nep-mac New Economics Papers
on Macroeconomics
Issue of 2016‒04‒23
eighty papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Theory and Evidence on the Finance-Growth Relationship: The Virtuous and Unvirtuous Cycles By Lauretta, Eliana; Chaudhry, Sajid; Mullineux, Andy
  2. How to Make The Fiscal policies Greener in China?——Based on The Perspective of Environmental Macroeconomics By Lu, Hongyou; Xu, Wenli; Xu, Kun
  3. Monetary policy when households have debt: new evidence on the transmission mechanism By Cloyne, James; Ferreira, Clodomiro; Surico, Paolo
  4. Central Bank Transparency and Inflation (Volatility) – New Evidence By Christoph S. Weber
  5. An investigation into improving the real-time reliability of OECD output gap estimates By David Turner; Maria Chiara Cavalleri; Yvan Guillemette; Alexandre Kopoin; Patrice Ollivaud; Elena Rusticelli
  6. Inflation is Always and Everywhere an Interest-Rate Phenomenon By Belanger, Gilles
  7. The Optimal Composition of Public Spending in a Deep Recession By Hafedh Bouakez; Michel Guillard; Jordan Roulleau-Pasdeloup
  8. Monetary Policy Transmission in an Open Economy: New Data and Evidence from the United Kingdom By Ambrogio Cesa-Bianchi; Gregory Thwaites; Alejandro Vicondoa
  9. Financial cycles and co-movements between the real economy, finance and asset price dynamics in large-scale crises By Punzi, Maria Teresa
  10. The Theory of Unconventional Monetary Policy By Farmer, Roger E A; Zabczyk, Pawel
  11. Provocări în perioada tranziției la economia de piață în România. Creșterea gradului de îndatorare externă și internă By Zaman, Gheorghe; Georgescu, George
  12. "Colonial American Paper Money and the Quantity Theory of Money: An Extension" By Farley Grubb
  13. UK term structure decompositions at the zero lower bound. By A. Carriero; S. Mouabbi; E. Vangelista
  14. The "Mystery of the Printing Press" Monetary Policy and Self-fulfilling Debt Crises By Giancarlo Corsetti; Luca Dedola; ;
  15. Revisiting Gertler-Gilchrist Evidence on the Behavior of Small and Large Firms By Kudlyak, Marianna; Sanchez, Juan M.
  16. Quantitative Easing and the Liquidity Channel of Monetary Policy By Herrenbrueck, Lucas
  17. The Federal Reserve as lender of last resort during the subprime crisis: Successful stabilisation without structural changes By Herr, Hansjörg; Rüdiger, Sina; Pédussel Wu, Jennifer
  18. Changes in nominal rigidities in Poland – a regime switching DSGE perspective By Baranowski, Paweł; Kuchta, Zbigniew
  19. How Fast Can China Grow? The Middle Kingdom’s Prospects to 2030 By Jeannine Bailliu; Mark Kruger; Argyn Toktamyssov; Wheaton Welbourn
  20. In Search of the Transmission Mechanism of Fiscal Policy in the Euro Area. By P. Fève; J.-G. Sahuc
  21. A simple theory of exploding household debts By Kim, Minseong
  22. Animal Spirits in a Monetary Model By Farmer, Roger E A; Platonov, Konstantin
  23. The Federal Reserve and market confidence By Boyarchenko, Nina; Haddad, Valentin; Plosser, Matthew
  24. Sentiment Shocks as Drivers of Business Cycles By Agustín Arias
  25. Can Currency Competition Work? By Fernández-Villaverde, Jesús; Sanches, Daniel
  26. Can Currency Competition Work? By Jesús Fernández-Villaverde; Daniel Sanches
  27. Bank Leverage and Monetary Policy's Risk-Taking Channel: Evidence from the United States By DellAriccia, Giovanni; Laeven, Luc; Suarez, Gustavo
  28. Macroeconomic and Financial Effects of Oil Price Shocks: Evidence for the Euro Area By Claudio Morana
  29. Union Debt Management By Equiza-Goni, Juan; Faraglia, Elisa; Oikonomou, Rigas
  30. Monetary Transmission: Are Emerging Market and Low-Income Countries Different? By Ales Bulir; Jan Vlcek
  31. The Swiss business cycle and the lead of small neighbor Liechtenstein By Brunhart, Andreas
  32. Cash and Negative Interest Rates By Berentsen, Aleksander; Schär, Fabian
  33. Structural transformation, the mismeasurement of productivity growth, and the cost disease of services By Alwyn Young
  34. Supply-Side Policies in the Depression: Evidence from France By Jérémie Cohen-Setton; Joshua K. Hausman; Johannes F. Wieland
  35. Real-Time Forecasting for Monetary Policy Analysis: The Case of Sveriges Riksbank By Iversen, Jens; Laseen, Stefan; Lundvall, Henrik; Söderström, Ulf
  36. Effects of fiscal consolidation on exports in Ukraine By Vdovychenko, Artem; Zubrytskyi, Artur
  37. Demographic Cycle, Migration and Housing Investment: a Causal Examination. By E. Monnet; C. Wolf
  38. The Impact of the National Minimum Wage on Industry-Level Wage Bargaining in France By Fougère, Denis; Gautier, Erwan; Roux, Sébastien
  39. Deep habits and exchange rate pass-through By Punnoose Jacob; Lenno Uuskula
  40. How did Immigrants fare in the Irish Labour Market over the Great Recession? By Elish Kelly; Seamus McGuinness; Philip O’Connell; Alberto González Pandiella; David Haugh
  41. Pass-Through, Expectations, and Risks. What Affects Chilean Banks’ Interest Rates? By Michael Pedersen
  42. The effects of us unconventional monetary policies in Latin America By Fructuoso Borrallo; Ignacio Hernando; Javier Vallés
  43. Blanchard and Kahn’s (1980) solution for a linear rational expectations model with one state variable and one control variable: the correct formula By Kollmann, Robert; Zeugner, Stefan
  44. Inflation at the Household Level By Schulhofer-Wohl, Sam; Kaplan, Greg
  45. Price expectations and the US housing boom By Pascal Towbin; Sebastian Weber
  46. The Impact of the National Minimum Wage on Industry-Level Wage Bargaining in France. By E. Gautier; D. Fougère; S. Roux
  47. Are Unemployment Rates in OECD Countries Stationary? Evidence from Univariate and Panel Unit Root Tests By Khraief, Naceur; Shahbaz, Muhammad; Heshmati, Almas; Azam, Muhammad
  48. Rent Extraction by Capitalists By Markus Brueckner
  49. Comisión de Expertos para la Equidad y la Competitividad Tributaria. Informe Final presentado al Ministro de Hacienda y Crédito Público. Diciembre de 2015 By Santiago Rojas; Ricardo Bonilla; Rosario Córdoba; Alfredo Lewin; Oscar Darío Morales; Soraya Montoya; Guillermo Perry; Julio Roberto Piza
  50. Reconsidering Wagner's Law: evidence from the functions of the government By António Afonso,; José Alves
  51. Business Cycles and Growth By Michaël Assous; Muriel Dal-Pont Legrand; Harald Hagemann
  52. Clans, Guilds, and Markets: Apprenticeship Institutions and Growth in the Pre-Industrial Economy By de la Croix, David; Doepke, Matthias; Mokyr, Joel
  53. Time Consistency and Fed Policy : a presentation at New York Association for Business Economics, New York, N.Y., March 24, 2016 By Bullard, James B.
  54. Isoelastic Elasticity of Substitution Production Functions By Jakub Growiec; Jakub Muck
  55. An Empirical Assessment of Global Capital Productivity By Knolle, Julia; Lehmann, Kai
  56. Growing together: Towards a more inclusive Ireland By David Haugh; Yosuke Jin; Alberto González Pandiella
  57. Is There Any Regional Price Disparity in Peninsular Malaysia? By Lee, Chin
  58. Re-estimating the Relationship between Inequality and Growth By Nathalie Scholl; Stephan Klasen
  59. The Limited Macroeconomic Effects of Unemployment Benefit Extensions By Gabriel Chodorow-Reich; Loukas Karabarbounis
  60. Implications of Fiscal Policy for Housing Tenure Decisions By Anastasia Girshina
  61. On the Causal Links between the Stock Market and the Economy of Hong Kong By Sin-Yu Ho and Bernard Njindan Iyke
  62. Commodities, financialization, and heterogeneous agents By Branger, Nicole; Grüning, Patrick; Schlag, Christian
  63. Los efectos de la flexibilidad salarial sobre el crecimiento y el empleo By Rafael Domenech; Juan Ramon Garcia; Camilo Ulloa
  64. Determinantes de las exportaciones manufactureras de Colombia: un estudio a partir de un modelo de ecuaciones simultáneas By Iader Giraldo S.
  65. Change and Rationality in Macroeconomics and Finance Theory: A New Rational Expectations Hypothesis By Roman Frydman; Michael Goldberg
  66. Ansatzpunkte zur Abschätzung der ökonomischen Folgen der Flüchtlingszahlen und erste Quantifizierung – Aktualisierung By Anja Sonnenburg; Britta Stöver; Dr. Marc Ingo Wolter
  67. Small Business and Liquidity Constraint By McCain, Roger
  68. Competitiveness and current account adjustments in the euro area By Böing, Tobias; Stadtmann, Georg
  69. Developing Islamic Liquidity Management Instruments: Resolving the Impasse between Central Bank of Nigeria (CBN) and Jaiz Bank Plc By Aliyu, Shehu Usman Rano
  70. Welcoming Remarks. Given at the Homer Jones Memorial Lecture. Federal Reserve Bank of St. Louis, April 6, 2016. By Bullard, James B.
  71. Three Lectures on the Theory of Money and Financial Institutions: Lecture 1: A Nontechnical Overview By Martin Shubik
  72. Assessing the Fit of a Small Open-Economy DSGE Model for the Brazilian Economy By Fernando de Menezes Linardi
  73. A theory of maintenance expenditures tested on automobile data from Greece By Bitros, George C.
  74. Fertility policies and social security reforms in China By Nicolas Coeurdacier; Stéphane Guibaud; Keyu Jin
  75. Climat des Affaires et Compétitivité de l’Entreprise Tunisienne Après la Révolution : Analyses et Perspectives By Dhaoui, Elwardi
  76. Impacts of Oil Shocks on Exchange Rates and Macroeconomic Variables: A multi-country analysis By IWAISAKO Tokuo; NAKATA Hayato
  77. Segregation and Gender Gaps through the UK’s Great Recession By Giovanni Razzu; Carl Singleton
  78. Macroeconomic Policy in DSGE and Agent-Based Models Redux: New Developments and Challenges Ahead By Giorgio Fagiolo; Andrea Roventini
  79. A New Settlement for the UK: A “Leap in the Dark” By Phedon Nicolaides; Roxana Nedelescu (née Sandu); Joanna Hornik; Gibran Watfe; Gil Stein
  80. Center-State Political Transfer Cycles in India By Manjhi, Ganesh; Keswani Mehra, Meeta

  1. By: Lauretta, Eliana; Chaudhry, Sajid; Mullineux, Andy
    Abstract: Since the 1980s, financial crises have tended to reoccur with increasing frequency and growing intensity. They are endogenously generated by the established OTD (Originate-To-Distribute) model within the new finance-growth paradigm. Good finance fosters the correct allocation of financial resources, the fair redistribution of wealth and positive economic growth (the virtuous cycle), whereas bad finance captures part of the created wealth and, thanks to a highly technologically advanced financial system with the ability to create money ex nihilo, over time it drags the economy down to recession or negative growth, destroying wealth and consequentially social welfare (the unvirtuous cycle). Therefore, structural factors are at the foundation of the persistence of instability and thus of what we define as the unvirtuous cycle, which can generate what we label the wealth trap. A VUC index has been developed by us to capture the status quo of the finance-growth relationship. A cross country analysis for the US, UK and Euro area economies has been made in order to verify the validity of the index. A core variable is identified: the degree of financial innovation. This is an endogenous variable within the endogenous money/credit creation process; its identification is of crucial importance, as it is the key to full understanding of the finance-growth relationship and is the element of originality in this field of studies. The VUC index for all countries shows clearly the exponential effect of the degree of financial innovation over time. It is important for scholars and policymakers to understand the mechanism underpinning the finance-growth relationship and that it is their responsibility to return the economic system to what we will call the virtuous cycle.
