nep-mac New Economics Papers
on Macroeconomics
Issue of 2016‒11‒20
72 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Equilibrium Yield Curves and the Interest Rate Lower Bound By Taisuke Nakata; Hiroatsu Tanaka
  2. Macroeconomics and Consumption By John Muellbauer
  3. Fiscal Policy after the Crisis – Workshop Proceedings By Matteo Salto
  5. Structural reform in Germany By Krebs, Tom; Scheffel, Martin
  6. Mortgage Credit: Lending and Borrowing Constraints in a DSGE Framework By Sánchez, Elmer
  7. Monetary Policy Tradeoffs Between Financial Stability and Price Stability By Shukayev, Malik; Ueberfeldt, Alexander
  8. The Impact of US Uncertainty on the Euro Area in Good and Bad Times: Evidence from a Quantile Structural Vector Autoregressive Model By Rangan Gupta; Chi Keung Marco Lau; Mark E. Wohar
  9. The Perils of Nominal Targets By Armenter, Roc
  10. Does the Fed's unconventional monetary policy weaken the link between the financial and the real sector? By Yimin Xu; Jakob de Haan
  11. Decline in Oil Prices and the Negative Interest Rate Policy in Japan By Yoshino, Naoyuki; Taghizadeh-Hesary, Farhad
  12. The Determinants of the Benchmark Interest Rates in China: A Discrete Choice Model Approach By Hyeongwoo Kim; Wen Shi
  13. Aggregate Hiring and the Value of Jobs Along the Business Cycle By Neele L. Balke; Morten O. Ravn
  14. Reserve Requirements, Liquidity Risk, and Bank Lending Behavior By Koray Alper; Mahir Binici; Selva Demiralp; Hakan Kara; Pınar Ozlu
  15. Fiscal consolidation in a low inflation environment: pay cuts versus lost jobs By Bandiera, Guilherme; Pappa, Evi; Sajedi, Rana; Vella, Eugenia
  16. Under-Insurance in Human Capital Models with Limited Enforcement By Krebs, Tom; Kuhn, Moritz; Wright, Mark L.J.
  17. A real-time measure of business conditions in Malta By Ellul, Reuben
  18. Sovereign Risk and Bank Risk-Taking By Ari, A.
  19. Trust in the Central Bank and Inflation Expectations By Dimitris Christelis; Dimitris Georgarakos; Tullio Jappelli; Maarten van Rooij
  20. Money creation and destruction By Faure, Salomon; Gersbach, Hans
  21. Aggregate Hiring and the Value of Jobs Along the Business Cycle By Eran Yashiv
  22. Liquidity, insolvency and the state By Ehnts, Dirk H.
  23. Regulation and Rational Banking Bubbles in Infinite Horizon By Claire Océane Chevallier; Sarah El Joueidi
  25. Entrepreneurship in the Shadows: Wealth Constraints and Government Policy By Tumen, Semih
  26. Explaining the Euro crisis: Current account imbalances, credit booms and economic policy in different economic paradigms By Engelbert Stockhammer; collin constantine; Severin Reissl
  28. What Do Latin American Inflation Targeters Care About? A Comparative Bayesian Estimation of Central Bank Preferences By Stephen McKnight; Alexander Mihailov; Antonio Pompa Rangel
  29. Is the output growth rate in NIPA a welfare measure? By Licandro, Omar
  30. Accounting for changing returns to experience By Hendricks, Lutz
  31. Firm Dynamics in the Neoclassical Growth Model By Licandro, Omar
  32. A New Index of Housing Sentiment By Lasse Bork; Stig V. Møller; Thomas Q. Pedersen
  33. Interest rate pass-through in Poland since the global financial crisis By Mariusz Kapuściński; Ewa Stanisławska
  34. Forecasting Financial Vulnerability in the US: A Factor Model Approach By Hyeongwoo Kim; Wen Shi
  35. A Quantitative Theory of Time-Consistent Unemployment Insurance By Pei, Yun; Xie, Zoe
  36. Agent Based Models, Housing Fluctuations and the Role of Heterogeneous Expectations By Jinke Li; Geoffrey Meen
  37. Appropriate Exchange Rate Regime for economic structure of Pakistan By Ali, Faran; Mamoon, Dawood; Tahir, Naveed
  38. House prices, wealth effects and labour supply By Disney, Richard; Gathergood, John
  39. The Relationship between the Inflation Rate and Inequality across US States: A Semiparametric Approach By Mehmet Balcilar; Shinhye Chang; Rangan Gupta; Stephen M. Miller
  40. Replacing Judgment by Statistics: Constructing Consumer Confidence Indicators on the Basis of Data-driven Techniques By Alessandro Girardi; Christian Gayer; Andreas Reuter
  41. Estimating GDP and Foreign Rents of the Oil and Gas Sector in the USSR then and Russia now By Kuboniwa, Masaaki
  42. Understanding Inflation as a Joint Monetary-Fiscal Phenomenon By Campbell Leith
  43. Macroeconomic Relevance of Insolvency Frameworks in a High-debt Context: An EU Perspective By Jean-Charles Bricongne; Maria Demertzis; Peter Pontuch; Alessandro Turrini
  44. Parental time investment and intergenerational mobility By Yum, Minchul
  45. HOW DO FIRMS FORM THEIR EXPECTATIONS? NEW SURVEY EVIDENCE By Yuriy Gorodnichenko; Saten Kumar; Olivier Coibion
  46. Decline and Growth in Transition Economies: A Meta-Analysis By Iwasaki, Ichiro; Kumo, Kazuhiro
  47. Heterogeneous Firms and the Micro Origins of Aggregate Fluctuations By Glenn Magerman; Karolien De Bruyne; Emmanuel Dhyne; Jan Van Hove
  48. Informality, Public Employment and Employment Protection in Developing Countries By Fran çois Langot; Shaimaa Yassin
  50. Inter-industry analysis and monetary policy evaluations in the Korean flow of funds accounts By Kim, Jiyoung
  51. Business Cycles and Household Formation: The Micro vs the Macro Labor Elasticity By Jose-Victor Rios-Rull; Greg Kaplan; Sebastian Dyrda
  52. Do Individual Behavioral Biases Affect Financial Markets and the Macroeconomy? By Raman Uppal; Harjoat Bhamra
  53. 新常态下商业银行和企业两部门杠杆联动的微观机制和宏观效应 By Gu, Xin; Cui, Tingfei; Hu, Yingquan
  54. The Evolution of Multiple Jobholding in the U.S. Labor Market: The Complete Picture of Gross Worker Flows By Lalé, Etienne
  55. Individual vs. Group Decision Making: an Experiment on Dynamic Choice under Risk and Ambiguity By Konstantinos Georgalos; Enrica Carbone; Gerardo Infante
  56. The U.S.–Mexico economic relationship and a discussion of U.S. monetary policy: remarks before the Asociación de Bancos de Mexico, Mexico City, November 4, 2016. By Kaplan, Robert Steven
  57. Using common factors to identify substitution possibilities in a factor demand system with technological changes By Håvard Hungnes
  58. Greenfield Foreign Direct Investment and Structural Reforms in Europe: what factors determine investments? By Erik Canton; Irune Solera
  59. On the fungibility of public and private transfers: A mental accounting approach By Waidler, Jennifer
  60. Financial remittances, trans-border conversations, and the state By Covadonga Meseguer; Sebastián Lavezzolo; Javier Aparicio
  61. "Financial Stability and Secure Currency in a Modern Context" By Jan Kregel
  62. Labor-Market Scars When Youth Unemployment Is Extremely High: Evidence from Macedonia By Petreski, Marjan; Mojsoska-Blazevski, Nikica; Bergolo, Marcelo
  63. What Piketty said in Capital in the Twenty-first Century and how economists reacted By Riccardo De Bonis
  64. Do people gamble more in good times? Evidence from 27 European countries By Baumöhl, Eduard; Výrostová, Eva
  65. Demographic dynamics and long-run development: Insights for the secular stagnation debate By Cervellati, Matteo; Sunde, Uwe; Zimmermann, Klaus F.
  66. Entropy Man, Chapter 6 Money By John Bryant
  67. Trends in the relation between regional convergence and economic growth in EU By Lucian Liviu Albu
  68. Elderly Care, Child Care, and Labor Supply in an Aging Japan By Ryuta Ray Kato
  69. Entropy Man, Chapter 2 A Short History of Human Development By John Bryant
  70. Entropy Man, Chapter 1 Setting the Entropy Scene By John Bryant
  71. Composition of Capital and Gains from Trade in Equipment By Mutreja, Piyusha
  72. Extreme dependence between crude oil and stock markets in Asia-Pacific regions: Evidence from quantile regression By Zhu, Huiming; Huang, Hui; Peng, Cheng; Yang, Yan

  1. By: Taisuke Nakata; Hiroatsu Tanaka
    Abstract: We study the term structure of default-free interest rates in a sticky-price model with an occasionally binding effective lower bound (ELB) constraint on interest rates and recursive preferences. The ELB constraint induces state-dependency in the dynamics of term premiums by affecting macroeconomic uncertainty and interest-rate sensitivity to economic activities. In a model calibrated to match key features of the aggregate economy and term structure dynamics in the U.S. above and at the ELB, we find that the ELB constraint typically lowers the absolute size of term premiums at the ELB and increases their volatility around the time of liftoff. The central bank's announcement to keep the policy rate at the ELB for longer than previously expected lowers the expected short rate path, but its effect on term premiums depends on the risk exposure of bonds to the macroeconomy; while the announcement increases term premiums if bonds are a hedge against economic downturns, it decreases them otherwise.
