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on Macroeconomics |
|
Issue of 2017‒05‒14
eighty-two papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Nurlan Turdaliev (Department of Economics, University of Windsor); Yahong Zhang (Department of Economics, University of Windsor) |
| Abstract: | Today's Canadian economy features a historic high of household debt and persistently low growth rate. The average debt-to-GDP ratio has reached the level experienced in the U.S. just prior to the recent financial crisis. Should monetary policy lean against the household indebtedness or are macroprudential policies better suited for the task? To provide a quantitative answer, this paper develops a small open economy dynamic stochastic general equilibrium model featuring a banking sector that channels funds between household savers and borrowers. We estimate the model using the Canadian data from 1991Q1 to 2015Q3 and conduct policy experiments. We find that using monetary policy that reacts to household indebtedness increases inflation volatility and lowers borrowers' welfare, while using macroprudential policies such as lowering the loan-to-value ratio limit increases borrowers' welfare. |
| Keywords: | household debt, macroprudential rules, monetary policy |
| JEL: | E32 E44 E52 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:wis:wpaper:1704&r=mac |
| By: | Rüdiger Bachmann; Sebastian Rüth (-) |
| Abstract: | What are the macroeconomic consequences of changing aggregate lending standards in residential mortgage markets, as measured by loan-to-value (LTV) ratios? In a structural VAR, GDP and business investment increase following an expansionary LTV shock. Residential investment, by contrast, falls, a result that depends on the systematic reaction of monetary policy. We show that, historically, the Fed tended to respond directly to expansionary LTV shocks by raising the monetary policy instrument, and, as a result, mortgage rates increase and residential investment declines. The monetary policy reaction function in the US appears to include lending standards in residential markets, a finding we confirm in Taylor rule estimations. Without the endogenous monetary policy reaction residential investment increases. House prices and household (mortgage) debt behave in a similar way. This suggests that an exogenous loosening of LTV ratios is unlikely to explain booms in residential investment and house prices, or run ups in household leverage, at least in times of conventional monetary policy. |
| Keywords: | loan-to-value ratios, monetary policy, residential investment, structural VAR, Cholesky identification, Taylor rules |
| JEL: | E30 E32 E44 E52 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:17/934&r=mac |
| By: | Klingelhöfer, Jan; Sun, Rongrong |
| Abstract: | This paper studies the Chinese case to show that a central bank can use macroprudential policies to play an active role in safeguarding financial stability. The narrative approach is used to disentangle macropudential policy actions from those monetary. We show that many monetary policy tools, such as the reserve requirement, window guidance, supervisory pressure and housing-market policies, can be used for macroprudential purposes. Time series are constructed to measure macroprudential tightness/ease. The VAR estimates suggest that macroprudential policy has immediate and persistent impact on the credit cycle, but no significant effect on output. Macroprudential policy can be used either alone to retain financial stability, without harming the real economy; or as a complement to monetary policy to offset the buildup of financial vulnerabilities resulted from a monetary easing. Our analysis suggests that it is the multi-instrument framework that enables a central bank to achieve both macroeconomic and financial stability objectives. This finding has implications for the current debates on the post-crisis central bank’s operating regime. |
| Keywords: | macroprudential policy, monetary policy, credit cycle, financial stability, China |
| JEL: | E44 E52 E58 |
| Date: | 2017–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:79033&r=mac |
| By: | Jose Maria Alvarez; Cristina Deblas; Jose Felix Izquierdo; Ana Rubio; Jaime Zurita |
| Abstract: | The crisis has made obvious the fragility of some aspects of EMU, like financial fragmentation and the need of banking consolidation. Banks have merged due to the vulnerability of some players or in order to improve the profitability/efficiency of the sector. |
| Keywords: | Banks , Europe , Working Paper |
| JEL: | E42 E43 E44 E51 E52 F36 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:bbv:wpaper:17/08&r=mac |
| By: | Marco Luca Pinchetti |
