribution, just as an econometrician would. Tails of the distribution are difficult to estimate. So estimated tails risk can fluctuate greatly as new data is observed. Shocks have persistent effects because they permanently change beliefs about future realizations. Since debt payouts are affected disproportionately by tail risk, changes to beliefs lead to large changes in the cost of issuing debt and therefore, incentives to invest. Thus, the combination of belief revisions and debt financing can amplify shocks and generate large, persistent fluctuations in investment and output. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:800&r=all |
| By: | Don Drummond; Evan Capeluck; Matthew Calver |
| Abstract: | Recent economic and fiscal projections produced by the Centre for the Study of Living Standards suggest that revenue growth over the next 23 years in most provinces and territories will be insufficient to maintain recent i ncreases in health expenditures while holding other spending constant on a real per capita basis. Motivated by these fiscal challenge s , we present a series of policy recommendations for Canada’s governments at all levels to foster greater economic growth. Higher GDP not only offers a means to raise government revenues, it also directly raises the well - being of Canadians. We consider options to boost economic growth in two broad ways. First, by boosting Canada’s productivity performance through policies pro moting private and public investment, education, technological innovation and diffusion, and trade. Second, by tapping into Canada’s underutilized labour supply, particularly by assisting women, older workers, persons with disabilities , Aboriginal people, and immigrants in successfully participating in the workforce. The recommendations in this report are guided by the Organization of Economic Co - operation and Development’ s green growth and inclusive growth frameworks and by the idea that government should take a more active role in supporting the economic activities of individuals and businesses. |
| Keywords: | Inclusive Growth, Green Growth, Fiscal Projections, Public Policy, Productivity Growth, Canada, Labour Supply, Provinces, Territories, Research and Development, Investment, Human Capital, Education, Internal Trade, International Trade, Immigration, Emigration, Old Age, Ageing, Aboriginal Peoples, Disabilities, Labour Force Participation, Inequality |
| JEL: | E62 H68 O40 J20 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:sls:resrep:1511&r=all |
| By: | Tomić, Bojan; Sesar, Andrijana |
| Abstract: | Industrial production is an important indicator of future trends in each of the economy including the Croatian economy. On the other hand, as a preceding factor of the economy dynamics changes, the equity indices of the capital market can be used. Due to different considerations and interpretations of their mutual initial causation, the paper analyzes the interdependence between the main index Croatian capital market CROBEX and indicators of total industrial production of the Republic of Croatian. Also, in the model was introduced exchange parity euro/kuna as an additional variable rate which is considered to have a significant influence on the competitiveness of the Croatian economy, as well as the capital market. The theoretical premise about the interaction of the foreign exchange rate and capital markets has been considered in the context of the "flow-oriented" and "stock-oriented" model. Aiming to determine the interdependence between aforementioned variables, the analysis was carried out using the vector autoregression model (VAR). The Granger causality test was conducted as part of the VAR model, as well as the decomposition of variance in future periods and the impulse response function of relevant variables. The results of analysis indicate the existence of causality of the exchange rate to the index of industrial production, as well as the existence of causality of the index of industrial production to CROBEX index. |
| Keywords: | VAR model; causality; industrial production; CROBEX; the exchange rate. |
| JEL: | C32 E44 G17 |
| Date: | 2015–04–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66816&r=all |
| By: | Beck, Günter W.; Kotz, Hans-Helmut; Zabelina, Natalia |