    Keywords: Effective Lower Bound ; Forward Guidance ; New Keynesian Model ; Recursive Preference ; Term Premiums ; Term Structure of Interest Rates ; Yield Curves
    JEL: E12 E32 E43 E44 E52 G12
    Date: 2016–10
  2. By: John Muellbauer
    Abstract: The failure of the ubiquitous New Keynesian "Dynamic Stochastic General Equilibrium" (NK-DSGE) models to capture interactions of finance and the real economy is widely-recognized since the 2008-9 financial crisis. NK-DSGE models exclude money, debt and asset prices and, importantly, ignore changing credit markets. These problems stem from assuming unrealistic micro-foundations for household behaviour, and that aggregate behaviour mimics a fully-informed representative agent (both assumptions are embodied in the underlying rational expectations permanent income' hypothesis (REPIH). This survey critiques the NK-DSGE models and its integral REPIH model, and discusses alternative post-crisis general equilibrium models which do incorporate debt and allow crises to occur. But neither model type can be directly applied to policy-making. The survey reviews misspecifications in standard non-DSGE macro-models used by central banks (e.g. the Fed.'s FRB-US), and related co-integration literature linking consumption with household portfolios. These too omit most of the 'financial accelerator', ignoring credit shifts and crucially, aggregating liquid, illiquid assets, debt and housing into a single 'net worth' construct. The survey's second focus is to improve non-DSGE models for policy using the Latent Interactive Variable Equation System (LIVES) approach, in which aggregate consumption is jointly modelled with the main elements of household balance sheets, extracting credit conditions as a latent variable. Empirical work on aggregate data is surveyed revealing the important role of debt and financial assets and the time and context-dependent role of housing collateral. Rather than 'one-size-fits-all' monetary and macro-prudential policy, institutional differences between countries then imply major differences for monetary policy transmission and policy.
    Keywords: DSGE, macroeconomic policy models, finance and the real economy, financial crisis, consumption, credit constraints, household portfolios, asset prices
    JEL: E17 E21 E44 E51 E52 E58 G01
    Date: 2016–11–02
  3. By: Matteo Salto
    Abstract: This paper presents the proceedings of the annual Public Finance Workshop organised by the Directorate-General for Economic and Financial Affairs in Brussels on 19 January 2016 in relation with the publication of its Public Finance in EMU 2015 Report. After the double-dip recession between 2009 and 2013, growth is gradually returning to the EU and the euro area but it is still subject to downside risks. On the nominal side, both inflation and interest rates remain very low, thereby curtailing the stabilisation function of monetary policy. After years of fiscal consolidation, budget deficits have been reduced significantly in most Member States. Nevertheless, the crisis has taken its toll on the societies of several Member States and left us with the legacy of high public-debt ratios and increased social challenges. The workshop discusses the best options for fiscal policy in such an environment. It was organised in two sessions: Session 1: "Fiscal policy in a low-inflation context", and Session 2: "Fiscal policy after the crisis". The proceedings display the high quality contributions that were presented in each of these sessions and the discussions that followed.
    JEL: C32 C54 E22 E32 E60 E62 F45
    Date: 2016–07
  4. By: Fujita, Shigeru (Federal Reserve Bank of Philadelphia); Fujiwara, Ippei (Keio University and Australian National University)
    Abstract: This paper explores a causal link between aging of the labor force and declining trends in the real interest rate and inflation in Japan. We develop a New Keynesian search/matching model that features heterogeneities in age and firm-specific skills. Using the model, we examine the long-run implications of the sharp drop in labor force entry in the 1970s. We show that the changes in the demographic structure induce significant low-frequency movements in per-capita consumption growth and the real interest rate. They also lead to similar movements in the inflation rate when the monetary policy follows the standard Taylor rule, failing to recognize the timevarying nature of the natural rate of interest. The model suggests that aging of the labor force accounts for roughly 40% of the declines in the real interest rate observed between the 1980s and 2000s in Japan.
    Keywords: aging; natural rate; deflation; Japan
    JEL: E24 E31 E52
    Date: 2016–11–07
  5. By: Krebs, Tom; Scheffel, Martin
    Abstract: This paper provides a quantitative evaluation of the macroeconomic, distributional, and fiscal effects of three reform proposals for Germany: i) a reduction in the social security tax in the low-wage sector, ii) a publicly financed expansion of full-day child care and full-day schooling, and iii) the further deregulation of the professional service sector. The analysis is based on a macroeconomic model with physical capital, human capital, job search, and household heterogeneity. All three reforms have positive short-run and long-run effects on employment, wages, and output. The quantitative effects of the deregulation reform are relatively small due to the small size of the professional services in Germany. Policy reforms i) and ii) have substantial macroeconomic effects and positive distributional consequences. Ten years after implementation, reforms i) and ii) taken together increase employment by 1.6 percent, potential output by 1.5 percent, real hourly pre-tax wages in the low-wage sector by 3 percent, and real hourly pre-tax wages of women with children by 2.7 percent. The two reforms create fiscal deficits in the short-run, but they also generate substantial fiscal surpluses in the long-run. They are fiscally efficient in the sense that the present value of short-term fiscal deficits and long-term fiscal surpluses is positive for any interest (discount) rate less than 9 percent.
    JEL: E24 E60 J2 J3
    Date: 2016
  6. By: Sánchez, Elmer (Banco Central de Reserva del Perú)
    Abstract: This paper develops a Dynamic Stochastic General Equilibrium (DSGE) framework to evaluate the relative importance of the easing of lending and borrowing constraints in mortgage credit markets for business cycle fluctuations in small open emerging economies. Credit markets are characterized by partial dollarization and are subject to demand shocks, innovations to stochastic loan-to-value ratios (borrowing constraints) imposed on borrowers, and supply shocks, innovations to stochastic bank capital-to-asset ratios (lending constraints) imposed on financial intermediaries. In addition, the model features a set of real and nominal domestic shocks to demand, productivity, and fiscal and monetary policy, as well as foreign shocks. The model is calibrated and estimated using data on the Peruvian economy. A historical decomposition conducted on household leverage ratios reveals that these variables’ cyclical dynamics were mainly driven by borrowing constraint shocks or credit demand shifts, while lending constraint shocks played a residual role. Counterfactual simulations also provide evidence in favor of this channel: turning off the borrowing constraint shocks significantly attenuates the fluctuations of leverage ratios from their steady-state levels. The importance of the demand channel in Peru is consistent with mortgage demand-boosting public programs enacted in the 2000s. While applied in the Peruvian context here, the framework is easily adaptable to the historical evolution of credit markets in a large variety of emerging market economies.
    Keywords: fricciones financieras, DSGE con sector bancario.
    JEL: E37 E44 E52
    Date: 2016–09
  7. By: Shukayev, Malik (University of Alberta, Department of Economics); Ueberfeldt, Alexander (Bank of Canada)
    Abstract: We analyze the impact of interest rate policy on financial stability in an environment where banks can experience runs on their short-term liabilities forcing them to sell assets at fire sale prices. Price adjustment frictions and a state-dependent risk of financial crisis create the possibility of a policy tradeoff between price stability and financial stability. Focusing on Taylor rules with monetary policy possibly reacting to banks' short-term liabilities, we find that the optimized policy uses the extra tool to support investment at the expense of higher inflation and output volatility.
    Keywords: Fire sales externality; short-term bank funding; business cycles; financial crisis
    JEL: D62 E32 E44 G01
    Date: 2016–11–11
  8. By: Rangan Gupta (Department of Economics, University of Pretoria, Pretoria); Chi Keung Marco Lau (Newcastle Business School, Northumbria University, UK); Mark E. Wohar (College of Business Administration, University of Nebraska at Omaha and School of Business and Economics, Loughborough University, Leicestershire)
    Abstract: We estimate a quantile structural vector autoregressive model for the Euro Area to assess the real effects of uncertainty shocks in expansions and recessions using monthly data covering the period of 1999:02 to 2016:05. Domestic and foreign (US) uncertainty shocks hitting during recessions are found to produce a relatively overall stronger negative impact on output growth than in expansions. Inflation, in general, is unaffected from a statistical perspective. Our results tend to suggest that policymakers need to implement state-dependent policies, with stimulus policies being more aggressive during recessions – something we see from our results in terms of stronger declines in the interest rate during bad times.
    Keywords: Economic Policy Uncertainty, US-Euro Area Spillovers, Quantile Structural Vector Autoregressive Model
    JEL: C32 E32 E60
    Date: 2016–11
  9. By: Armenter, Roc (Federal Reserve Bank of Philadelphia)
    Abstract: A monetary authority can be committed to pursuing an inflation, price-level, or nominal-GDP target yet systematically fail to achieve the prescribed goal. Con- strained by the zero lower bound on the policy rate, the monetary authority is unable to implement its objectives when private-sector expectations stray far enough from the target. Low-inflation expectations become self-fulfilling, resulting in an additional Markov equilibrium in which the monetary authority falls short of the nominal target, average output is below its efficient level, and the policy rate is typically low. Introducing a stabilization goal for long-term nominal rates can implement a unique Markov equilibrium without fully compromising stabilization policy.
    Keywords: inflation targeting; zero lower bound; Markov equilibria
    JEL: E52 E58
    Date: 2016–11–10
  10. By: Yimin Xu; Jakob de Haan
    Abstract: After the global financial crisis, several central banks introduced unconventional monetary policies, such as QE. If QE increases asset prices, but does not boost the real economy to the same extent, the relationship between the financial and the real sector will weaken. This study investigates this issue for the US using the predictive power of the credit spread for future employment growth as measure for the strength of the real-financial link in a moving-window framework. Our results suggest that the real-financial link is lower during bubbles and recessions. We also find that the relationship weakened after the Fed introduced QE.