| Abstract: | In this paper I incorporate a Schumpeterian mechanism of creative destruction in a standard DSGE framework. In the model, a sector of forward-looking profit maximizing innovators determines the economy’s TFP growth rate. I estimate the model with Bayesian methods, and show that models featuring an endogenous TFP channel can empirically outperform models that exhibit standard, exogenous productivity dynamics. The paper provides a comprehensive comparative assessment of the impact of the endogenous TFP channel in an estimated fully-fledged DSGE model. The variance decomposition analysis shows that endogenous TFP is a powerful channel of transmission of adverse shocks throughout the business cycle. The estimates suggest that the 35% of the productivity growth rate fluctuations had endogenous origins during the Great Recession. |
| Keywords: | DSGE model; endogenous TFP; schumpeterian growth; post-crisis slump |
| JEL: | E50 E24 E32 O47 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/250791&r=mac |
| By: | Urbschat, Florian; Watzka, Sebastian |
| Abstract: | We examine the effects of the Asset Purchase Programme (APP) gradually introduced by the European Central Bank from September 2014 onwards. Studying the short-term reaction of financial markets after APP press releases, we analyse the development of bond yields and spreads around these releases. More precisely, we try to estimate different asset price channels by quantifying the cumulative decrease of spreads and by running event regressions for several Euro Area countries. Focusing on the signalling channel, measured by the OIS rate, and the portfolio rebalancing channel, proxied by the conditional bond-OIS spread, we find that the effects in yield and spread reduction were most pronounced for the announcement on the Public Sector Purchase Programme (PSPP) but declined afterwards for additional announcements. Possible explanations for this are the declining degree to which the ECB surprised markets and the increasingly burdensome institutional set-up of the APP. Moreover, our evidence suggests that portfolio rebalancing had a far larger impact on periphery than core countries’ bonds, which supports argument made by Cúrdia and Woodford (2011). |
| Keywords: | Large Scale Asset Purchase; Yield curve; Quantitative Easing; APP; Event study |
| JEL: | E43 E44 E52 E58 G14 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:37365&r=mac |
| By: | José-Luis Peydró; Andrea Polo; Enrico Sette |
| 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:bge:wpaper:964&r=mac |
| By: | Alex Hsu; Francisco J. Palomino; Charles Qian |
| Abstract: | We document strong U.S. stock and bond return predictability from several macroeconomic volatility series before 1982, and a significant decline in this predictability during the Great Moderation. These findings are robust to alternative empirical specifications and out-of-sample tests. We explore the predictability decline using a model that incorporates monetary policy and shocks with time-varying volatility. The decline is consistent with changes in both policy and shock dynamics. While an increase in the response to inflation in the interest-rate policy rule decreases volatility, more persistent and less volatile shocks explain the lower predictability. |
| Keywords: | Asset return predictability ; Great Moderation ; Monetary policy ; Time-varying macroeconomic volatility |
| JEL: | E14 E44 G12 G18 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2017-50&r=mac |
| By: | Del Negro, Marco (Federal Reserve Bank of New York); Giannone, Domenico (Federal Reserve Bank of New York); Giannoni, Marc (Federal Reserve Bank of New York); Tambalotti, Andrea (Federal Reserve Bank of New York) |
| Abstract: | Why are interest rates so low in the Unites States? We find that they are low primarily because the premium for safety and liquidity has increased since the late 1990s, and to a lesser extent because economic growth has slowed. We reach this conclusion using two complementary perspectives: a flexible time-series model of trends in Treasury and corporate yields, inflation, and long-term survey expectations, and a medium-scale dynamic stochastic general equilibrium (DSGE) model. We discuss the implications of this finding for the natural rate of interest. |
| Keywords: | natural rate of interest; r*; DSGE models; liquidity; safety; convenience yield |
| JEL: | C11 C32 C54 E43 E44 |
| Date: | 2017–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:812&r=mac |
| By: | Denderski, Piotr (University of Leicester); Paczos, Wojciech (Cardiff Business School) |