| Abstract: | The global financial crisis (as well as the European sovereign debt crisis) has led to a substantial redesign of rules and institutions - aiming in particular at underwriting financial stability. At the same time, the crisis generated a renewed interest in properly appraising systemic financial vulnerabilities. Employing most recent data and applying a variety of largely only recently developed methods we provide an assessment of indicators of financial stability within the Euro Area. Taking a "functional" approach, we analyze comprehensively all financial intermediary activities, regardless of the institutional roof - banks or non-bank (shadow) banks - under which they are conducted. Our results reveal a declining role of banks (and a commensurate increase in non-bank banking). These structural shifts (between institutions) are coincident with regulatory and supervisory reforms (implemented or firmly anticipated) as well as a non-standard monetary policy environment. They might, unintendedly, actually imply a rise in systemic risk. Overall, however, our analyses suggest that financial imbalances have been reduced over the course of recent years. Hence, the financial intermediation sector has become more resilient. Nonetheless, existing (equity) buffers would probably not suffice to face substantial volatility shocks. |
| Keywords: | bank and non-bank financial intermediation,shadow banking,financial stability,systemic risk,financial regulation |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewh:29&r=all |
| By: | Alberto Alesina; Filipe Campante; Guido Tabellini |
| Abstract: | Fiscal policy is procyclical in many developing countries. We explain this policy failure with a political agency problem. Procyclicality is driven by voters who seek to ?starve the Leviathan? to reduce political rents. Voters observe the state of the economy but not the rents appropriated by corrupt governments. When they observe a boom, voters optimally demand more public goods or lower taxes, and this induces a procyclical bias in fiscal policy. The empirical evidence is consistent with this explanation: Procyclicality of fiscal policy is more pronounced in more corrupt democracies. |
| URL: | http://d.repec.org/n?u=RePEc:qsh:wpaper:248206&r=all |
| By: | Kuznetsova, Elena |
| Abstract: | The article is about the peculiarities of genesis the resource control methods as one of the main mechanisms for the implementation of social management. Particular attention is paid to the analysis of resource control methods applicable to different types of objects of social control. |
| Keywords: | resource control, resource control methods, social management, social control |
| JEL: | D7 E6 F3 F5 H5 J5 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66827&r=all |
| By: | Fligstein, Neil; Brundage, Jonah S; Schultz, Michael |
| Abstract: | One of the puzzles about the financial crisis of 2008 is why the regulators were so slow to recognize the impending collapse of the financial system. In this paper, we propose a novel account of what happened. We analyze the meeting transcripts of the Federal Reserve’s main decision-making body, the Federal Open Market Committee (FOMC), to show that they had surprisingly little recognition that a serious economic meltdown was underway even after the collapse of Lehman Brothers on September 15, 2008. This lack of awareness was a function of the inability of the FOMC to connect the unfolding events into a narrative reflecting the links between the housing market, the subprime mortgage market, and the financial instruments being used to package the mortgages into securities. We use the idea of sense-making to explain how this happened. The Federal Reserve’s main analytic framework for making sense of the economy, macroeconomic theory, made it difficult for them to connect the disparate events that comprised the financial crisis into a coherent whole. We use topic modeling to analyze transcripts of FOMC meetings held between 2000 and 2008, demonstrating that the framework provided by macroeconomics dominated FOMC conversations throughout this period. The topic models also suggest that each of the issues involved in the crisis remained a separate discussion and were never connected together. A close reading of the texts supports this argument. We conclude with implications for future such crises and for thinking about sense-making and the role of economics in policymaking more generally. |
| Keywords: | Social and Behavioral Sciences |
| Date: | 2014–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:indrel:qt97k6t78z&r=all |
| By: | Sen Gupta, Abhijit |
| Abstract: | High level of intra-regional trade and negative spillovers from competitive devaluation make exchange rate coordination extremely desirable in Asia. Employing a hypothetical Asian Currency Unit we evaluate the degree of coordination among Asian currencies. Traditional empirical tests yield little evidence of coordination among real and nominal exchange rates. However, introducing endogenously determined structural breaks to account for changes in exchange rate regimes provides more mixed evidence. While there is still little evidence for coordination in nominal terms, some degree of coordination among real rates emerges. The limited evidence for exchange rate coordination can be explained by the diverse exchange rate regimes prevailing in these economies, signaling differences in policy objectives. |
| Keywords: | Asian Currency Unit, currency coordination, structural breaks, exchange rate regimes, panel unit root |