    Keywords: Financial-real Linkages; unconventional monetary policies; QE; Federal Reserve
    JEL: E22 G31 G32 D92
    Date: 2016–11
  11. By: Yoshino, Naoyuki (Asian Development Bank Institute); Taghizadeh-Hesary, Farhad (Asian Development Bank Institute)
    Abstract: In April 2013, the Bank of Japan (BOJ) introduced an inflation target of 2% with the aim of overcoming deflation and achieving sustainable economic growth. But due to lower international oil prices it was unable to achieve this target and was forced to take further measures. Hence, in February 2016, the BOJ adopted a negative interest rate policy by massively increasing the money supply through purchasing long-term Japanese government bonds (JGBs). The BOJ had previously only purchased short-term government bonds, a policy that flattened the yield curve of JGBs. On the one hand, banks reduced the number of government bonds they purchased because short-term bond yields had become negative. Even the interest rates of long-term government bonds up to 15 years became negative. On the other hand, bank loans to the corporate sector did not increase, due to the Japanese economy’s vertical investment–saving (IS) curve. This paper firstly explains why, in the view of the authors, the BOJ has to reduce its 2% inflation target in the present low oil price era. Secondly, it argues that Japan cannot make a sustainable recovery from its long-lasting recession and tackle its long-standing deflation problem by means of its current monetary policy and its negative interest policy in particular. It is of key importance to make the IS curve downward rather than vertical. That means the rate of return on investment must be positive and companies must be willing to invest even if interest rates are set too low. Japan’s long-term recession is due to structural problems that cannot be solved by its current monetary policy.
    Keywords: Oil prices; negative interest rates; 金融政策; 量的金融緩和政策; 原油価格、吉野直行
    JEL: E52 E63 Q43
    Date: 2016–11–08
  12. By: Hyeongwoo Kim; Wen Shi
    Abstract: This paper empirically investigates the determinants of the two key benchmark interest rates in China using an array of constrained ordered probit models for quarterly frequency data from 1987 to 2013. Specifically, we estimate the behavioral equation of the People's Bank of China that models its decision-making process for revisions of the benchmark deposit rate and the lending rate. Our findings imply that the PBC's policy decisions are better understood as responses to changes in inflation and money growth, while output gaps and the exchange rate play negligible roles. We also implement in-sample fit analyses and out-of-sample forecast exercises. Our empirical findings show robust and reasonably good performances of our models in understanding dynamics of these benchmark interest rates.
    Keywords: Monetary Policy; People's Bank of China; Ordered Probit Model; Deposit Rate; Lending Rate; In-Sample Fit; Out-of-Sample Forecast
    JEL: E52 E58
    Date: 2016–11
  13. By: Neele L. Balke (University College London (UCL); Centre for Macroeconomics (CFM)); Morten O. Ravn (University College London (UCL); Centre for Macroeconomics (CFM); Centre for Economic Policy Research (CEPR))
    Abstract: We analyze time-consistent fiscal policy in a sovereign debt model. We consider a production economy that incorporates feedback from policy to output through employment, features inequality though unemployment, and in which the government lacks a commitment technology. The government's optimal policies play off wedges due to the lack of lump-sum taxes and the distortions that taxes and transfers introduce on employment. Lack of commitment matters during a debt crises - episodes where the price of debt reacts elastically to the issuance of new debt. In normal times, the government sets procyclical taxes, transfers and public goods provision but in crisis times it is optimal to implement austerity policies which minimize the distortions deriving from default premia. Could a third party provide a commitment technology, austerity is no longer optimal.
    Keywords: Time-consistent fiscal policy, Soverign debt, Debt crisis, Austerity
    JEL: E20 E62 F34 F41
    Date: 2016–11
  14. By: Koray Alper (Central Bank of the Republic of Turkey); Mahir Binici (Central Bank of the Republic of Turkey); Selva Demiralp (Koc University); Hakan Kara (Central Bank of the Republic of Turkey); Pınar Ozlu (Central Bank of the Republic of Turkey)
    Abstract: Although reserve requirements have been used in emerging markets to smooth credit cycles, the exact transmission mechanism remains to be explored. Using bank level data, this study looks inside the black-box to unveil the interaction of reserve requirement policy with bank lending. We identify a new channel that works through a decline in bank liquidity and loan supply due to an increase in reserve requirements. We show that “quantitative tightening” through reserve requirements affect the funding needs and the liquidity position of the banking system. The consequent changes in bank liquidity have a significant impact on the bank lending behavior.
    Keywords: Monetary transmission mechanism; liquidity channel; reserve requirements; Turkey.
    JEL: E44 E51 E52
    Date: 2016–11
  15. By: Bandiera, Guilherme (European University Institute); Pappa, Evi (European University Institute); Sajedi, Rana (Bank of England); Vella, Eugenia (University of Sheffield)
    Abstract: We construct a model of a monetary union to study fiscal consolidation in the Periphery of the euro area, through cuts in public sector wages or hiring when the nominal interest rate is constrained at its lower bound. Consolidation induces a positive wealth effect that increases demand, as well as a reallocation of workers towards the private sector, which together boost private activity. However, in a low inflation environment, demand is suppressed and the private sector is not able to absorb the additional workers. Comparing the two instruments, cuts in public hiring increase unemployment persistently in this environment, while wage cuts reduce it. Regions with higher mobility of labour between the two sectors are able to consolidate more effectively. Price flexibility is also key at the zero lower bound: for a higher degree of price rigidity in the Periphery, consolidation becomes harder to achieve. Consolidations can be self-defeating when the public good is productive, or a complement to private consumption.
    Keywords: Fiscal consolidation; public wage bill; zero lower bound
    JEL: E32 E62
    Date: 2016–11–11
  16. By: Krebs, Tom; Kuhn, Moritz; Wright, Mark L.J.
    Abstract: This paper uses a macroeconomic model calibrated to U.S. data to show that limited contract enforcement leads to substantial under-insurance against human capital risk. The model economy is populated by a large number of risk-averse households who can invest in risk-free physical capital and risky human capital. Expected human capital returns are age-dependent and calibrated to match the observed life-cycle profile of median labor income. Households have access to a complete set of credit and insurance contracts, but their ability to use the available financial instruments is limited by the possibility of default (limited contract enforcement). According to the baseline calibration, young households are severely under-insured against human capital (labor income) risk and the welfare losses due to the lack of insurance are substantial. These results are robust to realistic variations in parameter values.
    Keywords: Human Capital Risk; Insurance; Limited Enforcement
    JEL: D52 E21 E24 J24
    Date: 2016–11
  17. By: Ellul, Reuben
    Abstract: This paper outlines the structure for a high frequency measure of economic activity in Malta, with the ability of identifying turning points and changes in activity in real time. An array of flow and stock data is applied, measured at mixed frequencies. A dynamic factor model then filters the data and constructs a high frequency business conditions index (BCI). The framework is based on a study by Aruoba, Diebold and Scotti (2009). In this paper, their prototype example is extended to include extra monthly variables.
    Keywords: Nowcasting, business cycle, state space model, dynamic factor model, Malta
    JEL: C01 E32 E37
    Date: 2016–09–26
  18. By: Ari, A.
    Abstract: In European countries recently hit by a sovereign debt crisis, banks have sharply raised their holdings of domestic sovereign debt, reduced credit to forms, and faced rising financing costs, raising concerns about economic and financial resilience. This paper develops a general equilibrium model with optimizing banks and depositors to account for these facts and provide a framework for policy assessment. Under-capitalized banks in default-risky countries have an incentive to gamble on domestic sovereign bonds. Unless there is perfect transparency of bank balance sheets, the optimal reaction by depositors to bank insolvency risk leaves the economy susceptible to self-fulfilling shifts in sentiments. In a bad equilibrium, sovereign risk shocks lead to a prolonged period of financial fragility and a persistent drop in output. The model is quantified using Portuguese data and generates similar dynamics to those observed in the Portuguese economy during the debt crisis. Policy interventions face a trade-off between alleviating funding constraints and strengthening incentives to gamble. Liquidity provision to banks may eliminate the good equilibrium when not targeted. Targeted interventions have the capacity to eliminate adverse equilibria.
    Keywords: Sovereign Debt Crises, Bank Risk-Taking, Financial Constraints
    JEL: E44 E58 F34 G21 H63
    Date: 2016–11–17
  19. By: Dimitris Christelis (University of Naples Federico II, CSEF, CFS and CEPAR); Dimitris Georgarakos (European Central Bank, CFS and University of Leicester); Tullio Jappelli (Università di Napoli Federico II, CSEF and CEPR); Maarten van Rooij (De Nederlandsche Bank and Netspar)
    Abstract: Using micro data from the 2015 Dutch CentERpanel, we examine whether trust in the European Central Bank (ECB) influences individuals’ expectations and uncertainty about future inflation, and also whether it anchors inflation expectations. We find that higher trust in the ECB lowers inflation expectations on average, and significantly reduces uncertainty about future inflation. Moreover, results from quantile regressions suggest that trusting the ECB increases (lowers) inflation expectations when the latter are below (above) the ECB’s inflation target. These findings hold after controlling for people’s knowledge about the objectives of the ECB. In addition, higher trust in the ECB raises expectations about GDP growth. The findings suggest that a central bank can influence the economy through people’s expectations, even in times when conventional monetary policy tools likely have weak effects.
    Keywords: Inflation expectations, Inflation uncertainty, Anchoring, Trust in the ECB, Subjective Expectations
    JEL: D12 D81 E03 E40 E58
    Date: 2016–11–14
  20. By: Faure, Salomon; Gersbach, Hans
    Abstract: We study money creation and destruction in today's monetary architecture and examine the impact of monetary policy and capital regulation in a general equilibrium setting. There are two types of money created and destructed: bank deposits, when banks grant loans to firms or to other banks and central bank money, when the central bank grants loans to private banks. We show that equilibria yield the first-best level of money creation and lending when prices are flexible, regardless of the monetary policy or capital regulation. When prices are rigid, we identify the circumstances in which money creation is excessive or breaks down and the ones in which an adequate combination of monetary policy and capital regulation can restore effciency.