| Abstract: | We provide new evidence on the bank lending channel of monetary policy using bank-level data of 440 banks from eleven CEE transition economies between 1998 and 2012. Our findings are: i) banks adjust their loans to changes in host country’s monetary policy, ii) foreign-owned banks are less responsive to monetary policy of a host country than domestic-owned banks in both normal and crisis times, iii) foreign parent bank characteristics are irrelevant for the bank lending channel. We propose market segmentation hypothesis that can account for those facts better than the alternative, the internal market hypothesis. Foreign banks have a competitive advantage so that their loan portfolio adjusts less to changes in monetary policy. As a consequence, an increase in foreign penetration of the banking sector does not render monetary policy less effective. |
| Keywords: | banks, bank ownership, bank lending channel, monetary policy |
| JEL: | E44 E50 G21 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2017/3&r=mac |
| By: | Kollmann, Robert; Pataracchia, Beatrice; Raciborski, Rafal; Ratto, Marco; Roeger, Werner; Vogel, Lukas |
| 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: | E2 E3 E5 E6 F3 F4 |
| Date: | 2017–04–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78826&r=mac |
| By: | Marcus Mølbak Ingholt (Department of Economics, University of Copenhagen) |
| Abstract: | Geographical mobility correlates positively with house prices and negatively with unemployment over the U.S. business cycle. I present a DSGE model in which declining house prices and tight credit conditions impede the mobility of indebted workers. This reduces the workers’ cross-area competition for jobs, causing wages and unemployment to rise. A Bayesian estimation shows that this channel more than quadruples the response of unemployment to adverse housing market shocks. The estimation also shows that adverse housing market shocks caused the decline in mobility during the Great Recession. Absent this decline, the unemployment rate would have been 0.5 p.p. lower. |
| Keywords: | Refinancing collateral constraint, Geographical mobility, Wage setting, DSGE model |
| JEL: | D58 E24 E32 E44 R21 R23 |
| Date: | 2017–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:1706&r=mac |
| By: | Musgrave, Ralph S. |
| Abstract: | The majority of the money supply is issued by private banks, not central banks. However a system that restricts money creation to central banks has been advocated for many years by leading economists. There is no reason interest rates would not be at some sort of genuine free market rate under the latter system. In contrast, when private bank money is allowed, those banks undercut the free market rate of interest because it costs them nothing to come by the money they lend out: they effectively just print it, much as counterfeiters print money. The result is a sub-optimum or “non GDP maximising” rate of interest and an above optimum amount of debt. An additional misallocation of resources is that if private corporations are to be allowed to create money, there is no good reason why money lenders (i.e. private banks) should be allowed to do that and not car manufacturers or any other set of corporations. I.e. a second reason why letting private banks create money misallocates resources and reduces GDP is that different types of corporation do not compete on a level playing field. In contrast, the field is level if only central banks create money. |
| Keywords: | Bank; money; money creation; counterfeit; central bank. |
| JEL: | E4 E43 E51 E58 G21 |
| Date: | 2017–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78896&r=mac |
| By: | Paul Pichler; Flora Lutz |
| Abstract: | We study banks' borrowing and investment decisions in an economy with pecuniary externalities and both aggregate and idiosyncratic liquidity risk. We show that private decisions by pro t-maximizing banks always result in socially inecient outcomes, but the nature of ineciency depends critically on the structure of liquidity risk. Overborrowing and overinvestment in risky assets arises only if idiosyncratic risk is suciently small. By contrast, if idiosyncratic risk is large, unregulated banks underborrow, underinvest and hold insucient liquidity reserves. A macroprudential regulator can restore constrained eciency by imposing countercyclical reserve requirements. Pigouvian taxes or bank capital requirements cannot achieve this objective. |
| JEL: | E44 E58 G21 G28 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:vie:viennp:1701&r=mac |
| By: | Tomasz Łyziak (Narodowy Bank Polski); Maritta Paloviita (Bank of Finland) |
