|
on Macroeconomics |
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Issue of 2017‒05‒07
98 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Lakdawala, Aeimit |
| Abstract: | We study the effects of monetary policy on economic activity separately identifying the effects of a conventional change in the fed funds rate from the policy of forward guidance. We use a structural VAR identified using external instruments from futures market data. The response of output to a fed funds rate shock is found to be consistent with typical monetary VAR analyses. However, the effect of a forward guidance shock that increases long-term interest rates has an expansionary effect on output. This counterintuitive response is shown to be tied to the asymmetric information between the Federal Reserve and the public. |
| Keywords: | Monetary policy, Forward Guidance, Identification with External Instruments |
| JEL: | E31 E32 E43 E52 E58 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78254&r=mac |
| By: | Gehrke, Britta; Lechthaler, Wolfgang; Merkl, Christian |
| Abstract: | This paper analyzes Germany's unusual labor market experience during the Great Recession. We estimate a general equilibrium model with a detailed labor market block for post-unification Germany. This allows us to disentangle the role of institutions (short-time work, government spending rules) and shocks (aggregate, labor market, and policy shocks) and to perform counterfactual exercises. We identify positive labor market performance shocks (likely caused by labor market reforms) as the key driver for the "German labor market miracle" during the Great Recession. |
| Keywords: | Great Recession,search and matching,DSGE,short-time work,fiscal policy,business cycles,Germany |
| JEL: | E24 E32 E62 J08 J63 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwqwdp:092017&r=mac |
| By: | Bilbiie, Florin Ovidiu |
| Abstract: | The "New Keynesian Cross" proposed here describes aggregate demand through a planned expenditure PE curve and captures analytically a key mechanism and decomposition in heterogeneous-agent New Keynesian (HANK) models à la Kaplan, Moll and Violante, 2015. In response to monetary policy, PE's shift is the direct effect (intertemporal substitution), while its slope (marginal propensity to consume) is the share of the indirect effect in total. The total and indirect effects are increasing with the share of hand-to-mouth agents when these are employed, but decreasing when unemployed; the same holds for forward guidance. Despite this, the optimal duration of forward guidance is not much affected, for when its power increases so does its welfare cost. |
| Keywords: | hand-to-mouth; heterogenous agents; aggregate demand; optimal monetary policy; liquidity trap; Keynesian cross; forward guidance. |
| JEL: | E21 E31 E40 E44 E50 E52 E58 E60 E62 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11989&r=mac |
| By: | De Koning, Kees |
| Abstract: | Why is it that the rich seem to get richer over time and the poor cannot keep up with them? This is not only the situation in the U.S. but also in countries like the U.K., Germany, France and Italy. Wealth distribution is even more unequal than income distribution. For instance, in the U.S. according to the U.S Census Bureau , median net worth increased between 2000 and 2011 for households in the top two quintiles of the net worth distribution (the wealthiest 40 percent), while declining for those in the lower three quintiles (the bottom 60 percent). The result was a widening wealth gap between those at the top and those in the middle and bottom of the net worth distribution. The Census Bureau’s Distribution of Household Wealth in the U.S.: 2000 to 2011, states that the median household net worth decreased by $5,124 for households in the first (bottom) net worth quintile and increased by $61,379 (or 10.8 percent) for those in the highest (top) quintile. Median net worth of households in the highest quintile was 39.8 times higher than the second lowest quintile in 2000, and it rose to 86.8 times higher in 2011. Could there be a link between debt levels, especially of the long-term variety of home mortgages, and wealth inequality levels? From the 116.8 million U.S. households in 2008, 73.6 million had a mortgage in that year, or 63% of all households. 33.3% of the 73.6 million households faced foreclosure proceedings against them during the period 2005-2015. The bottom 40% of all households owned less than 0.1% of all U.S. wealth, the top 1% owned 35.5% and the top 20% owned 87% of all assets. In servicing mortgage debt, households on a lower income level have only their income to fall back on, while the wealthier households, can -if needed- service debt from accumulated assets. This difference between households has major implications for the economic consequences of excessive lending practices. In a paper: “How the U.S. financial crisis could have been averted” , this author analyses a link between income and mortgage debt and the consequences of ignoring such income link. The consequence is that mortgagors experience a depreciation of the U.S. dollar in the event house prices rise faster than income levels, thereby impairing their future income capacity to spend on other goods and services. |
| Keywords: | U.S wealth and income inequality, mortgage debt,household nominal incomes, average house price rises, depreciation in dollar values, national mortgage bank, early warning system |
| JEL: | E21 E3 E30 E32 E4 E44 E5 E58 |
| Date: | 2017–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78806&r=mac |
| By: | Binder, Michael; Lieberknecht, Philipp; Quintana, Jorge; Wieland, Volker |
| Abstract: | For some time now, structural macroeconomic models used at central banks have been predominantly New Keynesian DSGE models featuring nominal rigidities and forward-looking decision-making. While these features are widely deemed crucial for policy evaluation exercises, most central banks have added more detailed characterizations of the financial sector to these models following the Great Recession in order to improve their fit to the data and their forecasting performance. We employ a comparative approach to investigate the characteristics of this new generation of New Keynesian DSGE models and document an elevated degree of model uncertainty relative to earlier model generations. Policy transmission is highly heterogeneous across types of financial frictions and monetary policy causes larger effects, on average. The New Keynesian DSGE models we analyze suggest that a simple policy rule robust to model uncertainty involves a weaker response to inflation and the output gap in the presence of financial frictions as compared to earlier generations of such models. Leaning-against-the-wind policies in models of this class estimated for the Euro Area do not lead to substantial gains. With regard to forecasting performance, the inclusion of financial frictions can generate improvements, if conditioned on appropriate data. Looking forward, we argue that model-averaging and embracing alternative modelling paradigms is likely to yield a more robust framework for the conduct of monetary policy. |
| Keywords: | Financial Frictions; fiscal policy transmission; Forecasting; macroprudential policy transmission; model comparison; Model uncertainty; monetary policy transmission; New Keynesian DSGE; robust monetary policy |
| JEL: | E17 E44 E47 E52 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12013&r=mac |
| By: | Buiter, Willem H. |
| Abstract: | Necessary conditions for valid dynamic general equilibrium analysis include: (1) the number of equations equals the number of unknowns; (2) the number of state variables equals the number of boundary conditions; (3), if (1) and (2) hold, the model has one or more solutions and these solutions make economic sense. The fiscal theory of the price level – in any of its variants - fails these conditions, both away from and at the effective lower bound. The fundamental fallacy at the root of the FTPL is not requiring the intertemporal budget constraint (IBC) of the State to hold identically but only in equilibrium, and treating the IBC of the State (holding with equality and with sovereign debt priced at its contractual value) as a (misspecified) government bond pricing equilibrium condition. Arbitrary (non-Ricardian) policies governing public spending, taxation, interest rates and monetary issuance are asserted to satisfy the intertemporal budget constraint of the State in equilibrium because either the price level (in the original FTPL) or the level of real economic activity (in the Keynesian version of the FTPL developed by Sims) will adjust to make the real contractual value of the outstanding stock of nominal public debt equal to the present discounted value of current and future primary surpluses plus seigniorage. In reality this means overdetermined or inconsistent systems unless (a) the price level is flexible, (b) the interest rate is the monetary policy instrument and (c) there is a non-zero stock of nominal government bonds. Thus, a sticky price level implies overdeterminacy or another inconsistency, and a nominal money stock rule implies overdeterminacy. When all three conditions are satisfied, unacceptable anomalies occur: the possibility of negative price levels; the FTPL can price money when money does not exist; the logic of the FTPL applies equally to the intertemporal budget constraint of an individual household; when the bond pricing equation is specified correctly, there is no FTPL. The FTPL has nothing to do with monetary vs. fiscal dominance or active v. passive fiscal policy. The FTPL implies government debt is never a problem; the price level or the level of real economic activity take care of it, and not through unanticipated inflation or financial repression. If acted upon by fiscal authorities, the consequences could be severe. There is a correct fiscal theory of seigniorage. The issuance of return-dominated and/or irredeemable central bank money creates fiscal space and ensures that a combined monetary-fiscal stimulus always boosts nominal aggregate demand. |
| Keywords: | Fiscal theory of the price level; intertemporal budget constraint; equilibrium bond pricing equation; monetary and fiscal policy coordination |
| JEL: | E31 E40 E50 E58 E62 H62 H63 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11975&r=mac |
| By: | Mark Weisbrot; Jake Johnston; Julia Villarruel Carrillo |
| Abstract: | This paper looks at Brazil’s unusually high interest rates. Brazil has the fourth-highest interest burden in the world on its federal debt (out of a total of 183 countries). The paper finds that this is not a result of known risk factors, but rather is due to unusually high interest rates set by the Central Bank — Brazil’s policy interest rates have also been among the highest in the world — and to the market and political power of a highly concentrated banking sector. The authors warn that unless Brazil corrects its monetary policy, it could contribute to another severe, long-term growth failure comparable to the experience of 1980–2003. During that time, per capita GDP growth averaged about 0.2 percent per year. |
| JEL: | E E4 E42 E43 E5 E52 E58 F H H6 H63 |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:epo:papers:2016-22&r=mac |
| By: | Robert Amano; Stefano Gnocchi |
| Abstract: | We add downward nominal wage rigidity to a standard New Keynesian model with sticky prices and wages, where the zero lower bound on nominal interest rates is allowed to bind. We find that wage rigidity not only reduces the frequency of zero bound episodes but also mitigates the severity of corresponding recessions. As a result, previous studies abstracting from the presence of wage rigidity may have overemphasized the need for increasing the inflation target to offset the costs associated with hitting the zero bound. Moreover, our findings add to the recent debate on the presumed benefits of wage flexibility that has arisen in the aftermath of the Great Recession. |
| Keywords: | Inflation targets, Labour markets, Monetary policy framework |
| JEL: | E24 E32 E52 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:17-16&r=mac |
| By: | Valdivia Coria, Joab Dan |
| Abstract: | A general equilibrium model was developed for a small and open economy with financial frictions in order to analyze the effects of monetary policy and fiscal policy in Bolivia on certain variables such as: GDP, Consumption, Investment, interest rates Inflation The results were obtained from cyclical contraction effects of the Taylor rule on inflation. The estimation was made for the time periods 2000 - 2005 and 2006 - 2015 through Bayesian econometrics. A different response is evident in both periods of time, in fiscal spending and the price of natural gas. |
| Keywords: | Bayesian estimation, Fiscal Expenditure, Financial Frictions, Dynamic Stochastic General Equilibrium Model (DSGE). |
| JEL: | E42 E58 E62 E63 |
| Date: | 2016–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78784&r=mac |
| By: | Kerssenfischer, Mark |
| Abstract: | Dynamic factor models and external instrument identification are two recent advances in the empirical macroeconomic literature. This paper combines the two approaches in order to study the effects of monetary policy shocks. I use this novel framework to re-examine the effects found by Forni and Gambetti (2010, JME) in a recursively-identified DFM. Considering the fundamental differences between the identifying assumptions, the results are overall strikingly similar. Importantly, this finding stands in stark contrast to traditional VAR models, which yield decisively different results in the two identification schemes. This highlights the importance of using extended information sets to properly identify monetary policy shocks. |