    Keywords: money creation,bank deposits,capital regulation,zero lower bound,monetary policy,price rigidities
    JEL: D50 E4 E5 G21
    Date: 2016
  21. By: Eran Yashiv (Tel Aviv University; Centre for Macroeconomics (CFM); CEPR)
    Abstract: U.S. CPS data indicate that in recessions firms actually increase their hiring rates from the pools of the unemployed and out of the labor force. Why so? The paper provides an explanation by studying the optimal recruiting behavior of the representative firm. The model combines labor frictions, of the search and matching type, with capital frictions, of the q-model type. Optimal firm behavior is a function of the value of jobs, i.e., the expected present value of the marginal worker to the firm. These are estimated to be counter-cyclical, the underlying reason being the dynamic behavior of the labor share of GDP. The counter-cyclicality of hiring rates and job values, which may appear counter-intuitive, is shown to be consistent with well-known business cycle facts. The analysis emphasizes the difference between current labor productivity and the wider, forward-looking concept of job values. The paper explains the high volatility of firm recruiting behavior, as well as the reduction over time in labor market fluidity in the U.S., using the same estimated model. Part of the explanation has to do with job values and another part with the interaction of hiring and investment costs, both determinants having been typically overlooked.
    Keywords: Counter-cyclical job values, Business cycles, Aggregate hiring, Vacancies, Labor market frictions, Capital market functions, Volatility, Labor market fluidity
    JEL: E24 E32
    Date: 2016–11
  22. By: Ehnts, Dirk H.
    Abstract: The importance of liquidity and insolvency for nation states and banks has been highlighted by current economic woes in the eurozone and elsewhere. The concepts are grounded in monetary theory, which determine the way they are interpreted. Connected to the discussion of autometallism and Chartalism in the early 20th century, monetary economists of today have come full circle. Discussing some modern authors, it is argued that the concepts of liquidity and insolvency are connected. However, if the central bank functions as lender of last resort the link is cut. Also, fiscal policy has the potential to remove problems of illiquidity and insolvency in the financial system. Illiquidity and insolvency are signals of stress in the real economy. Their oppression through central bank policy might lead to the (wrong) perception that all is well in the economy.
    Keywords: monetary policy,fiscal policy,balance sheets,autometallism,Chartalism
    JEL: E5 E6 G21
    Date: 2016
  23. By: Claire Océane Chevallier (CREA, Université du Luxembourg); Sarah El Joueidi (CREA, Université du Luxembourg)
    Abstract: This chapter develops a dynamic stochastic general equilibrium model in infinite horizon with a regulated banking sector where stochastic banking bubbles may arise endogenously. We analyze the conditions under which stochastic bubbles exist and their impact on macroeconomic key variables. We show that when banks face capital requirements based on Value-at- Risk, two different equilibria emerge and can coexist: the bubbleless and the bubbly equilibria. Alternatively, under a regulatory framework where capital requirements are based on credit risk only, as in Basel I, bubbles are explosive and, as a consequence, cannot exist. The stochastic bubbly equilibrium is characterized by positive or negative bubbles depending on the tightness of capital requirements based on Value-at-Risk. We find a maximum value of capital requirements under which bubbles are positive. Below this threshold, the stochastic bubbly equilibrium provides larger wel- fare than the bubbleless equilibrium. In particular, our results suggest that a change in banking policies might lead to a crisis without external shocks.
    Keywords: Banking bubbles; banking regulation; DSGE; infinitely lived agents; multiple equilibria; Value-at-Risk
    JEL: E2 E44 G01 G20
    Date: 2016
  24. By: Cristina Lincaru (National Scientific Research Institute for Labor and Social Protection - INCSMPS, Bucharest); Speranta Pirciog (National Scientific Research Institute for Labor and Social Protection - INCSMPS, Bucharest)
    Abstract: Using Smart Map Search from Business Analyst Online (BAO) offered in ESRI platform we present some socio-economic profiles useful to characterise some development profiles at local level in Romania in 2013. The profiles result from multi-criteria selection exploration including Total Population, Registered Unemployed Population, Purchasing Power per capita, the total number of household and average household size. The economic development profiles at LAU2 / NUTS 5 level are described by demographic (total population by age and gender), social (households, unemployment), and economic (purchasing power as well as the consumption profile: Apparel and Services, Household Furnishings, Maintenance & Equipment, Health, Entertainment & Recreation, Food and Tobacco, Electronics & Personal effects) characteristics. The resulted profiles could provide valuable inputs for the sustainability of business as well as for policy makers’ decision process if the data will be reliable.
    Keywords: local development profiles, total population, unemployemnt, disposable income, total households, smarth map search
    JEL: R12 D31 E21 E24
    Date: 2016–11
  25. By: Tumen, Semih (Central Bank of Turkey)
    Abstract: I develop a dynamic model of forward-looking entrepreneurs, who decide whether to operate in the formal economy or informal economy and choose how much to invest in their businesses, taking government policy as given. The government has access to two policy tools: taxes on formal business activity and enforcement (or policing) discouraging informality. The main focus of the paper is on transitional dynamics under different initial wealth levels. Whether an initially small business will be trapped in the informal economy and remain small forever or grow quickly and become a large formal business depends on tax and enforcement policies. High tax rates accompanied by loose enforcement – which is mostly the case in less-developed countries (LDCs) – induce tax avoidance, discourage investment in formal businesses, and drive the entrepreneurial activity toward the informal sector even though the initial wealth level is high. Lowering taxes on formal activity joined with strict enforcement can help reducing the magnitude of poverty traps in LDCs.
    Keywords: investment, government policy, informal economy, entrepreneurship, wealth constraints
    JEL: E21 E26 L26 O17
    Date: 2016–10
  26. By: Engelbert Stockhammer (Kingston University); collin constantine; Severin Reissl
    Abstract: The paper proposes a post-Keynesian analysis of the Eurozone crisis and contrasts interpretations inspired by New Keynesian, New Classical, and Marxist theories. The origin of the crisis is the emergence of a debt-driven and an export-driven growth model, which resulted in a rapid increase in private debt ratios and current account imbalances. The reason the crisis escalated in southern Europe, but not in other parts of the world, lies in the unique dysfunctional economic policy regime of the Euro area. European fiscal rules and the Troika impose fiscal austerity on countries in crisis and the separation of fiscal and monetary spaces has made countries vulnerable to sovereign debt crises and forced them to comply. We analyse the role different paradigms attribute to current account imbalances, fiscal policy and monetary policy. Remarkably, opposing views on the relative importance of cost and demand developments in explaining current account imbalances can be found in both heterodox and orthodox economics. Regarding the assessment of fiscal and monetary policy there is a clearer polarisation, with heterodox analysis regarding austerity as unhelpful and large parts of orthodox economics endorsing it. We conclude that there is a weak mapping between post-Keynesian, New Classical, New Keynesian and Marxist theories and different economic policy strategies for the Euro area, which we label Keynesian New Deal, European Orthodoxy, Moderate Reform and Progressive Exit respectively.
    Keywords: Euro crisis, European economic policy, sovereign debt crisis, current account balance, fiscal policy, quantitative easing
    JEL: B00 E00 E50 E63 F53 G01
    Date: 2016–11
  27. By: Elena PELINESCU (Institute of Economic Forecasting, Romanian Academy)
    Abstract: The human capital is the main driver of development and economic growth. This paper is focused on human capital and tries to show how the human capital, as an important economic factor contributes to the growth of the economy. Romer (1969) identified a positive relation between the initial level of literacy and its rate of growth and the increase of income per capita. Benhabib, and Spiegel (1994) showed that the growth rate of total factor productivity depends on the human capital stock level. Wilson and Briscoe (2004) in a literature review of relation between human capital and economic performance at macroeconomic level highlighted that the increases in economic growth across the EU are associated with increases in both education and training. This paper is focused on the relation between human capital and development in Romania and uses econometric techniques to highlight the role of human capital in increasing the country’s wealth.
    Keywords: human capital, development, inovation
    JEL: E24 J24 F63 O15 O31
    Date: 2016–11
  28. By: Stephen McKnight (Centro de Estudios Económicos, El Colegio de México); Alexander Mihailov (Department of Economics, University of Reading); Antonio Pompa Rangel (
    Abstract: This paper uses Bayesian estimation techniques to uncover the central bank preferences of the big five Latin American inflation targeting countries: Brazil, Chile, Colombia, Mexico, and Peru. The target weights of each central bank's loss function are estimated using a medium-scale small open economy New Keynesian model with incomplete international asset markets and imperfect exchange-rate pass-through. Our results suggest that all central banks in the region place a high priority on stabilizing inflation and interest rate smoothing. While stabilizing the real exchange rate is a concern for all countries except Brazil, only Mexico is found to assign considerable weight to reducing real exchange rate fluctuations. Overall, Brazil, Colombia, and Peru show evidence of implementing a strict inflation targeting policy, whereas Chile and Mexico follow a more flexible policy by placing a sizeable weight to output gap stabilization. Finally, the posterior distributions for the central bank preference parameters are found to be strikingly different under complete asset markets. This highlights the sensitivity of Bayesian estimation, particularly when uncovering central bank preferences, to alternative international asset market structures.
    Keywords: Bayesian estimation, central bank preferences, inflation targeting, Latin America, small open economies, incomplete asset markets, monetary policy
    JEL: C51 E52 F41
    Date: 2016
  29. By: Licandro, Omar
    Abstract: National Income and Product Accounts (NIPA) measure real output growth by means of a Fisher ideal chain index. Bridging modern macroeconomics and the economic theory of index numbers, this paper shows that output growth as measured by NIPA is welfare based. In a dynamic general equilibrium model with general recursive preferences and technology, welfare depends on present and future consumption. Indeed, the associated Bellman equation provides a representation of preferences in the domain of current consumption and current investment. Applying standard index number theory to this representation of preferences shows that the Fisher-Shell true quantity index is equal to the Divisia index, in turn well approximated by the Fisher ideal index used in NIPA.
    Keywords: Embodied technical change; Fisher-Shell index; Growth measurement; NIPA; Quantity indexes
    JEL: C43 D91 O41 O47
    Date: 2016–11
  30. By: Hendricks, Lutz
    Abstract: Returns to experience for U.S. workers have changed over the post-war period. This paper argues that a simple model goes a long way towards replicating these changes. The model features three well-known ingredients: (i) an aggregate production function with constant skill-biased technical change; (ii) cohort qualities that vary with average years of schooling; and crucially (iii) time-invariant ageefficiency profiles. The model quantitatively accounts for changes in longitudinal and cross-sectional returns to experience, as well as the differential evolution of the college wage premium for young and old workers.