| JEL: | E58 F33 F36 N15 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66636&r=all |
| By: | Sebnem Kalemli-Ozcan (University of Maryland, United States); Bent Sørensen (University of Houston, United States); Carolina Villegas-Sanchez (Universitat Ramon Llull, Spain); Vadym Volosovych (Erasmus University Rotterdam, the Netherlands); Sevcan Yesiltas (Johns Hopkins University, United States) |
| Abstract: | Firm-level data on productivity, financial activity and firms' international linkages have become essential for research in the fields of macro, international finance and growth. This paper describes the development of a firm-level global panel dataset for public and private companies based on the administrative micro-dataset ORBIS, provided commercially by Bureau van Dijk Electronic Publishing (BvD). The ORBIS database provides data on firms' financial and productive activities from balance sheets and income statements together with detailed information on firms' domestic and international ownership structure for over 130 million companies across the world. Researchers need to overcome several challenges before making the database usable for research. First, the database is not designed for large downloads that is essential for an econometric analysis. Second, there are several inherent biases in the database that affect the download process and lead to missing information. Third, the raw data may contain a number of irregularities which, if not dealt with, will result in data loss during a standard cleaning procedure. In combination, these issues cause minimal coverage of small firms, extensive missing data, and poor national representation. We give detailed instructions on the data gathering process from ORBIS in terms of downloading methodology and cleaning procedure so that a researcher can construct a database that is nationally representative with minimal missing information. We provide examples from several European countries to present the process and discuss the resulting dataset in detail. |
| Keywords: | Firm-level data; ORBIS database; productivity; firm ownership; public and private companies |
| JEL: | E00 F00 O00 |
| Date: | 2015–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20150110&r=all |
| By: | Hesham Abdelghany (alexandria university) |
| Abstract: | The research investigated the impact of accounting disclosure quality and information asymmetry on the Egyptian stock market activity. The research provided some insights for the efficiency of the Egyptian stock market and how accounting disclosures play an active role in certain circumstances leading to reducing the informational gap between investors and management and enhancing the responsiveness to information in terms of increase in stock prices, transactions volume and transactions value. Data has been collected for companies listed in the Egyptian stock market for the period from 2002 through 2014. Research sample comprised of 60 companies which results in 780 observations for the research. I found that there are significant association between both accounting disclosure quality and information asymmetry and the stock market activity. |
| Keywords: | accounting disclosure quality |
| JEL: | E44 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:2704127&r=all |
| By: | International Monetary Fund. European Dept. |
| Abstract: | The Norwegian economy grew steadily in 2014 despite the sharp fall in oil prices. Nevertheless, the near term outlook has weakened, and the medium and longer term present challenges related to shifting away from a growth model dependent on oil- and gas-related demand. |
| Date: | 2015–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/249&r=all |
| By: | MANOJKUMAR GANDHI (JAYSINGPUR COLLEGE) |
| Abstract: | This comprehensive paper deals with the efforts made, recent trends in, and critical issues and challenges pertaining to Skill Development in India. This paper argues that development and articulation of a national policy on skill development is a matter of priority. A task of skill development has many challenges. This paper further argues that the skills and knowledge are the driving forces of economic growth and social development for any country. Countries with higher and better levels of skills adjust more effectively to the challenges and opportunities of world of work. This paper critically evaluates the concepts of ‘graduateness’ and ‘employability’ that have also been the subject of much recent debate. This paper also critically evaluates the claim made that developing these skills will enable students to become more effective learners and they are seen to be crucial to enhanced study skills, the personal development planning processes, and consequently to higher levels of attainment. This paper further argues that the students of Higher Education are not getting desired practical benefits of education. This is equally applicable to the students of technical education also. This paper elaborately discusses on the emerging trends in and efforts made and role being played by/on the part of all concerned in Skill Development in India. This paper suggests various modes, modalities, methods of the Industry and Academia Interaction, for better results in the endeavour of skills development initiatives for sustainable and inclusive growth and development of India’s economy. |