| Keywords: | Monetary Policy,Dynamic Factor Models,External Instrument,High-Frequency Identification |
| JEL: | C32 E32 E44 E52 F31 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:082017&r=mac |
| By: | Gerhard Rösl; Franz Seitz; Karl-Heinz Tödter |
| Abstract: | To broaden the operational scope of monetary policy, several authors suggest cash abolishment as an appropriate means of breaking through the zero lower bound. The key question in this respect is: What are the costs of such a proposal? We argue that the welfare costs of bypassing the zero lower bound can be dealt with analytically and empirically by assuming negative interest rates on cash holdings. Adopting a money-in-the-utility-function (MIU) model, we measure the welfare loss in terms of the amount needed to compensate consumers (compensated variation), and as excess burden (deadweight loss) imposed on the economy. Firstly, we gauge the welfare effects of abolishing cash, both, for the Euro area and for Germany, and we perform several robustness checks. Secondly, we broaden the analysis by taking into account the liquidity services of assets included in the monetary aggregates M1 and M3, and we contrast the results for the year 2015 with those for the pre-crisis period 2005. Our findings suggest that the welfare losses of negative interest rates incurred by consumers and society are large, notably if implemented in a low interest rate environment. Imposing a negative interest rate of 3 percent on cash holdings and reducing the interest on all assets included in M3 creates a deadweight loss of € 62bn for euro area and of €18bn for Germany. The annual compensation required by consumers in the euro area as well as in Germany is equivalent to 2.2 percent of GDP or about €700 per capita. Thus, stepping into deep negative interest rates turns out to be a very costly economic experiment, leaving aside the potential risks and negative side effects of protracted and intensified unconventional monetary policy. |
| Keywords: | Zero lower bound, cash abolishment, negative interest rates, welfare loss, compensated variation, deadweight loss |
| JEL: | E41 E21 E58 I3 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:rmn:wpaper:201706&r=mac |
| By: | Peydró, José Luis; Polo, Andrea; Sette, Enrico |
| Abstract: | The potency of the bank lending channel of monetary policy may be limited if banks rebalance their portfolios towards securities, e.g. to pursue risk-shifting or liquidity hoarding. To test for the bank lending and risk-taking (reach-for-yield) channels, we therefore analyze banks' securities trading, in addition to credit supply, in turn allowing us to also study the empirical relevance of key financial frictions. For identification, since the creation of the euro, we exploit the security and credit application registers owned by the central bank of Italy. In crisis times, we find that, with softer monetary policy, less capitalized banks prefer buying securities rather than increasing credit supply (not due to lack of good loan applications), thereby impacting firm-level real outcomes. Moreover, more - not less - capitalized banks reach-for-yield, which is inconsistent with the risk-shifting hypothesis. Results suggest that the main drivers at work are access to liquidity and risk-bearing capacity, and not regulatory capital arbitrage. Finally, in pre-crisis times, when financial frictions are limited, less capitalized banks do not expand securities holdings over credit supply. |
| Keywords: | bank capital; loan applications; monetary policy; reach-for-yield; regulatory arbitrage; securities; Sovereign debt |
| JEL: | E51 E52 E58 G01 G21 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12011&r=mac |
| By: | Ahmed Jamal Pirzada |
| Abstract: | This paper uses an extended version of the New Keynesian model to provide an alternate explanation for the decrease in energy price pass-through to core inflation. The results show that in a model in which energy goods are consumed by households, uncertain energy prices decrease firms’ responsiveness to an increase in the energy price. This is because uncertain energy prices increase the precautionary savings motive of households. Since firms expect demand for finished consumption goods to contract more, they increase their prices by less. When energy prices are highly uncertain, instead of increasing prices, firms decrease their prices following a positive energy price shock. |
| Keywords: | Energy Prices, Uncertainty, Inflation, Monetary Policy, DSGE. |
| JEL: | E31 E52 E58 |
| Date: | 2017–04–13 |
| URL: | http://d.repec.org/n?u=RePEc:bri:uobdis:17/681&r=mac |
| By: | José-Luis Peydró; Andrea Polo; Sette Enrico |
| Abstract: | The potency of the bank lending channel of monetary policy may be limited if banks rebalance their portfolios towards securities, e.g. to pursue risk-shifting or liquidity hoarding. To test for the bank lending and risk-taking (reach-for-yield) channels, we therefore analyze banks’ securities trading, in addition to credit supply, in turn allowing us to also study the empirical relevance of key financial frictions. For identification, since the creation of the euro, we exploit the security and credit application registers owned by the central bank of Italy. In crisis times, we find that, with softer monetary policy, less capitalized banks prefer buying securities rather than increasing credit supply (not due to lack of good loan applications), thereby impacting firm-level real outcomes. Moreover, more – not less – capitalized banks reach-for-yield, which is inconsistent with the risk-shifting hypothesis. Results suggest that the main drivers at work are access to liquidity and risk-bearing capacity, and not regulatory capital arbitrage. Finally, in pre-crisis times, when financial frictions are limited, less capitalized banks do not expand securities holdings over credit supply. |
| Keywords: | monetary policy, securities, loan applications, bank capital, reach-for-yield, held to maturity, available for sale, trading book, haircuts, regulatory arbitrage, sovereign debt. |
| JEL: | E51 E52 E58 G01 G21 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1565&r=mac |
| By: | Lucas Hafemann (Justus-Liebig-University Giessen); Peter Tillmann (Justus-Liebig-University Giessen) |
| Abstract: | This paper studies the transmission of ECB monetary policy, both at the aggregate euro area and the country level. We estimate a VAR model for the euro area in which monetary policy shocks are identified using an external instrument that refl ects policy surprises. For that purpose we use the change in German bunds at meeting days of the Governing Council. The identified monetary policy shock is then put into country-specific local projections in order to derive country-specific impulse responses. We find that (i) the transmission is very heterogeneous, both across channels and across countries, (ii) policy is transmitted through spreads, yields and the exchange rate, but less through banks and the stock market, and (iii) the strength of the transmission depends on structural characteristics of member countries, among them are current account balanced, debt to GDP levels, and the strength of banking systems. |
| Keywords: | Euro area, VAR, external instrument, local projections, monetary transmission |
| JEL: | E52 E32 E44 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201720&r=mac |
| By: | Ansgar Belke |
| Abstract: | Successfully managing a course back to normality (“exit”) will depend crucially on the central banks’ ability to communicate effectively a credible strategy for an orderly exit from such kind of policies. In this context, clear, deliberate, coordinated messages that are anchored in the central banks’ mandate are of essence. We focus upon transparency and “forward guidance” as potential tools to stimulate the economy in the Euro Area. We then deliver details on whether and how the effectiveness of central bank’s policies can be improved through more transparency and “forward guidance”. We do so by highlighting marked differences in the Fed’s and the ECB’s interpretation of “forward guidance”. In order to highlight the key issues of central bank communication and the management of expectations referring to a practical institutional example, we also comment on the role the Monetary Dialogue in the context of an evolving monetary policy. Communication is finally described as a policy option in terms of minimising risk in the context of exit from unconventional monetary policies and of the signalling channel which refers to what the public learns from announcements of unconventional monetary policy operations such as Quantitative Easing. |
| Keywords: | central bank communication, European Central Bank, forward guidance, monetary dialogue, transparency |
| JEL: | E52 E58 G14 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:rmn:wpaper:201704&r=mac |
| By: | Noga, Adam |
| Abstract: | In the paper is presented special theory of employment, which is not part of the four economic methods (simultaneous equations, partial equilibrium, macro- aggregates, Marxian hermeneutic). The special theory of employment indicating that households, as one of the four regulators of the economy, in addition to markets, the state and enterprises, in their search for work must themselves find a "loop" that integrates the regulators in order to achieve their goals. The building block for creating this "loop" is the disclosure, that in the history of economic thought too much importance was attributed to the substitutability and complementarity of goods (e.g. between leisure and consumption in the theories of employment), while not enough importance was attributed to the co-productivity of goods. The co-productivity of goods x and y means mutually gaining access to one of these goods as a result of using (consumption) of the other good. On account of this co-productivity households can control the remaining regulators of the economy and create employment for themselves, regardless of macroeconomic conditions of stability or instability. |
| Keywords: | Employment, Co-Productive Goods, Regulators of the Economy, Household, Consumption Structure |
| JEL: | D11 D13 D60 E21 E24 |
| Date: | 2016–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78647&r=mac |
| By: | Lakdawala, Aeimit; Schaffer, Matthew |
| Abstract: | We study the response of stock prices to monetary policy, distinguishing the effects of exogenous policy actions from ``Delphic" actions that reveal the Federal Reserve's macroeconomic forecasts. To decompose composite monetary policy surprises into these separate components, we exploit differences in central bank and private sector forecasts to construct a measure of Federal Reserve private information. Contractionary monetary policy shocks of either type cause a fall in stock prices with exogenous shocks having a larger negative effect. However there is an important asymmetry; when FOMC meetings are unscheduled or when the fed funds rate reverses direction, stock prices actually rise in response to a contractionary Delphic shock. |
| Keywords: | Monetary Policy Shocks, Stock Prices, Federal Reserve Private Information |
| JEL: | E44 E5 G14 |
| Date: | 2016–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:77608&r=mac |
| By: | William Gatt (Central Bank of Malta) |
| Abstract: | This paper estimates a Phillips curve for Malta using data since the 1960s and presents evidence that the relationship has flattened over time, implying that the link between inflation and economic activity has weakened. Further analysis finds that this phenomenon was driven by downward price stickiness, whereby the responsiveness of price inflation is limited during economic slowdowns; however the Phillips curve was and remains alive during economic booms. |
| JEL: | C11 C32 E31 E32 O11 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:wpaper:0216&r=mac |
| By: | Guo, Zi-Yi |
| Abstract: | Empirical evidence shows that house prices are highly volatile and closely correlated with the business cycle, and the fact is at odds with the evidence that rental prices are relatively stable and almost uncorrelated with the business cycle. To explain the fact, we introduce information heterogeneity into a standard dynamic stochastic general equilibrium (DSGE) model with financial frictions. Agents are endowed with heterogeneous shocks, and rationally extract information from market activities. Since agents are confused by changes in average private signals about future fundamentals, the model generates an amplified effect of technology shocks on house prices, which accounts for the disconnect between house prices and the discounted sum of future rents. In addition, the model provides insights for the lead-lag relationship between residential and nonresidential investment over the business cycle. The solution method developed in this paper can be applied in other DSGE models with heterogeneous information. |
| Keywords: | heterogeneous information,DSGE model,housing market |
| JEL: | C63 E22 E32 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201717&r=mac |
| By: | Aaron G Grech; Noel Rapa (Central Bank of Malta) |
| Abstract: | Malta’s current account has improved substantially since 2009, by about four times the change seen in the euro area. The note establishes that Malta’s current account is stationary, a necessary condition for avoiding sustainability problems in external accounts. This reflects a recovery in the national saving rate. Conversely investment has declined. |
| JEL: | E21 E32 F32 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:ppaper:0316&r=mac |