    Keywords: Returns to experience,College wage premium
    JEL: E24 I26 J31
    Date: 2016
  31. By: Licandro, Omar
    Abstract: This paper integrates firm dynamics theory into the Neoclassical growth framework. It embeds selection into an otherwise standard dynamic general equilibrium model of one good, two production factors (capital and labor) and competitive markets. Selection relies on firm specific investment: i) capital is a fixed production factor --playing the role of an entry cost, ii) the productivity of capital is firm specific, but observed after investment, iii) firm specific capital is partially reversible --its opportunity cost plays the same role as fixed production costs. At equilibrium, aggregate technology is Neoclassical, but the average quality of capital is endogenous and positively related to selection; due to capital irreversibility, the marginal product of capital is larger than the user cost and capital depreciation positively depends on selection. At steady state, output per capita and welfare both raise with selection; rendering capital more reversible or increasing the variance of the idiosyncratic shock both raise selection, productivity, output per capita and welfare.
    Keywords: Capital irreversibility; Entry and Exit; Firm Dynamics; Hopenhayn; Neoclassical growth model; Ramsey; selection
    JEL: O3 O4
    Date: 2016–11
  32. By: Lasse Bork (Aalborg University); Stig V. Møller (Aarhus University and CREATES); Thomas Q. Pedersen (Aarhus University and CREATES)
    Abstract: We propose a new measure for housing sentiment and show that it accurately tracks expectations about future house price growth rates. We construct the housing sentiment index using partial least squares on household survey responses to questions about buying conditions for houses. We ?find that housing sentiment explains a large share of the time-variation in house prices during both boom and bust cycles and it strongly outperforms several macroeconomic variables typically used to forecast house prices.
    Keywords: Housing sentiment, house price forecastability, partial least squares, dynamic model averaging
    JEL: C53 E3 G1
    Date: 2016–11–11
  33. By: Mariusz Kapuściński; Ewa Stanisławska
    Abstract: We analyse why loan rates in Poland have diverged from interbank interest rates since the beginning of the global financial crisis. Following Illes et al. (2015) we calculate a weighted average cost of liabilities, which might be considered as a more accurate proxy for a marginal cost of funding for banks than an interbank interest rate. Then, we investigate the interest rate pass-through on bank-level panel data using both measures. We find that an increase in the weighted average cost of liabilities, relative to interbank interest rates, explains some of the increase in credit spreads. However, deterioration of economic outlook, an increase in uncertainty and non-performing loans, as well as tightening of capital regulation have also been at play. That the cost of funding matters for loan rates has important implications for the current discussion on the potency of negative interest rates, as they rather cannot be transmitted to deposit rates, which are the main component of bank funding.
    Keywords: interest rate pass-through, monetary policy, global financial crisis, lending spreads, panel data models
    JEL: E43 E52 C23
    Date: 2016
  34. By: Hyeongwoo Kim; Wen Shi
    Abstract: This paper presents a factor-based forecasting model for the financial market vulnerability, measured by changes in the Cleveland Financial Stress Index (CFSI). We estimate latent common factors via the method of the principal components from 170 monthly frequency macroeconomic data in order to out-of-sample forecast the CFSI. Our factor models outperform both the random walk and the autoregressive benchmark models in out-of-sample predictability at least for the short-term forecast horizons, which is a desirable feature since financial crises often come to a surprise realization. Interestingly, the first common factor, which plays a key role in predicting the financial vulnerability index, seems to be more closely related with real activity variables rather than nominal variables. We also present a binary choice version factor model that estimates the probability of the high stress regime successfully.
    Keywords: Financial Stress Index; Method of the Principal Component; Out-of-Sample Forecast; Ratio of Root Mean Square Prediction Error; Diebold-Mariano-West Statistic; Ordered Probit Model
    JEL: E44 E47 G01 G17
    Date: 2016–11
  35. By: Pei, Yun (State University of New York at Buffalo); Xie, Zoe (Federal Reserve Bank of Atlanta)
    Abstract: During recessions, the U.S. government substantially increases the duration of unemployment insurance (UI) benefits through multiple extensions. This paper seeks to understand the incentives driving these increases. Because of the trade-off between insurance and job search incentives, the classic time-inconsistency problem arises. This paper endogenizes a time-consistent UI policy in a stochastic equilibrium search model, where a government without commitment to future policies chooses the UI benefit level and expected duration each period. A longer benefit duration increases unemployed workers’ consumption but reduces job search, leading to higher future unemployment. Quantitatively, the model rationalizes most of the variations in benefit duration during the Great Recession. We use the framework to evaluate the effects of the 2009–13 benefit extensions on unemployment and welfare.
    Keywords: time-consistent policy; unemployment insurance; labor market; business cycle
    JEL: E61 H21 J64 J65
    Date: 2016–11–01
  36. By: Jinke Li (School of Management, University of Swansea); Geoffrey Meen (Department of Economics, University of Reading)
    Abstract: Agent-based models (ABMs) have a long history, but are gradually being introduced as a technique into mainstream economics. ABMs are perhaps best known as a tool for explaining the spatial structure of cities, including patterns of segregation, using cellular automata. In this context ABMs can be used to demonstrate self-organisation and phases of transition, arising from interdependencies in behaviour. A key feature of ABMs is that they relax the traditional assumption of representative agents, used in macroeconomic models, so that agents are heterogeneous in behaviour. This has profound implications for the structure of models of financial and housing markets. In the standard pricing model, where house prices are modelled as the discounted stream of future rental payments, outcomes depend on the choice of the discount rate, which in the case of housing is the user cost of capital. But the user cost of capital requires a measure of house price expectations. Where agents have heterogeneous expectations, the model cannot be solved for the standard rational expectations outcomes and different approaches are required. It cannot be assumed that all agents’ expectations are determined by the true model determining prices. The question asked in this paper is what effect on aggregate housing market fluctuations occurs from heterogeneous expectations across agents compared with more conventional representative agent models. The starting point is the Artificial Stock Market Model first developed in the 1990s by Arthur et al., arising from the research programme in complex systems at the Santa Fe Institute, which we adapt to a housing market context and simulate on UK data.
    Keywords: agent based models, heterogeneity, expectations, volatility
    JEL: E32 E37 R21
    Date: 2016–07–05
  37. By: Ali, Faran; Mamoon, Dawood; Tahir, Naveed
    Abstract: This study empirically finds the appropriate exchange rate regime for economic structure of Pakistan. To find long run association between exchange rate regime and its determinants; ARDL bond testing approach is concern however for the estimation of short run analysis Error correction model (ECM) is applied. Time series data is used over the period from 1984 to 2012. Findings reveal that Trade openness, foreign exchange reserves, rate of inflation and financial development are important determinant while choosing appropriate exchange-rate regime for economy having features like Pakistan. On the basis of analysis, this study suggests that both extreme ends hard peg and free float are unfavorable for it. Still, lot of attention is required on this topic. Choice of regime is a difficult task in empirical analysis because few factors cannot explain actual regime.
    Keywords: Exchange Rate Regime,
    JEL: E5 E58
    Date: 2016–10–01
  38. By: Disney, Richard; Gathergood, John
    Abstract: We examine the impact of house prices on labour supply decisions using UK micro data. We combine household survey data with local level house price measures and controls for local labour demand. Our micro data also allows us to control for individual level income expectations. We find significant house price effects on labour supply, consistent with leisure being a normal good. Labour supply responses to house prices are concentrated among young married female owners and older owners. This finding suggests house prices affect the decisions of marginal workers in the economy. Our estimates imply house prices are economically important for the participation decisions for these workers.
    Keywords: Labour supply,Wealth effects,House prices
    JEL: D12 E21 J22
    Date: 2016
  39. By: Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Cyprus); Shinhye Chang (Department of Economics, University of Pretoria, South Africa); Rangan Gupta (Department of Economics, University of Pretoria, South Africa); Stephen M. Miller (Department of Economics, Lee Business School, University of Nevada, USA)
    Abstract: This paper uses a cross-state panel for the United States over the 1976 to 2007 period to assess the relationship between income inequality and the inflation rate. Employing a semiparametric instrument variable (IV) estimator, we find that the relationship depends on the level of the inflation rate. A positive relationship occurs only if the states exceed a threshold level of inflation rate. Below this value, inflation rate lowers income inequality. The results suggest that a nonlinear relationship exists between income inequality and the inflation rate.
    Keywords: Income inequality, Inflation rate, Semiparametric instrumental variable estimator
    JEL: E31 D31 C14
    Date: 2016–11
  40. By: Alessandro Girardi; Christian Gayer; Andreas Reuter
    Abstract: This article compares the properties of the European Commission's 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 perform only slightly better than the CCI in tracking real private consumption growth and 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.
    JEL: C22 C53 E37
    Date: 2016–07
  41. By: Kuboniwa, Masaaki
    Abstract: A Soviet legacy for present-day Russia is found in its resource dependency as well as its implicit exposition of resource rents from foreign trade in the national accounting. Estimating rents from the oreign trade of oil and gas, we demonstrate how large the GDP of the oil and gas sector had been in the Soviet Union and has been in present-day Russia, as well.
    Keywords: Soviet legacy, oil and gas, rent, GDP
    JEL: E01 P33 P51
    Date: 2016–10
  42. By: Campbell Leith (University of Glasgow)
    Abstract: We develop the fiscal theory of the price level in a range of models using both ad hoc policy rules and jointly optimal monetary and fiscal policies. The article is prepared for the Handbook of Macroeconomics, volume 2 (John B. Taylor and Harald Uhlig, editors, Elsevier Press).