| Keywords: | National Policy on Education, Skills Gaps and Needs of industries, Skill Development, Human development, Higher Education, UGC, Universities, Colleges, Industries, Industry-Academia Collborations, International Collborations, R& D. |
| JEL: | E24 J24 J69 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:2704976&r=all |
| By: | John Ssozi (Baylor University, USA); Simplice Asongu (Yaoundé/Cameroun) |
| Abstract: | After investigating the effect of external financial flows on total factor productivity and technological gain, we use the beta catch-up and sigma convergence to compare dispersions in output per worker, total factor productivity and technological gain in Sub-Saharan Africa (SSA) for the years 1980-2010. The comparative evidence is articulated with income levels, years of schooling, and health factors. We find; first, a positive association between foreign direct investment, trade openness, foreign aid, remittances and total factor productivity. However, when foreign direct investment is interacted with schooling, it is direct effect becomes negative on total factor productivity. Second, beta catch-up is between19.22% and 19.70% per annum with corresponding time to full catch-up of 25.38 years and 26.01 years respectively. Third, we find sigma-convergence among low-income nations and upper-middle income nations separately, but not for the entire sample together. Fourth, schooling in SSA is not yet a significant source of technology, but it can make external financial inflows more effective. Policies to induce external financial flows are not enough for development if absorptive capacity is low. More policy implications are discussed. |
| Keywords: | External capital flows, Human capital, Total Factor Productivity, Convergence, and Sub-Saharan Africa |
| JEL: | E23 O33 O55 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:15/038&r=all |
| By: | Rothstein, Jesse |
| Abstract: | The last eight years have been disastrous for many workers, and particularly so for those with low human capital or other forms of disadvantage. Although the Great Recession officially ended in 2009, the labor market has been very slow to recover. One explanation attributes the ongoing poor labor market outcomes of young and non - college workers to the combination of deficient aggregate labor demand and greater sensitivity of marginal workers to cyclical conditions. A second attributes the recent outcomes to structural changes in the labor market. These have importantly different policy implications: Cyclical explanations imply that the main challenge is to raise aggregate labor demand and that if this is done many of the patterns seen in the last several years will revert to their prior trends. Structural explanations, by contrast, suggest the recent experience is the “new normal,†absent policy responses to encourage more (or different) labor supply. This paper reviews recent data for evidence on the two explanations, focusing on wage trends as an indicator of the relative importance of labor supply and demand. I find little evidence of wage pressure in any quantitatively important labor markets before 2015. The most recent data is more mixed, but still suggests substantial ongoing slack. |
| Keywords: | Social and Behavioral Sciences |
| Date: | 2015–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:indrel:qt0gn7w7hn&r=all |
| By: | Alok Johri; Terry Yip |
| Abstract: | The collapse in trade relative to GDP during 2008-09 was unusually large and also puzzling relative to the predictions of canonical two-country models. In a calibrated model of customer capital where firms must acquire a customer base before any sales can occur, we show that credit shocks can cause a fall in the trade-GDP ratio equal to 43 percent of the observed value. The key mechanism involves a reallocation of scarce marketing resources from international to domestic customers, who are acquired more cheaply. Bayesian estimation shows that financial shocks are important in accounting for recent fluctuations in the trade-GDP ratio. |
| JEL: | E32 F41 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2015-13&r=all |
| By: | Ikeda Ryouichi (Osaka University and Tokushima University) |