| By: | Rösl, Gerhard; Seitz, Franz; Tödter, Karl-Heinz |
| Abstract: | To broaden the scope of monetary policy, cash abolishment is often suggested as a means of breaking through the zero lower bound. However, practically nothing is said about the welfare costs of such a proposal. Rösl, Seitz and Tödter argue that the welfare costs of bypassing the zero lower bound can be analyzed analytically and empirically by assuming negative interest rates on cash holdings. They gauge the welfare effects of abolishing cash, both, for the euro area and for Germany. Their findings suggest that the welfare losses of negative interest rates incurred by money holders are large, notably if implemented in the current low interest rate environment. Imposing a negative interest rate of 3 percentage points on cash holdings and reducing the interest on all assets included in M3 creates a deadweight loss of € 62bn for the euro area and of €18bn for Germany. Therefore, the authors argue that cash abolishment or negative interest rates on cash to break through the zero lower bound at any price can hardly be a meaningful policy goal. |
| Keywords: | zero lower bound,cash abolishment,negative interest rates,welfare loss,compensated variation,deadweight loss |
| JEL: | E41 E21 E58 I3 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:imfswp:112&r=mac |
| By: | Papavangjeli, Meri; Leka, Eralda |
| Abstract: | Including for the first time macroeconomic variables in the empirical analysis with panel data for commercial banks, this paper aims to shed light on the determinants of net interest margin in the Albanian banking sector. Considered as a good indicator of banking intermediation efficiency level, interest margin size helps to perceive asymmetries in the banking market and the costs transmitted to the clients. The issue is important in the context of monetary policy, since the higher are the asymmetries in the market, the more difficult the transmission of its signals. Using an OLS-based PCSE procedure to estimate the econometric model, this study suggests that bank specific factors such as overhead costs, capital adequacy ratio, current liquidity ratio and non-performing loans ratio are the most important determinants of interest margins in Albania. Macroeconomic factors such as growth, exchange rate and domestic debt have a significant impact, even though the main contribution is attributed to bank’s specific factors. The information about banking variables may have implications mainly in the banking supervision areas of market efficiency and regulation, but the new information about macroeconomic variables is of relevance to policymakers who, with their economic policies, can contribute to the stability of the banking market. |
| Keywords: | interest margin, efficiency, macroeconomic factors |
| JEL: | D43 E43 E44 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78604&r=mac |
| By: | Aldasoro, Iñaki; Unger, Robert |
| Abstract: | Using a Bayesian vector autoregression (BVAR) identified with a mix of sign and zero restrictions, we show that a restrictive bank loan supply shock has a strong and persistent negative impact on real GDP and the GDP deflator. This result comes about even though flows of other sources of financing, such as equity and debt securities, expand strongly and act as a "spare tire" for the reduction in bank loans. We show that this result can be rationalized by a recently revived view of banking, which holds that banks increase the nominal purchasing power of the economy when they create additional deposits in the act of lending. Consequently, our findings indicate that a substitution of bank loans by other sources of financing might have negative macroeconomic repercussions. |
| Keywords: | bank loans,Bayesian VAR,credit creation,ECB,euro area,external financing,financing structure |
| JEL: | E30 E40 E50 G20 G30 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:042017&r=mac |
| By: | Rueben Ellul (Central Bank of Malta) |
| 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. |
| JEL: | E32 E37 C01 C22 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:wpaper:0416&r=mac |
| By: | Lakdawala, Aeimit; Wu, Shu |
| Abstract: | In this paper we show how the degree of central bank credibility influences the level, slope and curvature of the term structure of interest rates. In an estimated structural model, we find that historical yield curve data are best matched by the Federal Reserve conducting policy in a loose commitment framework, rather than the commonly used discretion and full commitment assumptions. The structural impulse responses indicate that the past history of realized shocks play a crucial role in determining the dynamic effects of monetary policy on the yield curve. Finally, the regime-switching framework allows us to estimate likely re-optimization episodes which are found to impact the middle of the yield curve more than the short and long end. |
| Keywords: | Term Structure, Commitment, Regime-Switching Bayesian Estimation, Optimal Monetary Policy, DSGE models |
| JEL: | E52 G12 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78253&r=mac |
| By: | Pavel Vidal Alejandro (Faculty of Economics and Management, Pontificia Universidad Javeriana Cali) |
| Abstract: | The paper focuses on analyzing the leading macroeconomic trends and policies in Cuba from 1985-2013. Five macroeconomic indexes were estimated using dynamic factor models. The correlations between the estimated indexes and the GDP growth rate show that, on average, fiscal policy was procyclical while monetary policy was countercyclical. Econometric simulations confirmed the economy’s high vulnerability to an eventual collapse of relations with Venezuela; it would cause GDP to contract by about 10% over three years. The analysis also suggests that pending monetary reforms could create negative pressure on goods production and on households’ living conditions, which could not be mitigated by an expansionary fiscal policy. Instead, the negative effects of such shocks can be mitigated only through greater international openness; this is a more feasible objective. given the current situation of diminishing tensions with the US government. |
| Keywords: | Cuba, Reform, Macroeconomics, Dynamic Factor Model, Monetary Policy |
| JEL: | E61 E63 E66 C22 P24 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:ddt:wpaper:28&r=mac |
| By: | Stefano Eusepi; Bruce Preston |
| Abstract: | This paper proposes a theory of the fiscal foundations of inflation based on imperfect knowledge and learning. Because imperfect knowledge breaks Ricardian equivalence the scale and composition of the public debt matter for inflation. High moderate-duration debt generates wealth effects on consumption demand that impairs the intertemporal substitution channel of monetary policy: aggressive monetary policy is required to anchor inflation expectations. Counterfactual experiments, in an estimated medium-scale DSGE model, reveal the US economy would have been substantially more volatile over the Great Inflation and Great Moderation periods, had average debt been consistent with levels currently observed in Italy or Japan. |
| Keywords: | Monetary and Fiscal Interactions, Learning Dynamics, Expectations Stabilization, Great Moderation, Great Inflation |
| JEL: | E32 D83 D84 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2017-34&r=mac |
| By: | Gambetti, Luca (Autonomous University of Barcelona); Messina, Julián (Inter-American Development Bank) |
| Abstract: | Examines the evolution of the cyclicality of real wages and employment in four Latin American economies: Brazil, Chile, Colombia and Mexico, during the period 1980-2010. Wages are highly pro-cyclical during the 1980s and early 1990s, a period characterized by high inflation. As inflation declined wages became less pro-cyclical, a feature that is consistent with emerging downward wage rigidities in a low inflation environment. Compositional effects associated with changes in labor participation along the business cycle appear to matter less for estimates of wage cyclicality than in developed economies. |
| Keywords: | downward wage rigidity, indexation, real wage cyclicality, vector autoregression, time varying coefficients, Bayesian estimation |
| JEL: | E24 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10657&r=mac |
| By: | Emmanuel Farhi; Iván Werning |
| Abstract: | This paper extends the benchmark New-Keynesian model with a representative agent and rational expectations by introducing two key frictions: (1) agent heterogeneity with incomplete markets, uninsurable idiosyncratic risk, and occasionally-binding borrowing constraints; and (2) bounded rationality in the form of level-k thinking. Compared to the benchmark model, we show that the interaction of these two frictions leads to a powerful mitigation of the effects of monetary policy, which is much more pronounced at long horizons, and offers a potential rationalization of the “forward guidance puzzle”. Each of these frictions, in isolation, would lead to no or much smaller departures from the benchmark model. We conclude that the interaction of bounded rationality and market frictions improves the ability of the model to account for the effects of monetary policy. |
| JEL: | E03 E1 E4 E52 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23281&r=mac |
| By: | Robert Kollmann; Beatrice Pataracchia; Rafal Raciborski; Marco Ratto; Werner Roeger; Lukas Vogel |
| Abstract: | The Global Crisis led to a sharp contraction and long-lasting slump in both Eurozone and US real activity, but the post-crisis adjustment in the Eurozone and the US shows striking differences. This column argues that financial shocks were key determinants of the 2008-09 Great Recession, for both the Eurozone and the US. The post-2009 slump in the Eurozone mainly reflects a combination of adverse aggregate demand and supply shocks, in particular lower productivity growth, and persistent adverse shocks to capital investment linked to the poor health of the Eurozone financial system. Mono-causal explanations of the persistent slump are thus insufficient. Adverse financial shocks were less persistent for the US. |
| Keywords: | post-crisis slump; eurozone; united states; demand and supply shocks; financial shocks |
| JEL: | F40 F30 E20 E30 E50 E60 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/250500&r=mac |
| By: | BLINOV, Sergey |
| Abstract: | Forecasts showing how the economy will be developing are very important both for the government and for all the economic agents, including citizens. In Russia, the common practice is to forecast based on price assumptions for hydrocarbons, primarily oil. Such an approach causes serious errors. This paper proposes a different approach driven by the close linkage between the GDP and the real money supply. By way of an example, forecast scenarios for Russia’s GDP in 2017 are adduced. Options for using the proposed methodology in economic policy (including anti-crisis policy) are suggested |
| Keywords: | Monetary Policy; Business Cycles; Forecasting and Prediction Methods; Energy and the Macroeconomy |
| JEL: | C53 C54 E37 E52 Q43 |
| Date: | 2017–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78717&r=mac |
| By: | Tesfaselassie, Mewael F.; Wolters, Maik |
| Abstract: | During the 1970s, industrial countries, including the US and continental Europa, experienced a combination of slow productivity growth and high unemplyoment. Subsequent research has shown that the standard model of unemployment actually gives counterfactual predictions. Motivated by the observation that the 1970s were also characterized by high and rising inflation, Tesfaselassie and Wolters examine the effect of growth on unemployment in the presence of nominal price rigidity. The authors demonstrate that the effect of growth on unemployment may be positive or negative. Faster growth leads to lower unemployment if the rate of inflation is high enough. There is a threshold level of inflation below which faster growth leads to higher unemployment and above which faster growth leads to lower unemployment. The threshold level in turn depends on labor market characteristics, such as hiring efficiency, the job destruction rate, workers' relative bargaining power and the opportunity cost of work. |
| Keywords: | growth,trend inflation,unemployment |
| JEL: | E24 E31 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:imfswp:113&r=mac |
| By: | Brian Micallef (Central Bank of Malta) |
| Abstract: | This paper computes an aggregate ‘misalignment’ index using a multiple indicator approach to identify under or over-valuation of house prices in Malta based on fundamentals. A total of 5 indicators are used that capture demand, supply and banking system factors: the house price-to-RPI ratio, the price-to-income ratio, price-to-construction costs ratio, dwelling investment-to-GDP ratio and the loan-to-income ratio. These indicators enter the index in ‘gap’ form, that is, as a deviation from their trends or long-run averages. The weights are derived using principal component analysis. Based on the Central Bank of Malta house price index, the misalignment indicator shows a period of overvaluation in house prices that peaked in 2006-2007. This disequilibrium started to be corrected following the decline in house prices, reaching a trough in 2013. Starting in 2014, however, the index started to recover such that, by end-2015, house prices were broadly in equilibrium. |
| JEL: | E32 E37 C01 C22 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:wpaper:0316&r=mac |
| By: | Alessia Paccagnini (University College Dublin, School of Economics) |