| Abstract: | This paper analyses formation of inflation expectations in the euro area. At the beginning we analyse forecast accuracy of ECB inflation projections relative to private sector forecasts. Then, using the ECB Survey of Professional Forecasters, we estimate a general model integrating two theoretical concepts, i.e. the hybrid model of expectations, including rational and static expectations, and the sticky-information (epidemiological) model. Among determinants of inflation expectations we consider – except backward-looking factors – rational expectations assumption and the effects of the ECB inflation projections. We examine whether ECB inflation projections are still important in expectations’ formation once the impact of forwardlookingness of economic agents has been taken into account. We also assess the consistency of implicit (perceived) inflation targets with the ECB inflation target. Our analysis indicates that recent turbulent times have contributed to changes in expectations’ formation in the euro area, as the importance of backward-looking mechanisms has decreased and the importance of the perceived inflation target has increased. We also find that the perceived inflation target has remained broadly consistent with the official ECB inflation target in the medium-term. However, the downward trend of the perceived target signals some risks of de-anchoring of inflation expectations. The importance of ECB inflation projections for mediumterm private sector inflation expectations has increased over time, but the magnitude of this effect is rather small. However, SPF inflation forecasts remain consistent with the ECB communication, being ether close to ECB projections or between ECB projections and the inflation target. |
| Keywords: | Formation of inflation expectations, survey data, euro area, financial crisis, low inflation |
| JEL: | D84 E52 E58 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:nbp:nbpmis:261&r=mac |
| By: | Michael Frenkel; Jin-Kyu Jung; Jan-Christoph Rülke |
| Abstract: | In this paper, we study the bias in interest rate projections for four central banks, namely for Czech Republic, New Zealand, Norway, and Sweden. We examine whether central bank projections are based on an asymmetric loss function and report evidence that central banks perceive an overprojection of their longer-term interest rate forecasts as twice as costly as an underprojection of the same size. We document that rationality is consistent with biased interest rate projections which contribute to explaining the central banks’ behavior. |
| Keywords: | Interest rate forecasts, Central bank communication, Asymmetric loss |
| JEL: | E43 E47 E58 |
| Date: | 2017–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:whu:wpaper:17-03&r=mac |
| By: | Christian Pierdzioch (Department of Economics, Helmut Schmidt University, Hamburg, Germany); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa) |
| Abstract: | We use a Boosted Regression Trees (BRT) approach to study the potentially nonlinear link between various standard predictors (stock-market returns, term spread, a short-term interest rate, among others), components of a news-based uncertainty index, and U.S recessions. The BRT approach shows that, according to a relative-importance measure, war-related uncertainty is among the top five predictors of recessions at three different forecast horizons. In the second half of the 20th century, uncertainty regarding the state of securities markets has gained in relative importance. Partial-dependence curves show that the probability of a recession is nonlinearly linked to war-related and securities-markets uncertainty. An analysis based on receiver-operating-characteristic (ROC) curves shows that including war-related uncertainty in the list of predictors improves out-of-sample forecasting performance at a longer-term forecasting horizon, where the predictive value of this component relative to other components of uncertainty has fallen in the second half of the 20th century. Estimation results for a dynamic version of the BRT approach recover the relative importance of various lags of government-related uncertainty for recession forecasting at a longer forecast horizon. |
| Keywords: | Recessions, Uncertainty, Forecasting, Boosted regression trees, ROC curves |
| JEL: | C53 E32 E37 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:201732&r=mac |
| By: | Léo MALHERBE |
| Abstract: | Firstable we shall present the contemporary genesis of endogenous money concept. In doing so we will show that endogenous money theory arised within the post-keynesian school of thought by simultaneously accepting some key points and spotlighting some weaknesses of the Keynesian theory. Thereafter, endogenous money had been a very controversial issue among post-keynesian litterature. We shall look back at the two major controversies that took place : at first between horizontalists and structuralists, then between the evolutionary and the revolutionary view on endogenous money.\r\nWe will see that despite the existence of numerous internal debates, post-keynesian’s endogenous money theory entails some conceptual and methodological limits. That’s why we shall intend to clarify this concept by including some heterodox theoretical inputs such as those made by French institutionalists and the regulation school for instance.\r\nIn that way, we will propose in the last part of this paper what we called an under-determined endogenous money theory, aimed at achieving an heterodox synthesis on this topic. |