| Abstract: | In this paper, I conducted an analytical investigation to investigate the effects of the income tax that funds unemployment benefits on the unemployment rate and the fertility rate. I took unemployment into consideration in an overlapping generations model, introducing a household in which the head of household is employed and one in which the head of household is unemployed and receiving unemployment benefits, and analyzed the effects of unemployment benefits on the numbers of the children in both households. In doing so, I developed an expression for the conditions of an increase (decrease) in the numbers of children due to an increase in the replacement rate of unemployment benefits in both the employed household and the unemployed household. I found that regardless of those conditions, an increase in the replacement rate of unemployment benefits inevitably decreased the number of the children in the whole economy. This paper is the first to show the reason for this decrease in the number of children in the whole economy due to a rise in the replacement rate of unemployed benefits and the analytical conditions of an increase (decrease) in the numbers of children in employed and unemployed households. Needless to say, unemployment benefits are important, but we also should consider the negative effects on the fertility rate to a certain degree. |
| Keywords: | fertility, unemployment benefits, income tax, labor union, overlapping generations model |
| JEL: | J13 H55 E24 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1523&r=all |
| By: | Chaouech, Olfa |
| Abstract: | This paper estimates the Taylor rule under the static version, then the dynamic version of the Central bank of Tunisia (CBT), using monthly data from 2002:Q1 to 2014:Q12. The empirical results indicate that the CBT followed the Taylor rule in its dynamic version. |
| Keywords: | Tylor rule, GMM, Monetary policy, Reaction function |
| JEL: | C13 E52 |
| Date: | 2015–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:66771&r=all |
| By: | James Chapman; Jonathan Chiu; Sajjad Jafri; Héctor Pérez Saiz |
| Abstract: | The payments landscape in Canada is rapidly changing and will continue to evolve, fuelled by strong and persistent drivers. In Canada, the Canadian Payments Association (CPA) is on a path to modernize Canada’s core payment systems. This paper contributes to the discussion in three ways. First, it translates the government’s public policy objectives (PPOs) for the broad payments ecosystem into desired outcomes for CPA payment systems. Second, it develops a taxonomy for clearly describing the defining attributes of a payment system. These defining attributes are access, functionality, interoperability, timeliness of payments and risk management. Finally, we develop an analytic framework to consider the trade-offs of the various attributes to achieve the PPOs for the Canadian payments ecosystem. A key output of these contributions includes a possibilities frontier that represents the set of systems with designs that best achieve the PPOs, subject to regulatory and technological constraints. Based on the results of this exercise, we recommend the most critical issues for the CPA to investigate as it considers the modernization of its systems. |
| Keywords: | Economic models, Financial services, Financial system regulation and policies, Payment clearing and settlement systems |
| JEL: | E42 L14 L15 L52 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:15-6&r=all |
| By: | Brian Nolan (Institute for New Economic Thinking and Department of Social Policy and Intervention, Universtiy of Oxford); Sarah Voitchovsky (Melbourne Institute of Applied Economic and Social Research, University of Melbourne) |
| Abstract: | This paper explores the pattern of job loss in the Great Recession with a particular focus on its incidence by wage level, using data for Ireland. Ireland experienced a particularly pronounced decline in employment with the onset of the recession, by international and historical standards, which makes it a valuable case study. Using EU-SILC data, our analysis identifies which employees were most affected. The results show that the probability of staying in employment, from one year to the next, is positively related to monthly wages both during the boom and in the bust. The gradient with wages, however, is much more marked in the bust, and remains significantly so even after controlling for a range of individual characteristics including part-time status, demographics, education, labour market history, industries or occupations. Classification-E24, J23, J24, J62, J63 |
| Keywords: | Skills, occupations, wages, Great Recession, Ireland, job loss, EU-SILC |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:iae:iaewps:wp2015n17&r=all |
| By: | Alexander Chudik; Kamiar Mohaddes; M. Hashem Pesaran; Mehdi Raissi |