| Abstract: | We assess the predictive power of macroeconomic and financial latent factors on the key variables for the US economy before and after the recent Great Recession. We implement a forecasting horserace among Factor Augmented VAR (FAVAR), Classical, and Bayesian VAR models. FAVAR models outperform others. Focusing only on macroeconomic or on nancial latent factors,we nd how the nancial variables have not a driver role in forecasting the US economy including the Great Recession. |
| Keywords: | Factor Models, Factor Augmented VAR, VAR models, Bayesian VAR models,Forecasting |
| JEL: | C38 C53 C3 E32 E3 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:nbp:nbpmis:256&r=mac |
| By: | Asali, Muhammad |
| Abstract: | The net, positive, effect of unemployment at conception on birth outcomes in developed countries is likely overestimated in the literature. This is the consequence of ignoring the effects of unemployment during pregnancy. Using data from Israel, we not only confirm this finding but also find that the harmful effects of unemployment in the third trimester are large enough to offset any preceding positive effects. Stress and nutritional deficiencies due to economic contractions during pregnancy are at least as important as the positive self-selection at conception. This finding calls for policy intervention to support pregnant women even in developed countries. |
| Keywords: | recession; health outcomes; birth weight; developed countries |
| JEL: | E24 E32 I12 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78204&r=mac |
| By: | Kamal, Asmma |
| Abstract: | This paper employs an unrestricted vector autoregressive (VAR) model, identified using a recursive Cholesky decomposition, to examine the output composition of the monetary policy transmission mechanism in Pakistan. The results indicate that a contractionary monetary policy shock leads to a relatively larger decline in private consumption compared to private investment with a significant lag. Furthermore, preliminary analysis suggests that the consumption channel plays a more important role than investment channel in contributing to the output reactions resulting from policy rate (interbank rate) shocks during the period 1995Q3 2010Q2 analysed in this study. |
| Keywords: | Monetary policy, output composition, consumption, investment |
| JEL: | E5 E52 |
| Date: | 2016–10–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78655&r=mac |
| By: | William Gatt (Central Bank of Malta); Owen Grech (Central Bank of Malta) |
| Abstract: | Few macroeconomic variables generate as much interest and debate as house prices. Households, firms and policymakers alike watch house prices closely. In recent years, house prices in Malta have risen considerably, nearly doubling between 2000 and 2015, although with a significant degree of variability. This has led to growing concerns about the possible existence of a housing bubble. |
| JEL: | C22 C32 C53 E32 E44 R21 R38 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:ppaper:0216&r=mac |
| By: | Valdivia Coria, Joab Dan |
| Abstract: | I built a general equilibrium model for a small open economy, in order to analyze the effects of fiscal spending in Bolivia, observing certain effects on variables like is constructed: GDP, consumption, investment, exports, imports, real exchange rate and interest rate. Shocks are transmitted to the economy in the presence of the relationship between fiscal spending and the international price of oil, which was analyzed. The results indicate that in the short-term commodity price shock and fiscal spending have positively impacts in the product and despise the way real change. |
| Keywords: | Key words: Bayesian Estimation, Open Economy, Fiscal Spending, Dynamic Stochastic General Equilibrium (DSGE), commodity Price. |
| JEL: | E42 E58 E63 H39 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78789&r=mac |
| By: | Blinder, Alan S.; Ehrmann, Michael; de Haan, Jakob; Jansen, David-Jan |
| Keywords: | central banks, monetary policy, surveys |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20172047&r=mac |
| By: | Stähler, Nikolai |
| Abstract: | By simulating various (labour market) integration scenarios with the aid of a New Keynesian DSGE model, this paper explores the potential economic consequences and transmission mechanisms resulting from the recent refugee migration to Germany. We find that the long-run costs and benefits for domestic agents depend critically on the skill levels migrants will obtain in the long run. A failure to integrate the about 800,000 migrants (equivalent to 1% of initial German population) could reduce per capita output and consumption by 0.43% and 0.48%, respectively, while integration measures that improve their qualification structure could even yield per capita output and consumption gains of 0.34% and 0.38%, respectively. Measures that cause the migrant qualification structure to closely match that of the native population over the long term do not lead to significant changes in GDP and consumption. Overall, our model simulations suggest that the macroeconomic impact of refugee migration is small. |
| Keywords: | Refugee Migration,Labour Market Integration,Macroeconomics |
| JEL: | F22 J61 J31 E24 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:052017&r=mac |
| By: | Radosevic, Dubravko |
| Abstract: | When the financial crisis revealed weaknesses in eurozone governance, EU responded with new prevention and crisis resolution governance structure and counter-cyclical policies. A new surveillance procedure for the prevention and correction of macroeconomic imbalances, the so called Macroeconomic Imbalance Procedure (MIP). The EC has recognized the existence of excessive imbalances that requires strong and comprehensive policy measures to undertake significant adjustments. International competitiveness indicators and policy instruments are the most important for correction of external imbalances. This is also one of the major challenges in the euro zone – the symmetric adjustment of the intra – euro area competitiveness divergences and external imbalances. For non – euro area EU members, monetary strategies and exchange rate policies are highly important instruments of adjustment process. Spillover effects of financial crisis in EU periphery (non – EMU economies) could be damaging for the eurozone economies. The European economic governance mechanisms are inconsistent with specific position of the non - euro area countries of the EU. The aim of this policy paper is to analyze European economic governance for non – euro area members. Our reform proposals are based on the two basic areas of improvements in European economic governance for non – EMU members of the EU: (a) new approach to the European Semester, and (b) new financial assistance facilities for non – euro area countries, in order to reduce contagion risk in EU. |
| Keywords: | European Union debt crisis, European economic governance, EU conditionality, European Semester, spill – over effects, external adjustment mechanisms, crisis mechanisms for non – EMU economies, Brexit, Italy’s banking crisis, ECB, Target 2 |
| JEL: | B5 B50 E60 E61 F30 F33 F36 F4 F42 H1 H12 |
| Date: | 2016–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78613&r=mac |
| By: | Benjamin Beckers; Konstantin A. Kholodilin; Dirk Ulbricht |
| Abstract: | In this paper, we examine the predictive ability of automatic and expert-rated media sentiment indicators for German inflation. We find that sentiment indicators are competitive in providing inflation forecasts against a large set of common macroeconomic and financial predictors. Sophisticated linguistic sentiment algorithms and business cycle news rated by experts perform best and are superior to simple word-count indicators and autoregressive forecasts. |
| Keywords: | Inflation prediction, media sentiment indicators, news reports, real-time forecasting |
| JEL: | C53 E31 E37 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1665&r=mac |
| By: | Brian Micallef (Central Bank of Malta) |
| Abstract: | In this paper, the total number of employed and the full-time equivalent employment in Malta are estimated for the last three decades. These series give a new picture of the historical development of employment and productivity in Malta. The estimated full-time equivalent time series, in spite of its limitations, is a first step on the way towards a comprehensive statistical measure of labour input in Malta. |
| JEL: | E24 E32 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:ppaper:0115&r=mac |
| By: | Conesa, Juan Carlos (Stony Brook University); Costa, Daniela (Federal Reserve Bank of Minneapolis); Kamali, Parisa (Federal Reserve Bank of Minneapolis); Kehoe, Timothy J. (Federal Reserve Bank of Minneapolis); Nygard, Vegard (Federal Reserve Bank of Minneapolis); Raveendranathan, Gajen (Federal Reserve Bank of Minneapolis); Saxena, Akshar (Harvard University) |
| Abstract: | This paper develops an overlapping generations model to study the macroeconomic effects of an unexpected elimination of Medicare. We find that a large share of the elderly respond by substituting Medicaid for Medicare. Consequently, the government saves only 46 cents for every dollar cut in Medicare spending. We argue that a comparison of steady states is insufficient to evaluate the welfare effects of the reform. In particular, we find lower ex-ante welfare gains from eliminating Medicare when we account for the costs of transition. Lastly, we find that a majority of the current population benefits from the reform but that aggregate welfare, measured as the dollar value of the sum of wealth equivalent variations, is higher with Medicare. |
| Keywords: | Medicare; Medicaid; Overlapping generations; Steady state; Transition path |
| JEL: | E21 E62 H51 I13 |
| Date: | 2017–04–27 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmsr:548&r=mac |
| By: | Owen Grech (Central Bank of Malta); Noel Rapa (Central Bank of Malta) |
| Abstract: | This paper presents the third version of the Central Bank of Malta’s core macro-econometric model of the Maltese Economy, STREAM (Structural and TRaditional Econometric model for Malta). It is a traditional structural model built around the neo-classical synthesis. Behavioural equations are estimated in error-correction form on the basis of quarterly data spanning from 2000Q1 to 2013Q4. Economic agents are assumed to have adaptive expectations. The novelty of the model is that it contains fully fledged fiscal and financial blocks, which is uncommon in traditional structural models |
| JEL: | C3 C5 E1 E2 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:wpaper:0116&r=mac |
| By: | Michael Ash (Department of Economics and School of Public Policy, University of Massachusetts Amherst); Deepankar Basu (Department of Economics, University of Massachusetts, Amherst); Arindrajit Dube (Department of Economics, University of Massachusetts, Amherst) |
| Abstract: | We provide a comprehensive assessment of the relationship between public debt and GDP growth in the postwar advanced economies. We use the timing of changes in public debt and growth to account for endogeneity, and find little evidence of a negative relationship. Semi-parametric estimates do not indicate any threshold effects. Finally, we reconcile our results with four recent, influential papers that found a substantial negative relationship, especially when public debt exceeds 90 percent of GDP. These earlier results appear to derive mostly from peculiar parametric specifications of nonlinearities, or use of small samples which amplify the influence of outliers. |
| Keywords: | public debt, growth |
| JEL: | E00 E6 H6 C82 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2017-10&r=mac |
| By: | Francesco Furlanetto (Norges Bank and Banco de España); Ørjan Robstad (Norges Bank) |
| Abstract: | We propose a new VAR identification scheme that enables us to disentangle immigration shocks from other macroeconomic shocks. Identification is achieved by imposing sign restrictions on Norwegian data over the period 1990Q1 - 2014Q2. The availability of a quarterly series for net immigration is crucial to achieving identification. Notably, immigration is an endogenous variable in the model and can respond to the state of the economy. We find that domestic labour supply shocks and immigration shocks are well identified and are the dominant drivers of immigration dynamics. An exogenous immigration shock lowers unemployment (even among native workers), has a small positive effect on prices and on public finances, no impact on house prices and household credit, and a negative effect on productivity. |
| Keywords: | labour supply shocks, immigration shocks, job-related immigration, identifi cation, VAR |
| JEL: | C11 C32 E32 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1716&r=mac |
| By: | Polbin, Andrey; Skrobotov, Anton |
| Abstract: | The article proposes a new approach for estimation of the business cycle component of the Russian GDP. At the first step, the non-stationary component consisting of a deterministic trend with structural breaks, and components characterizing the long-run impact of oil prices on the Russian economy are eliminated from the series of GDP (in logs). At the second step, the component of the business cycle with a periodicity of fluctuations from 6 to 32 quarters is extracted from the stationary residuals using spectral analysis methods. We find that the business cycle component for the period from 2014 to 2016 was zero while other methods give negative estimates. Besides, the magnitude of cyclical fluctuations has decreased. |
| Keywords: | business cycle; output gap; Russian economy; GDP; oil prices; cointegrating regression; structural breaks; spectral analysis; band pass filter |
| JEL: | C18 C22 C51 E32 F41 |
