nep-mac New Economics Papers
on Macroeconomics
Issue of 2016‒10‒09
ninety-one papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Global macroeconomic effects of exiting from unconventional monetary policy By Pietro Cova; Patrizio Pagano; Massimiliano Pisani
  2. The meaning of monetary stability By Pesenti, Amos
  3. Building a path of equality to economic progress and macroeconomic stability - the economic theory of the Swedish model By Erixon, Lennart
  4. Quarterly Report on the Euro Area (QREA), Vol.13, No.4 (2014) By Francesca D’Auria; Maria Demertzis; Alexandr Hobza; Staffan Linden; Daniel Monteiro; Werner Roeger; Jan in ‘t Veld; Stefan Zeugner
  5. Financial Frictions, Asset Prices, and the Great Recession By Huo, Zhen; Ríos-Rull, José-Víctor
  6. Self-fulfilling deflations By Roberto Piazza
  7. Unemployment Persistence, Inflation and Monetary Policy in A Dynamic Stochastic Model of the Phillips Curve By George Alogoskoufis
  8. Monetary Policy Rule, Exchange Rate Regime, and Fiscal Policy Cyclicality in a Developing Oil Economy By Algozhina, Aliya
  9. Macroeconomic Effects of Financial Shocks: Comment By Pfeifer, Johannes
  10. Benchmarking macroprudential policies: An initial assessment By Domenico Lombardi; Pierre L. Siklos
  11. Has Inflation Targeting Become Less Credible? Oil Prices, Global Aggregate Demand and Inflation Expectations during the Global Financial Crisis By Sussman, Nathan; Zohar, Osnat
  12. Financial Globalisation and India: Internal and External Dimensions By Azad, Rohit; Bose, Prasenjit; Dasgupta, Zico
  14. Monetary Policy and Macroprudential Policy: Rivals or Teammates? By Simona Malovana; Jan Frait
  15. A Comparison of Three Models to Predict Liquidity Flows between Banks Based on Daily Payments Transactions By Triepels, Ron; Daniels, Hennie
  16. Optimal Public Debt Consolidation with Distributional Conflicts By Roberta, Cardani; Lorenzo, Menna; Patrizio, Tirelli
  17. Public finances and inflation: the case of Spain By Pablo Hernández de Cos; Samuel Hurtado; Francisco Martí; Javier J. Pérez
  18. Hipótesis de ingreso permanente y consumo en Colombia 1952-2014 By Edwin Mauricio Parra Rodríguez
  19. Search-and-matching frictions and labor market dynamics in Latvia By Buss, Ginters
  20. Asset market response to monetary policy news from SNB press releases By Hüning, Hendrik
  21. Understanding the New Normal : The Role of Demographics By Etienne Gagnon; Benjamin K. Johannsen; J. David Lopez-Salido
  22. Debt and Credit Quality in Central America, Panama, and the Dominican Republic By LaGarda, Guillermo; Prat, Jordi; Solera, Marco; Beverinotti, Javier
  23. The unemployment-stock market relationship in South Africa: Evidence from symmetric and asymmetric cointegration models By Tapa, Nosipho; Tom, Zandile; Lekoma, Molebogeng; Phiri, Andrew
  24. Catallactics misapplication;It crucial role in African underdeveloped Economy By Tweneboah Senzu, Emmanuel
  25. Monetary policy, market structure and the income shares in the U.S By George C. Bitros
  27. Uncertainty about Federal Reserve Policy and Its Transmission to Emerging Economies: Evidence from Twitter By Tillman, Peter
  28. Secular Stagnation, Rational Bubbles, and Fiscal Policy By Coen N. Teulings
  29. R.E.M. 2.0, An estimated DSGE model for Romania By Copaciu, Mihai,; Nalban, Valeriu,; Bulete, Cristian
  30. History dependence in wages and cyclical selection: Evidence from Germany By Bauer, Anja; Lochner, Benjamin
  31. Reputation Cycles By Jovanovic, Boyan; Prat, Julien
  32. Fiscal Policy and Macroeconomic Stability in South Asian Countries By Riaz, Nimra; Munir, Kashif
  33. Business Confidence in South Africa: Identifying Key Domestic Drivers and The Nature Of Their Impact. By Andrew Maredza; Zvikomborero Nyamazunzu
  34. Optimal monetary policy regime switches By Foerster, Andrew T.; Choi, Jason
  35. The I Theory of Money By Brunnermeier, Markus K.; Sannikov, Yuliy
  36. Impact des politiques fiscales et d’emploi sur le secteur informel et la pauvreté au Cameroun By NANA DJOMO JULES MEDARD; Carine Flore NZEUYANG NZOUCKIO; Claudiane Yanick MOUKAM; NGOUANA KOUDJOU Serges Rodrigue
  37. Overview of the Macedonian Policy Analysis Model (MAKPAM) By Tibor Hledik; Sultanija Bojceva-Terzijan; Biljana Jovanovic; Rilind Kabashi
  38. Across the crises of modern capitalism By Fusari, Angelo i
  39. Recession forecasting using Bayesian classification By Davig, Troy A.; Smalter Hall, Aaron
  40. Pre-Recession Wage Inflation and the Strength of the Subsequent Recovery By Campbell, Carl
  41. Do Inflation Expectations Granger Cause Inflation? By Stockhammar, Pär; Österholm, Pär
  42. Are Stocks Real Assets? Sticky Discount Rates in Stock Markets By Katz, Michael; Lustig, Hanno; Nielsen, Lars
  43. On Measuring Uncertainty: Snakes and Ladders By Junankar, Pramod N. (Raja)
  44. Deflationary Adjustment Processes and the Effectiveness of Structural Reforms In Monetary Unions By George D. Demopoulos; Nicholas A. Yannacopoulos
  45. Solving RE models with discontinuous policy rules: An application to minimum wage setting in Germany By Bursian, Dirk
  46. Inflation in the euro area and why it matters By Jakob de Haan; Marco Hoeberichts; Renske Maas; Federica Teppa
  47. Do Inflation Expectations Granger Cause Inflation? By Pär, Österholm; Pär, Stockhammar
  48. Income Inequality, Medical Conditions, and Household Bankruptcy By Youngsoo Jang
  49. Genuine Savings in developing and developed countries, 1900-2000 By Matthias Blum; Cristián Ducoing; Eoin McLaughlin
  50. The Elasticity of Factor Substitution Between Capital and Labor in the U.S. Economy: A Meta-Regression Analysis By Knoblach, Michael; Rößler, Martin; Zwerschke, Patrick
  51. Exchange rate Pass-through and Monetary Policy in Transition Economy: Evidence from Tunisia with disaggregated VAR Analysis By Dahem, Ahlem; Siala Guermazi, Fatma
  52. Inventory growth cycles with debt-financed investment By Matheus Grasselli; Adrien Nguyen-Huu
  53. Cross-border transmission of emergency liquidity By Kick, Thomas; Koetter, Michael; Storz, Manuela
  54. Vulnerable growth By Adrian, Tobias; Boyarchenko, Nina; Giannone, Domenico
  55. Oil and Unemployment in a New-Keynesian Model By Verónica Acurio Vásconez
  56. Animal Spirits in Open Economy: An Interaction-Based Approach to Bounded Rationality By Jang, Tae-Seok
  57. What order? Perturbation methods for stochastic volatility asset pricing and business cycle models By Oliver de Groot
  58. What order? Perturbation methods for stochastic volatility asset pricing and business cycle models By Oliver de Groot
  59. Optimal Bailout of Systemic Banks By Charles Nolan; Plutarchos Sakellaris; John D. Tsoukalas
  60. Incomplete Markets and Aggregate Demand By Ivan Werning
  61. On What States Do Prices Depend? Answers from Ecuador By Craig Benedict; Mario J. Crucini; Anthony Landry
  62. The Distribution of Household Savings in Germany By Jochen Späth; Kai Daniel Schmid
  63. What if oil is less substitutable? A New-Keynesian Model with Oil, Price and Wage Stickiness including Capital Accumulation By Verónica Acurio Vásconez
  64. Immigration Policy and Macroeconomic Performance in France By Hippolyte D'Albis; Ekrame Boubtane; Dramane Coulibaly
  65. The macroeconomic shock with the highest price of risk By Pinter, Gabor
  66. On the interplay between speculative bubbles and productive investment By Xavier Raurich; Thomas Seegmuller
  67. Volatility in the Small and in the Large: The Lack of Diversification in International Trade By Kramarz, Francis; Martin, Julien; Mejean, Isabelle
  68. Forecastability and statistical characteristics of aggregate oil and gas investments on the Norwegian Continental Shelf b By Lorentzen, Sindre; Osmundsen, Petter
  69. Aggregate Recruiting Intensity By Gavazza, Alessandro; Mongey, Simon; Violante, Giovanni L.
  70. Spain's Historical National Accounts: Expenditure and Output, 1850-2015 By Prados de la Escosura, Leandro
  71. Low long-term rates: bond bubble or symptom of secular stagnation? By Grégory Claeys
  72. Will increase in size of landholding reduce child labour in presence of unemployment? A theoretical analysis By Chakraborty, Kamalika; Chakraborty, Bidisha
  73. Sustainability of Student Debt in a Demand-Led Macrodynamics By Gustavo Pereira Serra; Gilberto Tadeu Lima
  74. ESBies: Safety in the Tranches By Brunnermeier, Markus K; Langfield, Sam; Pagano, Marco; Reis, Ricardo; van Nieuwerburgh, Stijn; Vayanos, Dimitri
  75. Who are the forerunners, economists or central bankers? By Ginafranco Tusset
  76. Redundancy, Unilateralism and Bias beyond GDP – results of a Global Index Benchmark By Dill, Alexander; Gebhart, Nicolas
  77. Optimal disaster-preventive expenditure in a dynamic and stochastic model By Takumi Motoyama
  78. Dynamic Directed Random Matching By Duffie, Darrell; Qiao, Lei; Sun, Yeneng
  79. Replacing Judgment by Statistics: Constructing Consumer Confidence Indicators on the basis of Data-driven Techniques. The Case of the Euro Area By Christian Gayer; Alessandro Girardi; Andreas Reuter
  80. Real Interest Rates over the Long Run By Yi, Kei-Mu; Zhang, Jing
  81. Secular stagnation? Growth, asset returns and welfare in the next decades: First results By Geppert, Christian; Ludwig, Alexander; Abiry, Raphael
  82. Informational Performance, Competitive Capital-Market Scaling, and the Frequency Distribution of Tobin’s Q By Paulo dos Santos; Ellis Scharfenaker
  83. The Comparative Inclusive Human Development of Globalisation in Africa By Simplice Asongu; Jacinta C. Nwachukwu
  84. Quelle prise en compte des caractéristiques nationales dans les mesures macro-prudentielles en zone euro? By Jean-Christophe Poutineau; Gauthier Vermandel
  85. Economically Relevant Human Capital or Multi-Purpose Consumption Good? Book Ownership in Pre-Modern Württemberg By Ogilvie, S.; Edwards, J.; Küpker, M.
  86. The Economic Outlook and Monetary Policy 09.28.16 Greater Cleveland Partnership Middle-Market Forum, Cleveland, OH By Mester, Loretta J.
  87. Macro-Micro Models By John Cockburn; Luc Savard; Luca Tiberti
  88. Bitcoin Literature: A Co-word Analysis By John Liu
  89. Child labour ban versus Education subsidy in a model with learning by doing effect in unskilled work By Chakraborty, Kamalika; Chakraborty, Bidisha
  90. "Greece: Getting Out of the Recession" By Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
  91. Dating Business Cycle Turning Points for the French Economy: a MS-DFM approach By Catherine Doz; Anna Petronevich

  1. By: Pietro Cova (Banca d'Italia); Patrizio Pagano (The World Bank); Massimiliano Pisani (Banca d'Italia)
    Abstract: This paper evaluates the international macroeconomic spillovers from the Eurosystem’s expanded Asset Purchase Programme (APP) under alternative assumptions as regards (i) the unwinding of the asset positions accumulated under the APP and (ii) the normalization of the US monetary policy stance. We simulate a dynamic general equilibrium model of the world economy, calibrated to the Euro area (EA), the US, China, Japan, and the ‘rest of the world’ (RW). Our results are as follows. First, APP expansionary spillovers are dampened if the Eurosystem brings forward the unwinding of its bond holdings because of the lower increase in EA aggregate demand and, therefore, EA imports. The RW is the region most affected because it has the greatest trade integration with the EA. Second, if the US monetary authority announces that it will hold the policy rate constant for a shorter period of time – which dampens the increase in US aggregate demand and, therefore, US imports from the EA – then US spillovers to the EA, while still expansionary, as in the case of a slower normalization of the monetary policy stance, are more modest.
    Keywords: DSGE models, open-economy macroeconomics, non-standard monetary policy, zero lower bound
    JEL: E43 E44 E52 E58
    Date: 2016–09
  2. By: Pesenti, Amos
    Abstract: The conventional approach to monetary stability is not so much different from that related to price stability. As such, it simply supposes that the aggregation of prices in the marketplace is necessary and sufficient for determining the presence of inflation (or deflation) in the economy. However, investigating monetary stability according to this microeconomic approach leads to confusion since the aggregation of price data, as suggested in this paper, does not explain the source of inflationary (or deflationary) pressure on overall prices. Consequently, price instability does not necessarily imply the existence of monetary instability, and vice versa. Hence, this paper, besides presenting a new macroeconomic approach to monetary stability, explains the true source of upward (or downward) pressure on overall prices and then provides policy recommendations to prevent monetary instability.