| Keywords: | Endogenous money, Monetary creation, Bank loans, Post-Keynesian theory, Instituionalism, Regulation school |
| JEL: | E12 E42 E58 B25 B41 B5 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:grt:wpegrt:2017-08&r=mac |
| By: | Tomá? Frömmel (University of Economics Prague, Department of Economics) |
| Abstract: | This paper formulates the Austrian business cycle theory in historical time, considering institutional context of the central bank policy. Since central banks intervene permanently in credit markets, entrepreneurs may be fooled by their policies and an artificial boom may be initiated. Hence, the Austrian business cycle theory is able to explain the course of business cycle of current economies even if the rational expectations hypothesis holds.This paper formulates the Austrian business cycle theory in historical time, considering institutional context of the central bank policy. Since central banks intervene permanently in credit markets, entrepreneurs may be fooled by their policies and an artificial boom may be initiated. Hence, the Austrian business cycle theory is able to explain the course of business cycle of current economies even if the rational expectations hypothesis holds. |
| Keywords: | Business cycle, Austrian business cycle theory, rational expectations, historical time |
| JEL: | D84 E32 E52 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:4507343&r=mac |
| By: | Tanweer Akram; Anupam Das |
| Abstract: | This paper investigates the determinants of nominal yields of government bonds in the eurozone. The pooled mean group (PMG) technique of cointegration is applied on both monthly and quarterly datasets to examine the major drivers of nominal yields of long-term government bonds in a set of 11 eurozone countries. Furthermore, autoregressive distributive lag (ARDL) methods are used to address the same question for individual countries. The results show that short-term interest rates are the most important determinants of long-term government bonds' nominal yields, which supports Keynes's (1930) view that short-term interest rates and other monetary policy measures have a decisive influence on long-term interest rates on government bonds. |
| Keywords: | Government Bond Yields; Interest Rates; Monetary Policy; Eurozone |
| JEL: | E43 E50 E60 G10 G12 O16 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_889&r=mac |
| By: | Tigran Poghosyan; Abdelhak Senhadji; Carlo Cottarelli |
| Abstract: | This paper assesses the extent to which fiscal transfers smooth regional shocks in three large federations: the US, Canada and Australia. We find that fiscal transfers offset 4-11 percent of idiosyncratic shocks (risk-sharing) and 13-24 percent of permanent shocks (redistribution). This fiscal insurance largely operates through automatic stabilizers embedded in a central budget primarily through federal taxes and transfers to individuals, rather than transfers from the central government to state budgets. These results have implications for the design of fiscal risk-sharing mechanisms in the euro area. |
| Keywords: | public debt cycles, credit cycles, asset price cycles, duration analysis |
| JEL: | E6 C4 H6 |
| Date: | 2016–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:stm:wpaper:18&r=mac |
| By: | Potter, Tristan (School of Economics Drexel University) |
| Abstract: | I document two new facts about job search during the Great Recession: (i) Search effort permanently increases after individuals receive (and reject) job offers, and (ii) search effort decreases with cumulative failed search. Motivated by these facts, I introduce a model in which Bayesian job seekers learn about the arrival rate of offers through their idiosyncratic search experiences. The model yields a tractable characterization of search effort in terms of an individual's past job offers and past search effort. I use the model to decompose the effect of learning on job search into static and dynamic components: Failing to find work exerts a negative influence on search by reducing the perceived opportunity cost of leisure in the current period, but also stimulates search by reducing the option value of unemployment in future periods. