nep-mac New Economics Papers
on Macroeconomics
Issue of 2016‒01‒18
fifty-nine papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. How effective is macroprudential policy during financial downturns? Evidence from caps on banks̕ leverage By Manuel Buchholz
  2. What are monetary policy shocks? By Qureshi, Irfan
  3. Financial Stability and Macroprudential Policy: A Structural Model Evaluation of an Emerging Economy By Horacio Aguirre; Emilio Blanco
  4. Why has the cyclicality of productivity changed?: what does it mean? By Fernald, John G.; Wang, J. Christina
  5. Macroeconomic factors in corporate and household saving. Evidence from Central and Eastern Europe By Merike Kukk; Karsten Staehr
  6. The Evasive Predictive Ability of Core Inflation By Pincheira, Pablo; Selaive, Jorge; Nolazco, Jose Luis
  7. The Relation between Money, Interest and Consumption in Developing Countries: The Case of Turkey By Yılmaz, Engin; Süslü, Bora
  8. The evasive predictive ability of core inflation By Jose Luis Nolazco; Pablo Pincheira; Jorge Selaive
  9. Working hard in the wrong place: a mismatch-based explanation to the UK productivity puzzle By Patterson, Christina; Sahin, Aysegul; Topa, Giorgio; Violante, Giovanni L.
  10. Antecedentes del Banco de la República, 1904 - 1922 By Adolfo Meisel-Roca
  11. Financial Intermediation, Resource Allocation, and Macroeconomic Interdependence By Galip Kemal Ozhan
  12. Las políticas del Banco de la República durante un auge entre dos crisis, 1930-1951 By Adolfo Meisel-Roca; Juliana Jaramillo-Echeverri
  13. Shocking language: Understanding the macroeconomic effects of central bank communication By Hansen, Stephen; McMahon, Michael
  14. The Interaction between Household and Firm Dynamics and the Amplification of Financial Shocks By Andrea Caggese; Ander Pérez Orive
  15. Global Liquidity and Monetary Policy Autonomy By Stefan Angrick
  16. Managers and Productivity Differences By Nezih Guner; Andrii Parkhomenko; Gustavo Ventura
  18. Quantitative Easing in an Open Economy : Prices, Exchange Rates and Risk Premia By Peiris, M.Udara; Polemarchakis, Herakles
  19. Estimating Aggregate Demand in Egypt By Emara, Noha; Mordos, Elise; Tyagi, Sonika
  20. Taking Stock - Credit Measures in Monetary Transmission By Stefan Behrendt
  21. Collective Bargaining Systems and Macroeconomic and Microeconomic Flexibility: The Quest for Appropriate Institutional Forms in Advanced Economies By Addison, John T.
  22. Collective Bargaining Systems and Macroeconomic and Microeconomic Flexibility: The Quest for Appropriate Institutional Forms in Advanced Economies By John T. Addison
  23. What is the Monetary Standard By Hetzel, Robert L.
  24. Filling the gap: open economy considerations for more reliable potential output estimates By Zsolt Darvas; Andras Simon
  25. DSGE model-based forecasting of modelled and nonmodelled inflation variables in South Africa By Rangan Gupta; Patrick T. Kanda; Mampho P. Modise; Alessia Paccagnini
  26. Perils of quantitative easing By McMahon, Michael; Peiris, Udara; Polemarchakis, Herakles
  27. Taming Macroeconomic Instability: Monetary and Macro Prudential Policy Interactions in an Agent-Based Model By Lilit Popoyan; Mauro Napoletano; Andrea Roventini
  28. Trade Competition, Technology and Labor Re-allocation By Bahar Baziki, Selva; Ginja, Rita; Borota Milicevic, Teodora
  29. Consolidarea fiscala prin austeritate si politicile UE de supraveghere By Iancu, Aurel; Olteanu, Dan
  30. Oil price forecastability and economic uncertainty By Stelios D. Bekiros; Rangan Gupta; Alessia Paccagnini
  31. Bank Efficiency and Interest Rate Pass-Through: Evidence from Czech Loan Products By Tomas Havranek; Zuzana Irsova; Jitka Lesanovska
  32. Stationarity and persistence of the term premia in the Polish money market By Michał Markun; Anna Mospan
  33. Causes and Remedies for Japan’s Long-Lasting Recession: Lessons for the People’s Republic of China By Yoshino, Naoyuki; Taghizadeh-Hesary, Farhad
  34. An argument for positive nominal interest By Bloise, Gaetano; Polemarchakis, Herakles
  35. ìColonial Virginiaís Paper Money Regime, 1755-1774: A Forensic Accounting Reconstruction of the Dataî By Farley Grubb
  36. The impact of firm financing constraints on R&D over the business cycle By Kadri Männasoo; Jaanika Meriküll
  37. Sectoral change and labour productivity growth during boom, bust and recovery By Andres Kuusk; Karsten Staehr; Uku Varblane
  38. Equilibrium Price Dispersion and the Border Effect By Ryan Chahrour; Luminita Stevens
  39. The Determinants of Country´s Risk Premium Volatility: Evidence from Panel VAR Model By Petra Palic; Petra Posedel Simovic; Maruska Vizek
  40. Money and the Scale of Cooperation By Maria Bigoni; Gabriele Camera; Marco Casari
  41. Predicting Belgium’s GDP using targeted bridge models By Christophe Piette
  42. The Economic Drivers of Differences in House Price Inflation Rates across MSAs By Fuess, Roland; Zietz, Joachim
  43. Fiscal Policy and Economic Growth - the Crisis Aftermath By Ivan Todorov
  44. Asset prices regime-switching and the role of inflation targeting monetary policy By Chatziantoniou, Ioannis; Filis, George; Floros, Christos
  45. Trade, Finance and Endogenous Firm Heterogeneity By Alessandra Bonfiglioli; Rosario Crinò; Gino Gancia
  46. Imputing consumption from Norwegian income and wealth registry data By Andreas Fagereng; Elin Halvorsen
  47. Volume of the steady-state space of financial flows in a monetary stock-flow-consistent model By Aur\'elien Hazan
  48. Credit conditions, macroprudential policy and house prices By Kelly, Robert; McCann, Fergal; O'Toole, Conor
  49. Competing Auctions of Skills By John Kennes; Daniel le Maire
  50. The Evolution of Gender Gaps in Industrialized Countries By Claudia Olivetti; Barbara Petrongolo
  51. An argument for positive nominal interest By Bloise, Gaetano; Polemarchakis, Herakles
  52. Industrial Composition and Intergenerational Mobility By Whitaker, Stephan
  53. Hedonic Regression Models for Tokyo Condominium Sales By Diewert, W. Erwin; Shimizu, Chihiro
  54. The Europe 2020 Strategy and Skill Mismatch By G.A. Meagher; R.A. Wilson; Hector Pollitt
  55. The stability of macroeconomic systems with Bayesian learners By James Bullard; Jacek Suda
  56. What can Big Data tell us about the passthrough of big exchange rate changes? By Lewis, John
  57. The varying coefficient Bayesian panel VAR model By Wieladek, Tomasz
  58. The Impact of Nurse Turnover on Quality of Care and Mortality in Nursing Homes: Evidence from the Great Recession By Yaa Akosa Antwi; John R. Bowblis
  59. Long-Run Energy Use and the Efficiency Paradox By Jan Abrell; Sebastian Rausch; Hagen Schwerin

  1. By: Manuel Buchholz
    Abstract: This paper investigates the effect of a macroprudential policy instrument, caps on banks’ leverage, on domestic credit to the private sector since the Global Financial Crisis. Applying a difference-in-differences approach to a panel of 69 advanced and emerging economies over 2002–2014, we show that real credit grew after the crisis at considerably higher rates in countries which had implemented the leverage cap prior to the crisis. This stabilising effect is more pronounced for countries in which banks had a higher pre-crisis capital ratio, which suggests that after the crisis, banks were able to draw on buffers built up prior to the crisis due to the regulation. The results are robust to different choices of subsamples as well as to competing explanations such as standard adjustment to the pre-crisis credit boom
    Keywords: macroprudential policies, domestic credit, financial crisis
    JEL: E51 E58 G21 G28
    Date: 2015–12–30
  2. By: Qureshi, Irfan (Department of Economics University of Warwick)
    Abstract: I decompose deviations of the Federal funds rate from a Taylor type monetary policy rule into exogenous monetary policy shocks and a time-varying inflation target. I show that the role of exogenous shocks may be exaggerated in a fixed inflation target model, and a large fraction of business cycle fluctuations attributed to them may actually be due to changes in the inflation target. A time-varying inflation target explains approximately half of the volatility normally attributed to these deviations, and consequently more than a quarter of the fluctuations in the business cycle. This contributes approximately 39% additional inflation volatility during the Great Inflation. I show that shocks to the inflation target imply a lower sacrifice ratio compared to exogenous changes in the interest rate and therefore propose a gradual adjustment of the inflation target in order to achieve monetary policy objectives.
    Keywords: Time-varying monetary policy ; inflation volatility ; sacrifice ratio
    JEL: E30 E31 E50 E52 E58
    Date: 2015
  3. By: Horacio Aguirre (Central Bank of Argentina); Emilio Blanco (Central Bank of Argentina)
    Abstract: We build a small structural open economy model, augmented to depict the credit market and interest rate spreads (distinguishing by credit to Örms and families); monetary policy with sterilized intervention in the foreign exchange market; and macroprudential policy as capital requirements. We estimate the model using Bayesian techniques with quarterly data for Argentina in 2003-2011; it can be extended to other emerging economies, allowing for comparative empirical analysis. Results indicate that shocks to lending rates and spread weigh on macroeconomic variables; likewise, the credit market is a§ected by macroeconomic shocks. Capital requirements, beyond their strictly prudential role, appear to have contributed to lower volatility of key variables such as output, prices, credit and interest rates. The interaction of monetary policy, foreign exchange intervention and prudential tools appears to be synergic: counting on a larger set of tools helps dampen volatility of both macroeconomic and Önancial system variables, taking into account the type of shocks faced during the estimation period.
    Keywords: macroprudential policy, semi-structural model, Bayesian estimation
    JEL: E17 E51 E52 E58
    Date: 2016–01
  4. By: Fernald, John G. (Federal Reserve Bank of San Francisco); Wang, J. Christina (Federal Reserve Bank of Boston)
    Abstract: Historically, U.S. labor productivity (output per hour) and total factor productivity (TFP) rose in booms and fell in recessions. Different models of business cycles explain this procyclicality differently. Traditional Keynesian models relied on "factor hoarding," that is, variations in how intensively labor and capital were utilized over the business cycle. Real business cycle (RBC) models instead posit that procyclical technology shocks drive the business cycle. Since the mid-1980s, however, the procyclicality of productivity has waned. TFP has been roughly acyclical with respect to inputs, whereas labor productivity has become significantly countercyclical. The slow pace of productivity growth after 2010, when the post-Great- Recession recovery gained a firm footing, is broadly consistent with these patterns. In this paper, the authors seek to understand empirically the forces behind the changing cyclicality of productivity.
    Keywords: procyclical productivity; labor hoarding; business cycles; growth-accounting; DSGE models
    JEL: E22 E23 E32 O47
    Date: 2015–10–01
  5. By: Merike Kukk; Karsten Staehr
    Abstract: This paper uses panel data estimations on annual data from 10 Central and Eastern European countries to assess the effect of different macroeconomic variables on the dynamics of corporate and household saving. The analyses reveal that changes in the macroeconomic environment are important for the saving rates in both sectors, but with marked differences across the sectors. The differences are most pronounced for the output gap, the real interest rate, the inflation rate and the current account balance. Some variables such as the unemployment rate and changes in the real exchange rate are unimportant in both sectors. The differences across the sectors underscore the importance of analysing corporate and household saving separately
    Keywords: sectoral saving rates, Central and Eastern Europe, macroeconomic variables
    JEL: E21 E32 E44
    Date: 2015–12–30
  6. By: Pincheira, Pablo; Selaive, Jorge; Nolazco, Jose Luis
    Abstract: We explore the ability of traditional core inflation –consumer prices excluding food and energy– to predict headline CPI annual inflation. We analyze a sample of OECD and non-OECD economies using monthly data from January 1994 to March 2015. Our results indicate that sizable predictability emerges for a small subset of countries. For the rest of our economies predictability is either subtle or undetectable. These results hold true even when implementing an out-of-sample test of Granger causality especially designed to compare forecasts from nested models. Our findings partially challenge the common wisdom about the ability of core inflation to forecast headline inflation, and suggest a careful weighting of the traditional exclusion of food and energy prices when assessing the size of the monetary stimulus.
    Keywords: Inflation, Forecasting, Time Series, Monetary Policy, Core Inflation
    JEL: E3 E31 E37 E4 E43 E44 E5 E52
    Date: 2016–01–06
  7. By: Yılmaz, Engin; Süslü, Bora
    Abstract: As the basis of the current economic approach, comes to the fore the intertemporal utility function of decision-making economic units. Decision-making economic units decide their expenditures upon the substitution of their future utility for present utility. They defer present consumption and head for making savings. Yet, the exact opposite may also apply. Changes in the policy decisions of monetary authority have impacts on the intertemporal utility maximization of economic units as well. In this study, the question whether the amount or the price of the money affects the aggregate demand in Turkish economy was examined within the framework of dynamic optimization. The results showed that in Turkish economy where nominal income expectations are high, the resource and loan creation would increase and that when the central bank increase the interest rates to hinder this process, consumption would head up even more.
    Keywords: New Neo Classical Synthesis, Consumption, Monetary Policy
    JEL: E51 E52 E58
    Date: 2015–09
  8. By: Jose Luis Nolazco; Pablo Pincheira; Jorge Selaive
    Abstract: We explore the ability of traditional core inflation –consumer prices excluding food and energy–to predict headline CPI annual inflation. We analyze a sample of OECD and non-OECD economies using monthly data from January 1994 to March 2015. Our results indicate that sizable predictability emerges for a small subset of countries.
    Keywords: Chile , Economic Analysis , Working Paper
    JEL: E31 E17 E37 E52 E58
    Date: 2016–01
  9. By: Patterson, Christina (Massachusetts Institute of Technology); Sahin, Aysegul (Federal Reserve Bank of New York); Topa, Giorgio (Federal Reserve Bank of New York); Violante, Giovanni L. (New York University)
    Abstract: The UK experienced an unusually prolonged stagnation in labor productivity in the aftermath of the Great Recession. This paper analyzes the role of sectoral labor misallocation in accounting for this “productivity puzzle.” If jobseekers disproportionately search for jobs in sectors where productivity is relatively low, hires are concentrated in the wrong sectors and the post-recession recovery in aggregate productivity can be slow. Our calculations suggest that, quantified at the level of three-digit occupations, this mechanism can explain up to two-thirds of the deviations from trend-growth in UK labor productivity since 2007.