    Keywords: banking; consumer price index; deflation; inflation; monetary stability; money; payments; price stability
    JEL: E10 E20 E31 E42 E51 E52
    Date: 2016–10–03
  3. By: Erixon, Lennart (Dept. of Economics, Stockholm University)
    Abstract: The Swedish Rehn-Meidner model is a unique economic- and wage-policy program for the simultaneous achievement of full employment, price stability, growth and equality. This article presents, specifies and develops the model’s underlying macroeconomic theory. The Rehn-Meidner theory is a synthesis between a flex-price Kaldorian model of profit margins and a Kaleckian model where profit margins are squeezed under full-employment conditions. The theory deviates from both Kaldorian and Kaleckian models by stressing the importance of low profit margins for productivity growth. The Rehn-Meidner theory and policy deserve a prominent place in macroeconomics even in the age of globalization and financialization. However, some weaknesses of the model make it necessary to modify the arguments for and partly the composition of its policy program.
    Keywords: Rehn-Meidner model; labor market policy; wage policy of solidarity; structural change; productivity growth; inflation
    JEL: E11 E12 E23 E24 E25 E31 E32 E62 F43
    Date: 2016–09–30
  4. By: Francesca D’Auria; Maria Demertzis; Alexandr Hobza; Staffan Linden; Daniel Monteiro; Werner Roeger; Jan in ‘t Veld; Stefan Zeugner
    Abstract: The focus section reviews the issue of cross-border spillovers, with an emphasis on the euro area. Close linkages in the euro area imply that macroeconomic policies can have significant spillovers. In particular, spillovers from fiscal policy shocks can be sizeable and model simulations show that increasing investment in euro area countries with fiscal space could have significant positive spillovers. Structural reforms are generally found to generate positive but rather small spillovers, although their simultaneous implementation across the euro area can lead to larger output gains. Financial spillovers were large during the crisis. An analysis of the bilateral spillover effects of sovereign credit risk shows considerable heterogeneity in the size of financial spillovers and asymmetry in the bilateral linkages between Member States. The first special topic presents medium-term growth projections and addresses the risks of secular stagnation. It argues that the euro area is facing a decline in potential growth, mostly due to weak productivity and population ageing. The negative growth effect of this medium-term supply trend, which started before the great recession, has been aggravated by downside demand pressures due to the correction of macroeconomic imbalances accumulated in pre-crisis years. The correction process is slow but ongoing and should be facilitated by measures taken to repair the financial sector. The recently announced Investment Plan for Europe and a renewed commitment to structural reforms are also essential to counter risks of secular stagnation in the euro area. The second special topic assesses the progress made in terms of external rebalancing in the countries that accumulated large current account deficits prior to the crisis. It finds that, in a number of countries, the process of rebalancing is not finished yet as high stocks of external debt still need to be addressed. Risks to the rebalancing process relate to lower-than-projected inflation and growth.
    Keywords: Quarterly report on the euro area,spillovers, contagion, linkages, sovereign risk, banking system, rebalancing, external position, secular stagnation, TFP, investment, employment growth, medium-term projections
    JEL: A10 C10 C20 E20 E30 E31 E40 E50 E60 E61 E65 F10 F15 F32 F34 F40 F41 F42 F43 F44 H10 O40 R20 R30
    Date: 2014–12
  5. By: Huo, Zhen; Ríos-Rull, José-Víctor
    Abstract: We study financial shocks to households' ability to borrow in an economy that quantitatively replicates U.S. earnings, financial, and housing wealth distributions and the main macro aggregates. Such shocks generate large recessions via the negative wealth effect associated with the large drop in house prices triggered by the reduced access to credit of a large number of households. The model incorporates additional margins that are crucial for a large recession to occur: that it is difficult to reallocate production from consumption to investment or net exports, and that the reductions in consumption contribute to reductions in measured TFP.
    Keywords: Asset price; Balance Sheet Recession; Goods market frictions; Labor market frictions
    JEL: E20 E32 E44
    Date: 2016–09
  6. By: Roberto Piazza (Banca d'Italia)
    Abstract: What types of monetary and fiscal policy rules produce self-fulfilling deflationary paths that are monotonic and empirically relevant? This paper presents simple theoretical conditions that guarantee the existence of these paths in a general equilibrium model with sticky prices. These sufficient conditions are weak enough to be satisfied by most monetary and fiscal policy rules. A quantification of the model which combines a real shock à la Hayashi and Prescott (2002) with a simultaneous sunspot that deanchors inflation expectations matches the main empirical features of the Japanese deflationary process during the “lost decade”. The results also highlight the key role of the assumption about the anchoring of inflation expectations for the size of fiscal multipliers and, in general, for any policy analysis.
    Keywords: deflation, liquidity trap, deanchoring, inflation target, sunspot
    JEL: E31 E40 E43
    Date: 2016–09
  7. By: George Alogoskoufis (Athens University of Economics and Business)
    Abstract: This paper puts forward an alternative “new Keynesian” dynamic stochastic general equilibrium model of aggregate fluctuations. The model is characterized by one period nominal wage contracts and endogenous persistence of deviations of unemployment from its natural rate. Aggregate fluctuations are analyzed under both a Taylor nominal interest rate rule and under the assumption of optimal discretionary monetary policy. Under both types of monetary policy, the persistence of unemployment results in persistent inflation as the central bank responds to deviations of unemployment from its natural rate. Econometric evidence from the United States since the 1890s cannot reject the main predictions of the model.
    Keywords: Aggregate fluctuations, unemployment persistence, inflation, monetary policy, insiders Outsiders, natural rate
    JEL: E3 E4 E5
    Date: 2016–03
  8. By: Algozhina, Aliya
    Abstract: This paper constructs a dynamic stochastic general equilibrium model of joint monetary and fiscal policy for a developing oil economy to find an appropriate monetary rule combined with pro-/countercyclical and neutral fiscal stance based on a loss measure. The model captures a set of structural specifics: two monetary instruments–interest rate and foreign exchange interventions, two fiscal instruments–public consumption and public investment, two production sectors–oil and non-oil, and the two types of households–optimizers and rule-of-thumb households. It further includes a Sovereign Wealth Fund, the foreign debt of private sector via collateral constraint, and a world oil price shock. The loss measure is chosen as an equal summation of variances in in ation, output, and real exchange rate to be minimized by Taylor rule’s parameters in a small open economy. The foreign exchange interventions distinguish between managed and exible exchange rate regime. Fiscal policy cyclicality is referred to the oil output response of public consumption and public investment. Impulse response functions to the negative world oil price shock are analyzed at exible and rigid prices.
    Keywords: oil economy, monetary policy, fiscal policy, exchange rate, oil price shock, interventions, SWF
    JEL: E31 E52 E62 E63 F31 F41 H54 H63 Q33 Q38
    Date: 2016–05
  9. By: Pfeifer, Johannes
    Abstract: Urban Jermann and Vincenzo Quadrini (2012) argue that financial shocks are the most important factor driving U.S. business cycles. I show that the construction of their TFP measure suffers from data problems. A corrected TFP measure is able to account for most of the Great Recession. Their estimated DSGE model is also affected by several issues. In a properly reestimated model, marginal efficiency of investment shocks explain most of output volatility, while the contribution of financial shocks is 6.5 percent as opposed to the 46 percent originally reported. Still, financial shocks contribute 2-3 percentage points to the observed GDP drop during the Great Recession.
    Keywords: Financial Frictions, Pecking Order, Marginal Efficiency of Investment
    JEL: E23 E32 E44 G01 G32
    Date: 2016–07
  10. By: Domenico Lombardi; Pierre L. Siklos
    Abstract: In recognition of the severe consequences of the recent international financial crisis, the topic of macroprudential policy has elicited considerable research effort. The present study constructs, for 46 economies around the globe, an index of the capacity to deploy macroprudential policies. Building on elements that have been the subject of recent research, we develop an index that aims to represent the essence of what constitutes a macroprudential regime. Specifically, the index quantifies: (1) how existing macroprudential frameworks are organized; and (2) how far a particular jurisdiction is from reaching the goals established by the Group of Twenty (G20) and the Financial Stability Board (FSB). The latter is a benchmark that has not been considered in the burgeoning literature that seeks to quantify the role of macroprudential policies.
    Keywords: Central banks, Financial Stability Board, index, macroprudential policy, policy framework
    JEL: E32 E42 E58 E02 F02
    Date: 2016–09
  11. By: Sussman, Nathan; Zohar, Osnat
    Abstract: Following the onset of the global financial crisis (2008) we witness a strengthening of the correlation between crude oil prices and medium-term inflation expectations. Using the first principal component of commodity prices as a measure for global aggregate demand, we decompose oil prices into a global demand factor and idiosyncratic factors that include supply side effects and weather conditions. The decomposition of oil prices allows us to show that since the crisis, global five-year breakeven inflation rates react quite strongly to global aggregate demand conditions embedded in oil prices. The result suggests that market participants perceive inflation targeting as either less effective around the effective lower bound or less aggressive when inflation deviates below target. Alternatively, it may be that in recent years monetary authorities have additional considerations such as macro-prudential issues.
    Keywords: anchoring; credibility; inflation expectations; inflation targeting; Monetary policy; oil prices
    JEL: E31 E32 E52 E58
    Date: 2016–09
  12. By: Azad, Rohit; Bose, Prasenjit; Dasgupta, Zico
    Abstract: The Research Project seeks to study the implications of financial liberalisation, global financial integration and cross-border capital flows for the Indian economy. The direction of policy change in India over the past two decades and a half has been in this direction. The domestic financial sector has grown significantly in the past decade, which has impacted the trajectory of real sector growth and economic development. The report contains four chapters. The first one introduces the readers to the Indian macroeconomic scene over the past two decades and the financial aspects of the growth process. The second chapter focuses on the internal dimensions of the growth process and the recent developments in the financial sector, especially the bad loans crisis. The third chapter looks at financial globalisation and its impact on India’s external vulnerability. The concluding chapter presents a theoretical model which seeks to explain the nature and consequences of financial liberalisation and the integration of the Indian economy into the globalised economy.
    Keywords: Corporate Investment, Debt, NPAs, Riskless Capitalism, Kaleckian Model
    JEL: E11 E22 E32 E44 E5
    Date: 2016–06–07
  13. By: Karolina Tura-Gawron (Gdansk University of Technology, Gdansk, Poland)
    Abstract: Modern monetary policy focuses on credibility and shaping consumers’ inflation expectations. According to the concept of inflation forecast targeting (IFT), inflation forecasts play a crucial role in the instrument rate decision-making process and may be a specific intermediate target. The aim of the study is to analyse the credibility of inflation forecasts published by the central banks of England, Sweden and Norway. The article presents the proposition of an inflation forecast credibility index. The inflation forecasts’ credibility index may be calculated for all types of inflation forecasts made by central banks, which implement an inflation targeting (IT) regime. It consists of three main elements: the accuracy of the forecasts, the similarity of the forecasts and the inflation forecast deviations from the inflation target. The credibility index has been calculated for the inflation forecasts made by central banks of England, Sweden and Norway. The research conducted shows that most of the inflation forecasts published in selected central banks were credible.
    Keywords: inflation forecasts targeting, inflation forecast, inflation forecast credibility index, inflation expectations
    JEL: E58 E52 E47
    Date: 2016–02
  14. By: Simona Malovana; Jan Frait
    Abstract: This paper sheds some light on situations in which monetary and macroprudential policies may interact (and potentially get into conflict) and contributes to the discussion about the coordination of those policies. Using data for the Czech Republic and five euro area countries we show that monetary tightening has a negative impact on the credit-to-GDP ratio and the non-risk-weighted bank capital ratio (i.e. a positive impact on bank leverage), while these effects have strengthened considerably since mid-2011. This supports the view that accommodative monetary policy contributes to a build-up of financial vulnerabilities, i.e. it boosts the credit cycle. On the other hand, the effect of the higher bank capital ratio is associated with some degree of uncertainty. For these and other reasons, coordination of the two policies is necessary to avoid an undesirable policy mix preventing effective achievement of the main objectives in the two policy areas.
    Keywords: Bayesian estimation, financial stability, macroprudential policy, monetary policy, time-varying panel VAR model
    JEL: E52 E58 E61 G12 G18
    Date: 2016–09
  15. By: Triepels, Ron (Tilburg University, Center For Economic Research); Daniels, Hennie (Tilburg University, Center For Economic Research)
    Abstract: The analysis of payment data has become an important task for operators and overseers of financial market infrastructures. Payment data provide an accurate description of how banks manage their liquidity over time. In this paper we compare three models to predict future liquidity flows from payment data: 1) a moving average model, 2) a linear dynamic system that links the inflow of banks with their outflow, and 3) a similar dynamic system but with a constraint that guarantees the conservation of liquidity. The error graphs of one-step-ahead predictions on real-world payment data reveal that the moving average model performs best, followed by the dynamic system with constraint, and finally the dynamic system without constraint.