| Date: | 2017–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78667&r=mac |
| By: | Mohaddes, Kamiar (University of Cambridge); Raissi, Mehdi (International Monetary Fund); Weber, Anke (International Monetary Fund) |
| Abstract: | This paper examines whether a tipping point exists for real GDP growth in Italy above which the ratio of non-performing loans (NPLs) to total loans falls significantly. Estimating a heterogeneous dynamic panel-threshold model with data on 17 Italian regions over the period 1997-2014, we provide evidence for the presence of growth-threshold effects on the NPL ratio in Italy. More specifically, we find that real GDP growth above 1.2 percent, if sustained for a number of years, is associated with a significant decline in the NPLs ratio. Achieving such growth rates requires decisively tackling long-standing structural rigidities and improving the quality of fiscal policy. Given the modest potential growth outlook, however, under which banks are likely to struggle to grow out of their NPL overhang, further policy measures are needed to put the NPL ratio on a firm downward path over the medium term. |
| JEL: | C23 E44 G33 |
| Date: | 2017–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:309&r=mac |
| By: | Òscar Jordà; Björn Richter; Moritz Schularick; Alan M. Taylor |
| Abstract: | Higher capital ratios are unlikely to prevent a financial crisis. This is empirically true both for the entire history of advanced economies between 1870 and 2013 and for the post-WW2 period, and holds both within and between countries. We reach this startling conclusion using newly collected data on the liability side of banks’ balance sheets in 17 countries. A solvency indicator, the capital ratio has no value as a crisis predictor; but we find that liquidity indicators such as the loan-to-deposit ratio and the share of non-deposit funding do signal financial fragility, although they add little predictive power relative to that of credit growth on the asset side of the balance sheet. However, higher capital buffers have social benefits in terms of macro-stability: recoveries from financial crisis recessions are much quicker with higher bank capital. |
| JEL: | E44 G01 G21 N20 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23287&r=mac |
| By: | Beyer, Robert; Wieland, Volker |
| Abstract: | The current debate on monetary and fiscal policy is heavily influenced by estimates of the equilibrium real interest rate. In particular, this concerns estimates derived from a simple aggregate demand and Phillips curve model with time-varying components as proposed by Laubach and Williams (2003). For example, Summers (2014a) refers to these estimates as important evidence for a secular stagnation and the need for fiscal stimulus. Yellen (2015, 2017) has made use of such estimates in order to explain and justify why the Federal Reserve has held interest rates so low for so long. First, we re-estimate the U.S. equilibrium rate with the methodology of Laubach and Williams (2003). Then, we build on their approach and the modifications proposed in Mésonnier and Renne (2007) and Garnier and Wilhelmsen (2009) to provide new estimates for the United States, the euro area and Germany. Third, we subject these estimates to a battery of sensitivity tests. Due to the great uncertainty and sensitivity that accompany these equilibrium rate estimates, the observed decline in the estimates is not a reliable indicator of a need for expansionary monetary and fiscal policy. Yet, if these estimates are employed to determine the appropriate monetary policy stance, such estimates are better used together with the consistent estimate of the level of potential output. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:imfswp:110&r=mac |
| By: | Siem Koopman (Vrije Universiteit Amsterdam, Tinbergen Institute); André Lucas (Vrije Universiteit Amsterdam, Tinbergen Institute); Marcin Zamojski (University of Gothenburg) |
| Abstract: | We consider score-driven time-varying parameters in dynamic yield curve models and investigate their in-sample and out-of-sample performance for two data sets. In a univariate setting, score-driven models were shown to offer competitive performance to parameter-driven models in terms of in-sample fit and quality of out-of-sample forecasts but at a lower computational cost. We investigate whether this performance and the related advantages extend to more general and higher-dimensional models. Based on an extensive Monte Carlo study, we show that in multivariate settings the advantages of score-driven models can even be more pronounced than in the univariate setting. We also show how the score-driven approach can be implemented in dynamic yield curve models and extend them to allow for the fat-tailed distributions of the disturbances and the time-variation of variances (heteroskedasticity) and covariances. |
| Keywords: | term-structure, dynamic Nelson-Siegel models, non-Gaussian distributions, time-varying parameters, observation-driven models, parameter-driven models |
| JEL: | C15 C32 C33 C58 C63 E43 E52 E58 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:nbp:nbpmis:258&r=mac |
| By: | Kang, Wensheng (Kent State University); Ratti, Ronald A. (University of Western Sydney); Vespignani, Joaquin L. (University of Tasmania) |
| Abstract: | This paper investigates the time-varying dynamics of global stock volatility, commodity prices, and domestic output and consumer prices. The main empirical findings of this paper are: (i) stock volatility and commodity price shocks impact each other and the economy in a gradual and endogenous adjustment process; (ii) the impact of a commodity price shock on global stock volatility is far greater during the global financial crisis than at other times; (iii) the effects of global stock volatility on US output are amplified by the endogenous commodity price responses; (iv) in the long run, shocks to commodity prices (stock market volatility) account for 11.9% (6.6%) and 25.1% (11.6%) of the variation in US output and consumer prices; (v) the effects of global stock volatility shocks on the economy are heterogeneous across nations and relatively larger in the developed countries. |
| JEL: | D80 E44 E66 F62 G10 |
| Date: | 2017–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:311&r=mac |
| By: | Hyeongwoo Kim; Yunxiao Zhang |
| Abstract: | This paper studies dynamic adjustments of 49 world commodity prices in response to innovations in the nominal exchange rate and the world real GDP. After we estimate the dynamic elasticity of the prices with respect to these shocks, we obtain the kernel density of our estimates to establish stylized facts on the adjustment process of the commodity price toward a new equilibrium path. Our empirical findings imply, on average, that the law of one price holds in the long-run, whereas the substantial degree of short-run price rigidity was observed in response to the nominal exchange rate shock. The real GDP shock tends to generate substantial price fluctuations in the short-run because adjustments of the supply can be limited, but have much weaker effects in the long-run as the supply eventually counterbalances the increase in the demand. Overall, we report persistent long-lasting effects of the nominal exchange rate shock on commodity prices relative to those of the real GDP shock. |
| Keywords: | Commodity Prices; Price Stickiness; Dynamic Elasticity; Vector Autoregression; Impulse-Response Function; Kernel Density |
| JEL: | E31 F31 Q02 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:abn:wpaper:auwp2017-02&r=mac |
| By: | Brian Micallef (Central Bank of Malta) |
| Abstract: | This paper estimates the impact of structural reforms aimed at increasing the female participation rate on potential output in Malta. Albeit starting from a low level, the female participation rate in Malta increased by 11.7 percentage points between 2008 and 2014, by far the highest increase registered among EU countries |
| JEL: | E24 J11 J21 J24 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:ppaper:0315&r=mac |
| By: | El-Anshasy, Amany (United Arab Emirates University); Mohaddes, Kamiar (University of Cambridge); Nugent, Jeffrey B. (University of Southern California) |
| Abstract: | This paper examines the long-run effects of oil revenue and its volatility on economic growth as well as the role of institutions in this relationship. We collect annual and monthly data on a sample of 17 major oil producers over the period 1961-2013, and use the standard panel autoregressive distributed lag (ARDL) approach as well as its cross-sectionally augmented version (CS-ARDL) for estimation. Therefore, in contrast to the earlier literature on the resource curse, we take into account all three key features of the panel: dynamics, heterogeneity and cross-sectional dependence. Our results suggest that (i) there is a significant negative effect of oil revenue volatility on output growth, (ii) higher growth rate of oil revenue significantly raises economic growth, and (iii) better fiscal policy (institutions) can offset some of the negative effects of oil revenue volatility. We therefore argue that volatility in oil revenues combined with poor governmental responses to this volatility drives the resource curse paradox, not the abundance of oil revenues as such. |
| JEL: | C23 E02 F43 O13 Q32 |
| Date: | 2017–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:310&r=mac |
| By: | Cholewa, Jan; Goecke, Henry; Grömling, Michael |
| Abstract: | There is no lack of information for diagnosing the development of an economy. The problem is more one of obtaining a concise summary. The IW Business Cycle Traffic Light captures at a glance the changes in important economic indicators for Germany, the Eurozone, the USA and China. This can only be achieved by establishing which improvements and deteriorations in the short-term development of the economy can be defined as relevant. Like its individual underlying indicators, the IW Business Cycle Traffic Light represents the status of information a varying number of months ago, thus partly reflecting the inevitable recognition lags in business cycle diagnosis. |
| JEL: | C82 E32 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwkrep:22016&r=mac |
| By: | Donadelli, Michael; Grüning, Patrick |
| Abstract: | We study the general equilibrium implications of different fiscal policies on macroeconomic quantities, asset prices, and welfare by utilizing two endogenous growth models. The expanding variety model features only homogeneous innovations by entrants. The Schumpeterian growth model features heterogeneous innovations: "incremental" innovations by incumbents and "radical" innovations by entrants. The government levies taxes on labor income and corporate profits and supplies subsidies to consumption, capital investment, and investments in research and development by entrants and, if applicable, incumbents. With these models at hand, we provide new insights on the interplay of innovation dynamics and fiscal policy. |
| Keywords: | endogenous growth,asset pricing,government,fiscal policy,heterogeneous innovation |
| JEL: | E22 G12 H20 I30 O30 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:171&r=mac |
| By: | José-María Da-Rocha; Marina Mendes Tavares; Diego Restuccia |
| Abstract: | What accounts for differences in output per capita and total factor productivity (TFP) across countries? Empirical evidence points to resource misallocation across heterogeneous production units as an important factor. We study resource misallocation in a model where establishment-level productivity is endogenous and responds to the same policy distortions that create misallocation. In this framework, policy distortions not only misallocate resources across a given set of productive units (static effect), but also create disincentives for productivity improvement (dynamic effect) thereby affecting the productivity distribution and further contributing to lower aggregate output and productivity. The dynamic effect is substantial quantitatively. Reducing the dispersion in revenue productivity in the model by 25 percentage points to the level of the U.S. benchmark implies an increase in aggregate output and TFP by a factor of 2.9-fold. Improved resource allocation accounts for 42 percent of the gain, whereas the change in the productivity distribution accounts for the remaining 58 percent. |
| JEL: | E0 E1 O1 O4 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23339&r=mac |
| By: | Piotr Bańbuła (Narodowy Bank Polski, Warsaw School of Economics); Marcin Pietrzak (Narodowy Bank Polski) |
| Abstract: | We built Early Warning Models (EWM) for determining the optimal moment for build-up phase of the countercyclical capital buffer. For this purpose we estimate a number of early warning models based on the wide panel of countries. We test many potential variables from the early 1970s until 2014, their combinations, and the stability of their signals. Our setting includes country-specific information without using country-specific effects. This allows for direct application of EWM we obtain to any country, including those that have not experienced a banking crisis. Models with three explanatory variables outperform models with smaller number of variates. The probability of extracting a correct signal from best-performing EWM exceeds 0.9. We find that low levels of VIX tend to precede crises, and this was also true before 2006. This corroborates Minsky’s hypothesis about periodic underestimation of risk in the financial sector. Other variables that generate signals with the highest accuracy and stability are those associated with credit growth, property prices and growth in the contribution of financial sector to GDP. This last finding suggests that substantial increases in measured value added of the financial sector seem to reflect augmented exposure to systemic risk, rather than welfare improvements. |