    Keywords: inflation, fiscal policy, fiscal theory of the price level, Monetary Policy, Debt Management
    Date: 2016
  43. By: Jean-Charles Bricongne; Maria Demertzis; Peter Pontuch; Alessandro Turrini
    Abstract: The high level of private debt in many EU countries has put a spotlight on the role that insolvency frameworks can play in helping to address debt overhangs and clean bank balance sheets of nonperforming loans. This paper reviews the macroeconomic relevance of insolvency frameworks from an EU perspective, discusses design issues of insolvency regimes and presents the main features of insolvency frameworks in selected EU Member States. It also reviews recently enacted reforms and examines remaining reform priorities from a macroeconomic perspective.
    JEL: D02 E44 F34 G33
    Date: 2016–06
  44. By: Yum, Minchul
    Abstract: This paper investigates parental time investment in children prior to formal schooling as a source of intergenerational income persistence in the U.S. I develop a dynamic general equilibrium model where lifetime income endogenously persists across generations through multiple channels. My model replicates a series of important untargeted aspects of the data including the U.S. income quintile transition matrix. I find that the parental time investment channel accounts for nearly 40 percent of the observed intergenerational income persistence. Policy experiments suggest that e¤ective ways of improving mobility should focus on narrowing discrepancies in the quantity and quality of parental time investments.
    Keywords: parental time , human capital investment , intergenerational persistence , college education
    JEL: E24 I24 J22
    Date: 2016
  45. By: Yuriy Gorodnichenko (University of California Berkeley); Saten Kumar (Auckland University of Technology); Olivier Coibion (UT Austin)
    Abstract: We implement a new survey of firms’ macroeconomic beliefs in New Zealand and document a number of novel stylized facts from this survey. Despite nearly twenty-five years under an inflation targeting regime, there is widespread dispersion in firms’ beliefs about both past and future macroeconomic conditions, especially inflation, with average beliefs about recent and past inflation being much higher than those of professional forecasters. Much of the dispersion in beliefs can be explained by firms’ incentives to collect and process information, i.e. rational inattention motives. Using experimental methods, we find that firms update their beliefs in a Bayesian manner when presented with new information about the economy. But few firms seem to think that inflation is most important to their business decisions and therefore they tend to devote few resources to collecting and processing information about inflation.
    Date: 2016
  46. By: Iwasaki, Ichiro; Kumo, Kazuhiro
    Abstract: Immediately after the collapse of socialism, the countries of Central and Eastern Europe and the former Soviet Union fell into a serious economic crisis, after which they experienced a gradual recovery. Therefore, without exception, these countries followed a J-curved growth path. However, there were marked differences among them in the length and depth of the crisis and the speed of recovery. In this paper, we perform a comparative meta-analysis of the effect size and statistical significance of structural change, transformation policy, the legacy of socialism, inflation, and regional conflict in order to elucidate the mechanism that generated the J-shaped trajectory in transition economies. The meta-synthesis, which employs 3,279 estimates drawn from 123 previous studies, revealed that while the growth-enhancing effects of structural change and transformation policy were small yet significant, inflation and regional conflict had a highly significant and strongly negative effect on output. In addition, the legacy of socialism might exacerbate the decline in production in the early stages of transition. The meta-regression analysis that simultaneously controls for various research conditions and the assessment of publication selection bias provides supporting evidence for the results obtained from the meta-synthesis.
    Keywords: decline, growth, transition economies, meta-analysis, publication selection bias, Central and Eastern Europe, former Soviet Union
    JEL: E31 O47 O57 P20 P21
    Date: 2016–10
  47. By: Glenn Magerman; Karolien De Bruyne; Emmanuel Dhyne; Jan Van Hove
    Abstract: This paper evaluates the impact of idiosyncratic productivity shocks to individual firms on aggregate output. Two sources of firm-level heterogeneity contribute to aggregate fluctuations: (i) asymmetries in supplier-buyer relationships and (ii) the skewed distribution of sales to final demand. We first develop a model with monopolistic competitive firms and derive a generalized centrality measure that takes these two sources of heterogeneity into account. The model is subsequently estimated using unique data on firm-to-firm transactions across all economic activities in Belgium. The model generates aggregate volatility from micro origins in the same order of magnitude as observed volatility in GDP. The top 100 firms contribute to 90% of the volatility generated by the model, underlining a strong granularity of the economy. Counterfactual analysis further shows that both sources of micro heterogeneity contribute substantially to aggregate fluctuations, while the relative contribution of each channel crucially depends on the labor share in the economy.
    Keywords: heterogeneous firms; networks; input-output linkages; aggregate volatility
    JEL: E30 L10
    Date: 2016–11
  48. By: Fran çois Langot (University of Le Mans (GAINS-TEPP & IRA), Paris School of Economics, CEPREMAP and IZA.); Shaimaa Yassin (University of Neuchâtel (IRENE), University of Paris 1 Panthéon-Sorbonne (CES and Paris School of Economics) and University of Le Mans (GAINS-TEPP).)
    Abstract: This paper proposes an equilibrium matching labor market model for developing countries where the interaction between public, formal and informal sectors is considered. Theoretical analysis shows that labor markets' liberalization reforms can be evicted by shifts in public employment. Since the public sector accounts for a substantial share of employment in developing countries, this approach is crucial to understand their labor market outcomes. Wage offers to public sector employees increase the outside option value of workers during their bargaining processes in the formal and informal sectors. It becomes more profitable for workers to search on-the-job to access more attractive and stable jobs. The public sector therefore acts as an additional tax imposed on private firms. Using workers flows data from Egypt, we show that labor markets' liberalization plays against informal employment by increasing formal jobs' profitability, but is evicted by the increase of public sector wages observed at the same time.
    Keywords: Job search, Informality, Public Sector, Egypt, Unemployment, Wages, Policy Interventions.
    JEL: E24 E26 J60 J64 O17
    Date: 2016–11
  49. By: Ion PARTACHI (Academia de Studii Economice, Chișinău, Republica Moldova,); Vitalie MOTELICA (Academia de Studii Economice, Chișinău, Republica Moldova,)
    Abstract: Implementing effective inflation targeting strategy requires the knowledge of all the factors that are responsible for the inflationary process. The consumer price index includes sub-components, such as trend or seasonality that makes it difficult to analyze the inflationary pressures for the monetary policy decision making. The annual inflation indicator eliminates these deficiencies to a certain extent. However, in the decision making process and for communication purposes, monthly inflation is used as well which, first must be seasonally adjusted to provide information relevant for monetary policy. In this study we addressed the seasonality issues for both CPI, and for the main sub-components of this indicator in Moldova to track the sources responsible for seasonal fluctuations. The study established that the seasonal factor has moderate positive values in the first 4 months of the year, then in the summer months it becomes negative. During the fall and in December, the seasonal factor is back in positive territory. Furthermore, the largest impact on seasonal fluctuations is determined by the seasonal factor of food prices.
    Keywords: Seasonal factors, CPI inflation, monetary policy, inflation targeting strategy
    Date: 2016–11
  50. By: Kim, Jiyoung
    Abstract: This study mainly aims to provide an inter-industry analysis through the subdivision of various industries in flow of funds (FOF) accounts. Combined with the Financial Statement Analysis data from 2004 and 2005, the Korean FOF accounts are reconstructed to form "from-whom-to-whom" basis FOF tables, which are composed of 115 institutional sectors and correspond to tables and techniques of input–output (I–O) analysis. First, power of dispersion indices are obtained by applying the I–O analysis method. Most service and IT industries, construction, and light industries in manufacturing are included in the first quadrant group, whereas heavy and chemical industries are placed in the fourth quadrant since their power indices in the asset-oriented system are comparatively smaller than those of other institutional sectors. Second, investments and savings, which are induced by the central bank, are calculated for monetary policy evaluations. Industries are bifurcated into two groups to compare their features. The first group refers to industries whose power of dispersion in the asset-oriented system is greater than 1, whereas the second group indicates that their index is less than 1. We found that the net induced investments (NII)–total liabilities ratios of the first group show levels half those of the second group since the former's induced savings are obviously greater than the latter.
    Keywords: Finance, Monetary policy, Industry, Flow-of-funds, Asset-liability-matrix, Inter-industry, Monetary policy
    JEL: C67 E01 E50 G30 L00
    Date: 2016–10
  51. By: Jose-Victor Rios-Rull (University of Pennsylvania); Greg Kaplan (Princeton University); Sebastian Dyrda (University of Toronto)
    Abstract: We provide a new evidence on the cyclical behavior of the household size and lab or market outcomes of young people conditional on their living arrangements in the United States from 1979 to 2010. Household size is countercyclical, which is mostly driven by young people moving into or delaying departure from the parental home. We document that young people living with the old work and earn less, and their hours and wages are more volatile relative to their peers living alone. We argue that living arrangements induce larger disparities in the lab or market outcomes than age does. Motivated by these observations we provide a joint theory of household formation and labor market engagement including the business cycle. We lay down a theory where young individuals decide where to live depending on their relative wage rate, disutility of living with old and implicit transfers received from the old. We show differences in volatilities across age groups can be accounted for by incorporating household formation channel in to the real business cycle model, while restricting the labor elasticity of the old to be within the range measured by micro economists.