    Keywords: large-value payment systems; predictive modeling; dynamic system; time-series analysis
    JEL: C32 C53 C61 E42 E44 E47
    Date: 2016
  16. By: Roberta, Cardani; Lorenzo, Menna; Patrizio, Tirelli
    Abstract: In this paper, we adopt a Ramsey-optimal approach to the identification of debt reduction strategies, that is, the optimal policy mix for labor and capital income taxes, public expenditures and inflation designed to achieve an exogenous debt reduction path. Our model accounts for monopoly profits, limited asset market participation and asset holders' infrequent optimization of their portfolio composition between money holdings and other financial assets. The optimal policy envisages persistent reductions in public consumption and increases in taxes and inflation. Distributional conflicts arise between asset owners and the rest of the population. When asset holders interests are relatively less important in the planner's objective function, labor income taxes are drastically reduced whereas capital income taxes and inflation are increased. Just in this case the consolidation has short term expansionary effects.
    Keywords: Fiscal Consolidation, Limited Asset Market Participation, Ramsey Fiscal Policy
    JEL: E32 E62 E63
    Date: 2016–10–05
  17. By: Pablo Hernández de Cos (Banco de España); Samuel Hurtado (Banco de España); Francisco Martí (Banco de España); Javier J. Pérez (Banco de España)
    Abstract: We empirically explore the influence of inflation on fiscal variables in the short, medium and long run, for the case of the Spanish economy, in particular to draw policy lessons for the design of the ongoing process of rebalancing of fiscal accounts. We focus on this topic through the lenses of: (i) the government budget constraint, to assess the influence of inflation on changes in public debt; (ii) accounting decompositions of nominal revenue and expenditure items into their real and price parts; (iii) a large-scale macroeconometric model that contains a detailed fiscal policy block; and (iv) a long-run accounting model on pension expenditure
    Keywords: inflation, public finances, public debt, fiscal consolidation
    JEL: E31 E62 H6
    Date: 2016–09
  18. By: Edwin Mauricio Parra Rodríguez
    Abstract: El presente trabajo pone a prueba la Hipótesis de Ingreso Permanente (HIP) y examina los principales determinantes del Consumo Privado Real para Colombia en el Periodo 1952-2014. Para esto, se utiliza una metodología de series de tiempo y, se estima la relación entre el Consumo Privado Real como proporción del Ingreso Nacional Disponible con un conjunto de variables que recogen los efectos permanentes y transitorios del ingreso. De manera complementaria, se estima un modelo en el que el logaritmo del Consumo Privado Real está en función de los componentes permanente (tendencial) y transitorio (cíclico) del ingreso, obtenidos por medio del filtro Hodrick y Prescott al Ingreso Nacional Disponible. Los resultados de las estimaciones sugieren que en Colombia: i) el Consumo Privado Real es una función de sus valores inmediatamente anteriores, lo cual valida la Hipótesis de Expectativas Adaptativas de Hall en la que el consumo se comporta como un paseo aleatorio y, ii) se cumple la HIP, no obstante, los ingresos transitorios también ejercen influencia sobre el consumo.
    Keywords: Ahorro Privado, Consumo Privado, Hipótesis de Ingreso Permanente, Política Macroeconómica.
    JEL: E12 E13 E20 E27
    Date: 2016–09–28
  19. By: Buss, Ginters
    Abstract: This paper examines, in an estimated, full-fledged New Keynesian DSGE model with Nash wage bargaining, sticky wage and high value of leisure akin to Christiano, Trabandt and Walentin (2011), whether search-and-matching frictions in labor market can explain aggregate labor market dynamics in Latvia. If vacancies are not observed, the model can, to a reasonable degree, generate realistic variance and dynamics of unemployment, and the correlation between unemployment and (latent) vacancies, but at the expense of too volatile vacancies. As a by-product, one-quarter ahead forecasts of hours worked and GDP exhibit less excess volatility and thus are more precise, compared to a model without search-and-matching frictions. However, if both unemployment and vacancies are observed and a shock to the matching efficiency is allowed for, then the cyclical behavior of forecasted vacancies - and the correlation between unemployment and vacancies - tends to counter the data (to the benefit of better fit of vacancies’ volatility), and the smoothed matching efficiency is counter-intuitively counter-cyclical. Hence the model cannot fit the three statistics - variance of unemployment and vacancies, and the correlation between the two - simultaneously.
    Keywords: DSGE model, unemployment, small open economy, Bayesian estimation, currency union, forecasting
    JEL: E0 E3 F0 F4 G0 G1
    Date: 2015–09
  20. By: Hüning, Hendrik
    Abstract: This paper analyses the effects of Swiss National Bank (SNB) communication on asset prices. It distinguishes between different monetary policy news contained in press releases following a monetary policy decision. Employing a latent variable approach and event-study methods, I find that medium- and long-term bond yields respond to changes in the communicated inflation and GDP forecasts as well as to the degree of pessimism expressed in press releases. Exchange rates mainly react to changes in the GDP forecast while stocks do not react to SNB communication on monetary policy announcement days. Additionally, short-term expectations about the future path of the policy rate are driven by the communicated inflation forecast. The results underline the role of qualitative news next to quantitative forecasts in influencing market expectations and asset prices.
    Keywords: monetary policy communication,asset markets
    JEL: E43 E52 G12
    Date: 2016
  21. By: Etienne Gagnon; Benjamin K. Johannsen; J. David Lopez-Salido
    Abstract: Since the onset of the Great Recession, the U.S. economy has experienced low real GDP growth and low real interest rates, including for long maturities. We show that these developments were largely predictable by calibrating an overlapping-generation model with a rich demographic structure to observed and projected changes in U.S. population, family composition, life expectancy, and labor market activity. The model accounts for a 1¼–percentage point decline in both real GDP growth and the equilibrium real interest rate since 1980—essentially all of the permanent declines in those variables according to some recent estimates. The model also implies that these declines were especially pronounced over the past decade or so because of demographic factors most-directly associated with the baby boom and the passing of the information technology boom. Our results further suggest that real GDP growth and real interest rates will remain low in coming decades, consistent with the U.S economy having reached a “new normal.”
    Keywords: Demographics ; Equilibrium real interest rate ; GDP growth ; New normal
    JEL: E17 E21 J11
    Date: 2016–09–28
  22. By: LaGarda, Guillermo; Prat, Jordi; Solera, Marco; Beverinotti, Javier
    Abstract: Credit quality has long been associated with the level of indebtedness. But the sole fact that there are countries with high creditworthiness and large stocks of debt suggests that indebtedness is just one of many factors which determine credit quality. In this paper we investigate the role that economic fundamentals have on risk perception of public debt, through both direct and indirect effects. Countries are grouped into four clusters, each corresponding to a different stage of development in their economic fundamentals. We find that the effect of the debt burden on credit quality is conditional on the current level of economic fundamentals and the degree to which they are improving. A transition to stronger fundamentals would require moving to a better cluster but would ease pressure on any debt adjustment necessary to improve creditworthiness. Consequently, there are two types of approaches countries in CAPDR could focus on to improve credit quality. On the one hand, there are a set of actions which could be carried out in the short run to move within a particular group or cluster-fiscal toolkit. On the other hand, there are actions, which in the medium term may enable a country to transition to a group with better credit perception -structural changes.
    Keywords: Debt, Credit Quality, Structural Reforms, Institutions, Macroeconomic Stability, Fiscal Deficit
    JEL: E44 E61 E62 H3 H30 H6 H60
    Date: 2016–07–26
  23. By: Tapa, Nosipho; Tom, Zandile; Lekoma, Molebogeng; Phiri, Andrew
    Abstract: In this study, we examine linear and nonlinear cointegration and causal relations between unemployment and stock market returns in South Africa using quarterly data collected between 1994:Q1 and 2016:Q1. Our empirical results reveal significant cointegration effects between the time series in both linear and nonlinear models, even though both frameworks ultimately reject the notion of any causal relations between the variables. Collectively, our study rejects the notion of unemployment being a good predictor for stock market returns and neither do developments in the stock market have any effect on the unemployment rate. Such evidence advocates for weak-form efficiency in the JSE equity prices whereby unemployment data cannot help investors to predict the movement of future share prices and further suggests that policymakers cannot rely on stock market development as an avenue towards lowering the prevailingly high levels of unemployment as set in current macroeconomic policy objectives.
    Keywords: Stock market returns; Unemployment; Cointegration; Causality effects; MTAR model; South Africa.
    JEL: C13 C22 C52 E24 E44
    Date: 2016–09–27
  24. By: Tweneboah Senzu, Emmanuel
    Abstract: The study and purpose of this paper is to correct the error which emerged from the careless use of imaginary construction on the direct and indirect exchange of the market, by the Central Banks of Africa to dispense their monetary policy. This results in fallacious economic predictions and policy constructions to the future of the market. The latter result is the frustration of the employment of capital and labour for the development of the economy of Africa.
    Keywords: Macroeconomics, Monetary Policy, Labour economics, Development Economics
    JEL: E52 E58 E6 E61
    Date: 2016–06
  25. By: George C. Bitros (Athens University of Economics and Business)
    Abstract: This paper investigates whether the monetary policy and the market structure have anything to do with the declining share of labor in the U.S in recent decades. For this purpose: (a)a dynamic general equilibrium model is constructed and used in conjunction with data over the 2000-2014 period to compute the income shares; (b) the latter are compared to those reported from various sources for significant differences , and (c) the influence of monetary policy is subjected to several statistical tests. With comfortable margins of confidence it is found that the interest rate the Federal Open Market Committee charges for providing liquidity to the economy is related positively with the shares of labor and profits and negatively with the share of interest. What these findings imply is that, by moving opposite to the equilibrium real interest rate, the relentless reduction of the federal funds rate since the 1980s may have contributed to the decline in the equilibrium share of labor, whereas the division of the equilibrium non-labor income between interest and profits has been evolving in favor of the former, because according to all indications the stock of producers’ goods in the U.S has been aging. As for the market structure,it is found that even if firms had and attempted to exercise monopoly power, it would be exceedingly difficult to exploit it because the demand of consumers’ goods is significantly price elastic. Should these results be confirmed by further research, they would go a long way towards explaining the deceleration of investment and economic growth.
    Keywords: Useful life of capital, equilibrium real interest, federal funds rate, income shares
    JEL: E19 E25 E40 E50
    Date: 2016–03
  26. By: Karolina Tura-Gawron (Gdansk University of Technology, Gdansk, Poland)
    Abstract: This article presents a comparative study of central paths’ projections of Consumer Price Index (CPI index), core inflation and monetary policy-relevant inflation measure (MPRI) in the central banks of Sweden, Norway and Czech Republic. The analysis refers to the possibility of using core and MPRI inflation projections as a tool (intermediate goal) for the implementation of Svensson’s concept of optimal inflation forecast targeting strategy (IFT) and determines what the chosen central banks are effectively targeting in practice. The study includes a reference of the central paths of the CPI, core inflation and MPRI inflation projections, based on the endogenous rate, to the inflation target. The analysis has allowed us to determine that the central paths of core inflation projections have converged with the inflation target as the time horizon became longer, but still remained medium-term. Such a result is not given for all of the CPI projections. The implications for the implementation of the Svensson’s concept of optimal IFT strategy are that a projection of core inflation may be a typical, operational tool which anchors inflation expectations; as such (as CPI projection), it should be published, treated and used as an intermediate goal of monetary policy.
    Keywords: core inflation, inflation projection, inflation targeting regime, inflation forecast
    JEL: E58 E52 E59
    Date: 2016–02
  27. By: Tillman, Peter (Asian Development Bank Institute)
    Abstract: It is well known that a tightening or easing of the United States’ monetary policy affects financial markets in emerging economies. This paper argues that uncertainty about future monetary policy is a separate transmission channel. We focus on the taper tantrum episode in 2013, a period with an elevated uncertainty about monetary policy, and use a data set that contains 90,000 Twitter messages (“tweets”) on Federal Reserve tapering. Based on this data set, we construct a new index about monetary policy uncertainty using a list of uncertainty keywords. An advantage of this index is that it reflects uncertainty about a specific policy decision. An estimated vector autoregression (VAR) shows that uncertainty shocks lead to a fall in asset prices and a depreciation of local currencies. We also discuss the policy implications of this uncertainty channel of monetary policy transmission.
    Keywords: federal Reserve policy; monetary policy; monetary policy transmission; policy uncertainty; taper tantrum; uncertainty; uncertainty shocks; emerging economies; twitter
    JEL: E32 E44 E52
    Date: 2016–10–06
  28. By: Coen N. Teulings (University of Cambridge, United Kingdom; University of Amsterdam, The Netherlands)
    Abstract: It is well known that rational bubbles can be sustained in balanced growth path of a deterministic economy when the return to capital r is equal to the growth rate g . When there is a lack of stores of value, bubbles can implement an efficient allocation. This paper considers a world where r fluctuates over time due to shocks to the marginal productivity of capital. Then, bubbles further efficiency, though they cannot implement first best. While bubbles can only be sustained when r = g in a deterministic economy, r > g "on average" in a stochastic economy. Fiscal policy improves welfare by adding an extra asset. Where only the elderly contribute to shifting resources between investment and consumption in a bubbly economy, fiscal policy allows part of that burden to be shifted to the young. Contrary to common wisdom, trade in bubbly assets implements intergenerational transfers, while fiscal policy implements intragenerational transfers. Hence, while bubbles and fiscal policy are perfect substitutes in the deterministic economy, fiscal policy dominates bubbles in a stochastic economy. For plausible parameter values, a higher degree of dynamic inefficiency should lead to a higher sovereign debt.