| Keywords: | countercyclical capital buffer, early warning models, financial stability |
| JEL: | E44 G01 G21 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:nbp:nbpmis:257&r=mac |
| By: | Dilger, Alexander |
| Abstract: | The euro area has several problems. Nevertheless, there is not only strong political support for it, but also most companies back the euro or at least do not complain. It is worthwhile to analyse which companies do profit from the euro and why most others do not oppose it. Exporting companies in the northern countries of the euro zone profit from the euro and the policies to save the common currency even if their countries and people suffer. Other companies, especially in the southern member countries, suffer themselves but fear a break-up of the euro area even more than its continuance. For small companies it is not worthwhile to lobby for other policies, while the companies worst affected already ceased to exist. All companies have to come to terms with the euro but should also prepare for the possible end of the euro zone. Companies in other European countries reconsider whether they really want their countries to join the euro area. |
| JEL: | E31 E42 F02 F45 G01 L21 M21 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:umiodp:32017&r=mac |
| By: | Noel Rapa (Central Bank of Malta) |
| Abstract: | This paper describes MEDSEA, a compact small open economy DSGE model of the Maltese economy. The model is similar in nature to other small open economy models, thus containing a number of nominal and real frictions allowing the model to replicate the sluggish reaction of economic variables documented in empirical research. Moreover, MEDSEA contains key modifications designed to account for Malta’s specific characteristics. The model distinguishes between a tradable and non-tradable sector reflecting the different nature of exports when compared to other production meant for domestic use. Furthermore, the model features distribution costs in the export sector allowing for a wedge to exist between wholesale and retail export prices. |
| JEL: | E12 E30 E50 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:wpaper:0516&r=mac |
| By: | Fella, Giulio; Frache, Serafin; Koeniger, Winfried |
| Abstract: | We use the Italian Survey of Household Income and Wealth, a rather unique dataset with a long time dimension of panel information on consumption, income and wealth, to structurally estimate a buffer-stock saving model. We exploit the information contained in the joint dynamics of income, consumption and wealth to quantify the degree of insurance against income risk. The estimated model implies that Italian households can insure between 89 and 95 percent of a transitory and between 7 and 9 percent of a permanent income shock. Compared to existing empirical estimates for the same dataset, our findings suggest that Italian households do not have access to significant insurance beyond self-insurance. |
| Keywords: | Consumption,Wealth,Incomplete markets,Insurance |
| JEL: | D91 E21 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:570&r=mac |
| By: | Jorge Uxo; Ignacio Àlvarez; Eladio Febrero |
| Abstract: | On the one hand, every official document about fiscal policy in Spain, and most orthodox academic papers argue that Spain has no "fiscal space" and that it should apply resolute actions to assure budget consolidation. On the other hand, Spain also had the second highest unemployment rate in the Eurozone in 2015: 21% of the active population. A rapid decline in that rate would require a higher fiscal impulse to sustain higher economic growth rates. This IMK working paper addresses this dilemma, presenting two alternative scenarios for the next years analyzing their impact on unemployment and fiscal sustainability. The first scenario represents a firm commitment to budget consolidation, while in the second the government uses the fiscal instrument to stimulate domestic demand and ensures a GDP growth rate target. The second scenario is based on an application of an "imperfect" balanced budget multiplier, proposing a combination of discretionary increases in both public expenditure and revenue. The main conclusion is that the end of fiscal austerity is feasible and perfectly compatible with fiscal finances sustainability for Spain. In addition some more general topics are discussed: the difference between the "functional finance" and the "sound finance" approaches to fiscal policy; the possibility of a Balanced Budget expansion; a discussion of the concept of "fiscal space"; and the inadequacy of European fiscal rules. |
| Keywords: | Fiscal Policy, Fiscal Space, Functional Finance, Balance Budget Multiplier, Spain |
| JEL: | E61 E62 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:imk:wpaper:176-2017&r=mac |
| By: | Helmut Hiess; Roman Römisch (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Zusammenfassung Aktuelle Entwicklungen und Trends in den Regionen Mittelost-/Südosteuropas und des Donauraums Die Studie analysiert aktuelle Entwicklungen und Trends in den Ländern Zentral- und Osteuropas sowie Süd- und Südosteuropas und deren Implikationen für die österreichische Regionalpolitik. Das Ziel der Studie ist, einen Beitrag zur Evaluierung der gegenwärtigen Regionalpolitik innerhalb Österreichs wie auch der EU zu leisten. Dafür untersucht die Studie überblicksmäßig folgende Punkte a) aktuelle wirtschaftliche Trends in Österreich und den Ländern des Donauraums (inklusive Polen), b) die Verknüpfung Österreichs mit diesen Ländern hinsichtlich Außenhandel, Investitionen, Arbeitsmärkte, Transport und Tourismus und c) die österreichische Regionalpolitik im nationalen sowie im europäischen Kontext. Auf Basis der Analyseergebnisse ergeben sich Rückschlüsse und Empfehlungen für die Entwicklung von Politikinitiativen in Österreich und der EU. English Summary Current developments and trends in the regions of Central, East and Southeast Europe and the Danube region The study analyses recent trends and developments in the Central and East European (CEE) and Southeast European (SEE) countries and the implication for Austrian regional policy. The aim of the study is to contribute to the evaluation of current Austrian and European regional policy instruments as well as to the Austrian preparation of the post-2020 EU Cohesion policy. In an overview, the study analyses a) the main (economic) trends in Austria and the CEE/SEE countries; b) their trade, investment, labour market, transport and tourism relationships; and c) Austrian regional policy in the national and European context. The results of the analysis allow drawing conclusions and recommendations for developing policy initiatives in Austria and the EU. |
| Keywords: | Österreich, Europäische Union, Regionalpolitik, Donauraum, Zentral- und Osteuropa, Süd- und Südosteuropa, Austria, European Union, regional policy, Danube region, Central and Eastern Europe, Southehiesast Europe |
| JEL: | E00 E24 F14 F15 F21 J20 J30 O11 R58 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:wii:ratpap:rpg:6&r=mac |
| By: | Rosengren, Eric S. (Federal Reserve Bank of Boston) |
| Abstract: | Boston Fed President Eric Rosengren said that structural changes in the macroeconomy "may necessitate more frequent use of large-scale asset purchases during recessions." He called it "quite likely" that the use of central bank balance sheets will be necessary in future economic downturns. |
| Date: | 2017–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbsp:117&r=mac |
| By: | Agudelo, Sonia A. (Universitat Autònoma de Barcelona); Sala, Hector (Universitat Autònoma de Barcelona) |
| Abstract: | This paper evaluates the extent of wage rigidities in Colombia over a period, 2002-2014, in which the fall in unemployment was relatively slow with respect to sustained economic growth. Following Holden and Wulfsberg (2009), we compute a measure of downward real wage rigidity (DRWR) of 12.09%, four times bigger than their aggregate estimate for the OECD economies. Moreover, in contrast to the evidence for the advanced economies, the determinants of such rigidities show no connection to the wage bargaining system. Amid the absence of effective labor market institutions to make rigidities less prevalent, economic growth appears as the most powerful mechanism to ward them off. Under this light, we provide a stylized description of the wage setting rule in Colombia, compare it with the common one in the advanced economies, and call for a far-reaching reform of the Colombian wage bargaining setup. |
| Keywords: | downward real wage rigidity, wage bargaining, minimum wage, informality, unemployment |
| JEL: | E24 J3 J48 J58 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10669&r=mac |
| By: | Ilomaki Jukka; Laurila Hannu (Faculty of Management, University of Tampere) |
| Abstract: | The central bank acts as a social planner, and adjusts the real risk-free rate of return to correct any mispricing in the stock market so that the emergence of positive or negative bubbles is avoided. The flip side is that if the real risk-free rate is fixed, it incorporates inefficiency into the financial market. Setting a zero bound for the risk-free rate constrains the adjustment in the case of negative bubbles, and the fixed negative risk-free rate in the market not only prevents the adjustment of possible positive bubbles but may also lead to rampant instability in the market. The paper also points out the limits of manageable control of mispricing. In addition, the analysis indicates that the central bank should intervene in the stock market even if it does not have perfect information about the bubble. |
| Keywords: | Real Interest Rate, Monetary Policy, Portfolio Choice |
| JEL: | E43 E52 G11 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:tam:wpaper:1713&r=mac |
| By: | Matthes, Jürgen; Iara, Anna |
| Abstract: | According to a dominant narrative, the recent crisis has allegedly shown that EMU is not sustainable without fiscal risk sharing. We identify two major hazards associated with this view. First, trust in EMU governance could unduly erode despite major recent achievements, notably if further fiscal integration should prove elusive. Second, the debate on further fiscal integration could distract from additional reforms needed to prevent financial cycles in the future. In contrast, we suggest that a limited set of reforms (mostly focusing on the financial sector) would suffice to make EMU sustainable. |
| JEL: | F45 E02 G28 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwkrep:172016&r=mac |
| By: | Shahardin, Nur'Izzate Iwana |
| Abstract: | The main purpose of this study is to examine the relationship between risk and performance of commercial bank in Malaysia. This study aims to investigate the impact of bank-specific factors which include liquidity risk, operational risk, and credit risk (microeconomic factors) and gross domestic product (GDP) and inflation rate (macroeconomic factors) on the performance of Malaysian commercial bank over the period of 2011 to 2015. The bank performance is measured by Return on Assets (ROA). The results imply that ratios employed in this study have different effects on the performance of bank. In this study, the findings show that only GDP has positive relationship with ROA. Four factors namely liquidity risk, operational risk, credit risk, and inflation rate have negative relationship with the ROA. |
| Keywords: | Credit Risk, Liquidity Risk, Profitability Risk, Macroeconomic and ROA |
| JEL: | D00 E00 E03 G00 |
| Date: | 2017–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78681&r=mac |
| By: | Brian Micallef (Central Bank of Malta) |
| Abstract: | This paper looks at long-run trends in economic growth in European countries, focusing in particular on the real convergence process in Malta. |
| JEL: | E24 O47 O52 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:ppaper:0217&r=mac |
| By: | Rocheteau, Guillaume (University of California, Irvine); Weill, Pierre-Olivier (University of California, Los Angeles); Wong, Russell (Federal Reserve Bank of Richmond) |
| Abstract: | We construct a continuous-time, New-Monetarist economy with general preferences that displays an endogenous, non-degenerate distribution of money holdings. Properties of equilibria are obtained analytically and equilibria are solved in closed form in a variety of cases. We study policy as incentive-compatible transfers financed with money creation. Lump-sum transfers are welfare-enhancing when labor productivity is low, but regressive transfers achieve higher welfare when labor productivity is high. We introduce illiquid government bonds and draw implications for the existence of liquidity-trap equilibria and policy mix in terms of "helicopter drops" and open-market operations. |
| Keywords: | money; inflation; risk sharing; liquidity traps |
| JEL: | E40 E50 |
| Date: | 2017–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:17-06&r=mac |
| By: | Hyeongwoo Kim; Kyunghwan Ko |
| Abstract: | We present a factor augmented forecasting model for assessing the financial vulnerability in Korea. Dynamic factor models often extract latent common factors from a large panel of time series data via the method of the principal components (PC). Instead, we employ the partial least squares (PLS) method that estimates target specific common factors, utilizing covariances between predictors and the target variable. Applying PLS to 198 monthly frequency macroeconomic time series variables and the Bank of Korea's Financial Stress Index (KFSTI), our PLS factor augmented forecasting models consistently outperformed the random walk benchmark model in out-of-sample prediction exercises in all forecast horizons we considered. Our models also outperformed the autoregressive benchmark model in short-term forecast horizons. We expect our models would provide useful early warning signs of the emergence of systemic risks in Korea's financial markets. |
| Keywords: | Partial Least Squares; Principal Component Analysis; Financial Stress Index; Out-of-Sample Forecast; RRMSPE |
| JEL: | C38 C53 C55 E44 E47 G01 G17 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:abn:wpaper:auwp2017-03&r=mac |
| By: | Andra Filote (Department of Economics, University of Konstanz); Georgi Kocharkov (Department of Economics, University of Konstanz, Germany); Jan Mellert (Department of Economics, University of Konstanz) |
| Abstract: | Teenage childbearing is a common incident in developed countries. However, the occurrence of teenage births is much more likely in the United States than in any other industrialized coun- try. The majority of these births are delivered by female teenagers coming from low-income families. The hypothesis put forward here is that the welfare state (a set of redistributive in- stitutions) plays a significant role for teenage childbearing behavior. We develop an economic theory of parental investments and risky sexual behavior of teenagers. The model is estimated to fit stylized facts about income inequality, intergenerational mobility and sexual behavior of teenagers in the United States. The welfare state institutions are introduced via tax and pub- lic education expenditure functions derived from U.S. data. In a quantitative experiment, we impose Norwegian taxes and/or education spending in the economic environment. The Nor- wegian welfare state institutions go a long way in explaining the differences in teenage birth rates between the United States and Norway. |
| Keywords: | Teenage risky sexual behavior, teenage birth rates, progressive taxation, education, redistribution |
| JEL: | E24 H31 I28 J13 J24 J62 |
| Date: | 2017–01–16 |
| URL: | http://d.repec.org/n?u=RePEc:knz:dpteco:1701&r=mac |
| By: | Mohammad Davoodalhosseini |
| Abstract: | Constrained efficient allocation (CE) is characterized in a model of adverse selection and directed search (Guerrieri, Shimer, and Wright (2010)). CE is defined to be the allocation that maximizes welfare, the ex-ante utility of all agents, subject to the frictions of the environment. When equilibrium does not achieve the first best (the allocation that maximizes welfare under complete information), then welfare in the CE is strictly higher than welfare in the equilibrium allocation. That is, equilibrium is not constrained efficient. Under some conditions, welfare in the CE even attains welfare in the first best. Finally, sufficient conditions are provided under which equilibrium is not constrained Pareto efficient, either. Cross-subsidization is the key to all these results. In an asset market application, the first best is shown to be implementable through tax schedules that are monotone in the asset prices. |
| Keywords: | Economic models, Financial markets, Financial system regulation and policies, Market structure and pricing |
| JEL: | D82 D83 E24 G1 J31 J64 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:17-15&r=mac |
| By: | Francesco Furlanetto (Norges Bank (Central Bank of Norway)); Paolo Gelain (Norges Bank (Central Bank of Norway)); Marzie Taheri Sanjani (International Monetary Fund) |
| Abstract: | This paper investigates how the presence of financial frictions and financial shocks changes the definition and the estimated dynamics of the output gap in a New Keynesian model. Financial shocks absorb explanatory power from efficient labor supply shocks, thus changing radically the dynamics of the economy's efficient frontier. Despite their large impact on the output gap, financial factors affect the monetary policy trade-offs only to some extent. Nominal stabilization can be achieved at the cost of limited (but non-negligible) fluctuations in real economic activity. Finally, we discuss an alternative measure of the output gap (in deviation from the optimal equilibrium) that is a better measure of imbalances in the economy than the conventional output gap. |
| Keywords: | Financial frictions; output gap; monetary policyClassification-JEL: E32, C51, C52Note: |
| Date: | 2017–04–27 |
| URL: | http://d.repec.org/n?u=RePEc:bno:worpap:2017_08&r=mac |
| By: | Aaron G Grech (Central Bank of Malta) |
| Abstract: | The Maltese economy has evolved very rapidly in recent years and has had a much better performance than neighbouring economies. This has coincided with a large decline in the share of industrial activity and the emergence of a large number of new services operators. Understanding whether this development could be long lasting is an important policy question. In this light, this note focuses on three issues: (i) Has the structure of the Maltese economy shifted over time? (ii) Has this shift made the Maltese economy less diversified? (iii) What could be the main macroeconomic effects of this shift? |
| JEL: | E00 N14 O52 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:ppaper:0215&r=mac |
| By: | Tng Boon Hwa; Mala Raghavan; Teh Tian Huey |
| Abstract: | This paper studies the causes and effects of portfolio flows in Malaysia. We use Structural Vector Autoregression (SVAR) and Autoregressive Distributed Lag (ARDL) models to analyse the interactions among portfolio flows, global and domestic macro and financial variables within a common empirical framework. Three findings emerge: First, the SVAR estimations show that global and domestic factors play transitory roles in driving Malaysia’s net portfolio flows. A subsample analysis from the ARDL model highlights that domestic factors play an increasingly important role in attracting portfolio inflows as Malaysia liberalised its exchange rate regime and capital flow restrictions. Second, higher net portfolio flows lead to exchange rate appreciation, higher equity prices and credit expansion. The effects are visible in the exchange rate, followed by equity prices and credit. Third, in the transmission of higher portfolio flows to growth, the positive effects from higher equity prices and credit are partially offset by the dampening effect from the appreciating exchange rate on output. While the contribution of portfolio flow’s effects on output variance is low, the impulse responses of output does change to portfolio flow shocks, suggesting that portfolio flows are tail risks to growth and that the risks magnify when the flows are large and volatile. |
| Keywords: | International Portfolio Flows, Open Economy, Financial Economics, SVAR Model |
| JEL: | C52 E44 F41 G15 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2017-35&r=mac |
| By: | Schlepper, Kathi; Riordan, Ryan; Hofer, Heiko; Schrimpf, Andreas |
| Abstract: | This paper investigates the scarcity effects of quantitative easing (QE) policies, drawing on intra-day transaction-level data for German government bonds, purchased under the Public Sector Purchase Program (PSPP) of the ECB/Eurosystem. This paper is the first to match high-frequency QE purchase data with high-frequency inter-dealer data. We find economically significant price impacts at high (minute-by-minute) and low (daily) frequencies, highlighting the relevance of scarcity effects in bond markets. Asset purchase policies are not without side effects, though, as the induced scarcity has an adverse impact on liquidity conditions as measured by bid-ask spreads and inter-dealer order book depth. We further show that the price impact varies greatly with market conditions: it is considerably higher during episodes of illiquidity and when yields are higher. |
| Keywords: | Quantitative Easing,European Central Bank,Scarcity Channel,Bond Market Liquidity,High-Frequency Data |
| JEL: | E52 E63 G11 G12 H63 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:062017&r=mac |
| By: | Asako, Yasushi (Waseda University); Funaki, Yukihiko (Waseda University); Ueda, Kozo (Waseda University); Uto, Nobuyuki (Waseda University) |
| Abstract: | Asymmetric information has been necessary to explain a bubble in past theoretical models. This study experimentally analyzes traders’ choices, with and without asymmetric information, based on the riding-bubble model. We show that traders have an incentive to hold a bubble asset for longer, thereby expanding the bubble in a market with symmetric, rather than asymmetric information. However, when traders are more experienced, the size of the bubble decreases, in which case bubbles do not arise, with symmetric information. In contrast, the size of the bubble is stable in a market with asymmetric information. |
| JEL: | C72 D82 D84 E58 G12 G18 |
| Date: | 2017–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:312&r=mac |
| By: | Marian Vavra (National Bank of Slovakia, Research Department) |
| Abstract: | This article tests the validity of underlying assumptions (i.e. linearity and normality) of UC-ARIMA models for trend-cycle decompositions using macroeconomic variables from 16 OECD countries. Clear and overwhelming evidence of non-normality and non-linearity is found. Our results thus cast doubts on the adequacy of the filtered cyclical component from this type of model. |
| Keywords: | Normality; Lobato-Velasco test; Linearity; Portmanteau Q test; Trend-cycle decomposition;UC-ARIMA models |
| JEL: | C12 C22 E32 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:svk:wpaper:1040&r=mac |
| By: | Claudio Borio; Boris Hofmann |
| Abstract: | Is monetary policy less effective in boosting aggregate demand and output during periods of persistently low interest rates? This paper reviews the reasons why this might be the case and the corresponding empirical evidence. Transmission could be weaker for two main reasons: (i) headwinds, which would typically arise in the wake of balance sheet recessions, when interest rates are low; and (ii) inherent non-linearities, which would kick in when interest rates are persistently low and would dampen their impact on spending. Our review of the evidence suggests that headwinds during the recovery from balance-sheet recessions tend to reduce monetary policy effectiveness. At the same time, there is also evidence of inherent non-linearities. That said, disentangling the two types of effect is very hard, not least given the limited extant work on this issue. In addition, there appears to be an independent role for nominal rates in the transmission process, regardless of the level of real (inflation-adjusted) rates. |
| Keywords: | monetary policy, low interest rates, balance-sheet recession, monetary transmission |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:628&r=mac |
| By: | Alessandro Di Nola (University of Konstanz, Germany); Georgi Kocharkov (University of Konstanz, Germany); Aleksandar Vasilev (Department of Economics, American University in Bulgaria) |
| Abstract: | We evaluate the relative importance of labor productivity versus income taxes and social contributions for tax compliance in an economy with a large degree of informality. Empirical evidence points out that tax evasion in Europe happens through partially concealing wages and profits in formally registered enterprises. To this end, we build a model in which employeremployee pairs of heterogeneous productive capacities make joint decisions on the degree of tax evasion. The quantitative model takes as inputs the income tax structure and social contributions. The model is used to analyze the case of Bulgaria which has the largest informal economy in Europe. The estimation strategy relies on matching the empirical series for the size of the informal economy and other aggregate outcomes for 2000-2014. Our counterfactual experiments show that the most important factor for the changing size of the informal economy is labor productivity, which accounts for more than 75% of the change. The variation in corporate income tax accounts for the rest. Changes in personal income tax levels and progressivity are found not to be quantitatively relevant for tax evasion. We also characterize optimal taxation in 2014 with respect to minimizing tax evasion. The productive gains of imposing optimal taxes are small. |
| Keywords: | Informal economy, progressive taxation, tax evasion, flat tax reform |
| JEL: | H24 H25 H26 C63 E62 E65 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:sko:wpaper:bep-2017-04&r=mac |
| By: | Yoon , Yeo Joon (Korea Institute for International Economic Policy); Lee , Woong (Korea Institute for International Economic Policy); Kwon , Hyuk Ju (Korea Institute for International Economic Policy); Moon , Seongman (Chonbuk National University) |
| Abstract: | Korean Abstract: 2013년 12월 시작된 연방준비제도 (이하 연준)의 테이퍼링과 2014년 10월 발표된 양적완화의 종료는 미국의 본격적인 통화정책 정상화를 예고하고 있다. 이는 이르면 2015년 말 기준금리 인상으로 시작될 전망이다. 미 통화당국은 2008년 시작된 금융위기의 타개를 위해 다수의 비전통적인 (unconventional) 정책도구들을 양산하였다. 먼저 기준금리인 연방기금금리를 0∼0.25% 수준까지 낮추었고 대규모 자산매입 (Large Scale Asset Purchase: LSAP)을 통해 장기국채, 주택정당증권 등의 자산을 매입하였다. 전통적으로 연준이 공개시장조작을 통해 단기국채 위주로 매매하였음을 볼 때, 대규모자산매입을 통해 연준이 사들인 자산의 면면은 양적완화 정책의 비전통성에 중요한 일부분을 차지한다고 볼 수 있다. 또한 ‘대규모’라는 말이 시사하듯 LSAP를 통한 연준의 자산 매입 규모 역시 전례 없는 것으로, 이 기간 중 총 $4.5조의 자산을 매입하였고 이로 인해 연준의 밸런스쉬트는 크게 증가했다. 정리해보면 미국의 통화정책 정상화는 Zero Lower Bound 에 도달한 기준금리를 인상시키는 문제 그리고 비전통적인 자산을 포함하고 있으며 크게 증가한 연준의 밸런스쉬트를 처리하는 문제로 생각할 수 있다. 본 연구는 통화정책 정상화가 수반하는 문제점은 무엇인지, 그리고 연준이 이를 위해 어떠한 출구전략을 고려하고 있는지에 대해 살펴보았다. 그리고 더 나아가 각 출구전략에 대한 효과를 분석하였으며 이를 바탕으로 우리에게 주는 시사점을 도출하였다. 이러한 과정의 세부적인 이해 없이는 미국의 통화정책 정상화가 우리에게 미치는 영향에 대한 분석 역시 제한적일 수 있으며 이에 대한 빈자리를 채워주는 것이 본 연구의 주된 목적이다. English Abstract: The Fed's exit from the unconventional monetary policy it has implemented since 2008, is imminent. To combat the Great Recession, the Fed lowered its policy rate to 0∼0.25% range and through Large Scale Asset Purchase (LSAP), acquired substantial amount of long-term government bonds and Mortgage Backed Securities (MBS). As U.S. economy is showing signs of recovery from the deepest recession since the Great Depression, these unprecedented policy measures are expected to be normalized soon. The normalization process will begin with raising the federal funds rate that has been kept near the zero lower bound for more than 5 years. Equally important component of the exit process is the normalization of the balance sheet. Not only the scale of the asset purchase was huge but also asset classes that the Fed bought through LSAP were not conventional. Traditionally the Fed, through the Open Market Operations, has been buying and selling short-term government bonds but LSAP bought mostly long-term government bonds and MBS. The normalization process will involve rate-raising and scaling down the balance sheet as well as returning SOMA portfolio back to the pre-crisis statue. This paper explores the exit strategy that the Fed is planning in order to normalize the monetary policy and possible problems that it would face in implementing these strategies. It also estimates the effects of raising the federal funds rate and normalizing the balance sheet (by selling assets), using econometric tools. Without understanding of these tools and procedures in details any further analysis on the effects of U.S. monetary policy normalization on Korean economy would be superficial. |
| Keywords: | Monetary Policy --United States; The Great Depression; The New Deal Policy; Excess Reserve; Balance Sheet; Exit Plan; United States |
| Date: | 2015–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kieppa:2015_023&r=mac |
| By: | Angel De la Fuente |
| Abstract: | En este trabajo se construyen series “homogeneas†anuales de VAB y PIB a precios corrientes y constantes y de puestos de trabajo para las regiones españolas durante el periodo 1955-2014. Estas series se obtienen enlazando la Contabilidad Regional del INE con las series elaboradas por Julio Alcaide y colaboradores para la Fundación BBVA. |
| Keywords: | Analisis Regional , Documento de Trabajo , España |
| JEL: | E01 R1 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:bbv:wpaper:1710&r=mac |
| By: | Lourdes, Joan Salome |
| Abstract: | The objective of this study is to examine the performance of Sliver Ridge Holdings Berhad as a whole with clearly defined risk factors and macroeconomic influence that contribute to its performance. The data is obtained from the yearly report of Silver Ridge Holdings Berhad from 2011-2015. Liquidity ratio and operating ratio measurement are used to view the performance of this company as a whole in a period of 5 years. In addition to it, the asset size measurement to the liquidity ratio has taken into consideration. The asset size has a negative relationship with liquidity risk. The higher the asset size increased, the lesser the liquidity risk occurred. To determine the relationship between the factors of risk to the profitability of this company, this study is using liquidity ratio (quick ratio), GDP and also the operating ratio. At the end of this paper, the factor that is significant to the profitability of this company is the operation and liquidity. The GDP has a positive and negative relationship throughout the 5 years. |
| Keywords: | Liquidity risk, Operational Ratio, Profitability, GDP, Asset size |
| JEL: | G0 G1 G2 G3 |
| Date: | 2017–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78804&r=mac |
| By: | Ken Urai (Graduate School of Economics, Osaka University); Hiromi Murakami (Faculty of Commerce, Doshisha University) |
| Abstract: | To characterize money in a static economic model, it is known to be important to consider the agentcommodity double-infinity settings, i.e., the overlapping-generations framework. There does not seem to exist abundant literature, however, treating the axiomatic characterization problems for such monetary Walras allocations under the social choice and/or mechanism design settings. We show that the monetary Walras allocation for the economy with double infinities is characterized by weak Paretooptimality, individual rationality and local independence or the monotonicity, or the incentive compatibility conditions of social choice correspondence among the allocation mechanisms with messages under the category theoretic approach in Sonnenschein (1974). We utilize Sonnenschein fs market extension axiom for swamped economies that is closely related to the replica stability axiom of Thomson (1988). We can see how these conditions characterize the price-money message mechanism universally among a wide class of mechanisms, and efficiently in the sense that it has the minimal message spaces (pricemoney dictionary theorems). Moreover, by using the category theoretic framework, we can obtain the up-to-isomorphism uniqueness for such a dictionary object (isomorphism theorems). |
| Keywords: | Resource Allocation Mechanism, Social Choice Correspondence, Overlapping-Generations Economy, Monetary Walras Allocation, Local Independence, Monotonicity, Incentive Compatibility, Universal Mapping Property |
| JEL: | C60 D50 D51 D71 E00 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1708&r=mac |
| By: | Marta Lachowska (W.E. Upjohn Institute for Employment Research) |
| Keywords: | Subjective well-being, affect, income effect, quasi-experimental, instrumental variable |
| JEL: | I31 H31 E62 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:ml17-jhr&r=mac |
| By: | Warmedinger, Thomas; Checherita-Westphal, Cristina; Drudi, Francesco; Setzer, Ralph; De Stefani, Roberta; Bouabdallah, Othman; Westphal, Andreas |
| Keywords: | euro area, fiscal policy, fiscal risks. JEL classification:, public debt, sovereign debt sustainability analysis |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2017185&r=mac |
| By: | Dieppe, Alistair; Georgiadis, Georgios; Ricci, Martino; Van Robays, Ine; van Roye, Björn |
| Keywords: | macro-modelling, monetary policy, multi-country models, spillovers |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20172045&r=mac |
| By: | Stefan Avdjiev; Stephan Binder; Ricardo Sousa |
| Abstract: | We assess the role of external debt in shaping the dynamics of domestic credit cycles. Using quarterly data for 40 countries between 1980 and 2015, we examine four dimensions of external debt composition: instrument, sector, currency and maturity. We show that the first two dimensions provide valuable information about the likelihood of credit booms and busts. In particular, we find that a higher share of external bank lending in the form of bonds is associated with a greater likelihood of credit booms. Our results also reveal that credit busts tend to be associated with a lower share of interbank lending and a higher share of lending from banks to nonbanks. |
| Keywords: | credit cycles, external debt composition |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:627&r=mac |
| By: | Ratti, Mattia Luigi (CERE and the Department of Forest Economics, SLU) |
| Abstract: | In the last decades, we have observed a dramatic increase in the number of reported natural disasters and of their widespread human, economic, and environmental losses. This paper presents an overview of the current status of economic research on natural disasters. Firstly, it discusses key issues related to disaster definition, available datasets, and cost assessment. Then, it presents the main methodological approaches for estimating impacts and effects of natural disasters on the economy. Finally, it proposes a number of possible future research directions. |
| Keywords: | definitions; data bias; true cost assessment; theoretical empirical; simulation models |
| JEL: | A12 C80 E10 O10 O40 Q54 |
| Date: | 2017–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2017_003&r=mac |
| By: | Ramlan, Nur Hu Yani |
| Abstract: | The aim of this study is to analyze company profit and firm performance with the specific risk. The data obtained from the annual report Bertam Alliance Berhad starting from the year 2012 to the year 2015. The measurement of liquidity ratio and operating ratio used to see the overall performance of the Bertam Alliance Berhad in 5 years. The other measurement that have been used is current ratio, debt to equity ratio, return on asset, return on equity and the average collection period. To see the relationship of the risks factors to the profitability, this study use liquidity ratio which is current ratio, GDP and operating ratio. The data was analysed by using correlation table. In this study found that the return of asset is positively significant to return on equity. |
| Keywords: | Credit risk, liquidity, profitability and macroeconomic |
| JEL: | E0 F0 F00 F1 F15 F18 |
| Date: | 2017–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78378&r=mac |
| By: | Chris Belfield (Institute for Fiscal Studies and Institute for Fiscal Studies); Richard Blundell (Institute for Fiscal Studies and IFS and UCL); Jonathan Cribb (Institute for Fiscal Studies and Institute for Fiscal Studies); Andrew Hood (Institute for Fiscal Studies and Institute for Fiscal Studies); Robert Joyce (Institute for Fiscal Studies and Institute for Fiscal Studies) |
| Abstract: | We study earnings and income inequality in Britain over the past two decades, including the period of relatively “inclusive” growth from 1997-2004 and the Great Recession. We focus on the middle 90%, where trends have contrasted strongly with the “new inequality” at the very top. Household earnings inequality has risen, driven by male earnings – although a ‘catch-up’ of female earnings did hold down individual earnings inequality and reduce within-household inequality. Nevertheless, net household income inequality fell due to deliberate increases in redistribution, the tax and transfer system’s insurance role during the Great Recession, falling household worklessness, and rising pensioner incomes. |
| Keywords: | Inequality, labour market, household earnings, social security |
| JEL: | D31 E24 J3 |
| Date: | 2017–01–13 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:17/01&r=mac |
| By: | Kevin x.d. Huang (Vanderbilt University); Munechika Katayama (Waseda University); Mototsugu Shintani (University of Tokyo and Vanderbilt University); Takayuki Tsuruga (Kyoto University) |
| Abstract: | We present a sticky-wage model with two types of labors: while a worker's labor contributes to current production, a researcher's work helps develop new ideas to add to a firm's knowledge capital that enhances its productivity for many periods. The long-lived effect of knowledge capital on productivity is analogous to the long-lasting effect of consumer durables on utility in the sticky-price model of Barsky, House and Kimball (2007). We show, however, that the relative role of the pricing of the two production inputs analogous to consumption durables and nondurables in BHK's sticky-price model is completely switched in our sticky-wage model. |
| JEL: | E0 C0 |
| Date: | 2017–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:vuecon-sub-17-00006&r=mac |
| By: | Rudolf Alvise Lennkh (European Stability Mechanism); Edmund Moshammer (European Stability Mechanism); Vilém Valenta (European Stability Mechanism) |
| Abstract: | This paper aims to contribute to the ESM’s capacity to monitor sovereign vulnerabilities in the EFSF/ESM programme countries. The purpose is to early identify a build-up of sovereign vulnerabilities, which may threaten countries’ repayment capacity. The assessment is based on a wide set of indicators comprising (i) government borrowing needs, conditions and debt structure, (ii) economic strength, (iii) fiscal position, (iv) financial sector and other contingent liabilities, (v) institutional parameters, and (vi) private sector leverage, credit flows and real estate developments. We apply a scoring system based on thresholds from the literature, where available, or derived from the historical distribution of a pool of OECD and EU countries. The aggregation scheme for an overall vulnerability score is informed by the available literature, correlation and principal component analyses, as well as expert judgement. The results of the framework as such are, however, free of judgement. We complement the numerical results with a system of traffic lights that allows assigning individual countries one of four broad categories reflecting degrees of their vulnerabilities. The framework can be used for a real-time vulnerability assessment, for an analysis of the evolution over time, as well as for an identification of areas where policy action may be needed. Back-tests for the countries that eventually requested EFSF/ESM financial assistance show that, with the benefit of hindsight, the tool would have identified the build-up of vulnerabilities well ahead of the onset of the crisis. The assessment, summarised in the form of a heat map and a scorecard, can be regularly updated. |
| Keywords: | Early warning system, sovereign risk, euro area crisis |
| JEL: | E02 F34 G15 G24 H63 |
| Date: | 2017–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:stm:wpaper:23&r=mac |
| By: | Aaron G Grech |
| Abstract: | As from 2012, the pension age in Malta started rising from 61 for men and 60 for women to eventually reach 65 for both genders in 2026. This paper evaluates the effects of the first change in the eligibility age, using employment and beneficiaries data covering that period. |
| JEL: | E37 J26 H55 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:ppaper:0116&r=mac |