    Keywords: misallocation; productivity
    JEL: E24 E32 J24
    Date: 2016–01–01
  10. By: Adolfo Meisel-Roca
    Abstract: A comienzos del siglo XX la economía colombiana se encontraba afectada negativamente por las consecuencias de la Guerra de los Mil Días (1899-1902), la cual dejó la moneda completamente depreciada por una inflación que había llegado a más del 300% anual. A pesar de este panorama desolador, entre 1904 y 1922, Colombia logró estabilizar su economía y tener un sólido crecimiento exportador sobre la base del café. Esto le permitió al país, a comienzos de la década de 1920, llevar a cabo reformas económicas para atraer prestamos del exterior, mejorar la infraestructura de transporte y así ubicarse en los primeros lugares en crecimiento económico en América Latina. En este contexto se generaron las bases para la creación del Banco de la República en 1923. Este documento tiene como propósito describir los antecedentes políticos y económicos que forjaron la creación del banco central colombiano. ******ABSTRACT: In the early twentieth century Colombia’s economy experienced the negative consequences of the Guerra de los Mil Días (1899-1902), which left a highly depreciated currency and an inflation of more than 300% per year. Despite this bleak picture, between 1904 and 1922, the country was able to stabilize its economic indicators and obtaining a strong growth based on the exports of coffee. This advances allowed the country, at the beginning of the 1920s, to carry out structural economic reforms with the purpose of attracting foreign loans and improving the transport infrastructure. As a result Colombia obtained the first places in terms of economic growth in Latin America. It is under this context that the foundations were built for the establishment of the Banco de la República in 1923. The main purpose of this document is to describe the political and economic background that made possible the creation of Colombia’s Central Bank.
    Keywords: Banco de la República, inflación, tasa de cambio
    JEL: E31 E42 E58
    Date: 2015–12–21
  11. By: Galip Kemal Ozhan
    Abstract: This paper studies the role of the financial sector in affecting domestic resource allocation and cross-border capital flows. I develop a quantitative, two-country, macroeconomic model in which banks face endogenous and occasionally binding leverage constraints. Banks lend funds to be invested in tradable or non-tradable sector capital and there is international financial integration in the market for bank liabilities. I focus on news about economic fundamentals as the key source of fluctuations. Specifically, in the case of positive news on the valuation of non-traded sector capital that turn out to be incorrect at a later date, the model generates an asymmetric, belief-driven boom-bust cycle that reproduces key features of the recent Eurozone crisis. Bank balance sheets amplify and propagate fluctuations through three channels when leverage constraints bind: First, amplified wealth effects induce jumps in import-demand (demand channel). Second, changes in the value of non-tradable sector assets alter bank lending to tradable sector firms (intra-national spillover channel). Third, domestic and foreign households re-adjust their savings in domestic banks, and capital flows further amplify fluctuations (international spillover channel). A common central bankâs unconventional policies of private asset purchases and liquidity facilities in response to unfulfilled expectations are successful at ameliorating the economic downturn.
    JEL: E44 F32 F41 G15
    Date: 2015–12–30
  12. By: Adolfo Meisel-Roca; Juliana Jaramillo-Echeverri
    Abstract: Entre 1930 y 1951 Colombia enfrentó grandes cambios y diversos choques económicos internos y externos. Este artículo estudia la política monetaria del Banco de la República y las nuevas funciones que adquirió durante esa época, dentro de las que se cuentan la administración de las salinas y las minas de esmeraldas. Por el lado de la contribución cultural se destaca su aporte por medio de la apertura de la biblioteca del Banco y el Museo del Oro. Pese a las crisis que tuvo que afrontar, el balance de la economía colombiana de este periodo fue positivo, sobre todo en el contexto de una desaceleración de la economía mundial y regional. Ese resultado se basó, en gran parte, en el buen desempeño de las exportaciones y el cambio estructural que representó la industrialización por sustitución de importaciones. ******ABSTRACT: Between 1930 and 1951 the Colombian economy faced profound changes and several national and international shocks. This paper analyzes the monetary policy carried out by Banco de la República (the Central Bank of Colombia) and its new responsibilities, such as the administration of salt and emeralds mines. On the cultural side, the Bank contributed with the creation of a public library and the Museo del Oro (Gold Museum). Despite the crisis, Colombia managed to end the period with a positive balance, a remarkable result considering the regional and world economic slowdown. These positive results can be attributed to the positive exports performance and the structural changes achieved through the import substitution industrialization.
    Keywords: Banco de la República, Colombia, política monetaria
    JEL: E31 E42 E58
    Date: 2016–01–05
  13. By: Hansen, Stephen (Universitat Pompeu Fabra and GSE); McMahon, Michael (IMF-STI, University of Warwick, CEPR, CAGE (Warwick), CfM (LSE), and CAMA (ANU))
    Abstract: We explore how the multi-dimensional aspects of information released by the FOMC has effects on both market and real economic variables. Using tools from computational linguistics, we measure the information released by the FOMC on the state of economic conditions, as well as the guidance the FOMC provides about future monetary policy decisions. Employing these measures within a FAVAR framework, we find that shocks to forward guidance are more important than the FOMC communication of current economic conditions in terms of their effects on market and real variables. Nonetheless, neither communication has particularly strong effects on real economic variables.
    Keywords: Monetary policy ; communication ; Vector Autoregression.
    JEL: E52 E58
    Date: 2015
  14. By: Andrea Caggese; Ander Pérez Orive
    Abstract: Empirical studies examining the 2007-2009 Great Recession suggest that financial shocks to households and firms are both important to explain output and employment fluctuations. Motivated by this evidence, we develop a model with financial and labor market frictions in which heterogeneous households face unemployment risk, and heterogeneous firms face costly bankruptcy and finance themselves partly with nominally fixed long-term debt. We show that shocks that cause household deleveraging and credit shocks to firms interact to greatly amplify the effects of financial shocks on output and employment, even when these same shocks separately have moderate effects.
    Keywords: financial shocks, amplification, precautionary savings, unemployment risk, Borrowing constraints, firm bankruptcy risk
    JEL: E21 E24 G33
    Date: 2015–07
  15. By: Stefan Angrick
    Abstract: This paper examines the monetary policy constraints facing economies on a fixed peg or managed float regime, contrasting the Mundell-Fleming Trilemma view against the Compensation view commonly found at central banks. While the former holds that foreign exchange inflows and outflows affect the domestic money base, constraining monetary policy under non-floating regimes unless capital controls are adopted, the latter purports that endogenous sterilisation of foreign exchange flows invalidates this trade-off. The predictions of both theories are empirically evaluated for five East Asian economies using central bank balance sheets, vector error correction models and impulse response functions. The findings indicate that the dynamics for the economies studied correspond more closely to the Compensation view than the Trilemma view, suggesting that it is a sustained loss of foreign ex-change reserves that imposes a relevant constraint on autonomy rather than the adoption of a non-floating exchange rate regime.
    Keywords: central banking, balance sheets, monetary policy, exchange rates, policy autonomy
    JEL: E51 E58 F41
    Date: 2015
  16. By: Nezih Guner; Andrii Parkhomenko; Gustavo Ventura
    Abstract: We document that for a group of high-income countries (i) mean earnings of managers tend to grow faster than for non managers over the life cycle; (ii) the earnings growth of managers relative to non managers over the life cycle is positively correlated with output per worker. We interpret this evidence through the lens of an equilibrium life-cycle, span-of-control model where managers invest in their skills. We parameterize this model with U.S. observations on managerial earnings, the size-distribution of plants and macroeconomic aggregates. We then quantify the relative importance of exogenous productivity differences, and the size-dependent distortions emphasized in the misallocation literature. Our findings indicate that such distortions are critical to generate the observed differences in the growth of relative managerial earnings across countries. Thus, observations on the relative earnings growth of managers become natural targets to discipline the level of distortions. Distortions that halve the growth of relative managerial earnings (a move from the U.S. to Italy in our data), lead to a reduction in managerial quality of 27% and to a reduction in output of about 7% – more than half of the observed gap between the U.S. and Italy. We find that cross-country variation in distortions accounts for about 42% of the cross-country variation in output per worker gap with the U.S.
    Keywords: managers, management practices, distortions, size, skill investments, productivity differences
    JEL: E23 E24 J24 M11 O43 O47
    Date: 2015–12
  17. By: Benjamin Eden (Vanderbilt University); Maya Eden (World Bank)
    Abstract: This paper studies the possibility of using financial regulation that prohibits the use of money substitutes as a tool for mitigating the adverse effects of deviations from the Friedman rule. We establish that when inflation is not too high regulation aimed at eliminating money substitutes improves welfare by economizing on transaction costs. The gains from regulation depend on the distribution of income and on the level of direct taxation. The area under the demand for money curve is equal to the welfare cost of inflation only when there are no direct taxes and no proportional intermediation costs: otherwise, the area under the demand curve overstates the welfare cost of inflation when money substitutes are not important and understates the welfare cost when money substitutes are important.
    Keywords: Welfare cost of inflation, Liquidity, Regulations of money substitutes
    JEL: E0
    Date: 2016–01–11
  18. By: Peiris, M.Udara (International College of Economics and Finance, National Research University-Higher School of Economics, Moscow, Russia and Department of Economics, University of Warwick); Polemarchakis, Herakles (Department of Economics, University of Warwick)
    Abstract: Explicit targets for the composition of assets traded by governments are necessary for fiscal-monetary policy to determine the stochastic paths of inflation or exchange rates; this is the case even if fiscal policy is non-Ricardian.Targets obtain with the traditional conduct of monetary policy and Credit Easing, but not with inconventional policy and Quantitative Easing. The composition of the portfolios traded by monetary-fiscal authorities determines premia in asset and currency markets
    JEL: E50 F41
    Date: 2015
  19. By: Emara, Noha; Mordos, Elise; Tyagi, Sonika
    Abstract: This econometric study seeks to determine the most important factors of aggregate demand in Egypt so as to provide insight into how this developing nation can grow economically in the coming years. The Ordinary Least Squares estimation method was used in order to estimate nominal GDP for the time period 1975 to 2009. Based on the results the real interest rate, the inflation rate, the growth rate of government expenditure, and the growth rate of the money supply are the most statistically and economically significant factors of the growth rate of nominal GDP for the coming year. A one percent change in the growth rate of the previous year government expenditure is predicted to cause the growth rate of the current year nominal GDP to increase by 54%. The role of government expenditures on public sector wage expansion is discussed in this study as to shed light on this factor’s significant influence on income inequality post-1975 in Egypt, which will continue to impact nominal GDP and social conditions for the developing nation in the coming years.
    Keywords: aggregate demand; growth; Egypt
    JEL: C1 E2 E6
    Date: 2015
  20. By: Stefan Behrendt (School of Economics and Business Administration, Friedrich Schiller University Jena)
    Abstract: Empirical research on the monetary transmission mechanism considering credit developments is almost exclusively limited to the amount of outstanding credit in an economy. Two issues arise out of this. First, stock-flow inconsistencies might occur. Second, the change of the outstanding amount of credit on banks' balance sheets does not consist only of new lending activity, but also incorporates other factors. As central banks should predominantly be focused on the amount of newly created credits in an economy while analysing the impact of monetary policy towards lending activity, using the change in the stock of lending can lead to distorted results, because of the incorporation of data on maturing loans, revaluations, securitization, and write-offs into this variable. The majority of existing credit channel literature does not really account for these issues. This paper makes a case to better caption new lending activity in monetary policy research. What is shown in this paper is that empirical investigations might lead to differing results when accounting for the other factors in the stock data. Central bank policy might therefore be biased.
    Keywords: credit channel, monetary transmission, bank lending
    JEL: C18 C82 E51 E52
    Date: 2016–01–06
  21. By: Addison, John T. (University of South Carolina)
    Abstract: This paper addresses the design of the machinery of collective bargaining from the perspective of the needs of microeconomic and macroeconomic flexibility. In the former context, greater attention is given over to enterprise flexibility than external adjustment. In the latter context, close attention is paid to changes in collective bargaining along the dimensions of bargaining coverage, structure, and coordination, drawing on Visser’s (2013) welcome update of national collective bargaining institutions; on the basis of which, and recent theoretical developments, specific support is adduced for the German, contemporary Scandinavian, and British models. The role of trust in securing micro and macro flexibility also receives attention, leading to the suggestion that the polder or Dutch model might also be expected to populate the firmament of favored collective bargaining arrangements. The paper concludes with a discussion of the policy implications raised by two developments that have been linked to the retreat of collective bargaining, namely heightened earnings dispersion and a shortfall in worker voice.
    Keywords: micro/macro flexibility, collective bargaining, growth, stabilization, voice, bargaining coverage/structure/coordination, inequality, decentralization, pacts, social pacts, trust, unemployment
    JEL: D02 E02 E24 E25 E61 J48 J50 J51 J52 J53 J58 P51
    Date: 2015–12
  22. By: John T. Addison (University of South Carolina, Durham University, GEMF/University of Coimbra, and IZA)
    Abstract: This paper addresses the design of the machinery of collective bargaining from the perspective of the needs of microeconomic and macroeconomic flexibility. In the former context, greater attention is given over to enterprise flexibility than external adjustment. In the latter context, close attention is paid to changes in collective bargaining along the dimensions of bargaining coverage, structure, and coordination, drawing on Visser’s (2013) welcome update of national collective bargaining institutions; on the basis of which, and recent theoretical developments, specific support is adduced for the German, contemporary Scandinavian, and British models. The role of trust in securing micro and macro flexibility also receives attention, leading to the suggestion that the polder or Dutch model might also be expected to populate the firmament of favored collective bargaining arrangements. The paper concludes with a discussion of the policy implications raised by two developments that have been linked to the retreat of collective bargaining, namely heightened earnings dispersion and a shortfall in worker voice.
    Keywords: micro/macro flexibility, collective bargaining, bargaining coverage/structure/coordination, inequality, growth, stabilization, decentralization, pacts, social pacts, trust, unemployment, voice.
    JEL: D02 E02 E24 E25 E61 J48 J50 J51 J52 J53 J58 P51
    Date: 2016–01
  23. By: Hetzel, Robert L. (Federal Reserve Bank of Richmond)
    Abstract: The monetary standard emerges out of the interaction of monetary policy with the structure of the economy. Characterization of the monetary standard thus requires specification of a model of the economy with a central bank reaction function. Such a specification raises all the fundamental issues of identification in macroeconomics.
    JEL: E50
    Date: 2015–11–09
  24. By: Zsolt Darvas (Institute of Economics - Centre for Economic and Regional Studies - Hungarian Academy of Sciences and Bruegel and Corvinus University of Budapest); Andras Simon (retired Head of Research at the Central Bank of Hungary)
    Abstract: This paper argues that the Phillips curve relationship is not sufficient to trace back the output gap, because the effect of excess demand is not symmetric across tradeable and non-tradeable sectors. In the non-tradeable sector, excess demand creates excess employment and inflation via the Phillips curve, while in the tradeable sector much of the excess demand is absorbed by the trade balance. We set up an unobserved-components model including both a Phillips curve and a current account equation to estimate ‘sustainable output’ for 45 countries. Our estimates for many countries differ substantially from the potential output estimates of the European Commission, IMF and OECD. We assemble a comprehensive real-time dataset to estimate our model on data which was available in each year from 2004-15. Our model was able to identify correctly the sign of pre-crisis output gaps using real time data for countries such as the United States, Spain and Ireland, in contrast to the estimates of the three institutions, which estimated negative output gaps real-time, while their current estimates for the pre-crisis period suggest positive gaps. In the past five years the annual output gap estimate revisions of our model, the European Commission, IMF, OECD and the Hodrick-Prescott filter were broadly similar in the range of 0.5-1.0 percent of GDP for advanced countries. Such large revisions are worrisome, because the European fiscal framework can translate the imprecision in output gap estimates into poorly grounded fiscal policymaking in the EU.
    Keywords: equilibrium current account; international trade; Kalman-filter; open economy; Phillips-curve; potential output; real-time data; sustainable output; state-space models
    JEL: C32 E32 F41
    Date: 2015–12
  25. By: Rangan Gupta; Patrick T. Kanda; Mampho P. Modise; Alessia Paccagnini
    Abstract: Inflation forecasts are a key ingredient for monetary policy-making – especially in an inflation targeting country such as South Africa. Generally, a typical Dynamic Stochastic General Equilibrium (DSGE) only includes a core set of variables. As such, other variables, for example alternative measures of inflation that might be of interest to policy-makers, do not feature in the model. Given this, we implement a closed-economy New Keynesian DSGE model-based procedure which includes variables that do not explicitly appear in the model. We estimate such a model using an in-sample covering 1971Q2 to 1999Q4 and generate recursive forecasts over 2000Q1 to 2011Q4. The hybrid DSGE performs extremely well in forecasting inflation variables (both core and nonmodelled) in comparison with forecasts reported by other models such as AR(1). In addition, based on ex-ante forecasts over the period 2012Q1–2013Q4, we find that the DSGE model performs better than the AR(1) counterpart in forecasting actual GDP deflator inflation.
    Keywords: DSGE model; Inflation; Core variables; Noncore variables
    JEL: C11 C32 C53 E27 E47
    Date: 2015
  26. By: McMahon, Michael (University of Warwick, CEPR, CAGE (Warwick), CEP (LSE), CfM (LSE) and CAMA (ANU)); Peiris, Udara (CEF, National Research University Higher School of Economics, Russian Federation.); Polemarchakis, Herakles (University of WarwickAbstract: Quantitative easing compromises the control of the central bank over the stochastic path of inflation)
    Keywords: Quantitative easing ; credit easing ; inflation
    JEL: D50 E31 E52
    Date: 2015
  27. By: Lilit Popoyan; Mauro Napoletano; Andrea Roventini
    Abstract: We develop an agent-based model to study the macroeconomic impact of alternative macro prudential regulations and their possible interactions with different monetary policy rules. The aim is to shed light on the most appropriate policy mix to achieve the resilience of the banking sector and foster macroeconomic stability. Simulation results show that a triple-mandate Taylor rule, focused on output gap, inflation and credit growth, and a Basel III prudential regulation is the best policy mix to improve the stability of the banking sector and smooth output fluctuations. Moreover, we consider the different levers of Basel III and their combinations. We find that minimum capital requirements and counter-cyclical capital buffers allow to achieve results close to the Basel III first-best with a much more simplified regulatory framework. Finally, the components of Basel III are nonadditive: the inclusion of an additional lever does not always improve the performance of the macro prudential regulation.
    Keywords: macro prudential policy; Basel III regulation; financial stability; monetary policy; agent-based computational economics
    Date: 2015–12–16
  28. By: Bahar Baziki, Selva (Central Bank of the Republic of Turkey); Ginja, Rita (Uppsala Center for Labor Studies); Borota Milicevic, Teodora (Uppsala Center for Labor Studies)
    Abstract: This paper studies the changes in labor allocation across firms and industries in response to changes in technology (captured by the adoption of information and communication technologies, ICT) and import competition, due to increased exposure to trade competition from China. We use detailed matched worker-firm data from the Swedish manufacturing sector. We provide new evidence on the mobility of heterogeneous workers across firms and document increased assortative matching of workers in ICT intensive industries. However, the sorting patterns are not uniform across industries within this group. The adoption of ICT along with stronger Chinese import competition results in a significant skill upgrade within high-wage firms. Incontrast,intheabsence of strong pressures in importcompetition, sorting occurs at the low end of the worker-firm distribution, i.e. low-skill workers allocate to low-wage firms. Industries with low ICT intensity do not exhibit any of these sorting patterns. We rationalize our empirical findings through a labor market matching model which is able to explain the increased assortative matching in ICT intensive industries through an increase in the relative demand for qualified workers.
    Keywords: Wage Inequality; Employment Dynamics; Assortative Matching; Import Competition; Technological Change
    JEL: E24 F16 J31 J63 O33
    Date: 2015–12–26
  29. By: Iancu, Aurel (Institutul National de Cercetari Economice al Academiei Române); Olteanu, Dan (Institutul National de Cercetari Economice al Academiei Române)
    Abstract: After a brief introduction dealing with critical opinions of some economists on the European austerity policy, the authors point out that austerity as a means of achieving fiscal consolidation and financial stability is applied when the fiscal domain is weak. After analyzing the effects of the 2009 crisis on some indicators and austerity measures taken by almost all EU countries, the study presents the content and the role of the EU fiscal compact and methodology used to support the fiscal consolidation measures. Most of the study consists in the analysis of the outcome of this methodology (through indicators, key-equations, graphs) revealing the relationships between indicators: effective GDP and potential GDP, production variation, effective cyclical and structural deficits as well as the deficit in the balance of payments. The paper reveals some shortcomings of the new mechanism which affect the development of some major segments of the real economy, such as public investments, and further the economic potential growth on medium and long terms.
    Keywords: fiscal policy, budget deficits, structural deficits, austerity, fiscal consolidation, the golden rule of public finance, economic growth
    JEL: E62 F02 H2 H5 H6 H7
    Date: 2015–12
  30. By: Stelios D. Bekiros; Rangan Gupta; Alessia Paccagnini
    Abstract: Information on economic policy uncertainty does matter in predicting the change in oil prices. We compare the forecastability of standard, Bayesian and time-varying VAR against univariate models. The time-varying VAR model outranks all alternative models over the period 2007:1–2014:2.
    Keywords: Oil prices; Economic policy uncertainty; Forecasting
    JEL: C22 C32 C53 E60 Q41
    Date: 2015–07
  31. By: Tomas Havranek; Zuzana Irsova; Jitka Lesanovska
    Abstract: An important component of monetary policy transmission is the pass-through from financial market interest rates, directly influenced or targeted by central banks, to the rates that banks charge firms and households. Yet the available evidence on the strength and speed of the pass-through is mixed and varies across countries, time periods, and even individual banks. We examine the pass-through mechanism using a unique data set of Czech loan and deposit products and focus on bank-level determinants of pricing policies, especially cost efficiency, which we estimate employing both stochastic frontier and data envelopment analysis. Our main results are threefold: First, the long-term pass-through was close to complete for most products before the financial crisis, but has weakened considerably afterward. Second, banks that provide high rates for deposits usually charge high loan markups. Third, cost-efficient banks tend to delay responses to changes in the market rate, smoothing loan rates for their clients.
    Keywords: Bank pricing policies, cost efficiency, data envelopment analysis, monetary transmission, stochastic frontier analysis
    JEL: E43 E58 G21
    Date: 2015–11
  32. By: Michał Markun; Anna Mospan
    Abstract: The present paper examines the term premia in the interbank money market in Poland. We use analyst surveys to proxy interest rate expectations and forward rate agreement (FRA) market data to construct term premia. We consider the term premia at shorter and longer horizons. Both premia follow autoregressive, stationary processes of low orders. The longer term premium is higher and more volatile than the shorter one; moreover, it is also characterized by substantially higher persistence. Our findings provide direct evidence against the efficient markets hypothesis (EMH) at the short end of the Polish yield curve and indicate areas of potential ineffectiveness of the monetary policy transmission mechanism.
    Keywords: short-term interest rate, expectations, term premium, persistence, surveys,Poland
    JEL: C83 E43 E58 G23
    Date: 2015
  33. By: Yoshino, Naoyuki (Asian Development Bank Institute); Taghizadeh-Hesary, Farhad (Asian Development Bank Institute)
    Abstract: Japan has suffered from sluggish economic growth and recession since the early 1990s. In this paper, we analyze the causes of the prolonged slowdown of the Japanese economy (the lost decade). Economics Nobel laureate Paul Krugman has argued that Japan’s lost decade is an example of a liquidity trap. However, our empirical analysis shows that stagnation of the Japanese economy comes from its vertical IS curve rather than a horizontal LM curve, so the Japanese economy faces structural problems rather than a temporary downturn. The structural problems mainly come from the aging demographic, which is often neglected in other studies, and also from the allocation of transfers from the central government to local governments, and the unwillingness of Japanese banks to lend money to startup businesses and SMEs, mainly because of Basel capital requirements. Many countries, like the People’s Republic of China, are expected to face similar issues, particularly the aging population, and so are very much concerned about the long-term recession that Japan has experienced. This paper will address why the Japanese economy has been trapped in a prolonged slowdown and will provide some remedies for revitalizing the economy.
    Keywords: Japan’s lost decade; recessions; prolonged slowdown
    JEL: E12 E62
    Date: 2015–12–31
  34. By: Bloise, Gaetano (Department of Economics, Yeshiva University, and Department of Economics, University of Rome); Polemarchakis, Herakles (Department of Economics, University of Warwick)
    Abstract: In a dynamic economy, money provides liquidity as a medium of exchange.A central bank that sets the nominal rate of interest and distributes its profit to shareholders as dividends is traded in the asset market. A nominal rates of interest that tend to zero, but do not vanish, eliminate equilibrium allocations that do not converge to a Pareto optimal allocation.
    Keywords: nominal rate of interest ; dynamic efficiency
    JEL: D60 E10
    Date: 2015
  35. By: Farley Grubb (Department of Economics, University of Delaware)
    Abstract: I reconstruct the data on Virginiaís paper money regime using forensic accounting techniques. I correct the existing data on the amounts authorized and outstanding. In addition, I reconstruct yearly data on previously unknown aspects of Virginiaís paper money regime, including printings, net new emissions, redemptions and removals, denominational structures, expected tax revenues, and specie accumulating in the treasury for paper money redemption. These new data form the foundation for narratives written on the social, economic, and political history of Virginia, as well as for testing models of colonial paper money performance.
    Keywords: bills of credit, data cloning, specie monies, tax revenues, treasury notes
    JEL: C82 E51 N11
    Date: 2015
  36. By: Kadri Männasoo; Jaanika Meriküll
    Abstract: This paper studies financing constraints on R&D over the most recent boom and bust episode in Central and Eastern Europe (CEE). Given that financial and venture capital markets in CEE are thin in comparison to those in high-income economies and that many of CEE countries experienced a credit crunch during the last recession, it is proposed that financing constraints have a significant adverse effect on R&D activity in these countries. The paper uses two complementary firm-level data-sources from ten CEE countries. We find that financing constraints have a substantial effect on R&D expenditures, as the probability of credit constrained firms undertaking R&D activities is around 70% lower than for other firms and firms’ R&D expenditure sensitivity to cash flow is very high. Despite the severity of the crisis, the adverse effect of financing constraints for R&D did not increase during the financial crisis. We also find that, conditional on credit constraints, firms’ R&D activity is higher during a recession
    Keywords: R&D financing constraints, credit constraints, business cycle, Central and Eastern Europe
    JEL: O16 O32 O52 E32 P23
    Date: 2015–12–30
  37. By: Andres Kuusk; Karsten Staehr; Uku Varblane
    Abstract: This paper assesses the extent of structural or sectoral change and its importance for aggregate productivity growth during times of boom, bust and recovery. The analysis covers 10 EU countries from Central and Eastern Europe over the years 2001–2012. The reallocation of labour across sectors was substantial during the boom, very extensive in 2009 at the depth of the crisis and modest in the subsequent recovery period. The contribution of sectoral change to aggregate productivity growth is computed using various decomposition methods. Changes in labour productivity within sectors play the dominant role for aggregate productivity growth, while reallocation of labour between sectors is less important. This pattern is found through most of the sample period despite large differences in the extent of sectoral change during the boom, crisis and recovery
    Keywords: labour productivity, structural change, reallocation, productivity decomposition
    JEL: L16 E32 P23
    Date: 2015–12–30
  38. By: Ryan Chahrour (Boston College); Luminita Stevens (University of Maryland)
    Abstract: We develop a model of equilibrium price dispersion via retailer search and show that the degree of market segmentation within and across countries cannot be separately identified by good-level price data alone. We augment a set of well-known empirical facts about the failure of the law of one price with data on aggregate intranational and international trade quantities, and calibrate the model to match price and quantity facts simultaneously. The calibrated model matches the data very well and implies that within-country markets are strongly segmented, while international borders contribute virtually no additional market segmentation.
    Keywords: Law of one price, Border effect, Real exchange rate
    JEL: F41 F30 E30
    Date: 2015–12–18
  39. By: Petra Palic (The Institute of Economics, Zagreb); Petra Posedel Simovic (Zagreb School of Economics and Management); Maruska Vizek (The Institute of Economics, Zagreb)
    Abstract: We use data for 24 European countries, spanning from 1994 to 2015, in order to examine how changes in macroeconomic conditions influence the country’s risk premium volatility proxied by sovereign spreads variance. In the first part of the empirical analysis we estimate the univariate generalised autoregressive conditional heteroskedasticity (GARCH) model in order to obtain the conditional variance of sovereign bond spreads. We show that the increase of this variance coincides with economic and financial crisis occurring either in the country or globally. In the second part of the empirical analysis we estimate panel vector autoregression (panel VAR) model in order to model the interplay among macroeconomic fundamentals (inflation, output gap, public debt and interest rates) and the country´s risk premium volatility. We show that overheating of the economy, along with the unexpected increase in public debt, inflation and interest rates increase the country´s risk premium volatility. We also show that sudden increase in country´s risk premium volatility depresses the economy, exerts deflationary pressures on consumer prices, and is followed by strong and permanent increase in public debt.
    Keywords: sovereign bond markets, panel VAR, European Union
    JEL: C33 E44 F34 G15
    Date: 2015–12
  40. By: Maria Bigoni (University of Bologna); Gabriele Camera (Chapman University & University of Basel); Marco Casari (University of Bologna & IZA)
    Keywords: Endogenous institutions, experiments, repeated games, strategic uncertainty
    JEL: C70 C90 D03 E02
    Date: 2015
  41. By: Christophe Piette (Research Department, NBB)
    Abstract: This paper investigates the usefulness, within the frameworks of the standard bridge model and the ‘bridging with factors’ approach, of a predictor selection procedure that builds on the elastic net algorithm. A pseudo-real time forecasting exercise is performed, in which estimates for Belgium’s quarterly GDP are generated using a monthly dataset of 93 potential predictors. While the simulation results indicate that specifying forecasting models using this procedure can lead to a slight improvement in terms of predictive accuracy over shorter horizons, the forecasting errors made by these ‘targeted’ models are not found to be significantly different from those based on the principal components extracted from the entire set of available indicators. In other words, the only advantage of following such an approach lies in the fact that it enables the forecaster to streamline the information set.
    Keywords: bridge models, nowcasting, variable selection
    JEL: C22 E37
    Date: 2016–01
  42. By: Fuess, Roland; Zietz, Joachim
    Abstract: This study examines why monetary policy at the national level can have vastly different effects on appreciation rates of single family houses across metropolitan statistical areas (MSAs). The study employs Case/Shiller monthly house price index data for 19 MSAs from 1992:06 to 2014:12 and FHFA quarterly house price index data for 94 MSAs from 1992:3 to 2014:4. We model the importance of MSA-specific demand and supply characteristics through a set of interaction terms between these factors and monetary policy. The empirical analysis is cast in terms of a state-space approach with a stochastic trend component to absorb the impact of omitted variables. Robustness checks use panel data estimators with interaction terms. A lower federal funds rate is associated with home price run-ups in MSAs that are characterized by higher demand and tighter supply conditions.