| Abstract: | This paper studies the long-run impact of public debt expansion on economic growth and investigates whether the debt-growth relation varies with the level of indebtedness. Our contribution is both theoretical and empirical. On the theoretical side, we develop tests for threshold effects in the context of dynamic heterogeneous panel data models with cross-sectionally dependent errors and illustrate, by means of Monte Carlo experiments, that they perform well in small samples. On the empirical side, using data on a sample of 40 countries (grouped into advanced and developing) over the 1965- 2010 period, we find no evidence for a universally applicable threshold effect in the relationship between public debt and economic growth, once we account for the impact of global factors and their spillover effects. Regardless of the threshold, however, we find significant negative long-run effects of public debt build-up on output growth. Provided that public debt is on a downward trajectory, a country with a high level of debt can grow just as fast as its peers in the long run. |
| Date: | 2015–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/197&r=all |
| By: | Marianna Endresz (Magyar Nemzeti Bank (the Central Bank of Hungary)); Peter Harasztosi (Magyar Nemzeti Bank (the Central Bank of Hungary)); Robert P. Lieli (Magyar Nemzeti Bank (the Central Bank of Hungary)) |
| Abstract: | The Magyar Nemzeti Bank (the Central Bank of Hungary) introduced a “funding for lending” type loan program aimed at small and medium sized enterprises (SMEs) in mid-2013. We combine firms’ balance sheet data with two loan data sets to study the program’s impact on firm level investment in 2013. We start from a simple difference-in-differences (DID) estimator, but argue that the parallel trend assumption that underlies the method is likely violated. Therefore, we propose a correction based on the idea that the selection process involved in securing a market loan in a pre-program year is similar to the selection process into the program. Our results indicate that the program succeeded in generating extra investment in the SME sector that would not have taken place otherwise; specifically, we attribute to the program about 30% of the total investment undertaken by participating firms. Nevertheless, the effect is markedly heterogeneous with respect to firm size, being proportionally larger for smaller firms. |
| Keywords: | funding for lending, program evaluation, difference-in-differences estimation, unconventional monetary policy. |
| JEL: | D04 G38 E58 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:mnb:wpaper:2015/2&r=all |
| By: | Göksu Aslan (University of Messina) |
| Abstract: | In this paper, redistribution and inequality impact on economic growth are observed for the countries in the panel framework approach, to the extent of their economic freedom score. There exists a growing research interest on inequality and economic growth relationships in the global level. On the other hand, redistributive policies and their effects are highly controversial since some views cover that the interventions for equality may have negative effects on economic growth. I apply system GMM estimation on a dynamic panel model as to test inequality and redistribution effects on economic growth and compare with ordinary least squares, within group and difference GMM estimations. Dataset includes annual observations from 1995 to 2011 for 141 countries. According to the SYS-GMM estimation results, for economically free countries, both net inequality and redistribution have negative impact on economic growth . The impact of net inequality is absolutely higher than impact of redistribution. For economically unfree countries, net inequality has positive significant effect, while redistribution has negative significant effect which is very low. |
| Keywords: | Economic growth, GDP, GMM, inequality, redistribution, economic freedom |
| JEL: | O40 C23 E62 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:2705203&r=all |
| By: | Gadea Rivas, Maria Dolores; Gómez Loscos, Ana; Pérez-Quirós, Gabriel |
| Abstract: | The Great Moderation (GM) is widely documented in the literature as one of the most important changes in the US business cycle. All the papers that analyze it use post WWII data. In this paper, for the first time we place the GM in a long historical perspective, stretching back a century and a half, which includes secular changes in the economic structure and a substantial reduction of output volatility. We find two robust structural breaks in volatility at the end of WWII and in the mid-eighties, showing that the GM still holds in the longer perspective. Furthermore, we show that GM volatility reduction is only linked to expansion features. We also date the US business cycle in the long run, finding that volatility plays a primary role in the definition of the business cycle, which has important consequences for econometricians and forecasters. |
| Keywords: | Business cycle; Secular changes; Structural Breaks; volatility |
| JEL: | C22 E32 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10825&r=all |