    Keywords: rational bubbles; fiscal policy; Secular Stagnation
    JEL: E44 E62
    Date: 2016–10–03
  29. By: Copaciu, Mihai,; Nalban, Valeriu,; Bulete, Cristian
    Abstract: This paper describes the theoretical structure and estimation results for a DSGE model for the Romanian economy. Having as benchmark the model of Christiano et al. (2011), the additional features we introduce refer to partial euroization in the financial sector, oil as an input in production process, disaggregation of headline inflation into administered and core components, National Accounts consistent measures for GDP volume and deflator, and an extension of the foreign sector to a two country semi-structural model. Following a depreciation of the domestic currency induced by a risk premium shock, GDP decreases due to a stronger contractionary balance sheet effect (as some of the entrepreneurs are now exposed to exchange rate risk) relative to the expansionary impact through the net exports channel. With foreign currency financial transactions taking place only in EUR, while trade with goods and services in both EUR and USD, external shocks have different effects on the domestic economy, according to the originating country (i.e. Euro area or the US). Thus, one can assess the impact of diverging monetary policies of ECB and FED on emerging economies through both financial and trade channels.
    Keywords: DSGE model, Financial frictions, Partial euroization, Employment frictions, Small open economy, Bayesian estimation
    JEL: E0 E3 F0 F4 G0 G1 J6
    Date: 2015–11
  30. By: Bauer, Anja (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Lochner, Benjamin
    Abstract: "Using administrative data from Germany, this paper analyzes the relation between wages and past and current labor market conditions. Specifically, it explores whether the data is more consistent with implicit contract models (Beaudry/DiNardo, 1991) or a matching model with on-the-job search and cyclical selection (Hagedorn/Manovskii, 2013). The data suggests that wages are related to past labor market conditions as contract theories postulate. However, past labor market conditions also affect contemporaneous wages through the evolution of the match qualities over a worker's job history - the main hypothesis of the selection model. Refining the selection model by taking into account within company job regrading, we find that wages of workers who switched employers and occupations at the same time respond stronger to the cycle than wages of job stayers. In contrast, wages of workers who only switch employers or occupations are not more cyclical than wages of workers who stay at their previous employer and in their previous occupation." (Author's abstract, IAB-Doku) ((en))
    JEL: E24 E32 J31 J41
    Date: 2016–09–29
  31. By: Jovanovic, Boyan; Prat, Julien
    Abstract: This paper shows that endogenous cycles can arise when contracts between firms and their customers are incomplete and when products are experience goods. Then firms invest in the quality of their output in order to establish a good reputation. Cycles arise because investment in reputation causes self-fulfilling changes in the discount factor. Cycles are more likely to occur when information diffuses slowly and consumers exhibit high risk aversion. A rise in idiosyncratic uncertainty is of two kinds that work in opposite ways: Noise in observing effort is contractionary as it generally is in agency models. But a rise in the variance of the distribution of abilities is expansionary. A calibrated version produces realistic fluctuations in terms of peak-to-trough movements in consumption and the spacing of time between recessions.
    Keywords: Endogenous Fluctuations; Intangible Capital; reputation
    JEL: E22 E32 L14
    Date: 2016–09
  32. By: Riaz, Nimra; Munir, Kashif
    Abstract: The objective of this study is to examine relationship between fiscal policy and macroeconomic stability in South Asian countries. The study also aimed to find the channels through which fiscal policy leads to macroeconomic stability i.e. automatic stabilizers, discretionary fiscal policy and cyclical fiscal policy. For attaining these objectives the study used data from 1990 to 2014. The study used Pooled OLS and Instrumental Variable Least Square methodology. Results indicate that automatic stabilizers and discretionary fiscal policy have destabilizing impact on economy which leads to decrease in economic growth of developing economies. Cyclical policy plays an important role in stabilizing the economy and growth of a country. The study concluded that automatic stabilizers and discretionary policy are weak in developing economies. Government should use cyclical policy for macroeconomic stability in developing countries.
    Keywords: Fiscal Policy, Macroeconomic Stability, Channels, Panel Data, South Asia
    JEL: C23 E62 O11 O53
    Date: 2016–09–09
  33. By: Andrew Maredza (North-West University); Zvikomborero Nyamazunzu (The Independent Institute of Education)
    Abstract: The primary objective of this paper is to empirically assess the magnitude, direction and significance of the impact of selected domestic macroeconomic fundamentals on business confidence index for the South African economy. This particular focus of the paper comes at a time in the history of the South African economy when the business climate and investor confidence is at its lowest. According to South African Chamber of Commerce and Industry (SACCI, 2016), the business confidence index reached a 22-year low record of 79.6 in December 2015 before slipping further down to its all-time low of 79.3 in May this year. The auto-regressive distributive lag (ARDL) model proposed by Pesaran et al (2001) is employed on quarterly data spanning the period 1975 – 2015 and 2002 – 2015 for two models; total business confidence and financial services business confidence respectively. We attempt to explore the relationship between business confidence and selected domestic macroeconomic indicators. Empirical results showed that real economic growth, interest rate, exchange rate, inflation outlook and stock market performance have significant impacts on business confidence. Hence, our study empirically supports the notion that macroeconomic stability drives business confidence. The results stress the need by the government to ensure that the business environment is conducive for doing business in order to boost business confidence. By instilling and preserving the needed business confidence in the financial sector and the larger economy, growth prospects and aspirations of a country improve.
    Keywords: business confidence, bounds testing, investor perception, investor sentiment, investor confidence, ARDL model.
    JEL: C22 E32 O11
  34. By: Foerster, Andrew T. (Federal Reserve Bank of Kansas City); Choi, Jason (Federal Reserve Bank of Kansas City)
    Abstract: Given regime switches in the economy’s growth rate, optimal monetary policy rules may respond by switching policy parameters. These optimized parameters differ across regimes and from the optimal choice under fixed regimes, particularly in the inflation target and interest rate inertia. Optimal switching rules produce welfare gains relative to constant rules, with switches in the implicit real interest rate used for policy and the degree of interest rate inertia producing the largest gains. However, gains from switching rules decrease if the monetary authority trades-off the probability of low rates, or if it may misidentify the regime.
    Keywords: Growth rate; Optimal policy; Regime switching; Taylor rule; Inflation target
    JEL: C63 E31 E52
    Date: 2016–08–01
  35. By: Brunnermeier, Markus K. (Princeton University); Sannikov, Yuliy (Princeton University)
    Abstract: A theory of money needs a proper place for financial intermediaries. Intermediaries create inside money and their ability to take risks determines the money multiplier. In downturns, intermediaries shrink their lending activity and fire-sell assets. Moreover, they create less inside money, exactly at a time when the demand for money rises. The resulting Fisher disinflation hurts intermediaries and other borrowers. The initial shock is amplified, volatility spikes and risk premia rise. Monetary policy is redistributive. An accommodative monetary policy, focused on the assets held by constrained agents, recapitalizes balance sheet-impaired sectors in downturns and hence mitigates these destabilizing adverse feedback effects. However, monetary policy also creates moral hazard in the sense that it cannot provide insurance and control risk-taking separately. Hence, macroprudential policy that controls leverage attains higher welfare than monetary policy alone.
    Date: 2016–01
    Abstract: Cette étude examine les rapports entre les économies informelle et formelle en essayant de répondre à la question suivante : quel est l’impact des politiques fiscales et d’emploi sur l’économie informelle et la pauvreté au Cameroun ? Pour y répondre, une approche méthodologique en équilibre général calculable (MEGC) a été mise en œuvre. Le modèle est implémenté à l’aide d’une matrice de comptabilité sociale (MCS) construite à partir des comptes nationaux 2010, puis désagrégée à l’aide des données d’enquêtes ECAM 3 et EESI 2. Les résultats des simulations montrent qu’une hausse de l’emploi qualifié dans le secteur formel engendre un recul de l’activité économique dans le secteur informel, et par conséquent, une amélioration de la croissance du PIB et une réduction considérable de la pauvreté. En revanche, outre la fiscalisation des produits du secteur informel qui amplifie la pauvreté, les politiques fiscales présentent des évolutions sans une démarcation perceptible entre les deux secteurs.
    Keywords: Secteur informel, politique fiscale, emploi, pauvreté, MEGC.
    JEL: E26 E24 D58
    Date: 2016
  37. By: Tibor Hledik (Czech National Bank); Sultanija Bojceva-Terzijan (National Bank of the Republic of Macedonia); Biljana Jovanovic (National Bank of the Republic of Macedonia); Rilind Kabashi (National Bank of the Republic of Macedonia)
    Abstract: This paper describes the Macedonian Policy Analysis Model (MAKPAM), which is used at the National Bank of the Republic of Macedonia (NBRM) for medium term macroeconomic forecasting and policy analysis. The MAKPAM is a medium scale, New Keynesian gap model that incorporates the key characteristics of the Macedonian economy: a small open economy with a fixed exchange rate regime. This model outlines the transmission mechanism of the monetary policy in the Macedonian economy, and it helps to quantify the reaction of the economy to various shocks. Since 2008, the MAKPAM model has gradually become an important block of the macroeconomic forecasting system of the NBRM. The model is therefore an important analytic tool for supporting the monetary policy decision-making of the NBRM.
    Keywords: New Keynesian, forecasting, monetary policy, Macedonia
    JEL: C53 E47 E12
    Date: 2016–09
  38. By: Fusari, Angelo i
    Abstract: This essay provides a preliminary assessment of the transition from the 1929 crisis (and its solution) to the 2008 crisis. It points out how the modalities of the solution of the first crisis have paved the way for the recent crisis. The paper hangs the description and explanation of the whole process on a combination of the notions of business cycles and phases of development, a combination that allows the representation and explanation of the successive and various patterns of capitalism across the considered historical period. Thereafter we underline, mainly using the notion of functional imperatives, the important institutional transformations required in the passage from one type of capitalism to another, and the destabilizing effects that have resulted from the absence of those transformations in the wake of the emergence of conflictualconsumeristic capitalism and financial capitalism. On this analytical basis, we ground the widening of the recent crisis, showing a growing menace of long-term stagnation, contradictions and conflicts. Finally, the paper delineates some institutional reforms essential to overcoming the structural deficiencies inherited by conflictual-consumeristic capitalism and the dawning and no less damaging drawbacks that are being prepared by financial capitalism
    Keywords: Business cycles; Phases of development; The present failure of demand models; The question of money; Oganization of financial markets; Separation principle
    JEL: A1 E5 E6 E60 O3 P50
    Date: 2015
  39. By: Davig, Troy A. (Federal Reserve Bank of Kansas City); Smalter Hall, Aaron (Federal Reserve Bank of Kansas City)
    Abstract: The authors demonstrated the use of a Naïve Bayes model as a recession forecasting tool. The approach has a close connection to Markov-switching models and logistic regression but also important differences. In contrast to Markov-switching models, Naïve Bayes treats National Bureau of Economic Research business cycle turning points as data rather than hidden states to be inferred by the model. Although Naïve Bayes and logistic regression are asymptotically equivalent under certain distributional assumptions, the assumptions do not hold for business cycle data.
    Keywords: Forecasting; Naïve Bayes model; Recession
    JEL: C11 C5 E32 E37
    Date: 2016–08–01
  40. By: Campbell, Carl
    Abstract: This study shows that the rate of wage inflation in the year before a recession is positively related to the rate of employment growth in the subsequent recovery. A possible explanation for this relationship is downward nominal wage rigidity. On the other hand, the prior rate of wage inflation is not significantly related to the employment decline during the ensuing recession, suggesting that prior wage growth has a greater impact on the strength of the recovery from a recession than on the severity of the recession.
    Keywords: Wage inflation; Recovery strength; Wage rigidity
    JEL: E32 J3
    Date: 2016–08–19
  41. By: Stockhammar, Pär (National Institute of Economic Research); Österholm, Pär (Örebro University, School of Business)
    Abstract: In this paper, we investigate whether survey measures of inflation expectations in Sweden Granger cause Swedish CPI-inflation. This is done by studying the precision of out-of-sample forecasts from Bayesian VAR models using a sample of quarterly data from 1996 to 2016. It is found that the inclusion of inflation expectations in the models tends to improve forecast precision. However, the improvement is typically small enough that it could be described as economically irrelevant. One exception can possibly be found in the expectations of businesses in the National Institute of Economic Research’s Economic Tendency Survey; when included in the models, these improve forecast precision in a meaningful way at short horizons. Taken together, it seems that the inflation expectations studied here do not provide a silver bullet for those who try to improve VAR-based forecasts of Swedish inflation. The largest benefits from using these survey expectations may instead perhaps be found among analysts and policy makers; they can after all provide relevant information concerning, for example, the credibility of the inflation target or challenges that the central bank might face when conducting monetary policy.
    Keywords: Bayesian VAR; Granger causality; Out-of-sample forecasts
    JEL: C32 F43
    Date: 2016–10–03
  42. By: Katz, Michael (AQR Capital Management); Lustig, Hanno (Stanford University); Nielsen, Lars (AQR Capital Management)
    Abstract: Local stock markets adjust sluggishly to changes in local inflation. When the local rate of inflation increases, local investors subsequently earn significantly lower real returns on local stocks, but not on local bonds or foreign stocks. Our findings are consistent with local stock market investors using sticky long-run nominal discount rates that are too low when inflation increases, because they are slow to update the inflation expectations in discount rates in response to aggregate inflation news. Small amounts of stickiness in inflation expectations suffice to match the real stock return predictability induced by inflation in the data. We also consider other explanations, such as nominal cash flow extrapolation.