    Date: 2016
  52. By: Raman Uppal (Edhec Business School); Harjoat Bhamra (Imperial College Business School)
    Abstract: A common criticism of behavioral economics is that it has not shown that individual investors' biases lead to aggregate long-run effects on both asset prices and macroeconomic quantities. Our objective is to address this criticism in a production economy where individual portfolio biases cancel when summed across investors, but still have an effect on aggregate quantities in the long-run. We solve in closed form a model of a stochastic general-equilibrium production economy with a large number of heterogeneous firms and investors. Investors are ambiguity averse, so they hold portfolios biased toward familiar assets. We specify this bias to be unsystematic - it cancels out when aggregated across investors. However, each investor bears more risk than necessary, which distorts the consumption of all investors in the same direction. Hence, distortions in consumption do not cancel out in aggregate and increasing the price of risk and distorting aggregate investment and growth. The increased risk from holding biased portfolios, which increases the demand for the risk-free asset, leading to a higher equity risk premium and lower risk-free rate that match empirical values. Our analysis illustrates that idiosyncratic behavioral biases can have long-run distortionary effects on both financial markets and the macroeconomy
    Date: 2016
  53. By: Gu, Xin; Cui, Tingfei; Hu, Yingquan
    Abstract: 本文通过构建一个具备微观基础的局部均衡模型,研究了企业和商业银行两部门杠杆联动与 资本市场信贷风险溢价之间的动态关系。研究结果发现上述两者之间存在正相关性。这一结 果丰富了当前新凯恩斯主义货币经济对信贷风险溢价的内涵,将金融杠杆纳入微观动态研究 框架内。在宏观层面上,企业和商业银行两部门杠杆联动一方面会减弱企业投资动力,另一 方面又会导致银行“惜贷”,导致“债务-通缩”加速。由此本文建议宏观政策制定者应着 重从企业和金融两部门关注当前“去杠杆”进程,在保持相对宽松的货币政策前提下,辅以 预期管理,为经济转型造成良好的宏观环境。
    Keywords: 信贷风险溢价;杠杆;债务-通缩;局部均衡
    JEL: E5 E6
    Date: 2016–11–14
  54. By: Lalé, Etienne (University of Bristol)
    Abstract: The U.S. labor market experienced a more than 20 percent reduction in the share of workers holding multiple jobs over the past 20 years. While this substantial trend is receiving increasing attention, the literature lacks a comprehensive picture of the gross worker flows that underlie the evolution of multiple jobholding. In this paper, first we construct new estimates of worker transitions into and out of multiple jobholding based on a Markov chain model that addresses several measurement issues. In particular, we show that time-aggregation bias cannot be ignored, as has been done in previous studies: workers typically hold a second job for a short period of time, which imparts a large bias in the estimates of transition probabilities. We go on to conduct a decomposition of the downward trend in multiple jobholding into the evolution of the underlying worker flows. This decomposition indicates that the trend is overwhelmingly explained by the dwindling propensity of full-time workers to take on a second job. We view the decrease in multiple jobholding as another manifestation of the changing labor supply behavior of U.S. workers observed during the past decades.
    Keywords: multiple jobholding, worker flows, trend decomposition
    JEL: E24 J21 J22 J60
    Date: 2016–11
  55. By: Konstantinos Georgalos; Enrica Carbone; Gerardo Infante
    Abstract: This paper focuses on comparing individual and group decision making, in a stochastic inter-temporal problem in two decision environments, namely risk and ambiguity. Using a consumption/saving laboratory experiment, we investigate behaviour in four treatments: (1) individual choice under risk; (2) group choice under risk; (3) individual choice under ambiguity and (4) group choice under ambiguity. Comparing decisions within and between decision environments, we find an anti-symmetric pattern. While individuals are choosing on average closer to the theoretical optimal predictions, compared to groups in the risk treatments, groups tend to deviate less under ambiguity. Within decision environments, individuals deviate more when they choose under ambiguity, while groups are better planners under ambiguity rather than under risk. We argue that the results might be driven by differences in the levels of ambiguity and risk attitudes between individuals and groups, extending the frequently observed pattern of groups behaving closer to risk and ambiguity neutrality, to its dynamic dimension.
    Keywords: Risk, Ambiguity, Inter-temporal Optimisation, Group Decision Making, Learning, Experiment
    JEL: C91 C92 D11 D91 E21
    Date: 2016
  56. By: Kaplan, Robert Steven (Federal Reserve Bank of Dallas)
    Abstract: Increased bilateral trade and production sharing between the U.S. and Mexico has resulted in stronger economic integration, rising foreign direct investment and increasing business-cycle synchronization.
    Date: 2016–11–04
  57. By: Håvard Hungnes (Statistics Norway)
    Abstract: I apply a common factor approach to identifying substitution possibilities between input factors in a factor demand system. Technological changes can lead to shifts in the relative use of input factors within an industry. Technological changes can also be common to several industries. If such common shocks are not taken into account, the estimates of the substitution elasticity might be biased. In this paper, I investigate the importance of taking account of technological changes by allowing for different kinds of common factors, both within and between industries. The estimation results show that, if technological changes are not properly taken into account, we obtain unreliable (negative) estimates of the elasticity of substitutions. When taking such changes into account, however, the estimated elasticities of substitution are positive in all the non-government industries in mainland Norway.
    Keywords: cross-sectional averages
    JEL: C33 E23
    Date: 2016–11
  58. By: Erik Canton; Irune Solera
    Abstract: Greenfield FDI flows into EU countries account for a non-negligible share of total EU FDI. They create new capital assets and additional production capacity which are important elements to support the transition to a stronger European growth path. This project investigates determinants of Greenfield FDI flows into the EU countries using sectoral data on bilateral greenfield FDI flows and associated job creation for the 2003-2014 period. The dataset covers the 28 EU countries and also includes as country of origin the main non-EU investors. A gravity model explaining FDI from distance indicators and policy variables is built, while controlling for other important factors, employing Heckman two-step selection procedure. The results suggest that the business climate (from World Bank's Doing Business) and product market regulations (from OECD's PMR) are important determinants of greenfield investment in the EU. This project provides additional evidence on the importance of removing unnecessary regulatory barriers to investment and could help in the discussion on the Investment Plan for Europe.
    JEL: C33 C34 E22
    Date: 2016–06
  59. By: Waidler, Jennifer (UNU-MERIT)
    Abstract: A common assumption in economics is that money is fungible. In other words, spending patterns do not depend on the source of income, only on the total amount. The mental accounting theory, however, rejects this assumption by arguing that people compartmentalise their income into different mental accounts and decide on their consumption within each of these accounts. In this paper I hypothesise that households differently associate a private transfer coming from a migrant than a public transfer received from the government, and that this impacts the way transfers are spent. By analysing the first nationally representative longitudinal survey in South Africa, covering the years 2008, 2010 and 2012, I find evidence that public and private transfers are not spent in the same way.
    Keywords: Fungibility, Mental Accounting, Remittances, Social transfers, South Africa
    JEL: D1 D12 F24 J18 I38 E21
    Date: 2016–10–26
  60. By: Covadonga Meseguer; Sebastián Lavezzolo; Javier Aparicio
    Abstract: How does the reception of remittances change the views of those left behind? In this paper, we compare the impact of financial remittances (transmission of money) with the impact of social remittances (transmission of ideas and values) on preferences about the role of the state in the economy (in particular, the role of the state in creating jobs, reducing inequality, and securing citizens’ well-being). Using data from the Latin American Public Opinion Project (2008–2010), we find that social learning via cross-border communication is positively associated with preference for an enhanced role of the state.
    Keywords: international migration; remittance; social remittance; trans-nationalism; welfare state; Latin America; developing countries
    JEL: E6
    Date: 2016–11–03
  61. By: Jan Kregel
    Abstract: Against the background of modern-day monetary proposals, ranging from a return to the gold standard to the wholesale abolition of currency, this paper seeks to draw implications from David Ricardo's "Proposals for an Economical and Secure Currency" for plans to reform the operation of central banks and extraordinary monetary policy. Although 200 years old, the "Ingot plan," proposed during a period in which gold convertibility was suspended, appears to be applicable to modern monetary conditions and suggests possible avenues of reform.
    Keywords: David Ricardo; Monetary Systems; Ingot Plan; Gold Standard
    JEL: B12 E42 N10
    Date: 2016–11
  62. By: Petreski, Marjan (University American College Skopje); Mojsoska-Blazevski, Nikica (University American College Skopje); Bergolo, Marcelo (IECON, Universidad de la República)
    Abstract: The objective of this study is to assess how the duration of the unemployment spell of Macedonia youth affects later employment (the employment 'scarring' effect) and wage outcomes (the wage 'scarring' effect). To that end, we first devise a model in which the unemployment spell is determined by individual and household characteristics and work attitudes and preferences. Discrete-time duration method is used to estimate this model. Then, we rely on a standard employment and Mincer earnings functions. We repeatedly impute missing wages to address the selection on observables, and use the regional unemployment rate when individual finished school as an instrument to mitigate the selection on unobservables. The School to Work Transition Survey 2012 is used. Results robustly suggest a presence of employment scar as those young persons who stay unemployed over a longer period of time were found to have lower chances to find a job afterwards. On the other hand, the study does not provide evidence for the existence of the wage scar.
    Keywords: employment scarring, wage scarring, extremely high unemployment, Macedonia
    JEL: E24 J24 J64
    Date: 2016–11
  63. By: Riccardo De Bonis (Bank of Italy, Directorate General for Economics, Statistics and Research)
    Abstract: This work rehearses the main themes of Piketty.s book and summarizes the debate it triggered. The paper dwells on the rise in the ratio of household wealth to GDP in the rich countries since the 1980s and the role played by the build-up of saving and variations in house and financial asset prices; on the various justifications put forward for the increasing income and wealth inequality that has accompanied the rise in the wealth/income ratio, especially in the US and Britain; on the relationship between the rate of return on capital and the economic growth rate; on the ties between rising income inequality and the financial crisis of 2007-08; on the feasibility of Piketty.s proposals for higher taxation of top incomes and a progressive global tax on net household wealth; and on the progress that has been made in the US and Europe in exchanging information on citizens. income and foreign assets.
    Keywords: ratio household wealth/GDP; distribution of income and wealth; taxation; welfare State
    JEL: C80 D14 D31 D91 E62 H26
    Date: 2016–11
  64. By: Baumöhl, Eduard; Výrostová, Eva
    Abstract: We provide evidence of a positive relationship between the intensity of gambling and economic growth in 27 European countries for 2005–2013. Our proxy for gambling is represented by government revenues from taxes on lotteries, betting and gambling. This variable is linked to GDP growth in a panel regression framework and pooled OLS. However, when we split our sample to account for the heterogeneity among European countries, we found that the positive “gambling – GDP growth” relationship is driven extensively by the Central and Eastern European countries. It appears that people in these countries tend to gamble more when the economy is expanding.
    Keywords: gambling, lottery, GDP growth, European countries
    JEL: L83 O1 O4
    Date: 2016–11–10
  65. By: Cervellati, Matteo (IZA Bonn, and University of Bologna); Sunde, Uwe (IZA Bonn, and University of Munich); Zimmermann, Klaus F. (UNU-MERIT, and Princeton University)
    Abstract: This paper takes a global, long-run perspective on the recent debate about secular stagnation, which has so far mainly focused on the short term. The analysis is motivated by observing the interplay between the economic and demographic transition that has occurred in the developed world over the past 150 years. To the extent that high growth rates in the past have partly been the consequence of singular changes during the economic and demographic transition, growth is likely to become more moderate once the transition is completed. At the same time, a similar transition is on its way in most developing countries, with profound consequences for the development prospects in these countries, but also for global comparative development. The evidence presented here suggests that long-run development dynamics have potentially important implications for the prospects of human and physical capital accumulation, the evolution of productivity and the question of secular stagnation.
    Keywords: secular stagnation, long-term development, income growth, demographic transition
    JEL: C54 E10 J11 J13 J18 N30 O10 O40
    Date: 2016–09–14
  66. By: John Bryant (Vocat International)
    Abstract: Chapter from a book entitled Entropy Man, which deals with the relationships between the disciplines of thermodynamics and economics. Chapter 1 illusrates how entropy impacts on the world in which we live. Chapter 2 is a short history of human development. Chapter 3 covers such concepts as the distribution of income, elasticity, the first and second laws of thermodynamics and utility. Chapter 4 explores production and consumption. Chapter 5 explores the relationship between economic entropy and money, illustrated by data of the UK and USA economies. Chapter 7 explores the relationship between economic entropy and employment. Chapter 8 sets out the key dynamics of resources.Chapter 9 illustrates trends in non-renewable resources of oil, gas, coal, nuclear power, steel, cement and Aluminium. Chapter 10 illustrates trends in renewable resources, including humankind, water, land and soil, cereals and grain, meat, fish, the greeen revolution, and renewable energy, including hydro-electric power, wind and solar energy. Chapter 11 is a summary of trends relating to climate change and economic output, and chapter 12 summarises how economics and entropy relate to a sustainable world.
    Keywords: Thermodynamics, economics, Le Chatelier, entropy, utility, money, equilibrium, value, energy, interest, elasticity, employment, climate change
    JEL: A1 C02 C68 D5 E O
    Date: 2015–03
  67. By: Lucian Liviu Albu (Institute for Economic Forecasting, Romanian Academy)
    Abstract: The purpose of this study is to investigate the relation between regional convergence inside of countries in EU and economic growth, and, based on it, to establish some relevant behavioural regimes. As data sources, we are using data from NUTS 2, EUROSAT, for the period 2000-2014. Thus, initially a number of 276 regions grouped in 28 countries were considered. Then, because six countries (Cyprus, Estonia, Latvia, Lithuania, Luxembourg, and Malta) are not divided in regions in NUTS 2 we made few aggregations, finally resulting 24 countries or groups of countries. As usually in specialised literature, to study the correlation between the real convergence and economic growth we focused on the dynamics of GDP per capita expressed in case of EU in PPS (Purchasing Power Standard). On the one hand, in order to estimate a trend of convergence/divergence among regions within a country or group of countries we used the dynamics of the coefficient of variation. On the other hand, within EU, we used for each country or group of countries the dynamics of the ratio between the individual level of GDP per capita and the average EU GDP per capita in order to evaluate how the position of a country changed. Based on such methodology, we succeeded to elaborate a general typology that permitted us to classify countries of EU in four major groups: 1) countries that improved their position in EU (as GDP per capita), but by sacrificing the regional convergence; 2) countries in which it was registered a regional convergence, but by worsening their position in EU; 3) countries for which both their position in EU was decreasing and a regional divergence registered (the most unfavourable dynamics); 4) countries for which both their position in EU was increasing and a regional convergence was registered (the most favourable dynamics).
    Keywords: growth; convergence; nonlinear model; GDP per capita; behavioural regimes
    JEL: C31 E17 O11 O15 O47 O52
    Date: 2016–11
  68. By: Ryuta Ray Kato (International University of Japan)
    Abstract: This paper numerically examines the impact of the financial and time cost of child care as well as elderly care on economic growth and welfare in an aging Japan within a dynamic general equilibrium framework of multi-period overlapping generations with endogenized labor supply. Simulation results indicate that the replacement rate of the public pension scheme becomes below 50 percent from year 2039, even if the currently accumulated public pension funds are used up for paying pension benefits by year 2115. Financial burdens for the first group (age 65 and over) and for the second group (age 40 - 64) in the public long-term care insurance in year 2060 become more than double and more than five times as much as the level of year 2010 in an aging Japan, respectively. While increased child benefits stimulate savings and thus they improve welfare, the impact of elimination of the time cost of child care and elderly care is quite mixed, depending on the gender and job contract types of workers within the household. When the time cost of elderly care spent by all workers irrespective of gender and job contract types is eliminated, many generations enjoy welfare gain, but when the time cost of child care by all workers is eliminated, then almost all generations, except for relatively elder generations, reversely suffer from welfare loss. When a starting age to contribute to the long-term care insurance becomes earlier from the current age of 40 to age 35, welfare of all generations improves.
    Keywords: Child Care, Child Benefits, Elderly Care, Long-Term Care Insurance, Public Pension, Female Labor Supply, Aging, Economic Growth, Simulation, CGE Model
    JEL: C68 H51 E62 H55 J16
    Date: 2016–11
  69. By: John Bryant (Vocat International)
    Abstract: Chapter from a book entitled Entropy Man, which deals with the relationships between the disciplines of thermodynamics and economics. Chapter 1 illusrates how entropy impacts on the world in which we live. Chapter 2 is a short history of human development. Chapter 3 covers such concepts as the distribution of income, elasticity, the first and second laws of thermodynamics and utility. Chapter 4 explores production and consumption. Chapter 5 explores the relationship between economic entropy and money, illustrated by data of the UK and USA economies. Chapter 7 explores the relationship between economic entropy and employment. Chapter 8 sets out the key dynamics of resources.Chapter 9 illustrates trends in non-renewable resources of oil, gas, coal, nuclear power, steel, cement and Aluminium. Chapter 10 illustrates trends in renewable resources, including humankind, water, land and soil, cereals and grain, meat, fish, the greeen revolution, and renewable energy, including hydro-electric power, wind and solar energy. Chapter 11 is a summary of trends relating to climate change and economic output, and chapter 12 summarises how economics and entropy relate to a sustainable world.
    Keywords: Thermodynamics, economics, Le Chatelier, entropy, utility, money, equilibrium, value, energy, interest, elasticity, employment, climate change
    JEL: A1 C02 C68 D5 E O
    Date: 2015–03
  70. By: John Bryant (Vocat International)
    Abstract: Chapter from a book entitled Entropy Man, which deals with the relationships between the disciplines of thermodynamics and economics. Chapter 1 illustrates how entropy impacts on the world in which we live. Chapter 2 is a short history of human development. Chapter 3 covers such concepts as the distribution of income, elasticity, the first and second laws of thermodynamics and utility. Chapter 4 explores production and consumption. Chapter 5 explores the relationship between economic entropy and money, illustrated by data of the UK and USA economies. Chapter 7 explores the relationship between economic entropy and employment. Chapter 8 sets out the key dynamics of resources. Chapter 9 illustrates trends in non-renewable resources of oil, gas, coal, nuclear power, steel, cement and Aluminium. Chapter 10 illustrates trends in renewable resources, including humankind, water, land and soil, cereals and grain, meat, fish, the greeen revolution, and renewable energy, including hydro-electric power, wind and solar energy. Chapter 11 is a summary of trends relating to climate change and economic output, and chapter 12 summarises how economics and entropy relate to a sustainable world.
    Keywords: Thermodynamics, economics, Le Chatelier, entropy, utility, money, equilibrium, value, energy, interest, elasticity, employment, climate change
    JEL: A1 C02 C68 D5 E O
    Date: 2015–03
  71. By: Mutreja, Piyusha
    Abstract: Composition of capital varies systematically with incomes: rich countries have higher equipment capital shares than poor countries. Also, equipment production is highly concentrated and most countries import equipment. I investigate the quantitative importance of equipment trade for capital composition and how it affects incomes through capital composition. In a multi-country trade model, I show that equipment trade accounts for one-quarter of the cross-country variation in equipment capital share. The decline in equipment trade barriers during 1985-2005 resulted in income gains for all countries. Digging into these income gains reveals that capital composition is an important transmission mechanism: changes in capital composition alone account for 45 percent of the gains, on average.
    Keywords: Equipment capital, Structures capital, Capital composition, Trade, Income, Capital goods, Equipment goods
    JEL: E22 F14 F43 O16 O47
    Date: 2016–06
  72. By: Zhu, Huiming; Huang, Hui; Peng, Cheng; Yang, Yan
    Abstract: This paper investigates the extreme dependence between the Asia-Pacific stock markets and the international crude oil market by applying the quantile regression theory and using daily data from January 4th, 2000 to July 4th, 2016. The authors obtain a more detailed result on the degree and structure of the dependence, and furthermore, the results present an asymmetric and heterogeneous dependence. Moreover, the dependence increases dramatically after a structural break point, meaning a crisis. Additionally, the authors observe a more significant dependence at the lower tails than the upper tails. They demonstrate the positive relationship at low quantiles, which is evidence of positive dependence in recessions or bearish markets.
    Keywords: Extreme dependence,Crude oil,Asia-Pacific stock market,Quantile regression,Structural breaks
    JEL: E44 Q43
    Date: 2016

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