    Keywords: Finance, Growth, Business Cycle, Financial Innovation, Regulatory Dialectic, Financial Power.
    JEL: E32 E44 E50 E51 G01 O33
    Date: 2015–12–03
  2. By: Lu, Hongyou; Xu, Wenli; Xu, Kun
    Abstract: From the perspective of environmental macroeconomics, in addition to environmental equilibrium effected by environmental policies, the fiscal policy have an impact on the environment equilibrium. On this basis, this paper constructs a RBC model with environmental equilibrium, that contains different financing mode of government environmental expenditure, within which incorporating fiscal spending shocks, labor income tax rate shock, capital income tax rate shock and environmental tax shock. Utilizing the historically macroeconomic data during 1978 to 2014, this paper estimate the long-run steady-state of macroeconomic and environmental variables, then simulate short-run fluctuation of these macro-variables. The results show that:(1) government environmental expenditure being arranged in the general budget, taxing emission achieve the "double dividend" that output increase by 0.13%, and the stock of carbon dioxide fall by 1.1%; (2) changes of environmental tax rates is one important source of volatility in the stock of carbon dioxide, volatility contribution rate of 87%; (3) changes in fiscal policy have a significant impact on short-term fluctuations of carbon dioxide, and the environmental effects of direction caused by expansionary fiscal policy depend on the fiscal policy type. Based on the above conclusions, this paper suggests the introduction of environmental taxes as quickly as possible, government environmental expenditure take the general tax financing mode, and a combination of modest increase in fiscal expenditure, reducing labor income tax rate and inceasing capital income tax rate in order to promote green development during "Thirteen Five Plan" period.
    Keywords: environmental tax; finacing mode; fiscal policies; business cycle
    JEL: E62 H23 H3 Q5
    Date: 2016–03–23
  3. By: Cloyne, James (Bank of England); Ferreira, Clodomiro (London Business School); Surico, Paolo (London Business School and CEPR)
    Abstract: In response to an interest rate change, mortgagors in the United Kingdom and United States adjust their spending significantly (especially on durable goods) but outright home-owners do not. While the dollar change in mortgage payments is nearly three times larger in the United Kingdom than in the United States, these magnitudes are much smaller than the overall change in expenditure. In contrast, the income change is sizable and similar across both household groups and countries. Consistent with the predictions of a simple heterogeneous agents model with credit-constrained households and multi-period fixed-rate debt contracts, our evidence suggests that the general equilibrium effect of monetary policy on income is quantitatively more important than the direct effect on cash flows.
    Keywords: Monetary policy; mortgage debt; liquidity constraints
    JEL: E21 E32 E52
    Date: 2016–04–08
  4. By: Christoph S. Weber
    Abstract: The last decades have shown a tendency towards higher central bank transparency. It became customary for central bankers to explain their monetary policy decisions in detail and for them to publish inflation forecasts. This leads to the question of how central bank transparency is entangled with price stability and inflation volatility. A plethora of studies analysed the relationship from a theoretical point of view and came to contradictory results. Whilst some studies argued that transparency leads to lower inflation, others concluded that openness of central banks results in higher prices. Conversely, there is only a small amount of studies looking at this issue empirically. Most studies found a diminishing effect of transparency on inflation. However, these studies hardly controlled for other causes of inflation. This paper tries to close this gap by employing a panel data set on central bank transparency. We find that transparency significantly reduces inflation rates even if we control for other determinants of inflation. This result still holds under various robustness checks. The same is true for inflation volatility: central bank transparency seems to diminish inflation uncertainty. This confirms the economic importance of central bank transparency.
    Keywords: Central Bank Transparency, Inflation, Inflation Volatility, Determinants of Inflation, Central Bank Independence
    JEL: E31 E42 E58
    Date: 2016–03
  5. By: David Turner; Maria Chiara Cavalleri; Yvan Guillemette; Alexandre Kopoin; Patrice Ollivaud; Elena Rusticelli
    Abstract: Estimates of the output gap ought to be a useful guide for macroeconomic policy, both for assessing inflationary pressures and fiscal sustainability, but their reliability has been called into question by the large revisions which they are often subject to, particularly around turning points. Revisions to OECD published estimates of the output gap around the period of the financial crisis have been exceptionally large, with by far the largest contribution to these revisions coming from the labour-efficiency gap. The current paper investigates a modification to the standard OECD production function method for deriving potential output, which involves an additional cyclical adjustment in the derivation of trend labour efficiency. The additional adjustment helps to reduce the occurrence of large end-point revisions and of sign switches between the initial and final estimates of the labour-efficiency gap. The variables which are most often found to be useful in providing this cyclical adjustment of labour efficiency are manufacturing capacity utilisation and the investment share. However, for a few countries additional variables – house prices and credit – have been used to provide the cyclical adjustment, although this raises an issue as to whether the cyclical adjustment should be limited to a core set of variables to ensure the method remains reasonably homogenous across countries. Recent improvements to the specification of the Phillips curve, which imply a tighter fit between the unemployment gap and inflation, should also reduce end-point revisions to the unemployment gap in future. Améliorer la fiabilité en temps réel des estimations d'écarts de production de l'OCDE : une investigation Les estimations de l’écart de production devraient être un guide utile à la politique macroéconomique, à la fois pour mesurer les pressions inflationnistes et la viabilité de la politique fiscale, mais leur validité et leur fiabilité ont été mises en question par les larges révisions dont elles ont souvent fait l’objet, particulièrement autour des points de retournements. Les révisions concernant les estimations de l’écart de production publiées par l’OCDE autour de la période de la crise financière ont été exceptionnellement larges, en majeure partie à cause de révisions aux écarts de productivité (efficience du travail). Cette étude examine une modification de la méthode usuelle utilisée par l’OCDE pour le calcul de la production potentielle, basée sur une fonction de production, qui rajoute un ajustement cyclique additionnel au niveau du calcul de l’efficience du travail. Cet ajustement additionnel permet de réduire l’occurrence de larges révisions dues à la sensibilité des filtres aux points terminaux et du changement de signe entre les estimations initiales et finales des écarts de productivité. Les variables s’avérant les plus utiles pour cet ajustement cyclique sont le taux d’utilisation des capacités du secteur manufacturier et la part de l’investissement dans le PIB. Cependant, pour quelques pays, des variables additionnelles comme les prix des logements et le crédit ont été utilisées pour effectuer cet ajustement cyclique, quoique cela soulève la question de savoir si l’ajustement cyclique devrait être limité à un noyau de variables de base pour assurer l’homogénéité de la méthode entre pays. Des améliorations récentes sur la spécification de la courbe de Phillips, dont découle une correspondance plus stricte entre écarts de chômage et inflation, devraient aussi permettre de réduire les révisions des écarts du chômage dans le futur.
    Keywords: production function, potential output, financial crisis, total factor productivity, labour efficiency, crise financière, efficience du travail, fonction de production, production potentielle, productivité multifactorielle
    JEL: E3 E32 E5 E6
    Date: 2016–04–19
  6. By: Belanger, Gilles
    Abstract: Following an earlier paper, I investigate an economy where nominal interest rates are rigid, but aggregate prices are not. Though the title exaggerates, interest rates rigidity does account for an uncanny number of stylized facts about inflation. This paper shows that previously shown results are robust to changes in the specification of interest rate rigidity. Results investigated include: (1) the procyclicality of inflation, (2) inflation control through interest rate manipulation,(3) the persistence of inflation since World War II, (4) the Great Moderation under inflation targeting, (5) real rate volatility under a gold standard, (6) the price puzzle.
    Keywords: Interest Rate Rigidity, Inflation, Monetary Policy, Fisher Effect.
    JEL: E31 E43 E52
    Date: 2016–04–19
  7. By: Hafedh Bouakez; Michel Guillard; Jordan Roulleau-Pasdeloup
    Abstract: We study optimal monetary and fiscal policy under commitment in an economy where monetary policy is constrained by the zero lower bound on the nominal interest rate, and where the government can allocate spending to public consumption and public investment. We show that the optimal response to an adverse shock that precipitates the economy into a liquidity trap entails a small and short-lived increase in public consumption but a large and persistent increase in public investment, which lasts well after the natural rate of interest has ceased to be negative. During this period, the optimal composition of public spending is therefore heavily skewed towards public investment. Contrary to the literature that abstracts from public investment, we find that the optimal increase in total public spending in a deep recession is sizable. However, we show that this fiscal expansion has little to do with a stabilization motive and is instead warranted by the intertemporal allocation of resources that efficiency dictates even in the absence of an output gap.
    Keywords: Public spending; Public investment; Time to build; Ramsey policies; Zero lower bound
    JEL: E4 E52 E62 H54
    Date: 2016–04
  8. By: Ambrogio Cesa-Bianchi (Bank of England; Centre for Macroeconomics (CFM)); Gregory Thwaites (Bank of England; Centre for Macroeconomics (CFM)); Alejandro Vicondoa (European University Institute)
    Abstract: This paper constructs a new series of monetary policy surprises for the United Kingdom and estimates their effects on macroeconomic and financial variables, employing high-frequency identification methods. Using direct projections, monetary policy is found to have persistent effects on real interest rates and expected inflation at long horizons. We use our series of surprises as an instrument in a SVAR and show that monetary policy affects economic activity, prices, the exchange rate, and the trade balance. Exploiting the availability of the narrative series of monetary policy shocks computed by Cloyne and Huertgen (2014), we propose a test of overidentifying restrictions and find no evidence that either set of shocks contains any 'endogenous' response to macroeconomic variables.
    Keywords: Monetary Policy Transmission, External Instrument, High-Frequency Identification, Structural VAR, Local Projections
    JEL: E31 E32 E43 E44 E52 E58
    Date: 2016–04
  9. By: Punzi, Maria Teresa
    Abstract: We empirically analyze asset price boom-bust cycles over a long-run period of 1896-2014 for the U.S., the Netherlands, Norway and Sweden. We focus on macro-financial linkages to understand if these are common phenomena during financial crises, or if the linkage was simply amplified during the last financial crisis in 2007. In particular, we ask if economic recessions are usually followed by asset price and credit bursts, and find that housing and stock prices tend to lead real economic activities, while developments in credit and money markets typically lag developments in the real economy. The dynamic of assets' portfolio allocation effects in times of crises has been the same. We also study the cyclical behaviour of real GDP per capita, asset prices (housing or stocks) and lending. In particular, we test for the existence of co-movements with asset prices during periods of crisis. We find that the correlations between real GDP per capita and real housing prices and between lending and real housing prices have increased since World War II, and that the increase is much more pronounced if we compare the Great Recession with the Great Depression. Monetary policy shocks also become more important in explaining the co-movements in the Great Recession, compared with the Great Depression. Furthermore, inflation shocks have played an important role in explaining the correlation between house prices and lending for Scandinavian countries.
    Keywords: Housing Prices,Stock Prices,Business Cycle,Co-movements,Large-Scale Dataset
    JEL: C23 E32 E44 E52 G10 G21
    Date: 2016
  10. By: Farmer, Roger E A; Zabczyk, Pawel
    Abstract: This paper is about the effectiveness of qualitative easing, a form of unconventional monetary policy that changes the risk composition of the central bank balance sheet with the goal of stabilizing economic activity. We construct a general equilibrium model where agents have rational expectations and there is a complete set of financial securities, but where some agents are unable to participate in financial markets. We show that a change in the risk composition of the central bank's balance sheet will change equilibrium asset prices and we prove that, in our model, a policy in which the central bank stabilizes non-fundamental fluctuations in the stock market is Pareto improving and self-financing.
    Keywords: Qualitative Easing; Sunspots; Unconventional Monetary Policy
    JEL: E02 E6 G11 G21
    Date: 2016–03
  11. By: Zaman, Gheorghe; Georgescu, George
    Abstract: Under the circumstances of the globally interconnected world, facing currently with growing uncertainties and capital flows volatility, the assessment of external and internal indebtedness of a country could be crucial for designing better policies in order to stimulate recovery and sustainable economic growth. The paper focuses on the analysis of the main causes of the accelerated increase in Romania’s external and internal debt during the transition period, enhanced by the effects of the global financial crisis, which were neither anticipated nor countered. It was found out that, in terms of international debt sustainability standards, adjusted for Romania, the country has reached an excessive indebtedness degree in the post-crisis years, along with the deterioration of the macroeconomic situation. Among the main conclusions of the paper, strong efforts targeting coherent macroeconomic policies aimed, as central objectives, at raising the potential output growth and the resilience to shocks from the external environment have been underlined, toward the recovery of Romania’s financial position and ensuring the external and internal debt sustainability.
    Keywords: internal and external debt; debt sustainability; financial crisis; debt threshold; systemic risk
    JEL: B22 E44 E62 F34 H63
    Date: 2016–02–19
  12. By: Farley Grubb (Department of Economics, University of Delaware)
    Abstract: The quantity theory of money is applied to the paper money regimes of seven of the nine British North American colonies south of New England. Individual colonies, and regional groupings of contiguous colonies treated as one monetary unit, are tested. Little to no statistical relationship, and little to no magnitude of influence, between the quantities of paper money in circulation and prices are found. The failure of the quantity theory of money to explain the value and performance of colonial paper money is a general and widespread result, and not an isolated and anomalous phenomenon.
    Keywords: bills of credit, bills of exchange, border effects, price indices, purchasing power parity
    JEL: E31 E42 E51 N11
    Date: 2016
  13. By: A. Carriero; S. Mouabbi; E. Vangelista
    Abstract: This paper employs a Zero Lower Bound (ZLB) consistent shadow-rate model to decompose UK nominal yields into expectation and term premia components. Compared to a standard affine term structure model, it performs relatively better in a ZLB setting and effectively captures the countercyclical nature of term premia. The ZLB model is then exploited to estimate inflation expectations and risk premia. This entails jointly pricing and decomposing nominal and real UK yields. We find evidence that medium- and long-term inflation expectations are contained within narrower bounds since the early 1990s, suggesting monetary policy credibility improved after the introduction of inflation targeting.
    Keywords: No-arbitrage, term structure, zero-lower bound, risk premia, inflation expectations.
    JEL: E31 E43 E52 E58 G12
    Date: 2016
  14. By: Giancarlo Corsetti; Luca Dedola; ;
    Abstract: Sovereign debt crises may be driven by either self-fulfilling expectations of default or fundamental fiscal stress. This paper studies the mechanisms by which either conventional or unconventional monetary policy can rule out the former. Conventional monetary policy is modelled as a standard choice of inflation, while unconventional policy as outright purchases in the debt market. By intervening in the sovereign debt market, the central bank effectively swaps risky government paper for monetary liabilities only exposed to inflation risk and thus yielding a lower interest rate. We show that, provided fiscal and monetary authorities share the same objective function, there is a minimum threshold for the size of interventions at which a backstop rules out self-fulfilling default without eliminating the possibility of fundamental default under fiscal stress. Fundamental default risk does not generally undermine the credibility of a backstop, nor does it foreshadow runaway inflation, even when the central bank is held responsible for its own losses.
    Keywords: Sovereign risk and default, Lender of last resort, Seigniorage, inflationary financing
    JEL: E58 E63 H63
    Date: 2014–09–19
  15. By: Kudlyak, Marianna (Federal Reserve Bank of Richmond); Sanchez, Juan M. (Federal Reserve Bank of Richmond)
    Abstract: Gertler and Gilchrist (1994) provide evidence for the prevailing view that adverse shocks are propagated via credit constraints of small firms. We revisit the behavior of small versus large firms during the episodes of credit disruption andrecessions in the sample extended to cover the 2007-09 economic crisis. We find that large firms' short-term debt and sales contracted relatively more than those of small firms during the 2007-09 episode. Furthermore, the short-term debt of large firms also contracted relatively more in the previous tight money episodes if one takes into account the longer period that it takes for large firms' debt to reach its post-shock trough. Our findings challenge the view that propagation of shocks in the economy takes place via credit constraints of small firms.
    JEL: E32 E51 E52
    Date: 2016–04–13
  16. By: Herrenbrueck, Lucas
    Abstract: How do central bank purchases of illiquid assets affect interest rates and the real economy? In order to answer this question, I construct a parsimonious and very flexible general equilibrium model of asset liquidity. In the model, households are heterogeneous in their asset portfolios and demand for liquidity, and asset trade is subject to frictions. I find that open market purchases of illiquid assets are fundamentally different from helicopter drops: asset purchases stimulate private demand for consumption goods at the expense of demand for assets and investment goods, while helicopter drops do the reverse. A temporary program of quantitative easing can therefore cause a 'hangover' of elevated yields and depressed investment after it has ended. When assets are already scarce, further purchases can crowd out the private flow of funds and cause high real yields and disinflation, resembling a liquidity trap. In the long term, lowering the stock of government debt reduces the supply of liquidity but increases the capital-output ratio. The consequences for output are ambiguous in theory but a calibration to US data suggests that the liquidity effect dominates; in other words, the supply of Treasuries is 'too small'.
    Keywords: Monetary theory, asset liquidity, search frictions, quantitative easing, liquidity trap
    JEL: E31 E40 E50 G1 G12
    Date: 2014–12–06
  17. By: Herr, Hansjörg; Rüdiger, Sina; Pédussel Wu, Jennifer
    Abstract: This paper studies the actions of the U.S. Federal Reserve Bank (FRB) during the financial crisis from 2007-2012 rating the performance of the Federal Reserve during the crisis. The chosen scoring model approach shows that the average performance of five specific measures taken by the FRB only ranks between fair and good. Comparing Stiglitz (2010) viewpoints with those of the FRB, this paper analyses several policies and events and argues that the resulting decisions were well intentioned but that the outcome was different from expectations because of missing regulations and restrictions. Furthermore, the structure of the FRB is examined and criticized.
    JEL: E42 E58 G18 E65
    Date: 2016
  18. By: Baranowski, Paweł; Kuchta, Zbigniew
    Abstract: We estimate a dynamic stochastic general equilibrium model that allows for regimes Markov switching (MS-DSGE). Existing MS-DSGE papers for the United States focus on changes in monetary policy or shocks volatility, contributing the debate on the Great Moderation and/or Volcker disinflation. However, Poland which here serves as an example of a transition country, faced a wider range of structural changes, including long disinflation, EU accession or tax changes. The model identifies high and low rigidity regimes, with the timing consistent with menu cost explanation of nominal rigidities. Estimated timing of the regimes captures the European Union accession and indirect tax changes. The Bayesian model comparison results suggest that model with switching in both analyzed rigidities is strongly favored by the data in comparison with switching only in prices or in wages. Moreover, we find significant evidence in support of independent Markov chains.
    Keywords: nominal rigidities, Markov-switching DSGE models, Bayesian model comparison, regime switching
    JEL: C11 E31 E32 J30 P22
    Date: 2015–12
  19. By: Jeannine Bailliu; Mark Kruger; Argyn Toktamyssov; Wheaton Welbourn
    Abstract: Given its size and importance for global commodity markets, the question of how fast the Chinese economy can grow over the medium term is an important one. This paper addresses this question by examining the evolution of the supply side of the Chinese economy over history and projecting how it will evolve over the next 15 years. Using a Cobb-Douglas production function, we decompose the growth of trend GDP into those of the capital stock, labour, human capital and total factor productivity (TFP) and then forecast trend output growth out to 2030 using a bottom-up approach based on forecasts that we build for each one of these factors. Our paper distinguishes itself from existing work in that we construct a forecast of Chinese TFP growth based on the aggregation of forecasts of its key determinants. Moreover, our analysis is based on a carefully constructed estimate of the Chinese productive capital stock and a measure of human capital – based on Chinese wage survey data – that better reflects the returns to education in China. Our results suggest that Chinese trend output growth will decelerate from around 7% currently to about 5% by 2030, and are consistent with a gradual rebalancing of the Chinese economy characterized by a decline in the investment rate.
    Keywords: Development economics, International topics, Potential output, Productivity
    JEL: E32 E22 E23
    Date: 2016
  20. By: P. Fève; J.-G. Sahuc
    Abstract: This paper applies the DSGE-VAR methodology to assess the size of fiscal multipliers in the data and the relative contributions of two transmission mechanisms of government spending shocks, namely hand-to-mouth consumers and Edgeworth complementarity. Econometric experiments show that a DSGE model with Edgeworth complementarity is a better representation of the transmission mechanism of fiscal policy as it yields dynamic responses close to those obtained with the flexible DSGE-VAR model (i.e. an impact output multiplier larger than one and a crowding-in of private consumption). The estimated share of hand-to-mouth consumers is too small to replicate the positive response of private consumption.
    Keywords: Fiscal multipliers, hand-to-mouth, Edgeworth complementarity, DSGE-VAR, Euro area, Bayesian econometrics.
    JEL: C32 E32 E62
    Date: 2016
  21. By: Kim, Minseong
    Abstract: In this paper, I explore how a household budget constraint allows one to construct a simple theory of exploding household debts. The conclusion reached in this paper is that in case the household started off being indebted, maintaining balanced budget all the time is a very dangerous choice. For analysis, government is assumed to be non-existent.
    Keywords: household debt, budget constraint
    JEL: D11 E13 E21 E62 H61 H62 H63
    Date: 2016–04–16
  22. By: Farmer, Roger E A; Platonov, Konstantin
    Abstract: We integrate Keynesian economics with general equilibrium theory in a new way. Our approach differs from the prevailing New Keynesian paradigm in two ways. First, our model displays steady state indeterminacy. This feature allows us to explain persistent unemployment which we model as movements among the steady state equilibria of our model. Second, our model displays dynamic indeterminacy. This feature allows us to explain the real effects of nominal shocks by selecting a dynamic equilibrium where prices are slow to respond to unanticipated money supply disturbances. Price rigidity arises as part of a rational expectations equilibrium in which the equilibrium is selected by beliefs. To close our model, we introduce a new fundamental that we refer to as the belief function.
    Keywords: animal spirits; belief function; Keynesian economics; Unemployment
    JEL: E12 E3 E4
    Date: 2016–03
  23. By: Boyarchenko, Nina (Federal Reserve Bank of New York); Haddad, Valentin (Princeton University); Plosser, Matthew (Federal Reserve Bank of New York)
    Abstract: We discover a novel monetary policy shock that has a widespread impact on aggregate financial conditions. Our shock can be summarized by the response of long-horizon yields to Federal Open Market Committee (FOMC) announcements; not only is it orthogonal to changes in the near-term path of policy rates, but it also explains more than half of the abnormal variation in the yield curve on announcement days. We find that our long-rate shock is positively related to changes in real interest rates and market volatility, and negatively related to market returns and mortgage demand, consistent with policy announcements affecting market confidence. Our results demonstrate that Federal Reserve pronouncements influence markets independent of changes in the stance of conventional monetary policy.
    Keywords: policy announcement; risk premium; uncertainty; financial conditions
    JEL: E44 G12 G14
    Date: 2016–04–01
  24. By: Agustín Arias
    Abstract: This paper studies the role of sentiment shocks as a source of business cycle fluctuations. Considering a standard New Keynesian model of the business cycle, it introduces agents that update beliefs about the parameters of their forecasting models using newly observed data and exogenous sentiment shocks. The resulting learning model fits U.S. data better than its non-sentiment version and than its rational expectations counterpart. Sentiment is found to be an important driver of economic fluctuations, accounting for up to half of the forecast error variance of aggregate variables at business cycle frequencies. Furthermore, sentiment displays a common pattern for real GDP, investment and consumption growth, where a significant part of the sluggish recovery following a recession can be attributed to the persistent pessimistic views of agents. Sentiment also explains a substantial fraction of the high inflation experienced during the 70’s and early 80’s.
    Date: 2016–03
  25. By: Fernández-Villaverde, Jesús; Sanches, Daniel
    Abstract: Can competition among privately issued fiat currencies such as Bitcoin or Ethereum work? Only sometimes. To show this, we build a model of competition among privately issued fiat currencies. We modify the current workhorse of monetary economics, the Lagos-Wright environment, by including entrepreneurs who can issue their own fiat currencies in order to maximize their utility. Otherwise, the model is standard. We show that there exists an equilibrium in which price stability is consistent with competing private monies, but also that there exists a continuum of equilibrium trajectories with the property that the value of private currencies monotonically converges to zero. These latter equilibria disappear, however, when we introduce productive capital. We also investigate the properties of hybrid monetary arrangements with private and government monies, of automata issuing money, and the role of network effects.
    Keywords: cryptocurrencies; currency competition; Monetary policy; Private money
    JEL: E40 E42 E52
    Date: 2016–04
  26. By: Jesús Fernández-Villaverde; Daniel Sanches
    Abstract: Can competition among privately issued fiat currencies such as Bitcoin or Ethereum work? Only sometimes. To show this, we build a model of competition among privately issued fiat currencies. We modify the current workhorse of monetary economics, the Lagos-Wright environment, by including entrepreneurs who can issue their own fiat currencies in order to maximize their utility. Otherwise, the model is standard. We show that there exists an equilibrium in which price stability is consistent with competing private monies, but also that there exists a continuum of equilibrium trajectories with the property that the value of private currencies monotonically converges to zero. These latter equilibria disappear, however, when we introduce productive capital. We also investigate the properties of hybrid monetary arrangements with private and government monies, of automata issuing money, and the role of network effects.
    JEL: E40 E42 E52
    Date: 2016–04
  27. By: DellAriccia, Giovanni; Laeven, Luc; Suarez, Gustavo
    Abstract: We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on banks' internal ratings on loans to businesses over the period 1997 to 2011 from the Federal Reserve's survey of terms of business lending. We find that ex-ante risk taking by banks (measured by the risk rating of new loans) is negatively associated with increases in short-term interest rates. This relationship is more pronounced in regions that are less in sync with the nationwide business cycle, and less pronounced for banks with relatively low capital or during periods of financial distress.
    Keywords: banks; interest rates; leverage; Monetary policy; risk
    JEL: E43 E52 G21
    Date: 2016–04
  28. By: Claudio Morana (Department of Economics, Management and Statistics, University of Milano-Bicocca, Italy; Collegio Carlo Alberto, Italy; The Rimini Centre for Economic Analysis, Italy)
    Abstract: The paper asses the macroeconomic and financial effects of oil prices shocks in the euro area since its creation in 1999, with a special focus on the recent slump. The analysis is carried out episode by episode, within a time-varying parameter framework, consistent with the view that "not all the oil price shocks are alike", yet without imposing any a priori identification assumption. We find evidence of recessionary effects triggered not only by oil price hikes, but also by oil price slumps in some cases, likewise for the most recent episode, which is also rising deflation risk and financial distress. In addition through uncertainty effects, the current slump might then be depressing aggregate demand by increasing the real interest rate, as ECB monetary policy is already conducted at the zero lower bound. The increase in real money balances following the slump points to the accommodation of the shock by the ECB, concurrent with the implementation of the Quantitative Easing policy (QE). Yet, in so far as QE failed to generate inflationary expectations within the current and expected environment of soft oil prices, the case for a more expansionary use of fiscal policy than in the past would become compelling, in order to counteract the deflationary and recessionary threats to the euro area.
    Date: 2016–02
  29. By: Equiza-Goni, Juan; Faraglia, Elisa; Oikonomou, Rigas
    Abstract: We study the role of government debt maturity in a monetary union in the absence of fiscal transfers across countries. Our key finding is that fi scal hedging is only possible when spending represents an aggregate shock in the union. In the case of idiosyncratic disturbances in spending it is not possible to target a portfolio which provides fi scal insurance to the governments: the allocation is one of incomplete financial markets. These implications are in line with the empirical evidence. Using a sample of 5 Euro area countries and historical holding period returns on government debt, we find that fiscal insurance is not signifi cant against country speci fic shocks however, it is signifi cant against aggregate shocks. Our analysis extends the theoretical results of the literature on optimal fiscal policy without state contingent debt to a two country model. We show that in the two country setup and under an incomplete market the optimal tax schedule, consumption and leisure follow a random walk.
    Keywords: Debt Management; Fiscal policy; Government Debt; Maturity Structure; Tax Smoothing
    JEL: E43 E62 H63
    Date: 2016–03
  30. By: Ales Bulir; Jan Vlcek
    Abstract: We use two representations of the yield curve, by Litterman and Scheinkman (1991) and by Diebold and Li (2006), to test the functioning of the interest rate transmission mechanism along the yield curve based on government paper in a sample of emerging market and low-income countries. We find a robust link from short-term policy and interbank rates to longer-term bond yields. Two policy implications emerge. First, the presence of well-developed secondary financial markets does not seem to affect transmission of short term rates along the yield curve. Second, the strength of the transmission mechanism seems to be affected by the choice of monetary regime: advanced countries with a credible IT regime seem to have "better behaved" yield curves than those with other monetary regimes.
    Keywords: Monetary transmission, yield curve
    JEL: E43 E52 G12
    Date: 2016–03
  31. By: Brunhart, Andreas
    Abstract: This contribution investigates the business cycles of Switzerland compared to its five neighboring countries Germany, Austria, Italy, France and Liechtenstein. In contrast to the widespread notion of small countries “importing” the business cycle from bigger neighbors, it is shown that the real GDP of the very small neighboring country Liechtenstein is a leading indicator for Switzerland’s economy, regarding the growth rates as well as the output gap. This finding is based on cross correlation analyses and univariate and multivariate Granger causality tests, applying annual data from 1972 until 2013. The significant lead of one year is robust across all the various country-samples, time frames and model specifications. This conclusion indicates the possibility that small nations are not only more opposed to foreign shocks, react more sensitively to international economic fluctuations, and are more volatile than big nations – all stylized facts from small state economics literature –, but that their business cycles are also affected earlier.
    Abstract: Der vorliegende Beitrag untersucht den schweizerischen Konjunkturzyklus vergleichend mit den fünf angrenzenden Staaten Deutschland, Österreich, Italien, Frankreich und Liechtenstein. In Kontrast zu der weitverbreiteten Auffassung, dass kleine Staaten ihren Konjunkturzyklus von Grossstaaten „importieren“, kann gezeigt werden, dass das reale BIP des Klein(st)staates Liechtenstein einen Vorlaufindikator für die Volkswirtschaft der Schweiz darstellt, sowohl was die Wachstumsraten als auch die Trendabweichung (Produktionslücke) betrifft. Diese Schlussfolgerung, auf Jahresdaten für 1972 bis 2013 gestützt, beruht auf Kreuzkorrelationsanalysen sowie univariaten und multivariaten Granger-Kausalitätstest. Der statistisch signifikante Vorlauf von einem Jahr ist robust für alle verwendeten Länder-Samples, Zeitfenster der vorliegenden Jahresbeobachtungen und Modellspezifikationen. Dieses Ergebnis deutet die Möglichkeit an, dass Mikrostaaten nicht nur ausländischen Schocks stärker ausgesetzt sind, empfindlicher auf internationale Fluktuationen reagieren und volatiler als Grossstaaten sind – alles stilisierte Fakten der Literatur der Kleinstaaten-Ökonomie –, sondern dass deren Konjunkturzyklen auch früher betroffen sind.
    Keywords: Business Cycles,Leading Indicators,Switzerland,Liechtenstein,VAR,Granger Causality
    JEL: C22 C32 E32 O52
    Date: 2015
  32. By: Berentsen, Aleksander; Schär, Fabian
    Abstract: Cash is accused of three sins: First, cash is inefficient and costly to use, and society would be better off without it. Second, it promotes crime, and facilitates money laundering and tax evasion. Third, it makes negative nominal interest rates infeasible. In certain situations, this may hinder central banks from implementing optimal monetary policies. In this article, we argue that all three accusations are fallacies; they are based on faulty reasoning. There is absolutely no need to limit the use of cash. On the contrary, societies should facilitate its use.
    Keywords: Cash, Negative Interest Rates, Lower Bound
    JEL: E4 E5
    Date: 2016–01–01
  33. By: Alwyn Young
    Abstract: If workers self-select into industries based upon their relative productivity in different tasks, and comparative advantage is aligned with absolute advantage, then the average efficacy of a sector's workforce will be negatively correlated with its employment share. This might explain the difference in the reported productivity growth of contracting goods and expanding services. Instrumenting with defense expenditures, I find the elasticity of worker efficacy with respect to employment shares is substantially negative, albeit imprecisely estimated. The estimates suggest that the view that goods and services have similar productivity growth rates is a plausible alternative characterization of growth in developed economies.
    JEL: E23 E24 H56 J24 O41 O47
    Date: 2014–11
  34. By: Jérémie Cohen-Setton; Joshua K. Hausman; Johannes F. Wieland
    Abstract: The effects of supply-side policies in depressed economies are controversial. We shed light on this debate using evidence from France in the 1930s. In 1936, France departed from the gold standard and implemented mandatory wage increases and hours restrictions. Deflation ended but output stagnated. We present time-series and cross-sectional evidence that these supply-side policies, in particular the 40-hour law, contributed to French stagflation. These results are inconsistent both with the standard one-sector new Keynesian model and with a medium scale, multi-sector model calibrated to match our cross-sectional estimates. We conclude that the new Keynesian model is a poor guide to the effects of supply-side shocks in depressed economies.
    JEL: E31 E32 E65 N14
    Date: 2016–03
  35. By: Iversen, Jens; Laseen, Stefan; Lundvall, Henrik; Söderström, Ulf
    Abstract: We evaluate forecasts made in real time to support monetary policy decisions at Sveriges Riksbank (the central bank of Sweden) from 2007 to 2013. We compare forecasts made with a DSGE model and a BVAR model with judgemental forecasts published by the Riksbank, and we evaluate the usefulness of conditioning information for the model-based forecasts. We also study the perceived usefulness of model forecasts for central bank policymakers when producing the judgemental forecasts.
    Keywords: Forecast evaluation; Inflation targeting; Monetary policy; Real-time forecasting
    JEL: E37 E52
    Date: 2016–03
  36. By: Vdovychenko, Artem; Zubrytskyi, Artur
    Abstract: The question of Ukraine's economic recovery after several years of rapid decline is closely connected to the reform of its fiscal policy. Because Ukraine is a country with a small, open economy, exports may be one of the drivers of economic recovery. Monetary policy over the past decades had, for various reasons, a limited impact on the dynamics of exports, while today, a long period of unsustainable fiscal policy forces the government to carry out fiscal consolidation. Adding together all these facts, we can state the importance of studying the influence of fiscal balance parameters on the exports of Ukraine. Using the gravity model, we conclude that fiscal consolidation has a positive effect on Ukraine's exports with a lag of several years. We also find that the effect of fiscal consolidation on exports is mainly due to the correction of the exchange rate. The stimulating effect of fiscal consolidation takes place on an intensive margin of exports; exposing serious structural problems in the Ukrainian economy.
    Keywords: structural budget balance, exports, gravity model, fixed effects, random effects, fiscal consolidation, monetary policy, and exchange rate.
    JEL: F10 H32 H62
    Date: 2016–01
  37. By: E. Monnet; C. Wolf
    Abstract: We study residential investment over GDP in 20 OECD countries since 1980, and show that it is closely associated with the growth dynamics of population aged 20-49. We develop a new method to uncover the causal effect of the growth of the 20-49 age group. Using past demographic data as an instrument to avoid potential endogeneity between migration and the housing cycle, we find that a 1% increase in the population aged 20-49 increases the residential investment rate by 1.3 pp. Demographic changes are a better predictor of the residential investment rate than any macroeconomic or financial variable we control for.
    Keywords: business cycle, housing, demography, migration.
    JEL: E32 J11 R21
    Date: 2016
  38. By: Fougère, Denis; Gautier, Erwan; Roux, Sébastien
    Abstract: This paper examines empirically how industry-level wage floors are set in French industry-level wage agreements and how the national minimum wage (NMW) interacts with industry-level wage bargaining. For this, we use a unique dataset containing about 48,000 occupation-specific wage floors, in more than 340 French industries over the period 2006-2014. We find that the NMW has a significant impact on the seasonality and on the timing of the wage bargaining process. Inflation, past sectoral wage increases and real NMW increases are the main drivers of wage floor adjustments; elasticities of wage floors with respect to these macro variables are 0.6, 0.3 and 0.25 respectively. Wage floor elasticities to inflation and to the NMW both decrease along the wage floor distribution but are still positive for all levels of wage floors.
    Keywords: collective bargaining; minimum wage; wages
    JEL: E24 J31 J51
    Date: 2016–04
  39. By: Punnoose Jacob; Lenno Uuskula
    Abstract: Habit persistence at the level of individual goods varieties can explain incomplete exchange rate pass-through to international prices. Deep habits give rise to a dynamic import demand function that leads to import price markup adjustments, independently of nominal pricing frictions. Augmenting a standard New Keynesian two-country model with deep habits, we obtain low exchange rate pass-through to import prices even when local currency prices are relatively flexible. As prices become more rigid, the presence of deep habits further reduces the pass-through of exchange rate fluctuations. Without deep habits, the model requires implausibly high degrees of price stickiness to match the pass-through dynamics triggered by an exchange rate shock in a vector autoregression.
    Keywords: Exchange Rate Pass-through, Deep Habits, Sticky Prices, Price Markups, Local Currency Pricing
    JEL: F41 E31
    Date: 2016–04
  40. By: Elish Kelly; Seamus McGuinness; Philip O’Connell; Alberto González Pandiella; David Haugh
    Abstract: This paper identifies the labour market impact of the Great Recession on immigrants compared to natives and how this relationship has evolved since the downturn. We find that the employment penalty suffered by immigrant workers, relative to native workers, increased significantly over the Irish recession and persisted during the subsequent recovery. Differences in labour market outcomes between immigrants and natives were accentuated by the recession, when the employment penalty was the highest. Secondly we conclude that the more recent evolution of the employment penalty appears to be related to a composition effect, as many refugee immigrants with weak labour market attachment became naturalised citizens during the recession. This suggests that the difficulties that some immigrants experience in the labour market would be under-estimated without taking due account of naturalisation processes, as is done in this paper for the first time in Ireland. This working paper relates to the 2015 OECD Economic Survey of Ireland ( Comment les immigrants réussissent dans le marché du travail irlandais sur la Grande Récession ? Ce document identifie l'impact sur le marché du travail de la grande récession sur les immigrants par rapport aux autochtones et comment cette relation a évolué depuis la récession. Nous constatons que la pénalisation de l'emploi subie par les travailleurs immigrés, par rapport aux travailleurs indigènes, a considérablement augmenté au cours de la récession irlandaise et a persisté pendant la récupération ultérieure. Les différences de performance dans le marché du travail entre les immigrants et les autochtones ont été accentuées par la récession, lorsque la pénalisation de l'emploi était au plus haut. Deuxièmement, nous concluons que l'évolution récente de la pénalisation de l'emploi semble être liée à un effet de composition car de nombreux immigrants réfugiés faiblement attachés au marché du travail ont été naturalisés Irlandais pendant la récession. Cela laisse à penser que les difficultés rencontrées par certains immigrés sur le marché du travail seraient sous-estimées si le processus de naturalisation n’était pas pris en compte. Ce document prend en compte cet effet de composition pour la première fois en Irlande. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de l'Irlande 2015 ( -economique-irlande.htm).
    Keywords: Ireland, immigration, labour market, Refugees, Naturalisation, Great recession, Naturalisation, Réfugiés, marchés du travail, Irlande, immigration, Grande récession
    JEL: E24 F22 J21 J61 J64
    Date: 2016–04–12
  41. By: Michael Pedersen
    Abstract: The analysis in this paper is focused on how the pass-through of changes in the monetary policy rate (MPR), expectations of MPR changes, and different measures of risks affect banks’ interest rates. Nominal and real lending and deposit rates are examined as are different maturities for the cases of nominal lending rates. Several measures of risk are constructed and incorporated into the analysis to take into account credit, market, liquidity, and interest rate risk. Evidence suggests that the pass-through of MPR changes is symmetric and instantaneous complete for the majority of the lending horizons of commercial and consumer loans with nominal rates. Pass- through is symmetric for commercial loans and deposits with real rates, but not for mortgage loans. Generally, liquidity, market, and credit risks are important for the banks when setting interest rates, while interest rate risks affect mainly consumer loans and deposits with nominal rates. Inflation changes affect the real rates of commercial loans and deposits as well as nominal consumer loans with a long maturity. Inflation expectations are mainly taken into account when setting real rates of commercial and mortgage loans. Expectations of MPR changes affect principally the rates of mortgage loans.
    Date: 2016–03
  42. By: Fructuoso Borrallo (Banco de España); Ignacio Hernando (Banco de España); Javier Vallés (Banco de España)
    Abstract: This paper offers an empirical analysis of the way in which US unconventional monetary policy has affected Latin American countries. First, we estimate the effects of US monetary policy announcements on sovereign bond interest rates, exchange rates and stock market indices for a set of emerging countries, including five Latin American economies. We find that QE announcements in 2008/2009 and the “tapering talk” in 2013 generated sizable sovereign yield and exchange rate fluctuations. We further find some excess response of Latam asset prices that disappear once we take into account their country characteristics. In the second part of the paper we estimate a simple model that measures the influence of country-specific macroeconomic fundamentals on the transmission of US financial disturbances. An estimated model including the inflation rate, the CDS spread, the ratio of official reserves and market capitalisation explains some of the observed cross-country heterogeneity of spillovers from US monetary policy announcements. Under this model, a greater impact from the normalisation of US monetary policy can be expected in Latin America relative to other emerging economies
    Keywords: unconventional monetary policy, spillovers, emerging economies, event study
    JEL: E52 F32 G11
    Date: 2016–03
  43. By: Kollmann, Robert; Zeugner, Stefan
    Abstract: This note corrects Blanchard and Kahn’s (1980) solution for a linear dynamic rational expectations model with one state variable and one control variable.
    Keywords: linear dynamic rational expectations model, model solution
    JEL: C0 C6 E3
    Date: 2016
  44. By: Schulhofer-Wohl, Sam (Federal Reserve Bank of Minneapolis); Kaplan, Greg (Princeton University)
    Abstract: We use scanner data to estimate inflation rates at the household level. Households' inflation rates are remarkably heterogeneous, with an interquartile range of 6.2 to 9.0 percentage points on an annual basis. Most of the heterogeneity comes not from variation in broadly defined consumption bundles but from variation in prices paid for the same types of goods - a source of variation that previous research has not measured. The entire distribution of household inflation rates shifts in parallel with aggregate inflation. Deviations from aggregate inflation exhibit only slightly negative serial correlation within each household over time, implying that the difference between a household's price level and the aggregate price level is persistent. Together, the large cross-sectional dispersion and low serial correlation of household-level inflation rates mean that almost all of the variability in a household's inflation rate over time comes from variability in household-level prices relative to average prices for the same goods, not from variability in the aggregate inflation rate. We provide a characterization of the stochastic process for household inflation that can be used to calibrate models of household decisions.
    Keywords: Inflation; Heterogeneity
    JEL: D12 D30 E31
    Date: 2016–04–11
  45. By: Pascal Towbin; Sebastian Weber
    Abstract: As it has proved difficult to explain the recent US house price boom on the basis of fundamentals, many observers have emphasised the role of speculation. This kind of argument is, however, indirect, as speculation is treated as a deviation from a benchmark. Our paper identifies house price expectation shocks directly, using a VAR with sign restrictions. House price expectation shocks are the most important driver of the US house price boom. We also show that a model-based measure of changes in price expectations leads a survey-based measure. Our baseline specification leaves the question of whether expectation shifts are realistic or unrealistic unanswered. In alternative specifications, we provide evidence that expectation shifts during the boom were largely unrealistic.
    Keywords: Housing Market, House Price Expectations, Speculation, Housing Boom, VAR
    JEL: E3 E4 R3
    Date: 2016
  46. By: E. Gautier; D. Fougère; S. Roux
    Abstract: This paper examines empirically how industry-level wage floors are set in French industry-level wage agreements and how the national minimum wage (NMW) interacts with industry-level wage bargaining. For this, we use a unique dataset containing about 48,000 occupation-specific wage floors, in more than 340 French industries over the period 2006-2014. We find that the NMW has a significant impact on the seasonality and on the timing of the wage bargaining process. Inflation, past sectoral wage increases and real NMW increases are the main drivers of wage floor adjustments; elasticities of wage floors with respect to these macro variables are 0.6, 0.3 and 0.25 respectively. Wage floor elasticities to inflation and to the NMW both decrease along the wage floor distribution but are still positive for all levels of wage floors.
    Keywords: minimum wage, collective bargaining, wages.
    JEL: J31 J51 E24
    Date: 2016
  47. By: Khraief, Naceur (Faculty of Economic Science and Management of Sousse, University of Sousse, Tunisia, & GREDEG (Research Group on Law Economics and Management, University of Nice Sophia Antipolis, France); Shahbaz, Muhammad (Department of Management Sciences, COMSATS Institute of Information Technology, Lahore, Pakistan); Heshmati, Almas (Jönköping International Business School (JIBS), Centre of Excellence for Science and Innovation Studies (CESIS),& Department of Economics, Sogang University, Seoul, South Korea); Azam, Muhammad (School of Economics, Finance & Banking, College of Business, Universiti Utara Malaysia)
    Abstract: This paper revisits the dynamics of unemployment rate for 29 OECD countries over the period of 1980-2013. Numerous empirical studies of the dynamics of unemployment rate are carried out within a linear framework. However, unemployment rate can show nonlinear behaviour as a result of business cycles or some idiosyncratic factors specific to labour market (Cancelo, 2007). Thus, as a testing strategy we first perform Harvey et al. (2008) linearity unit root test and then apply the newly ESTAR nonlinear unit root test suggested by Kruse (2011). This test has higher power than conventional unit root tests when time series exhibits nonlinear behaviour. Our empirical findings provide significant evidence in favour of unemployment rate stationarity for 25 countries. For robustness purpose, we have also used panel unit root tests without and with structural breaks. The results show that unemployment hysteresis hypothesis is strongly rejected when taking into account the cross-sectional and structural break assumptions. Thus, unemployment rates are expected to return back to their natural levels without executing any costly macroeconomic labour market policies by the OECD’s governments.
    Keywords: Unemployment; Unit root; labour market policy; OECD
    JEL: C23 E24 J48 J64 N30
    Date: 2016–04–06
  48. By: Markus Brueckner
    Abstract: Rent extraction by capitalists is present if the capital income share exceeds the capital output elasticity. Based on a sample of 111 countries during the period 1970-2010, this paper provides estimates of the capital output elasticity and compares these to countries' capital income shares. Three findings arise: (i) for the average country in the sample, the capital income share significantly exceeds the capital output elasticity; (ii) the difference between the capital income share and the capital output elasticity has increased since the 1980s; (iii) in democracies the capital income share is not significantly different from the capital output elasticity.
    Keywords: Capital output elasticity, capital income share, rent extraction
    JEL: E0 O4
    Date: 2016–04
  49. By: Santiago Rojas; Ricardo Bonilla; Rosario Córdoba; Alfredo Lewin; Oscar Darío Morales; Soraya Montoya; Guillermo Perry; Julio Roberto Piza
    Abstract: "En Febrero 25 de 2105 el Gobierno Nacional conformó la Comisión de Expertos para la Equidad y la Competitividad Tributaria de acuerdo con lo señalado por la Ley 1739 de 2014 y el Decreto 0327 de 2015. La Comisión, conformada por nueve miembros ad honorem, tuvo como propósito estudiar, entre otros, el régimen del impuesto sobre la renta y CREE, el régimen tributario especial del impuesto sobre la renta y complementarios aplicable a las entidades sin ánimo de lucro, los beneficios tributarios existentes y las razones que los justifican, el régimen del impuesto sobre las ventas y el régimen aplicable a los impuestos, tasas y contribuciones de carácter territorial con el objeto de proponer reformas orientadas a combatir la evasión y elusión fiscales y a hacer el sistema tributario más equitativo y eficiente. La Comisión tuvo un plazo de 10 meses a partir de su conformación para allegar al Gobierno Nacional un documento con las recomendaciones para una reforma tributaria estructural. Al culminar estos diez meses de trabajo, la Comisión presenta este informe al Ministro de Hacienda con sus recomendaciones para una reforma tributaria estructural, en un escenario en el que la economía colombiana enfrenta grandes dificultades y retos, pero también grandes oportunidades. Es un momento en el que, por la alta dependencia de la economía y de las finanzas públicas en la producción y exportación de productos minero-energéticos, la abrupta reducción en los precios internacionales del petróleo y de otros bienes básicos se ha venido reflejando desde 2014 en elevados desbalances externos y fiscales. De no actuar de manera oportuna a través de políticas económicas acertadas, una corrección demorada de estos desbalances acarrearía indeseables efectos en materia económica y social en el corto y largo plazo."
    Keywords: Tributación, Impuestos, Sistemas Tributarios, Evasión Tributaria, Reformas Tributarias, Política Fiscal, Colombia
    JEL: E62 H21 H26 H30
    Date: 2015–12–30
  50. By: António Afonso,; José Alves
    Abstract: We revisitWagner's law of increasing state expenditure by function of government expenditure. Using data of 14 European countries between 1996 and 2013, we apply panel data and SUR methods to assess public expenditure-income elasticities. We find that some functions of government spending for a few countries (e.g. Austria, France, the Netherlands, and Portugal) validate Wagner's law. For the Netherlands expenditures with environment protection increase more than proportionately to economic growth, and for France that is the case of spending in housing and community amenities. In addition, Greece is the only country where two public spending items react more than one to one to growth. Key Words : Fiscal Policies; Government spending; SUR estimation; Wagner's Law.
    JEL: C33 E62 H50 O47
    Date: 2016–04
  51. By: Michaël Assous (PHARE; University of Paris 1); Muriel Dal-Pont Legrand (GREDEG CNRS; Université Nice Sophia Antipolis); Harald Hagemann (University of Hohenheim, Stuttgart)
    Keywords: Business cycle, growth
  52. By: de la Croix, David; Doepke, Matthias; Mokyr, Joel
    Abstract: In the centuries leading up to the Industrial Revolution, Western Europe gradually pulled ahead of other world regions in terms of technological creativity, population growth, and income per capita. We argue that superior institutions for the creation and dissemination of productive knowledge help explain the European advantage. We build a model of technological progress in a pre-industrial economy that emphasizes the person-to-person transmission of tacit knowledge. The young learn as apprentices from the old. Institutions such as the family, the clan, the guild, and the market organize who learns from whom. We argue that medieval European institutions such as guilds, and specific features such as journeymanship, can explain the rise of Europe relative to regions that relied on the transmission of knowledge within extended families or clans
    Keywords: Apprenticeship; Clans; Dissemination of Knowledge; Guilds
    JEL: E02 J24 N10 N30 O33 O43
    Date: 2016–03
  53. By: Bullard, James B. (Federal Reserve Bank of St. Louis)
    Abstract: St. Louis Fed President James Bullard discussed whether the FOMC's decision earlier this month to leave the policy rate unchanged was an example of time-inconsistent policymaking, given that the state of the U.S. economy then was arguably consistent with the FOMC's Summary of Economic Projections (SEP) from December, which could have led some to believe an increase was warranted. During a presentation to the New York Association for Business Economics, he said that some key changes to the SEP in March were enough to justify a somewhat different policy stance than would otherwise have been warranted. He concluded that it is reasonable to interpret the FOMC as remaining time-consistent at the March meeting.
    Date: 2016–03–24
  54. By: Jakub Growiec; Jakub Muck
    Abstract: We generalize the normalized Constant Elasticity of Substitution (CES) production function by allowing the elasticity of substitution to vary isoelastically with (i) relative factor shares, (ii) marginal rates of substitution, (iii) capital–labor ratios, or (iv) capital–output ratios. Ensuing four variants of Isoelastic Elasticity of Substitution (IEES) production functions have a range of intuitively desirable properties and yield empirically testable predictions for the functional relationship between relative factor shares and (raw or technology-adjusted) capital–labor ratios. As an empirical application, the parameters of IEES functions are estimated in a three-equation supply-side system with factor-augmenting technical change, based on data on aggregate production in the post-war US economy. Our estimates consistently imply that the elasticity of substitution between capital and labor has remained relatively stable, at about 0.8–0.9, from 1948 to the 1980s, followed by a period of secular decline.
    Keywords: production function, factor share, elasticity of substitution, marginal rate of substitution, normalization
    JEL: E23 E25 O33 O47
    Date: 2016–03
  55. By: Knolle, Julia; Lehmann, Kai
    Abstract: Does the world experience a secular decline in capital productivity? Due to the long-run downward trend in interest rates, some economists do think so. However, this reasoning equates capital productivity with interest, which is a critical assumption. This paper presents a new proxy that can be used to estimate capital productivity. It is based on weighted average cost of capital (WACC), which are employed by firms in their investment appraisals as a benchmark return. The paper uses an original WACC data set for many OECD countries and for the time period 2000-2015. Data are adjusted for tax distortions and expected inflation. The principle finding is that the data do not indicate a long-run decline in capital productivity.
    Keywords: Capital productivity; cost of capital; interest-growth-differential; WACC.
    JEL: D24 E22 E43
    Date: 2016–04
  56. By: David Haugh; Yosuke Jin; Alberto González Pandiella
    Abstract: The Irish economy is growing strongly, but there is a risk many households will be left behind despite robust growth. High joblessness especially among the low-educated and skill-biased wage differentials have induced high market income inequality, among the highest in the OECD. Ireland’s comprehensive welfare system provides a broad range of social benefits, which keeps jobless households out of poverty, but this reduces the financial incentives to work, especially for families with children. Structural unemployment is also explained by the lack of skills required to find employment in the Irish labour market, where the presence of multinational enterprises increases the reward for high skills and the penalty for poor skills. With the unemployed pool lacking the right skills and financial incentives, employers tend to resort to foreign workers, a practice facilitated by the well-functioning migration system. Getting more people into work is important to share the benefits of the recovery as widely as possible. This requires building up work capacity, especially by improving jobseekers’ training, and ensuring welfare recipients honour their Job Path commitments in return. More needs to be done to increase incentive to work by reducing welfare and low-income traps. This should be done by shifting the tax burden from labour to indirect taxes in a progressive way that does not harm the lowest income groups. ( Grandir ensemble : Vers une Irlande plus inclusive La croissance de l'économie irlandaise est forte, mais il y a un risque que nombreux ménages restent à l’écart de cette croissance robuste. Le chômage élevé, surtout parmi les personnes peu instruites, et les différences de salaires basées sur les compétences, ont induit une forte inégalité des revenus avant impôts et transferts, , qui se situe parmi les plus élevées de l'OCDE. Le système de protection sociale élargi de l'Irlande offre une vaste gamme de prestations sociales, qui évite la pauvreté pour les ménages sans emploi , mais qui réduit les incitations financières au travail, en particulier pour les familles avec enfants. Le chômage structurel est également expliqué par le manque de compétences nécessaires pour trouver un emploi sur le marché du travail irlandais, où les entreprises multinationales recherchent des compétences élevées, ce qui pénalise qui n’ont pas les qualifications requises. Etant donné que les demandeurs d’emploi irlandais n’ont souvent pas les compétences requises et font face à peu d’incitations financières, les employeurs ont tendance à recourir à des travailleurs étrangers, une pratique facilitée par le système dímmigration qui fonctionne bien. Faciliter le retour à l’emploi est important pour parvenir à un partage partager des fruits de la reprise aussi large que possible. Cela nécessite d’améliorer le socle des compétences, et notamment la formation des demandeurs d'emploi, et d'assurer que les bénéficiaires de prestations sociales respectent leurs engagements en termes de retour à l’emploi. Plus doit être fait pour accroître les incitations au travail et pour réduire les trappes dans les bas revenus et les prestations sociales, . Cela devrait être fait en transférant la pression fiscale pesant sur le travail vers les impôts indirects, d'une manière progressive afin de ne pas nuire pas aux groupes à faible revenu. ( ique-irlande.htm).
    Keywords: labour market reform, skills, turnover, réforme du marché du travail
    JEL: E2 E24 J01 J08 J6
    Date: 2016–04–19
  57. By: Lee, Chin
    Abstract: This study examines whether there are significant differences in prices across four regions in Peninsular Malaysia, namely Northern, Central, Southern, and Eastern Peninsular Malaysia. Disaggregate monthly consumer price indices for twelve types of goods and services from July 2010 to February 2013 were analyzed. Based on the Levin and Lin (1993) panel unit root test, this study found statistical evidence of price convergence among the four zones for two-thirds of the price groups. Most importantly, price convergence exists for three major consumers’ expenditures items: Food and Non-Alcoholic Beverages; Housing, Water, Electricity, Gas and Other Fuels; and Transport. Indeed, these eight price groups that converged comprised 83.6% of total consumer expenditures. Evidence of price convergence among these price groups suggests that Peninsular Malaysia markets are highly integrated. In addition, this study found that the half-life for the tradable goods is roughly 2-3 months and for nontradable goods about 5-10 months. These findings indicate that tradable goods prices adjust more rapidly than nontradable goods do.
    Keywords: regional price disparity, price convergence, half-life, speed of adjustment, panel unit root test
    JEL: D12 E31 E64 R11 R12
    Date: 2015
  58. By: Nathalie Scholl (Georg-August University Göttingen); Stephan Klasen (University of Göttingen)
    Abstract: In this paper, we revisit the inequality-growth relationship using an enhanced panel data set with improved inequality data and special attention to the role of transition countries. We base our analysis on the specification of Forbes (2000), but also address the functional form concerns raised by Banerjee and Duflo (2003). We arrive at three main findings: First, similar to Forbes we find a significant positive association between inequality and subsequent economic growth in the full sample, but this is entirely driven by transition (post-Soviet) countries. Second, this positive relationship in transition countries is not robust to the inclusion of separate time effects. Lastly, it therefore appears that this association is not causal but rather driven by the particular dynamics of the transition. Our finding is consistent with the claim that the relationship between inequality and growth emerges due to the particular timing of inequality and growth dynamics in transition countries. In particular, the rise in inequality in the 1990s coincided with a sharp output collapse, leading us to find an association between the large increase in inequality in the early 1990 and a growth recovery in the late 1990s. In sum, once the transition country dynamics are accounted for, we find no robust, systematic relationship between inequality and subsequent growth, neither for levels nor for changes in inequality. These results hold for different lag structures as well as in the medium- rather than the short term, and the empirical patterns observed are robust to the use of different data sets on inequality.
    Keywords: Inequality; Growth; Transition Countries; Dynamic Panel
    JEL: O11 O15 O40 E25
    Date: 2016–04–14
  59. By: Gabriel Chodorow-Reich; Loukas Karabarbounis
    Abstract: By how much does an extension of unemployment benefits affect macroeconomic outcomes such as unemployment? Answering this question is challenging because U.S. law extends benefits for states experiencing high unemployment. We use data revisions to decompose the variation in the duration of benefits into the part coming from actual differences in economic conditions and the part coming from measurement error in the real-time data used to determine benefit extensions. Using only the variation coming from measurement error, we find that benefit extensions have a limited influence on state-level macroeconomic outcomes. We use our estimates to quantify the effects of the increase in the duration of benefits during the Great Recession and find that they increased the unemployment rate by at most 0.3 percentage point.
    Date: 2016–01
  60. By: Anastasia Girshina (Department of Economics, University Of Venice Cà Foscari)
    Abstract: Many of the world's wealthy countries provide fiscal incentives to homeowners. Yet, the impact of such tax breaks on housing tenure decision is unclear. Using difference-in-differences approach, this study estimates the effect of mortgage interest deduction on homeownership in the United States. The identification relies on the large changes in income tax rates and standard deduction. The largest of these changes increased income tax rate by as much as 23,9% and decreased standard deduction by 7,2% between 2002 and 2004. The baseline estimates suggest that increase in income tax rate in a state that allows mortgage interest deduction is associated to 3 percentage points increase in homeownership relative to states that didn't change their fiscal policy and to 5 percentage points -relative to states that do not allow mortgage interest deduction but had a comparable increase in tax rates. The results are robust to a range of alternative specifications.
    Keywords: fiscal policy, tenure choice, mortgage interest deduction, income tax, homeownership
    JEL: E62 G11 H24 H31 K34
    Date: 2016
  61. By: Sin-Yu Ho and Bernard Njindan Iyke
    Abstract: There is a bulk of literature that identifies the major economic drivers of Hong Kong’s rapid and steady economic performance over the last three decades. Of these major economic drivers identified, the performance of the stock market has received less attention. This paper examines the causal links between stock market performance and economic performance of Hong Kong in an augmented VAR setting. Using an extended quarterly dataset which covers the period 1986 Q2-2014 Q4 and the Toda-Yamamoto causality test, we find that stock market performance, as proxied by market capitalisation ratio, and economic performance stimulates each other. Also, the stock market performance, as proxied by total value traded ratio, and economic performance influence each other. However, the causal links between stock market performance and economic performance dissipate, if stock market performance is proxied by turnover ratio. This suggests that the causal links between stock market performance and economic performance are highly dependent on the proxy of stock market performance in the case of Hong Kong.
    Keywords: causality, Economic performance, Stock Market Performance, Toda-Yamamoto
    JEL: C32 E44
    Date: 2016
  62. By: Branger, Nicole; Grüning, Patrick; Schlag, Christian
    Abstract: The term 'financialization' describes the phenomenon that commodity contracts are traded for purely financial reasons and not for motives rooted in the real economy. Recently, financialization has been made responsible for causing adverse welfare effects especially for low-income and low-wealth agents, who have to spend a large share of their income for commodity consumption and cannot participate in financial markets. In this paper we study the effect of financial speculation on commodity prices in a heterogeneous agent production economy with an agricultural and an industrial producer, a financial speculator, and a commodity consumer. While access to financial markets is always beneficial for the participating agents, since it allows them to reduce their consumption volatility, it has a decisive effect with respect to overall welfare effects who can trade with whom (but not so much what types of instruments can be traded).
    Keywords: commodities,general equilibrium,heterogeneous preferences,financial markets
    JEL: E23 G12 G13 Q11 I30
    Date: 2016
  63. By: Rafael Domenech; Juan Ramon Garcia; Camilo Ulloa
    Abstract: En este trabajo se estima el impacto macroeconomico de la mayor flexibilidad salarial e interna en las empresas favorecida por los distintos cambios en la regulacion laboral aprobados a partir de 2012 en Espana.
    Keywords: Analisis Macroeconomico , Documento de Trabajo , Espana , Investigacion
    JEL: C32 E24 J08
    Date: 2016–03
  64. By: Iader Giraldo S.
    Abstract: "Las exportaciones manufactureras de Colombia han sido el segundo sector en importancia dentro del total de exportaciones del país, sin embargo, estas han venido perdiendo dinamismo y han visto reducida su participación en los últimos años debido en parte al auge del sector minero-energético. La presente investigación estima los determinantes de las exportaciones manufactureras colombianas a partir de datos anuales de comercio bajo clasificación CIIU y un modelo macroeconómico de ecuaciones simultaneas. Los resultados muestran como las exportaciones manufactureras se determinan principalmente por tres factores: los precios relativos de las exportaciones en los mercados foráneos, la renta extranjera y el costo de oportunidad entre vender en el mercado doméstico o el extranjero. Además de estos, las exportaciones quedan determinadas por el precio de las importaciones y los costos de producción."
    Keywords: Determinantes de las Exportaciones, Exportaciones Manufactureras, Clasificación CIIU, Ecuaciones Simultaneas
    JEL: E0 F14 F41 F47 C23
    Date: 2015–12–30
  65. By: Roman Frydman (Department of Economics, New York University); Michael Goldberg (Peter T. Paul College of Business and Economics, University of New Hampshire)
    Abstract: We call attention to the class of models that serve as the foundation for the rational expectations hypothesis (REH). Models in this class rule out completely any structural change that cannot be fully anticipated with a probabilistic or other quantitative rule. REH models are abstractions of rational decision-making, but only in a hypothetical world in which participants can fully anticipate when and how they might revise their understanding of the process driving outcomes. We propose a new rational expectations hypothesis (NREH) as a way to represent rational decision- making in real-world markets. NREH builds on the insights of Muth (1961) and Lucas(1972, 2001) and imposes internal coherence between the economist’s under- standing of outcomes and that of the market. However, like Soros’s (1987) conceptual framework, NREH models recognize that any quantitative understanding of the process driving outcomes is necessarily provisional, eventually becomes inadequate, and thus requires revision. Consequently, NREH does so in the context of models that are partly open to unanticipated structural change. NREH models accord participants’ expectations an autonomous role in internally coherent models. They also incorporate REH’s and behavioral economists’ insights about the importance of fundamental and psychological considerations, without presuming that market participants are irrational.
    JEL: D8 E3
    Date: 2015–03
  66. By: Anja Sonnenburg (GWS - Institute of Economic Structures Research); Britta Stöver (GWS - Institute of Economic Structures Research); Dr. Marc Ingo Wolter (GWS - Institute of Economic Structures Research)
    Abstract: Vor dem Hintergrund der kurzfristigen strukturellen und mengenmäßigen Änderungen in der Flüchtlingszuwanderung sowie den Verhaltensanpassungen in der Flüchtlingspolitik wurde das GWS Discussion Paper 2015/17 aktualisiert. Insbesondere die Prognose und Langzeitabschätzungen wurden an den aktuellen Stand angepasst. Im Ergebnis sind positive ökonomische Wirkungen bezogen auf das BIP zu erwarten, denn Dienstleistungen und Wohnraum werden vermehrt nachgefragt werden und langfristig ist eine Ausweitung des Produktionspotenzials möglich. Die Wirkungen sind umso stärker, je besser die Integration in den Arbeitsmarkt gelingt. Mit dem Arbeitsplatz verbinden sich Einkommen und Konsummöglichkeiten, die wiederum zu Nachfrage und Arbeitsplätzen führen können. Ein Teil dieses Zuwachses ist allerdings mit einem geringeren Finanzierungssaldo des Staates verbunden.
    Keywords: Demografischer Wandel, Zuwanderung, Flüchtlingswelle, ökonomische Folgen, Parameter
    JEL: J1 E2 O1
    Date: 2016
  67. By: McCain, Roger (School of Economics)
    Abstract: This essay will adapt the life-cycle theory of saving to the case of a small business proprietor who can invest his saving either in his own business or in financial securities, and may face a constraint on borrowing because of the limited liquidity of the business assets. This exercise does not seem to have been done before. For simplicity, certainty is assumed throughout. Thus risk and risk aversion play no explicit part, though it is assumed that there may be a margin between the rate at which the businessperson can borrow and the rate of return that she can obtain on financial capital and that there may be capital rationing by lenders. These elements may be consequences of risk in a more complex model that does allow uncertainty, but those considerations are beyond the scope of this essay, which aims only to extend the life cycle hypothesis to allow for investment in business capital and for a lending margin and capital rationing. The first section introduces liquidity constraint, with some very selective examples from the longstanding literature on the topic; the second presents a formal model, and the third gives a diagrammatic exposition of the model. These sections focus on the application to a small business. A following section discusses application to consumers in general. A brief summary and conclusions follow.
    Keywords: Liquidity constraint; Small business
    JEL: M13 M20
    Date: 2016–02–29
  68. By: Böing, Tobias; Stadtmann, Georg
    Abstract: We empirically assess the impact of competitiveness measured by unit labor costs for current account balances in the Euro area. For this purpose, we estimate a panel with annual observations from 2000 to 2013. Our findings confirm the importance of competitiveness: Higher unit labor costs growth leads to lower current account balances. By splitting up unit labor costs growth in wage growth and productivity growth, we find wage growth and productivity growth to have a significantly negative and positive effect, respectively. However, the effect of unit labor costs is mainly driven by productivity growth, so that wage cuts are relatively ineffective and painful to fight current account deficits. But pushing productivity is also likely to be ineffective, since its positive effect for the current account may be offset by its effect on wages and GDP, which decreases current account balances.
    Keywords: Euro Area,Competitiveness,Unit Labor Costs,Wage Growth,Labor Productivity Growth,Current Account,Panel
    JEL: F32 E69 C33
    Date: 2016
  69. By: Aliyu, Shehu Usman Rano
    Abstract: Despite tremendous growth of Islamic finance globally, the phenomenon is relatively new in Nigeria. The first full-fledged Islamic bank, Jaiz Bank Plc, was licensed as a regional bank by the Central Bank of Nigeria (CBN) in 2011 and it started its operations in January, 2012. Over 3 years now, the apex regulatory body is yet to develop robust shari’ah complainant instruments for liquidity management of Islamic banks in Nigeria. This paper assesses the predicaments of Jaiz bank Plc over the last 3 years of its operations in the face of this challenge on the basis of secondary data from the financial statements of the Bank. Evidences on the basis of CAMEL analysis show that while the Bank performs quite well in respect to capital adequacy, assets and management quality, the Bank, however, suffers most, on average, with respect to earning quality and liquidity. The paper recommends that the CBN should, while the shari’ah compliant instruments are being awaited, introduce a measure of deposit-free and loan-free for Jaiz Bank plc and consider lowering the statutory liquidity ratio, all with a view of easing financial constraints of the Bank.
    Keywords: Islamic liquidity management, CAMEL, Islamic Finance Institutions
    JEL: E52 G2 G21
    Date: 2015–04–19
  70. By: Bullard, James B. (Federal Reserve Bank of St. Louis)
    Abstract: St. Louis Fed President James Bullard delivered welcoming remarks at the 27th Homer Jones Memorial Lecture. He introduced this year's speaker, Lawrence Summers—one of the country's most influential economists and policymakers—who discussed "Secular Stagnation and Monetary Policy." The annual event honors the St. Louis Fed's former Research director, Homer Jones, who played a major role in helping the Bank become a leader in monetary research and statistics.
    Date: 2016–04–06
  71. By: Martin Shubik (Cowles Foundation, Yale University)
    Abstract: This is a nontechnical retrospective paper on a game theoretic approach to the theory of money and financial institutions. The stress is on process models and the reconciliation of general equilibrium with Keynes and Schumpeter’s approaches to non-equilibrium dynamics.
    Keywords: Bankruptcy, Innovation, Growth, Competition, Price-formation
    JEL: C7 E12
    Date: 2016–04
  72. By: Fernando de Menezes Linardi
    Abstract: This paper estimates a small open-economy dynamic stochastic general equilibrium (DSGE) model using Brazil´s economy data for the inflation-targeting period. The model includes a number of shocks that are important to explain the macroeconomic fluctuations of emerging markets economies. Then the empirical fit of different specifications of the model is tested in a Bayesian framework. The potential model misspecification is also assessed by comparing it to a more general reference model using the DSGE-VAR approach. The results show that the model with no price indexation fits the data better than the fully specified one. The DSGE-VAR approach indicated some degree of misspecification in the stylized small open-economy model
    Date: 2016–04
  73. By: Bitros, George C.
    Abstract: This paper derives a model of irregular or unplanned maintenance and repair outlays from an analytical framework based on rational economic behavior in which maintenance, utilization and service life decisions are appropriately integrated and estimates it with the help of data from 433 automobiles imported into Greece from various countries. On the theoretical plain it is shown that the model allows endogenously for most of the variables that have been identified in the relevant literature as important determinants of such expenditures. Also the model yields sharp sign predictions for the included variables and by doing so it sheds considerable light on several issues of theory and applied research in this area. On the empirical plain it is found that: a) there are two behavioral clusters of automobile owners, i.e. one that recommends pooling of the corresponding country data and another that suggests separate estimation of the model at the country level; b) as expected, the reported amounts of these outlays are related positively to the automobile’s age, intensity of utilization, and road accidents, and c) even though the expenditures under consideration for Japanese made cars appear to be relatively more sensitive to road accidents than those of automobiles from all other countries, at least in the years of the sample and on this basis, they offered the best value for the money.
    Keywords: maintenance and repair expenditures, utilization, service life, road accidents
    JEL: D12 E2 E22
    Date: 2016–04–15
  74. By: Nicolas Coeurdacier; Stéphane Guibaud; Keyu Jin
    Abstract: This paper analyzes the impact of relaxing fertility controls and expanding social security in China. We develop an overlapping generations model in which fertility decisions and capital accumulation are endogenously determined in the presence of social security. In our model, children are an alternative savings technology—as they transfer resources to their retired parents. Important feedback links arise between fertility and social security variables: an expansion of social security benefits reduces fertility—partially offsetting the effects of relaxing the one-child policy. The feedback loop between social security variables and fertility suggests that abandoning fertility restrictions may not be as effective in helping to finance China’s intended pension reform, especially if children are an important source of old-age support. The sustainability of the pension system is particularly at risk in the event of a growth slowdown. The objective of pension reforms may also be incongruent with other reforms, such as financial liberalization and financial integration.
    Keywords: one-child policy; social security; demographics
    JEL: E21 H55 J11 J13
    Date: 2014–08
  75. By: Dhaoui, Elwardi
    Abstract: This article focuses on assessing the business climate in Tunisia in an internal and external context by focusing on institutional characteristics in which companies operate . The analysis focuses on the situation and the perspectives of companies’s activities after the Revolution to see the impact of the context on their activities and investments. The impact on employment will also be analyzed.
    Keywords: Revolution ; Competitiveness; Investment
    JEL: E0 F41 F66 J2
    Date: 2015–10
  76. By: IWAISAKO Tokuo; NAKATA Hayato
    Abstract: This paper provides a quantitative assessment of the relative importance of exogenous shocks related to oil price determination on countries' exchange rates and outputs within the same framework of the structural vector autoregression (VAR) model. Because we are interested in the effect of oil price changes on energy exporters and importers, we chose Australia, Canada, Japan, Norway, and the United Kingdom as the sample countries. We assume four structural shocks: (i) oil supply shocks, (ii) global demand shocks, (iii) oil price fluctuations unrelated to supply and demand, and (iv) pure exchange rate fluctuations unrelated to other structural shocks. Differing responses to structural shocks explain the correlation structure of these currencies, while pure exchange rate shocks are the main sources of exchange rate volatilities. We also examine the roles of structural shocks in explaining macro variables, taking Australia and Japan as examples. We find evidence that global demand shocks and nonfundamental oil price fluctuations have a strong impact on gross domestic product (GDP) and export growth for both countries, while pure exchange rate shocks are relatively unimportant in explaining Japan's macroeconomic variables.
    Date: 2016–03
  77. By: Giovanni Razzu (Department of Economics, University of Reading); Carl Singleton (University of Edinburgh)
    Abstract: Gender gaps in work respond to the business cycle. Although there are many potential explanations, this paper tests the simplest. Is this because of the extent of gender segregation in work? A counterfactual-type analysis is constructed which can account for the specific role of combined gender segregation across industry sectors and occupations that existed at the onset of the Great Recession in the UK. Gaps in employment, pay and hours worked are all studied. After accounting for the gender segregation of work at the broad sector and occupation group level, the results contradict the existing narrative that men’s employment has been more harshly affected by the recession than women’s employment: gender segregation accounts for over two and a half times the actual fall in the gender gap between 2007 and 2011. Results for pay and hours are more mixed. Gender segregation accounts for some of the fall in the pay gap, but does not explain the decline in the hours gap, nor the relatively greater rise in part-time work among men since 2007.
    Keywords: gender, employment, hours, gender pay gap, gender segregation, business cycle
    Date: 2016–04–05
  78. By: Giorgio Fagiolo; Andrea Roventini
    Abstract: The Great Recession seems to be a natural experiment for economic analysis, in that it has shown the inadequacy of the predominant theoretical framework -- the New Neoclassical Synthesis (NNS) -- grounded on the DSGE model. In this paper, we present a critical discussion of the theoretical, empirical and political-economy pitfalls of the DSGE-based approach to policy analysis. We suggest that a more fruitful research avenue should escape the strong theoretical requirements of NNS models (e.g., equilibrium, rationality, representative agent, etc.) and consider the economy as a complex evolving system, i.e. as an ecology populated by heterogenous agents, whose far-from-equilibrium interactions continuously change the structure of the system. This is indeed the methodological core of agent-based computational economics (ACE), which is presented in this paper. We also discuss how ACE has been applied to policy analysis issues, and we provide a survey of macroeconomic policy applications (fiscal and monetary policy, bank regulation, labor market structural reforms and climate change interventions). Finally, we conclude by discussing the methodological status of ACE, as well as the problems it raises.
    Keywords: Economic Policy, New Neoclassical Synthesis, New Keynesian Models, DSGE Models, Agent-Based Computational Economics, Agent-Based Models, Complexity Theory, Great Recession, Crisis
    Date: 2016–04–13
  79. By: Phedon Nicolaides (Director of Studies and Jan Tinbergen Chair, Department of European Economic Studies, College of Europe); Roxana Nedelescu (née Sandu) (College of Europe, Department of European Economic Studies); Joanna Hornik (College of Europe, Department of European Economic Studies); Gibran Watfe (College of Europe, Department of European Economic Studies); Gil Stein (College of Europe, Department of European Economic Studies)
    Abstract: This paper examines the outcome of the negotiations for a new settlement concerning the United Kingdom’s relationship with the European Union. It reviews the nature and possible consequences of the “substantial changes” that were demanded in the areas of economic governance, competitiveness, sovereignty, and immigration. We argue that the proposed arrangements do not amount to much and can prove harmful to the future of the EU. The paper is a follow-up to our analysis of the initial proposals, available under Bruges European Economic Policy Briefings, 38/2016.
    JEL: O11 F02 E61 H50
    Date: 2016–03
  80. By: Manjhi, Ganesh; Keswani Mehra, Meeta
    Abstract: This paper attempts to answer two basic questions -- first, whether an election affects the transfers to the states through different component heads such as - grants from the center, loan from the center, finance commission transfer and grants in aids. Secondly, whether different transfer variables and the characteristics of the incumbent government will be able to create the possibility of retaining the power? Using the Arellano-Bond dynamic panel-data estimation methods (GMM) on a balanced panel data from 1980-2010 for 16 Indian states, we find that the right wing and coalition government is less likely to transfer the resources to the states. However, the state level ruling party which is either the same party at the center or ally get more transfers from the center than a non-coalition ruling party. Unlike the political budget cycles in the most literatures, the political transfer cycle is visible in the post-election period, which supports the possibility that while the announcements and promises are made before the election, the actual realization is observed only after the election. This may also be on account of attracting votes in the legislative assembly elections at the state level. The paper is extended to the logit and probit specifications of the model. It is found that; higher voters’ turnout in the state is more likely to win the election. Further, inflation reduces the possibility of winning the election, whereas more experienced government has a higher probability of winning the election. Moreover, our result also show that, the right wing government is more likely to win the election as they also behave more opportunistically and the coalition government where states are its allies lowers the possibility of winning the election.
    Keywords: Opportunist Incumbent; Political Budget Cycle, Political Transfer Cycle, Indian Federation
    JEL: E6 H5 H7
    Date: 2016–04–10

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