    Date: 2015–09
  43. By: Junankar, Pramod N. (Raja) (University of New South Wales)
    Abstract: The Global Crisis demonstrated to the world that Ratings Agencies had misled the public about the stability of financial institutions. The Finance literature had decided that it was impossible to have bubbles in financial markets and any surge in the stock market would be self-correcting. Recent papers have discussed the role of "uncertainty" and its measurement in influencing economic decisions. They attempt to measure uncertainty by indexes of volatility of the stock market, GDP, forecaster disagreement, mentions of uncertainty in news media, and the dispersion of productivity shocks to firms. Underlying their measures of uncertainty is the hypothesis that an increase in uncertainty leads to lower consumption by households and lower investment by firms, and hence leads to lower aggregate investment and growth. This paper argues that although risk can be measured, uncertainty cannot be measured. Even though risk can be measured, a simple symmetric measure (variance or standard deviation) is inappropriate because agents are loss averse and treat gains differently from losses. Although, it is clear that an increase in uncertainty worsens economic conditions, in this paper I shall also argue that this attempt at "measuring" risk or (fundamental) uncertainty is flawed.
    Keywords: uncertainty, risk, Keynes, variance measures, loss aversion, investment
    JEL: E12 E22 G01 G11
    Date: 2016–09
  44. By: George D. Demopoulos (Athens University of Economics and Business, European Chair Jean Monnet); Nicholas A. Yannacopoulos (University of Piraeus)
    Abstract: In a currency area,the only policy option available to a deficit country to regain the loss of its competitiveness is to deflate. This is going to be a painful process, especially in situations in which the Tobin-Fisher effect is dominant. Adjusting through deflation may destabilize (under certain conditions) the economy of the debtor country, while in cases in which stability is preserved , the economy is trapped in a deflationary equilibrium characterized by low output and employment. There are no policies, at the national level, able to help the economy of the debtor country out of this deflationary trap, if the surplus country insists on preserving its surpluses. In this case, the debtor is forced to reduce its spending , demand side policies are out of question, while supply policies are counterproductive. Deflation may also worsen the terms of trade of the debtor country, reducing further its welfare.
    Keywords: Monetary unions, asymmetric adjustments, structural reforms
    JEL: E52 E61 F15 F36
    Date: 2016–03
  45. By: Bursian, Dirk
    Abstract: The legal regulations require the minimum wage in Germany to be adjusted biennially which gives rise to a policy discontinuity. From the perspective of rational expectations models, such policy features render standard local approximation techniques infeasible. The paper presents a stylised model in which negotiated wages and corporate profits are the outcome of an optimisation problem, while changes to the minimum wage are modelled by a discontinuous policy rule. Using the simple example of minimum wage setting in Germany, the paper illustrates how such models can be solved using the method of undetermined coefficients and presents selected simulation results.
    Keywords: rational expectations model,discontinuous policy rule,method of undetermined coefficients
    JEL: E1 E6
    Date: 2016
  46. By: Jakob de Haan; Marco Hoeberichts; Renske Maas; Federica Teppa
    Abstract: This study provides an overview of the academic and policy debates about inflation. It is written in a non-technical way. We aim to explain the role of inflation in monetary policy making for a broad audience. Why do central banks care about inflation? How is inflation measured? Why are inflation expectations so important for monetary policymakers? How are inflation expectations measured? What can central banks do to realize their objective of price stability? These issues are all addressed in the present study, with a focus on the euro area.
    Date: 2016–09
  47. By: Pär, Österholm (Örebro University School of Business); Pär, Stockhammar (National Institute of Economic Research)
    Abstract: In this paper, we investigate whether survey measures of inflation expec-tations in Sweden Granger cause Swedish CPI-inflation. This is done by studying the precision of out-of-sample forecasts from Bayesian VAR models using a sample of quarterly data from 1996 to 2016. It is found that the inclusion of inflation expectations in the models tends to improve forecast precision. However, the improvement is typically small enough that it could be described as economically irrelevant. One exception can possibly be found in the expectations of businesses in the National Insti-tute of Economic Research’s Economic Tendency Survey; when included in the models, these improve forecast precision in a meaningful way at short horizons. Taken together, it seems that the inflation expectations studied here do not provide a silver bullet for those who try to improve VAR-based forecasts of Swedish inflation. The largest benefits from using these survey expectations may instead perhaps be found among analysts and policy makers; they can after all provide relevant information concerning, for example, the credibility of the inflation target or challenges that the central bank might face when conducting monetary policy.
    Keywords: Bayesian VAR; Granger causality; Out-of-sample forecasts
    JEL: C32 F43
    Date: 2016–10–03
  48. By: Youngsoo Jang (the Ohio state university)
    Abstract: I study disparities in emergency and non-emergency medical conditions between high and low income individuals and their implications on consumption, savings, and bankruptcy. In the Medical Expenditure Panel Survey (MEPS), two patterns emerge. First, low income individuals are more likely to visit emergency rooms than high income individuals, and this gap is disproportionately larger for working age individuals. Second, although the differences between high and low income individuals in non-emergency medical conditions are little in early life, the gap in non-emergency medical conditions is substantial in middle and late life. To explain these facts, I build an overlapping generations general equilibrium model that features (i) endogenous decisions on default and health insurance, (ii) endogenous health that determines labor productivity, (iii) the existence of emergency (non-discretionary) medical expenditures and non-emergency (discretionary) medical expenditures, and (iv) the endogenous distribution of emergency and non-emergency health shocks. I find that low income individuals spend less on their health in early life, leading to their contacting more severe and more frequent health conditions (emergency and non-emergency) following their middle life onwards. This enforces low income individuals to be sicker and to visit emergency rooms more often, while spending more on health cares from their middle life. Moreover, this model shows that this endogenous distribution of health shocks causes low income individuals to have more precautionary savings and less consumption due to their highly volatile earnings from severe health shocks. The poor default more often due to their lower earnings and more frequent emergency (non-discretionary) medical treatments, which arises from their bad health status.
    Keywords: Income Inequality, Household Bankruptcy. Health
    JEL: E21 K35 I13
  49. By: Matthias Blum (Queen’s University Management School, Queen’s University Belfast); Cristián Ducoing (; Eoin McLaughlin (Department of Geography and Sustainable Development, University of St. Andrews)
    Abstract: This paper traces the long-run development of Genuine Savings (GS) using a panel of eleven countries during the twentieth century. This panel covers a number of developed countries (Great Britain, Germany, Switzerland, France, the US, and Australia) as well as a set of resource-abundant countries in Latin America (Argentina, Brazil, Chile, Colombia, and Mexico). These countries represent approximately 50 percent of the world’s output in terms of Gross Domestic Product (GDP) by 1950, and include large economies and small open economies, and resource-rich and resource-scarce countries, thus allowing us to compare their historical experiences. Components of GS considered include physical and human capital as well as resource extraction and pollution damages. Generally, we find evidence of positive GS over the course of the twentieth century, although the twoWorldWars and the Great Depression left considerable marks. Also, we found striking differences between Latin American and developed countries when Total Factor Productivity (TFP) is included; this could be a signal of natural resource curse or technological gaps unnoticed in previous works.
    Keywords: Genuine Savings, Developed countries Latin America, Sustainability
    JEL: E21 E22 N50 Q00 Q01 Q20 Q30 Q50
    Date: 2016–10
  50. By: Knoblach, Michael; Rößler, Martin; Zwerschke, Patrick
    Abstract: The elasticity of factor substitution between capital and labor is a crucial parameter in many economic fields. However, despite extensive research, there is no agreement on its value. Utilizing 738 estimates from 41 studies published between 1961 and 2016, this paper provides the first meta-regression analysis of capital-labor substitution elasticities for the U.S. economy. We show that heterogeneity in reported estimates is driven by the choice of estimation equations, the modeling of technological dynamics, and data characteristics. Based on the underlying meta-regression sample and a "best practice" specification, we estimate a long-run elasticity in the range of 0.6 to 0.7. For all estimated elasticities the hypothesis of a Cobb-Douglas production function is rejected.
    Keywords: Elasticity of Factor Substitution,Capital,Labor,Cobb-Douglas,CES Production Function,Meta-Regression Analysis,Meta Regression,Meta Analyse,Substitutionselastizität,Cobb-Douglas,CES Produktionsfunktion,Arbeit,Kapital
    JEL: E23 O30 O40
    Date: 2016
  51. By: Dahem, Ahlem; Siala Guermazi, Fatma
    Abstract: The issue of exchange rate pass-through has raised interest in international economy, a necessary step for adopting an adequate monetary policy, which accentuated in 2000 given its impacts on the monetary policy. Yet, on the academic level, research attempts at studying small open economy in a transitory period, e.g. Tunisia, seem to bring about only a few responses. Relying on monthly and quarterly data, from 2000 to 2015, this paper keeps up with SVAR modeling and price chain study, but through two different approaches: a direct aggregate approach that aims at checking the direct impact of exchange rate transmissions on the global prices, and a disaggregate approach that aims at analyzing the exchange rate degree of transmission on the various components of consumer price. To our knowledge, this study is the first attempt at exchange rate pass-through estimation through a disaggregate approach for the consumer price indexe. The main preliminary findings show that the total exchange rate pass-through is about 20% after 2011. Specifically, 10% of pass-through on the administered prices. More accurately, there is a 6% of pass-through degree for food administered prices as well as 7% of pass-through degree for energy prices (after 2011 revolution date), which contradicts the prevailing theory that admits the inexistence of pass-through for administered prices. On the whole, our findings confirm the importance of a disaggregate analysis for studying exchange rate pass-through, and can help policy makers in Tunisia to adopt the appropriate strategies for implementing monetary policy and containing inflation.
    Keywords: Exchange Rate Pass-through – Monetary policy – Emerging Market – Disaggregated analysis
    JEL: C32 E31 E41 E52 F31 F41 O55
    Date: 2016–09–30
  52. By: Matheus Grasselli (LAMETA, CREST); Adrien Nguyen-Huu (LAMETA, CREST)
    Abstract: We propose a continuous-time stock-flow consistent model for inventory dynamics in an economy with firms, banks, and households. On the supply side, firms decide on production based on adaptive expectations for sales demand and a desired level of inventories. On the demand side, investment is determined as a function of utilization and profitability and can be financed by debt, whereas consumption is independently determined as a function of income and wealth. Prices adjust sluggishly to both changes in labour costs and inventory. Disequilibrium between expected sales and demand is absorbed by unplanned changes in inventory. This results in a five-dimensional dynamical system for wage share, employment rate, private debt ratio, expected sales, and capacity utilization. We analyze two limiting cases: the long-run dynamics provides a version of the Keen model with effective demand and varying inventories, whereas the short-run dynamics gives rise to behaviour that we interpret as Kitchin cycles.
    Date: 2016–10
  53. By: Kick, Thomas; Koetter, Michael; Storz, Manuela
    Abstract: We show that emergency liquidity provision by the Federal Reserve transmitted to non-U.S. banking markets. Based on manually collected holding company structures of international banks, we can identify banks in Germany with access to U.S. facilities via internal capital markets. Using proprietary interest rate data reported to the German central bank, we compare lending and borrowing rates of banks with and without such access. U.S. liquidity shocks cause a significant decrease in the short-term funding costs of German banks with access. Short-term loan rates charged to German corporates also decline, albeit with lags between two and four months. These spillover effects of U.S. monetary policy are confined to short-term rates.
    Keywords: monetary policy transmission,emergency liquidity,internal capital markets,interest rates
    JEL: E52 E58 F23 F38 G01 G21
    Date: 2016
  54. By: Adrian, Tobias (Federal Reserve Bank of New York); Boyarchenko, Nina (Federal Reserve Bank of New York); Giannone, Domenico (Federal Reserve Bank of New York)
    Abstract: We study the conditional distribution of GDP growth as a function of economic and financial conditions. Deteriorating financial conditions are associated with an increase in conditional volatility and a decline in the conditional mean of GDP growth, leading to a highly skewed distribution. The lower quantiles of GDP growth exhibit strong variation as a function of financial conditions, while the upper quantiles are stable over time. Although measures of financial conditions have significant influence in forecasts of downside vulnerability, measures of economic conditions have significant predictive power only for the median of the distribution. These findings are robust both in and out of sample and to the inclusion of different measures of financial conditions. We quantify GDP vulnerability as relative entropy between the empirical conditional and unconditional distribution. We show that this measure of vulnerability is highly asymmetric: The contribution to the total relative entropy of the probability mass below the median of the conditional distribution is larger and more volatile than the contribution of the probability mass above the median. The asymmetric response of the distribution of GDP growth to financial and economic conditions—with adverse financial conditions increasing downside vulnerability of growth but not the median forecast—is challenging for standard models of the macroeconomy. We argue that the inclusion of a financial sector is crucial for generating the observed dynamics of growth vulnerability.
    Keywords: Downside risk; entropy; quantile regressions
    JEL: C22 E17 E37
    Date: 2016–09–29
  55. By: Verónica Acurio Vásconez (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The effects of oil shocks in inflation and growth have been widely discussed in the literature, however few have focused on the impact of oil price increases on unemployment. In order to shed some light on this problem, this paper develops a medium scale Dynamic Stochastic General Equilibrium model (DSGE) that allows for oil utilization in production and consumption as in Acurio-Vásconez (2015); unemployment as in Mortensen & Pissarides (1994); and staggered nominal wage contracting as in Gertler & Trigari (2009). It then analyzes the effects of oil price increases on the economy. The model recovers most of the well-known stylized facts observed after the oil shock in the 2000s'. A sensitivity analysis shows that the reduction of the bargaining power of households to negotiate wage contracts reduces the impact of an oil shock in unemployment, without affecting negatively GDP. However, it also shows that the reduction of bargaining power, together with wage flexibility strongly reduces the increase in unemployment after an oil shock, but causes a decrease in real wages, which reduces household income and affects GDP.
    Abstract: Les effets des chocs pétroliers sur l'inflation et la croissance ont été largement étudiés dans la littérature, cependant peu d'études ont traité l'impact de l'augmentation du prix du pétrole sur le chômage. Afin de faire la lumière sur la question, cet article développe un modèle d'équilibre général dynamique stochastique (DSGE) de taille moyenne où : le pétrole est utilisé en production et consommation comme dans Acurio-Vásconez (2015) ; le chômage est introduit comme dans Mortensen & Pissarides (1994) ; et les salaires nominales sont construits comme dans Gertler & Trigari (2009). On analyse ensuite les effets de l'augmentation du prix du pétrole dans l'économie. Le modèle récupère la plupart des effets stylisés observés après le choc pétrolier des années 2000. L'étude de sensibilité montre que la réduction du pouvoir de négociation salariale des ménages permet d'atténuer l'impact positif du choc pétrolier sur le chômage, sans affecter négativement le PIB. Cependant, il montre aussi que la réduction du pouvoir de négociation ensemble avec la flexibilisation des salaires réduit l'augmentation du chômage après un choc pétrolier, mais il provoque une diminution des salaires réels, ce qui réduit le revenu des ménages et impacte le PIB.
    Keywords: New-Keynesian model,oil,Match & Search models,unemployment,modèle New-Keynésien,DSGE,pétrole,CES,modèles d'appariement,chômage
    Date: 2015–05
  56. By: Jang, Tae-Seok
    Abstract: In this paper, we develop the waves of optimists and pessimists in an open-economy New Keynesian model á la Gali and Monacelli (2005). We extend the model to include the dynamics of inflation and output generated by the heterogeneous bounded rational agents according to De Grauwe (2011). The effects of social interaction are merged into open DSGE model. In particular, the interaction between heterogeneous agents provides the basis for bounded rational behavior in a two-country model. As a result, the model is able to describe the herding behavior of investors in open economy. The simulation results suggest that the business cycle goes through periods of high volatility when the large number of optimists or pessimists in one country strongly affects a foreign country.
    Keywords: animal spirits, bounded rationality, new keynesian, two-country model
    JEL: C63 E31 F41
    Date: 2015–10
  57. By: Oliver de Groot (School of Economics and Finance, University of St Andrews)
    Abstract: When a DSGE model features stochastic volatility, is a third-order perturbation approximation sufficient? The answer is often no. A key parameter - the standard deviation of stochastic volatility innovations - does not appear in the coefficients of the decision rules of endogenous variables until a fourth- or sixth-order perturbation approximation (depending on the functional form of the stochastic volatility process). This paper shows analytically this general result and demonstrates, using three models, that important model moments can be imprecisely measured when the order of approximation is too low. i) In the Bansal-Yaron long-run risk model, the equity risk premium rises from 4.5% to 10% by going to sixth-order. ii) In a workhorse real business cycle model, the welfare cost of business cycles also rise when a fourth-order approximation properly accounts for the presence of stochastic volatility. iii) In a canonical New-Keynesian model, the risk-aversion parameter can be lowered while matching the term premium when a fourth-order approximation is used.
    Keywords: Numerical solution methods, Time-varying uncertainty, Equity premium, DSGE models, Welfare
    JEL: C63 C68 E32
    Date: 2016–09–07
  58. By: Oliver de Groot (School of Economics and Finance, University of St Andrews)
    Abstract: When a DSGE model features stochastic volatility, is a third-order perturbation approximation sufficient? The answer is often no. A key parameter - the standard deviation of stochastic volatility innovations - does not appear in the coefficients of the decision rules of endogenous variables until a fourth- or sixth-order perturbation approximation (depending on the functional form of the stochastic volatility process). This paper shows analytically this general result and demonstrates, using three models, that important model moments can be imprecisely measured when the order of approximation is too low. i) In the Bansal-Yaron long-run risk model, the equity risk premium rises from 4.5% to 10% by going to sixth-order. ii) In a workhorse real business cycle model, the welfare cost of business cycles also rise when a fourth-order approximation properly accounts for the presence of stochastic volatility. iii) In a canonical New-Keynesian model, the risk-aversion parameter can be lowered while matching the term premium when a fourth-order approximation is used.
    Keywords: Numerical solution methods, Time-varying uncertainty, Equity premium, DSGE models, Welfare
    JEL: C63 C68 E32
    Date: 2016–09–07
  59. By: Charles Nolan (University of Glasgow); Plutarchos Sakellaris (Athens University of Economics and Business); John D. Tsoukalas (University of Glasgow)
    Abstract: Following the recent global nancial crisis, there have been many significant changes to financial regulatory policies. These may have reduced the likelihood and future cost of the next crisis. However, they have not addressed the central dilemma in financial regulation which is that governments cannot commit not to bail out banks and other financial rms. We develop a simple model to reflect this dilemma, and argue that some form of penalty structure imposed on key decision makers post-bailout is necessary to address it.
    Keywords: Financial Crisis, Bank bail-outs, Systemic risk, Macroprudential policy
    JEL: E2 E3
    Date: 2016–09
  60. By: Ivan Werning (Massachusetts Institute of Technology)
    Abstract: I study the relationship between aggregate consumption and interest rates when mar- kets are incomplete. I first provide a generalized Euler relation involving the real interest rate, current and future aggregate consumption under extreme illiquidity (no borrowing and no outside assets). This provides a tractable way of incorporating incomplete markets into macroeconomic models. When household income risk is acyclical I show that this relation coincides with that of a representative agent, al- though time-varying discount factors may potentially act as aggregate demand shocks. The same representation extends to the case with positive liquidity as long as liquidity relative to income is acyclical. A corollary of these ‘as if’ results is that forward guid- ance policies are as powerful as in representative agent models. Away from the ‘as if’ benchmark, I show that aggregate consumption becomes more sensitive to inter- est rates, especially future ones, when idiosyncratic income risk is countercyclical or when liquidity is procyclical. Finally, I also apply my analysis to a Real Business Cy- cle model, providing an exact analytical aggregation result that complements existing numerical findings.
    Date: 2016
  61. By: Craig Benedict; Mario J. Crucini; Anthony Landry
    Abstract: In this paper, we argue that differences in the cost structures across sectors play an important role in firms’ decisions to adjust their prices. We develop a menu-cost model of pricing in which retail firms intermediate trade between producers and consumers. An important facet of our analysis is that the labor-cost share of retail production differs across goods and services in the consumption basket. For example, the price of gasoline at the retail pump is predicted to adjust more frequently and by more than the price of a haircut because of the high volatility in wholesale gasoline prices relative to the wages of unskilled labor, even when both retailers face a common menu cost. This modeling approach allows us to account for some of the cross-sectional differences observed in the frequency of price adjustments across goods. We apply this model to Ecuador to take advantage of inflation variations and the rich panel of monthly retail prices.
    Keywords: Inflation and prices, Transmission of monetary policy
    JEL: E3 E5 F3 F33
    Date: 2016
  62. By: Jochen Späth; Kai Daniel Schmid
    Abstract: Savings are, apart from inheritances and transfers, the corner stone for the accumulation of wealth. Against the background of rising economic inequality in industrialized countries and the ongoing assessment of its root causes, analyses of the distribution of savings along the income and wealth distribution are of high interest for the question on whether mutual stimulation between income flows and wealth stocks contributes to rising inequality. We analyze the extent of the concentration of household savings in Germany by estimating saving amounts, saving rates and shares in aggregate savings for different classes of household income and household wealth in Germany. Our calculations are based on the Sample Survey of Household Income and Expenditure (in German: Einkommens- und Verbrauchsstichprobe - EVS), a large sample containing more than 40,000 households in Germany. We show that the concentration of savings in Germany is substantial, as in 2013 the top income decile's share in aggregate savings amounts to about 60 percent, whereas the lower half of the income distribution actually does not save at all. Conditional on the distribution of wealth the concentration of savings is somewhat less pronounced, but still apparent. Over the years 2003 till 2013 we find an increase of the concentration of household savings across the income and wealth distribution. Finally, based on a set of assumptions, we look beyond the top income threshold underlying the EVS dataset (18,000 euros of monthly net household income) in order to estimate bias-corrected saving rates for the top income groups which are considerably higher than those that can be calculated with our data set alone. Using these corrected saving rates as input parameters for a macro simulation of the distribution of household incomes and savings we find that the aggregate saving rate increases by two to three percentage points compared to the estimate based on EVS data alone. Also, the top decile and percentile groups' shares in aggregate savings are substantially higher compared to the estimates solely based on EVS data.
    Keywords: Household Savings, Saving Rate, EVS, Administrative Data, Inequality, Endogenous Accumulation
    JEL: D14 E21
    Date: 2016
  63. By: Verónica Acurio Vásconez (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The recent literature on fossil energy has already stated that oil is not perfectly substitutable to other inputs, considering fossil fuel as a critical production factor in different combinations. However, the estimations of substitution elasticity are in a wide range between 0.004 and 0.64. This paper addresses this phenomenon by enlarging the DSGE model developed in Acurio-Vásconez et al. (2015) by changing the Cobb-Douglas production and consumption functions assumed there, for composite Constant Elasticity of Substitution (CES) functions. Additionally, the paper introduces nominal wage and price rigidities through a Calvo setting. Finally, using Bayesian methods, the model is estimated on quarterly U.S. data over the period 1984:Q1-2007:Q3 and then analyzed. The estimation of oil's elasticity of substitution are 0.14 in production and 0.51 in consumption. Moreover, thanks to the low substitutability of oil, the model recovers and explains four well-known stylized facts after the oil price shock in the 2000's: the absent of recession, coupled with a low persistent increase in inflation rate, a decrease in real wages and a low price elasticity of oil demand in the short run. Furthermore, ceteris paribus, the reduction of nominal wage rigidity amplifies the increase in inflation and the decrease in consumption. Thus in this model more wage flexibility does not seem to attenuate the impact of an oil shock.
    Abstract: La littérature récente sur énergie a déjà établit que le pétrole n'est pas parfaitement substituable aux autres facteurs, en considérant l'énergie fossile comme étant un facteur de production critique en différentes combinaisons. Cependant, les valeurs estimées de l'élasticité de substitution se trouvent dans un large rang, entre 0.004 et 0.64. Cet article évoque ce phénomène en élargissant le modèle DSGE développe en Acurio Vásconez et al. (2015) en modifiant les fonctions de production et consommation supposées Cobb-Douglas par des fonctions à élasticité de substitution constante (CES). Cet article introduit aussi des rigidités de salaire et des prix à la Calvo. Finalement, en utilisant des techniques Bayésiennes, le modèle est estimé sur les données trimestrielles aux Etats-Unis, pour la période 1984:Q1 - 2007:Q3 et après analysé. L'estimation de l'élasticité de substitution du pétrole est 0.14 dans le secteur productif et 0.51 pour les ménages. De plus, grâce à la faible substituabilité du pétrole, ce modèle récupère et explique quatre fait stylisés observés après le choc pétrolier des années 2000 : l'absence de récession, jumelée avec une faible mais persistante augmentation du taux d'inflation, une décroissance des salaires réels et une faible élasticité de prix de la demande de pétrole dans le court terme. En outre, le modèle montre que, ceteris paribus, la réduction de la rigidité des salaires nominales amplifie l'augmentation de l'inflation et la diminution de la consommation. Donc dans ce modèle, plus de flexibilité de salaires ne semble pas atténuer l'impact d'un choc pétrolier.
    Keywords: New-Keynesian model,oil,stickiness,oil substitution,modèle New-Keynésien,DSGE,pétrole,CES,viscosité,substitution du pétrole
    Date: 2015–05
  64. By: Hippolyte D'Albis (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Ekrame Boubtane (CERDI - Centre d'études et de recherches sur le developpement international - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Dramane Coulibaly (EconomiX - UPOND - Université Paris Ouest Nanterre La Défense - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper quantitatively assesses the interaction between permanent immigration into France and France's macroeconomic performance as seen through its GDP per capita and its unemployment rate. It takes advantage of a new database where immigration is measured by the flow of newly-issued long-term residence permits, categorized by both the nationality of the immigrant and the reason of permit issuance. Using a VAR model estimation of monthly data over the period 1994-2008, we find that immigration flow significantly responds to France's macroeconomic performance: positively to the country's GDP per capita and negatively to its unemployment rate. At the same time, we find that immigration itself increases France's GDP per capita, particularly in the case of family immigration. This family immigration also reduces the country's unemployment rate, especially when the families come from developing countries.
    Keywords: VAR models,immigration,female and family migration,growth,unemployment
    Date: 2015–02
  65. By: Pinter, Gabor (Bank of England)
    Abstract: I propose a new method of constructing a macroeconomic shock based on its ability to explain the cross-section of asset returns. The only identifying assumption is that this λ-shock demands the highest risk price per unit of exposure, or equivalently, minimises the associated sum of squared pricing errors, when pricing a given asset portfolio. When applying the method to the stock portfolios studied by Fama-French, a robust economic feature of the λ-shock is the delayed effect on aggregate quantities such as output and consumption and a sharp impact on the short-term interest rate and the term spread. The estimated λ-shock bears strong resemblance both with monetary policy shocks and with technology news shocks studied by the macroeconomic literature.
    Keywords: Stock returns; VAR; identification; shocks; technology news; monetary policy
    JEL: C32 G12
    Date: 2016–09–23
  66. By: Xavier Raurich (Universitat de Barcelona); Thomas Seegmuller (Aix-Marseille University)
    Abstract: The aim of this paper is to study the interplay between long term productive investments and more short term and liquid speculative ones. A three-period lived overlapping generations model allows us to make this distinction. Agents have two investment decisions. When young, they can invest in productive capital that provides a return during the following two periods. When young or in the middle age, they can also invest in a bubble. Assuming, in accordance with the empirical evidence, that the bubbleless economy is dynamically efficient, the existence of a stationary bubble raises productive investment and production. Indeed, young agents sell short the bubble to increase productive investments, whereas traders at middle age transfer wealth to the old age. We outline that a technological change inducing either a larger return of capital in the short term or a similar increase in the return of capital in both periods raises productive capital, production and the bubble size. This framework also allows us to discuss several economic applications: the effects of both regulation on limited borrowing and fiscal policy on the occurrence of bubbles, the introduction of a probability of market crash and the effect of bubbles on income inequality.
    Keywords: Bubble, Efficiency, Vintage capital, Short sellers, Overlapping generations.
    JEL: E22 E44 G12
    Date: 2016
  67. By: Kramarz, Francis; Martin, Julien; Mejean, Isabelle
    Abstract: We study how different sources of fluctuations interact with the micro-structure of trade networks to shape the volatility of exports at the firm-level and in the aggregate. Four shocks affect transactions -- a macroeconomic shock and three individual shocks hitting the exporters, their foreign partners, and their matches. We structurally estimate these shocks using data on the transactions connecting French exporters to their individual European buyers. Individual shocks explain half of aggregate fluctuations and the entirety of individual fluctuations. The volatility of sales across firms and countries are well-explained by the cross-sectional heterogeneity in the diversification of their trade networks.
    Keywords: Aggregate fluctuations; Firm-level volatility; firm-to-firm trade
    JEL: D22 E32 F14
    Date: 2016–09
  68. By: Lorentzen, Sindre (UiS); Osmundsen, Petter (UiS)
    Abstract: We investigate the potential for statistical forecasting of aggregate oil and gas investment on the Norwegian Continental Shelf (NCS). A unique and detailed dataset containing data from 109 different fields on the NCS between 1970 and 2015 was employed. A set of 1080 autoregressive distributed lag models are evaluated pseudo out-of-sample and tested for data mining by utilizing a Diebold-Mariano hypothesis test and the model confidence set procedure by Hansen and Lunde (2011). The main results are as follows. First, we find that it is indeed possible but challenging to outperform the parsimonious random walk benchmark in an out-of-sample environment. Second, lags of investment growth, crude oil price growth and realized volatility is found to be adequate predictors for the investment growth. Finally, there is a clear benefit from re-estimating the models coefficient at every step.
    Keywords: Investment; oil and gas sector; Norwegian Continental Shelf; pseudo out-of-sample forecasting
    JEL: C31 C52 D22 D92 E17 E22 E27 G31
    Date: 2016–10–03
  69. By: Gavazza, Alessandro; Mongey, Simon; Violante, Giovanni L.
    Abstract: We develop a model of firm dynamics with random search in the labor market where hiring firms exert recruiting effort by spending resources to fill vacancies faster. Consistent with micro evidence, in the model fast-growing firms invest more in recruiting activities and achieve higher job-filling rates. In equilibrium, individual decisions of hiring firms aggregate into an index of economy-wide recruiting intensity. We use the model to study how aggregate shocks transmit to recruiting intensity, and whether this channel can account for the dynamics of aggregate matching efficiency around the Great Recession. Productivity and financial shocks lead to sizable pro-cyclical fluctuations in matching efficiency through recruiting effort. Quantitatively, the main mechanism is that firms attain their employment targets by adjusting their recruiting effort as labor market tightness varies. Shifts in sectoral composition can have a sizable impact on aggregate recruiting intensity. Fluctuations in new-firm entry, instead, have a negligible effect despite their contribution to aggregate job and vacancy creations.
    Keywords: Aggregate Matching Efficiency; Firm Dynamics; Macroeconomic Shocks; Recruiting Intensity; Unemployment; Vacancies
    Date: 2016–09
  70. By: Prados de la Escosura, Leandro
    Abstract: This essay offers a new set of historical GDP estimates from the demand and supply sides that revises and expands those in Prados de la Escosura (2003) and provides the basis to investigate Spain’s long run economic growth. It presents a reconstruction of production and expenditure series for the century prior to the introduction of modern national accounts. Then, it splices available national accounts sets over the period 1958-2015 through interpolation, as an alternative to conventional retropolation. The resulting national accounts series are linked to the ‘pre-statistical era’ estimates providing yearly series for GDP and its components since 1850. On the basis of new population estimates, GDP per head is derived. Trends in GDP per head are, then, drawn and, using new employment estimates, decomposed into labour productivity and the amount of work per person, and placed into international perspective.
    Keywords: Spain; Splicing GDP; Expenditure; Output; GDP; Historical national accounts
    JEL: N14 N13 E01 C82
    Date: 2016–09–01
  71. By: Grégory Claeys
    Abstract: Yields on European sovereign bonds have reached historically low levels in 2016. The goals of this paper are to understand why interest rates are currently so low and to determine if this level is justified by fundamental factors, or if rates are artificially low because of unconventional monetary policies. The decline in yields over the last 30 years is the result of various factors - the fall in inflation, lower risk premia in European countries, and most importantly the fall in the real interest rate driven by a secular decline in the 'neutral' rate. Consequently, central banks are not fully responsible for the actual level of long-term real rates, because they adopt, to fulfil their price stability mandates, the necessary policies to influence market rates in order to make them consistent with neutral rates, over which they have little influence. Low rates are the symptoms of our diseases, not their cause. It is therefore crucial to tackle the structural causes behind the fall in long-term rates, but also to find solutions for the harmful consequences that lower equilibrium rates could have for the conduct of monetary policy.
    Date: 2016–09
  72. By: Chakraborty, Kamalika; Chakraborty, Bidisha
    Abstract: This paper builds an overlapping generations household economy model in rural set up and examines the relationship between landholding and child labour in presence of unemployment in the manufacturing sector. We find that irrespective of whether the parents work in the agricultural sector as farmers or they work on own land, increase in size of land holding leads to decline in schooling of the child worker in the short run, and decline in growth rate of human capital formation in the long run but may lead to increase in the steady state human capital in the long run.
    Keywords: land holding, child labour, human capital, schooling, unemployment
    JEL: E24 J22 J24 O15 Q1 Q15
    Date: 2016–07–26
  73. By: Gustavo Pereira Serra; Gilberto Tadeu Lima
    Abstract: This paper analyses the sustainability of student debt in a theoretical model in which economic activity is determined by aggregate effective demand. While most of the literature on this topic considers on its sustainability analysis only the wage differentials among workers with distinct educational levels, we propose a formal methodology that considers the impact of this indebtedness on certain macroeconomic variables that affect the possibility of serving the outstanding debt, such as the rate of employment. We compare two forms of debt repayment, the first being similar to the “Income-Driven Repayment Plans”, which have become common in the U.S. as of late, while, in the second, households’ marginal propensity to consume adapts to some extent to the debt service. Our results indicate that factors such as the distribution of income and marginal propensities to consume of different functional classes affect macroeconomic conditions for the sustainability of student debt
    Keywords: Student debt; income distribution, Minskyan financing regimes; macrodynamics
    JEL: E12 E23 E25
    Date: 2016–09–30
  74. By: Brunnermeier, Markus K; Langfield, Sam; Pagano, Marco; Reis, Ricardo; van Nieuwerburgh, Stijn; Vayanos, Dimitri
    Abstract: The euro crisis was fueled by the diabolic loop between sovereign risk and bank risk, coupled with cross-border flight-to-safety capital flows. European Safe Bonds (ESBies), a union-wide safe asset without joint liability, would help to resolve these problems. We make three contributions. First, numerical simulations show that ESBies would be at least as safe as German bunds and approximately double the supply of euro safe assets when protected by a 30%-thick junior tranche. Second, a model shows how, when and why the two features of ESBies---diversification and seniority---can weaken the diabolic loop and its diffusion across countries. Third, we propose a step-by-step guide on how to create ESBies, starting with limited issuance by public or private-sector entities.
    Keywords: bank-sovereign loop; ESBies; Euro crisis; monetary policy; public debt issuance; safe assets
    JEL: E5 F3 G1 G2 H6
    Date: 2016–09
  75. By: Ginafranco Tusset (University of Padova)
    Abstract: Is it possible to tell whether central banks’ choices are grounded on monetary theories or whether the theories derive from what central bankers have already experimented? This study delves into this issue by adopting an approach that is novel for at least two reasons. First, it involves a lexical comparison between the textual content used by central banks and in economic articles. Second, this comparison is drawn using quantitative tools. In short, the variables measured here are words and segments of text that were submitted to a statistical analysis to identify trends and behaviors in central bankers and economists that would otherwise not be immediately apparent.
    Keywords: Monetary forerunners, Central bankers’ speeches, Monetary approaches, Quantitative history of economic thought.
    JEL: B23 B59 E58
    Date: 2016–09
  76. By: Dill, Alexander; Gebhart, Nicolas
    Abstract: Eight out of ten leading international indices to assess developing countries in aspects beyond GDP are showing strong redundancy, bias and unilateralism. The quantitative comparison gives evidence for the fact that always the same countries lead the ranks with a low standard deviation. The dependency of the GDP is striking: do the indices only measure indicators that are direct effects of a strong GDP? While the impact of GDP can be discussed reverse as well, the standard deviation shows a strong bias: only one out of the twenty countries with the highest standard deviation is among the Top-20 countries of the world, but 11 countries among those with the lowest standard deviation. Let’s have a look at the backsides of global statistics and methods to compare their findings. The article is the result of a pre-study to assess Social Capital for development countries made for the German Federal Ministry for Economic Cooperation and Development. The study leaded to the UN Sustainable Development Goals (UN SDG) project World Social Capital Monitor.
    Keywords: Beyond GDP, GDP, Gross Domestic Product, United Nations Sustainable Development Goals, UN SDG, bias, unilateralism, redundancy, Global Index Benchmark, indices, country rankings
    JEL: A11 A12 A13 A14 B40 C10 C83 E16 E66 F62 F63 G01 H41 H5 H50 I31 I32 O1 O11 O2 O57 P00 Q5 Q50 Y8 Y80 Z1 Z13
    Date: 2016–09–25
  77. By: Takumi Motoyama (Graduate School of Economics, Osaka University)
    Abstract: The purpose of this study is to present an analytical framework for publicly optimal disasterpreventive expenditure. We examine the optimal policy combination of tax rate, disaster-preventive expenditure, and productive government expenditure in a neoclassical growth model, in which natural disasters occur stochastically and partially destroy existing capital. Based on this model, we can decompose the welfare effect of raising preventive expenditure into three effects: the damage reduction, crowding out, and precautionary effects. By identifying these marginal benefits and costs, we obtain the policy conditions that maximize household welfare. Furthermore, we show that optimal prevention is increasing in disaster probability, and by using a numerical example, we show that there is an inverse U-shaped relationship between the expected growth rate and disaster probability.
    Keywords: Natural disasters, Disaster-preventive expenditure, Optimal policy
    JEL: E13 H4 Q54 Q58
    Date: 2015–04
  78. By: Duffie, Darrell (Stanford University); Qiao, Lei (National University of Singapore); Sun, Yeneng (National University of Singapore)
    Abstract: We demonstrate the existence of a continuum of agents conducting directed random searches for counterparties, and characterize the implications. Our results provide the first probabilistic foundation for static and dynamic directed random search (including the matching function approach) that is commonly used in the search-based models of financial markets, monetary theory, and labor economics. The agents' types are shown to be independent discrete-time Markov processes that incorporate the effects of random mutation, random matching with match-induced type changes, and with the potential for enduring partnerships that may have randomly timed break-ups. The multi-period cross-sectional distribution of types is shown to be deterministic via the exact law of large numbers.
    Date: 2015–11
  79. By: Christian Gayer (European Commission, DG-ECFIN); Alessandro Girardi (ISTAT); Andreas Reuter (European Commission, DG-ECFIN)
    Abstract: This article compares the properties of the European Commission (EC) Consumer Confidence Indicator (CCI) for the euro area with three alternative indices which differ from the former in that they (i) consider a richer set of survey questions and (ii) are the result of data-driven statistical techniques, rather than the simple arithmetic mean of the input series. The alternative indicators are shown to fail to produce significantly better forecasts of expansions and contractions in private consumption, once information from relevant, timely available hard data is controlled for. The conclusions change, however, if the analysis is re-conducted on well-defined subsets of survey questions. Concretely, the application of the alternative construction techniques to a data set which is limited to questions about consumers' personal finances produces an indicator which, combined with relevant macro-economic time series, yields significant improvements in forecasting expansions and contractions in private consumption.
    Keywords: consumer surveys, composite indicators, euro area, principal components analysis, partial least squares, ridge regression, macroeconomic forecasting
    JEL: C22 C53 E37
    Date: 2016
  80. By: Yi, Kei-Mu (Federal Reserve Bank of Minneapolis); Zhang, Jing (Federal Reserve Bank of Chicago)
    Abstract: Long-term interest rates have a crucial influence on virtually all major financial decisions faced by households, businesses and governments. This paper reviews several decades of data on long-term rates internationally, explores several factors that determine them and discusses implications of this evidence. {{p}} The data indicate declining long-term rates since the 1980s, converging internationally at very low levels. This implies that the rate decline is not due to the Great Recession or to the early 2000s downturn. It further suggests a higher likelihood than before of hitting the zero bound on nominal interest rates as well as sustained rate convergence as global financial integration proceeds. {{p}} Furthermore, evidence of a downward trend in global fixed investment, coupled with the main finding of declining long-term interest rates, suggests that forces leading to declining global investment demand may be more important than those leading to increased saving in explaining current trends in long-term rates.
    Date: 2016–09–29
  81. By: Geppert, Christian; Ludwig, Alexander; Abiry, Raphael
    Abstract: Ongoing demographic change will lead to a relative scarcity of raw labor to the effect that output growth will be decreasing in the next decades, a secular stagnation. As physical capital will be relatively abundant, this decrease of output will be accompanied by reductions of asset returns. We quantify these effects for the US economy by developing an overlapping generations model with risky and risk-free assets. Without adjustments of human capital, risky returns decrease until 2035 by about 0.7 percentage point, and the risk-free rate by about one percentage point, leading to substantial welfare losses for asset rich households. Per capita output is reduced by 6%. Endogenous human capital adjustments strongly mitigate these effects. We conclude that human capital policies will be crucial in the context of labor shortages.
    Keywords: secular stagnation,demographic change,overlapping generations,natural rate,equity premium,growth,welfare,human capital
    JEL: E17 C68 G12
    Date: 2016
  82. By: Paulo dos Santos (Department of Economics, New School for Social Research); Ellis Scharfenaker (Department of Economics, University of Missouri Kansas City)
    Abstract: We develop a systemic interpretation of the functioning of capital markets that formally accounts for the observed frequency distribution of Tobin’s q, reported in Scharfernaker and dos Santos, 2015. Considering Tobin’s q as a ratio of expected total rates of return, we draw on an epistemological understanding of the tools of statistical mechanics to interpret capital markets as a competitive informational system. The strong modality in the distribution of q is taken to be conditioned by the arbitrage operations of corporate insiders. We take the persistent spread in the distribution of q to reflect the presence of obstacles to that agency, which impose an informational constraint on the operation of capital markets. This spread is also shaped by the fact that the measure of Tobin’s q e↵ectively scales the expected returns for an individual corporation relative to those expected of all corporations. This scaling reflects aggregate measures of bullishness in investors’ valuations that insiders do not seek to exploit. In addition to accounting for the frequency distribution of q observed for the past 50 years, this interpretation points to a systemic diagnostic for the presence of speculative equity-price bubbles, and o↵ers a new informational characterization efficiency in capital markets. According to the latter, U.S. capital markets have experienced a steady secular loss in their informational efficiency since the early 1980s.
    Keywords: Tobin’s q, Information Theory, Statistical Mechanics, Observational Economics
    JEL: C46 E10 G1 L1
    Date: 2016–09
  83. By: Simplice Asongu (Yaoundé/Cameroun); Jacinta C. Nwachukwu (Coventry University, UK)
    Abstract: This study examines the impact of globalisation on inclusive human development in 51 African countries for the period 1996-2011 with particular emphasis on income levels (low income versus middle income), legal origins (English common law versus French civil law), resource wealth (oil-rich versus oil-poor), landlockedness (landlocked versus unlandlocked), religious domination (Christianity versus Islam) and political stability (stable versus unstable). The empirical evidence is based on instrumental variable panel Fixed effects and Tobit regressions in order to control for the unobserved heteroegeneity and limited range in the dependent variable. Political, economic, social and general globalisation variables are used. Six main hypotheses are investigated. The findings broadly show that middle income, English common law, oil-poor, unlandlocked, Christian-oriented and politically-stable countries are associated with comparatively higher levels of globalisation-driven inclusive human development. Puzzling findings are elucidated and policy implications discussed.
    Keywords: Globalisation; inequality; inclusive development; Africa
    JEL: E60 F40 F59 D60 O55
    Date: 2016–10
  84. By: Jean-Christophe Poutineau (CREM - Centre de Recherche en Economie et Management - UR1 - Université de Rennes 1 - Université de Caen Basse-Normandie - CNRS - Centre National de la Recherche Scientifique); Gauthier Vermandel (CREM - Centre de Recherche en Economie et Management - UR1 - Université de Rennes 1 - Université de Caen Basse-Normandie - CNRS - Centre National de la Recherche Scientifique, LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine)
    Abstract: This article examines the impact of cross-border lending on the implementation of macroprudential measures in the Euro Area. The goal is to evaluate - regardless of the current institutional organization - what relative weight should be allocated to federal and national considerations. The analysis relies on an estimated two-country dynamic stochastic general equilibrium (DSGE) model, based on the financial accelerator mechanism. This model is estimated using Bayesian techniques on European data adopting the core-periphery dichotomy. Our results underline that divergences of real and financial cycles between the two regions of the monetary union are driven by both the regional heterogeneity of structural parameters and shocks which are larger in periphery. Regarding the implementation of financial stability measures, the heterogeneous treatment between countries leads to tighter macroprudential measures for periphery, but this affects differently regional macroeconomic performances. Finally, a counterfactual analysis studying the response of output and investment during the financial crisis episode reveals that peripheral countries strongly benefited from the implementation of macroprudential measures at the expense of core countries which experienced a deterioration of their situation.
    Abstract: Cet article évalue l’impact des prêts transfrontaliers sur les modalités de mise en œuvre des mesures de politique macro-prudentielle dans la zone euro. L’objectif est d’apprécier - indépendamment de l’organisation institutionnelle actuelle - quel poids relatif il convient d’affecter aux considérations fédérales et nationales. L’analyse est menée dans le cadre d’un MEGIS à deux pays, prenant en compte le mécanisme d'accélérateur financier. Ce modèle est estimé à l'aide de l'économétrie bayésienne sur données européennes en séparant les pays du cœur de la zone des pays de la périphérie. Nos résultats montrent que la divergence des cycles réels et financiers entre les deux régions de l’union monétaire tient à la fois à l’hétérogénéité régionale des paramètres structurels et à celle des chocs subis qui apparaissent plus importants dans les pays de la périphérie. Pour ce qui concerne la mise en œuvre de la politique de stabilité financière, le traitement hétérogène des pays conduit à une plus forte réaction de cet instrument dans les pays de la périphérie, ce qui affecte parfois de manière différente les performances macroéconomiques régionales. Enfin, une analyse contrefactuelle étudiant la réaction de l’activité et de l’investissement au moment de la crise montre que si globalement l’union monétaire (en moyenne) et les pays de la périphérie bénéficient de la mise en œuvre de mesures macro prudentielles, les pays du cœur voient au contraire leur situation se détériorer.
    Keywords: Politique macroprudentielle,modèle DSGE,intégration bancaire,stabilité financière
    Date: 2015
  85. By: Ogilvie, S.; Edwards, J.; Küpker, M.
    Abstract: Human capital is widely regarded as central to economic growth but historical analyses find no causal link between standard literacy indicators and economic development. Book consumption has been proposed as an alternative indicator which has the advantage of measuring economically relevant human capital. We investigate this possibility using individual-level data from a German region between 1610 and 1900. Book ownership was widespread in this society from an early date. But multivariate analysis reveals that the relationship between book ownership and signatures, the standard literacy measure, differed substantially across time-periods, locations, and social groups. Book consumption was associated with other variables – time, gender, urbanization, migration status, and wealth – in ways inconsistent with its having conveyed the “useful knowledge” of industrial and commercial matters emphasized as the way books might have measured economically relevant human capital. Book consumption is interesting in its own right and casts light on important aspects of the preferences of pre-modern economic agents, but cannot serve as an indicator of human capital for historical analyses of economic growth.
    Keywords: economic history; human capital; education; growth; Germany
    JEL: N33 E24 J24 O15
    Date: 2016–09–26
  86. By: Mester, Loretta J. (Federal Reserve Bank of Cleveland)
    Abstract: It is a pleasure to welcome you to the Federal Reserve Bank of Cleveland. Since my arrival in Cleveland over two years ago, I have seen first-hand the important role that the Greater Cleveland Partnership plays in supporting the growth of our regional economy and I am very proud to serve on its board. Of course, as president of one of the country’s 12 Federal Reserve Banks I have a keen interest in our regional economy. As we gather in the lobby of this historic building, it is hard not to think back to a time more than 100 years ago and applaud the Congressmen — yes, they were all men back then — who came up with such an ingenious design for our Federal Reserve System. Congress established the Fed in 1913 as a decentralized central bank, independent within the government but not independent from the government. The Fed’s design balances public-sector and private-sector interests, and Wall Street and Main Street concerns. I believe the design has served the country well by allowing monetary policy decisions to take into account the diversity of the American economy and its people.
    Keywords: Economic Growth; Labor Markets; Monetary Policy;
    Date: 2016–09–28
  87. By: John Cockburn; Luc Savard; Luca Tiberti
    Date: 2015
  88. By: John Liu (National Taiwan University of Science and Technology)
    Abstract: A technical article in 2008 and the follow-up open-source software in 2009 released by Satoshi Nakamoto have modified the concept of currency and seem to continue affecting our economic and financial thinking. In less than 8 years, bitcoin, a digital currency, is not only accepted as a mean of payment but also traded in numerous ‘bitcoin exchanges’, which have accumulated a market capitalization of around 10.7 billion U.S. dollar. The phenomenon raised the interest of scholars across wide disciplines including finance, economics, law, and computer science. Research articles regarding bitcoin has gradually formed a growing body of literature, which reflects the state of the art of bitcoin research. However, there is no systematic survey of this literature up to now. The purpose of this study is to fill the gap by systematically surveying the bitcoin literature in the hope to uncover the main discussion topics and made suggestions for future research. We collect a total of 253 articles directly related to bitcoin from the Scopus database. In addition to providing basic descriptive statistics of this dataset, we apply co-word analysis to separate the literature into groups. This is done by establishing a network in which articles are nodes and co-usage of the key terms links these articles. The network is then separated into groups based on nodes’ similarity in their connectivity. The result is a division of the articles into three groups each contain distinct discussion topics. The first group is a pool of technological articles which elaborates on improving various aspects of bitcoin technology. The second group focuses on bitcoin’s impacts to existing financial system and real economy. The discussions in the third group call for a legal framework to regulate bitcoin and other digital currency. In the end, we model the bitcoin research in a PEST (political, economic, social, and technological) analysis structure and suggest that the influence of bitcoin and the associated technology on society as a whole is a big gap waiting to be filled in future research.
    Keywords: bitcoin, digital currency, cryptocurrency, literature survey, co-word analysis
    JEL: G00 E50 K40
  89. By: Chakraborty, Kamalika; Chakraborty, Bidisha
    Abstract: This paper builds an overlapping generations household economy model with learning by doing effect in unskilled work. We study the relative effectiveness of child labour ban and education subsidy on schooling. We find some interesting results- the time path of schooling is oscillating but convergent in nature; a fall in child wage does not necessarily increase steady state schooling; if unskilled adult wage is sufficiently small, education subsidy is more effective in enhancing schooling than banning child labour and a child labour ban that increases steady state schooling may not be accompanied by increase in utility level of the household.
    Keywords: child labour, schooling, human capital, oscillation, child labour ban, education subsidy
    JEL: E24 I21 J22 J24 O10
    Date: 2016–04–27
  90. By: Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza
    Abstract: The Greek government has agreed to a new round of fiscal austerity measures consisting of a sharp increase in taxes on income and property and further reductions in pension and other welfare-related expenditures. Based on our model of the Greek economy, policies aimed at reducing the government deficit will cause a recession, unless other components of aggregate demand increase enough to more than offset the negative impact of fiscal austerity on output and employment. In this report we argue that the troika strategy of increasing net exports to restart the economy has failed, partly because of the low impact of falling wages on prices, partly because of the low trade elasticities with respect to prices, and partly because of other events that caused a sharp reduction in transport services, which used to be Greece’s largest export sector. A policy initiative to boost aggregate demand is urgently needed, now more than ever. We propose a fiscal policy alternative based on innovative financing mechanisms, which could trigger a boost in confidence that would encourage renewed private investment.
    Date: 2016–09
  91. By: Catherine Doz (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Anna Petronevich (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: The official institutions (NBER, OECD, CEPR and others) provide business cycle chronology with a lag from 3 months up to several years. Markov-Switching Dynamic Factor Model (MS-DFM) allows to produce the turning points more timely. The Kalman filter estimates of the model can be obtained in one step with limited number of series or in two steps on a much richer dataset. While the choice of correct series is a challenge for the one-step method, the problem of the two-step method is the potential misspecification. In this paper we apply one-step and two-step approaches to the French data and compare their performance. Both methods give qualitatively similar results and prove to reproduce the OECSD business cycle chronology on the 1993-2014 monthly sample well. We find that the two-step method is more precise in determining the beginnings and the ends of recessions. Also, both methods produce extra signals corresponding to downturns which were too short to belong to OECD chronology of recessions.
    Keywords: dynamic factor models,Markov switching models,business cycle turning points
    Date: 2015–02

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