    Keywords: House price inflation, demand and supply factors, federal funds rate, monetary policy, state-space models
    JEL: C21 C23 E50 R10
    Date: 2015–12
  43. By: Ivan Todorov (Market regulation department of Communications Regulation Commission)
    Abstract: The purpose of this study is to analyze the effectiveness of government spending and net taxes in Bulgaria for the period after the recent crisis. An empirical evaluation is based on two approaches. First, the ARDL analysis based on the Index of industrial production monthly data shows that the long term multiplier effects are valued 1.35 for spending, and close to 0.7 for net taxes. Second, using SVAR robust check based on GDP data the estimated values of the first-year multipliers are respectively 0.5 and 0.2 while the cumulative impact effect reaches up to 0.8 and 0.4.
    Keywords: Fiscal Policy, Economic Growth, Fiscal multipliers, SVAR, ADRL
    JEL: C32 E62
    Date: 2015–10
  44. By: Chatziantoniou, Ioannis; Filis, George; Floros, Christos
    Abstract: This paper provides the empirical framework to assess whether UK monetary policy shocks induce both the UK housing market and the UK stock market to remain at a high-volatility (risk) environment. The Markov regime switching modelling approach is employed in order to identify two distinct environments for each market; namely, a high-risk environment and a low-risk environment, while a probit model is employed in order to test whether monetary policy shocks provide this predictive information regarding the current state of both markets under consideration. Our findings indicate that monetary policy shocks do indeed have predictive power on the stock market. In addition, in both asset markets there is a key role for inflation. Results are important especially within the framework of the inflation targeting monetary policy regime.
    Keywords: United Kingdom, Inflation targeting, Markov regime switching, Forecasting, Asset prices
    JEL: C22 E52 G1
    Date: 2015
  45. By: Alessandra Bonfiglioli; Rosario Crinò; Gino Gancia
    Abstract: We study how financial frictions affect firm-level heterogeneity and trade in a model where productivity differences across monopolistically competitive firms are endogenous and depend on investment decisions at the entry stage. By increasing entry costs, financial frictions soften competition and lower the value of investing in bigger projects with more dispersed outcomes. Hence, credit frictions make firms more homogeneous and hinder the volume of exports both along the intensive and the extensive margin. Export opportunities, instead, shift expected profits to the tail and increase the value of technological heterogeneity. We test these predictions using comparable measures of sale dispersion within 365 manufacturing industries in 119 countries, built from highly disaggregated US import data. Consistent with the model, financial development increases sale dispersion, especially in more financially vulnerable industries; sale dispersion is also increasing in measures of comparative advantage. These results are quantitatively important for explaining the effect of financial development and factor endowments on export sales.
    Keywords: financial development, firm heterogeneity, international trade
    JEL: F12 F16 E24
    Date: 2015–12
  46. By: Andreas Fagereng; Elin Halvorsen (Statistics Norway)
    Abstract: Data on consumption expenditure of the household is essential in a wide array of economic research. This includes both topics in micro as well as macroeconomics. However, obtaining a consistent and precise measure of household consumption has proven notoriously difficult. This paper documents a method for computing a longitudinal consumption measure for Norwegian households from administrative records of income and wealth. Expenditure surveys tend to suffer from limited sample sizes and underrepresentation of high-income households. Administrative data does not have such limitations and offers a much larger sample with better coverage of all household types. This is particularly useful for improving the measurement of heterogeneity in consumption behavior.
    Keywords: consumption measurement; savings; household finance
    JEL: D12 D14 D31 E21 G11
    Date: 2015–12
  47. By: Aur\'elien Hazan
    Abstract: We show that a steady-state stock-flow consistent macroeconomic model can be represented as a Constraint Satisfaction Problem (CSP). The set of solutions is a polytope, which volume depends on the constraints applied and reveals the potential fragility of the economic circuit, with no need to specify the dynamics. Several methods to compute the volume are compared, inspired by operations research methods and the analysis of metabolic networks, both exact and approximate. We also introduce a random transaction matrix, and study the particular case of linear flows with respect to money stocks.
    Date: 2016–01
  48. By: Kelly, Robert (Central Bank of Ireland); McCann, Fergal (Central Bank of Ireland); O'Toole, Conor (Central Bank of Ireland)
    Abstract: We provide a micro-empirical link between the large literature on credit and house prices and the burgeoning literature on macroprudential policy. Using loan-level data on Irish mortgages originated between 2003 and 2010, we construct a measure of credit availability which varies at the borrower level as a function of income, wealth, age, interest rates and prevailing market conditions around Loan to Value ratios (LTV), Loan to Income ratios (LTI) and monthly Debt Service Ratios (DSR). We deploy a property-level house price model which shows that a ten per cent increase in credit available leads to an 1.5 per cent increase in the value of property purchased. Coeffcients from this model are then used to fit values under scenarios of macroprudential restrictions on LTV, LTI and DSR on credit availability and house prices in Ireland for 2003 and 2006. Our results suggest that macroprudential limits would have had substantial impacts on house prices, and that both the level at which they are set and the timing of their introduction is a crucial determinant of their impact on housing values.
    Keywords: Mortgages, credit availability, macroprudential policy, house prices.
    Date: 2015–12
  49. By: John Kennes (Department of Economics and Business Economics, Aarhus University, Denmark); Daniel le Maire (Department of Economics, University of Copenhagen, Denmark)
    Abstract: We generalize McAfee’s (1993) game of competing sellers to the case of heterogeneous sellers. In the generalized McAfee (GM) game, the equilibrium expected job offer distribution of each worker (seller) type evolves over time as a function of stochastic events. We derive a tractable method of solving the GM game. We estimate, using non-parametric methods, a close fit between a benchmark GM game and a cross-section of Danish data on productivity and unemployment. The theoretical properties of the GM game, which relate to on-the-job search, assortative matching, aggregate and match specific shocks, and the equivalence of alternative games, are also characterized.
    Keywords: Auctions, assortative matching, wage dispersion, aggregate shocks, on-the-job search
    JEL: J64 J63 E32
    Date: 2016–05–01
  50. By: Claudia Olivetti (Boston College; NBER); Barbara Petrongolo (Queen Mary University; Centre for Economic Performance, LSE)
    Abstract: Women in developed economies have made major inroads in labor markets throughout the past century, but remaining gender differences in pay and employment seem remarkably persistent. This paper documents long-run trends in female employment, working hours and relative wages for a wide cross-section of developed economies. It reviews existing work on the factors driving gender convergence, and novel perspectives on remaining gender gaps. The paper finally emphasizes the interplay between gender trends and the evolution of the industry structure. Based on a shift-share decomposition, it shows that the growth in the service share can explain at least half of the overall variation in female hours, both over time and across countries.
    Keywords: gender gaps, demand and supply, industry structure
    JEL: E24 J16 J31
    Date: 2016–01–01
  51. By: Bloise, Gaetano (Department of Economics, Yeshiva University, and Department of Economics, University of Rome); Polemarchakis, Herakles (Department of Economics, University of Warwick)
    Abstract: In a dynamic economy, money provides liquidity as a medium of exchange.A central bank that sets the nominal rate of interest and distributes its profit to shareholders as dividends is traded in the asset market. A nominal rates of interest that tend to zero, but do not vanish, eliminate equilibrium allocations that do not converge to a Pareto optimal allocation.
    Keywords: nominal rate of interest ; dynamic eciency JEL classification numbers: D60; E10.
    Date: 2015
  52. By: Whitaker, Stephan (Federal Reserve Bank of Cleveland)
    Abstract: For five decades, the share of adults employed in college-degree-intensive industries, such as health care and education, has been rising. Industries that provided employment for workers without degrees, especially manufacturing, have been reducing their payrolls. This economic transition could impact the probability of children obtaining higher levels of education than their parents achieved. In this analysis, measures of the local industrial composition from the Current Population Survey are merged with the National Longitudinal Surveys of Youth using the confidential geo-coded records. Living in a labor market with a higher share of adults employed in degree-intensive industries is positively associated with obtaining a college degree among youth whose parents do not have a degree. An additional standard deviation difference in the share of employment in degree intensive industries corresponds to a 0.02 increase in the probability of ascending to being a college graduate, from a mean of 0.23. For cohorts born in the 1960s, living in a manufacturing-intensive region was negatively correlated with college attainment, but the relationship becomes positive among more recent cohorts. Alternate specifications introduce measures of several factors that could relate the industrial composition to educational attainment, including returns to education (wage premiums), opportunity costs (youth employment), parental inputs (family structure, income), community resources (per capita income), information (regional education levels, post-secondary student populations), and networks (parent’s employment).
    Keywords: Industrial Composition; Intergenerational Mobility; Educational Attainment
    JEL: E24 J24 O14 R11
    Date: 2016–01–04
  53. By: Diewert, W. Erwin; Shimizu, Chihiro
    Abstract: The paper fits a hedonic regression model to the sales of condominium units in Tokyo over the period 2000-2015. The problem is complicated by the need to decompose the selling price of a unit into a component that can be attributed to the structure area of the unit and another component that can be attributed to the unit’s share of land value. There is very little information on the value of condominium land and so this paper develops a methodology for reducing this knowledge gap. The paper extends the builder’s model which was developed in Eurostat (2013). Characteristics which prove to be important in explaining condominium prices are: the floor space area of the unit, the total land area of the building, the number of units in the building, the total number of stories in the building, the height of the sold unit, the age of the structure and the amount of excess land. The paper also derives an estimate for the annual geometric structure depreciation rate for condominiums in Tokyo.
    Keywords: Condominium property price indexes, System of National Accounts, Balance Sheets, methods of depreciation, land and structure price indexes, hedonic re
    JEL: C2 C23 C43 E31 R21
    Date: 2016–01–05
  54. By: G.A. Meagher; R.A. Wilson; Hector Pollitt
    Abstract: In a recent study, the European Centre for the Development of Vocational Training (Cedefop) investigated the expected effect on European labour markets of the transition to a high-employment, low-carbon economy. The study extended its previous initiatives in skills forecasting to determine employment under different policy scenarios derived from the Europe 2020 Strategy. This strategy includes the so-called 20-20-20 climate and energy targets, namely, * a reduction in EU greenhouse gas emissions of at least 20% below 1990 levels; * a requirement that renewable sources represent 20% of EU final energy consumption; * a reduction in energy consumption of 20% from projected 2020 levels by improving energy efficiency. It also includes an employment target whereby 75% of the population aged 20-64 will be employed by 2020. In its quantitative analysis it employs the E3ME macro-econometric model to determine the effects of transition on the demand for labour by industry. The industry projections are then converted into demand for labour by skill (as represented by occupation and qualification) using employment shares taken from the earlier forecasts. The implementation of a demand-side policy package like the 2020 Strategy introduces structural pressures into the markets for labour in the sense that it creates tendencies towards excess demands for, or supplies of, skills. If the pressures are not accommodated by supply-side policies (such as training programs), they will tend to emerge as changes in relative wage rates and/or unemployment rates. One purpose of Cedefop's analysis is to reveal the nature of the structural pressures the Strategy releases, and hence kind of training programs that are required. However, its scope is limited because it abstracts from constraints imposed by the available supplies of labour. In this paper a CGE-style labour market extension MLME to the E3ME model is used to investigate how labour supply considerations affect the skill requirements of the Strategy. Specifically, it investigates the proclivity of the Strategy to produce mismatches between the demand for, and supply of, labour differentiated by occupation. Results are reported and compared for 26 EU countries.
    Keywords: Forecasting, CGE models, hybrid models, labour markets, structural imbalances
    JEL: C53 C58 D58 E27 J23 O41
    Date: 2015–12
  55. By: James Bullard; Jacek Suda
    Abstract: We study abstract macroeconomic systems in which expectations play an important role. Consistent with the recent literature on recursive learning and expectations, we replace the agents in the economy with econometricians. Unlike the recursive learning literature, however, the econometricians in the analysis here are Bayesian learners. We are interested in the extent to which expectational stability remains the key concept in the Bayesian environment. We isolate conditions under which versions of expectational stability conditions govern the stability of these systems just as in the standard case of recursive learning. We conclude that Bayesian learning schemes, while they are more sophisticated, do not alter the essential expectational stability findings in the literature.
    Keywords: Expectational stability, recursive learning, learnability of rational expectations equilibrium, Bayesian learning
    JEL: D84 E00 D83
    Date: 2015
  56. By: Lewis, John (Bank of England)
    Abstract: Using a large data set of import volumes and values for goods imports from around 50 trading partners, and 3,000 goods type, this paper finds that the micro level, passthrough is non-linear in the exchange rate. The passthrough of larger bilateral exchange rate movements (ie more than 5%) is around four times larger than that of smaller changes. However, regressions on aggregate data indicate that passthrough at the macro level is close to full. The resolution to this apparent puzzle lies in the fact that larger bilateral movements account for the vast majority of variation in the exchange rate index, and hence the non-linearity at the micro level largely disappears at the macro level.
    Keywords: Exchange rate passthrough; Big Data; non-linearity
    JEL: E31 F14 F41
    Date: 2016–01–08
  57. By: Wieladek, Tomasz (Bank of England)
    Abstract: Interacted panel VAR (IPVAR) models allow coefficients to vary as a deterministic function of observable country characteristics. The varying coefficient Bayesian panel VAR generalises this to the stochastic case. As an application of this framework, I examine if the impact of commodity price shocks on consumption and the CPI varies with the degree of exchange rate, financial, product and labour market liberalisation on data from 1976 Q1–2006 Q4 for 18 OECD countries. The confidence bands are smaller in the deterministic case and as a result most of the characteristics affect the transmission mechanism in a statistically significant way. But only financial liberalisation is an important determinant of commodity price shocks in the stochastic case. This suggests that results from IPVAR models should be interpreted with caution.
    Keywords: Bayesian panel VAR; commodity price shocks
    JEL: C33 E30
    Date: 2016–01–08
  58. By: Yaa Akosa Antwi (Indiana University - Purdue University Indianapolis); John R. Bowblis (Miami University)
    Abstract: We estimate the causal effect of nurse turnover on mortality and the quality of nursing home care with a fixed effect instrumental variable estimation that uses the unemployment rate as an instrument for nursing turnover. We find that ignoring endogeneity leads to a systematic underestimation of the effect of nursing turnover on mortality and quality of care in a sample of California nursing homes. Specifically, 10 percentage point increase in nurse turnover results in a facility receiving 2.2 additional deficiencies per annual regulatory survey, reflecting a 19.3 percent increase. Not accounting for endogeneity of turnover leads to results that suggest only a 1 percent increase in deficiencies. We also find suggestive evidence that turnover results in lower quality in other dimensions and may increase mortality. An implication of our mortality results is that turnover may be a mechanism for the procyclicality of mortality rates.
    Keywords: Employee turnover, unemployment rate, quality of care, nursing home
    JEL: I11 J21 E24
    Date: 2016–01
  59. By: Jan Abrell (ETH Zurich, Switzerland); Sebastian Rausch (ETH Zurich, Switzerland); Hagen Schwerin (ETH Zurich, Switzerland)
    Abstract: We develop a theory of vintage capital and energy use in businesses and households to measure the response of energy use to energy- saving technological change. Calibration of the model's balanced growth path to U.S. post-WWII data shows that energy efficiency increased on average by about three percent per year. Higher energy efficiency increased rather than reduced energy use as equipment- specific technological progress enhanced energy use by more than higher energy prices reduced it. The energy rebound in response to technological progress (higher energy prices) was 125 percent of (reduced energy use by 30 percent below) hypothetical energy savings.
    JEL: D13 E23 O30 O41 Q43
    Date: 2016–01

This nep-mac issue is ©2016 by Soumitra K Mallick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.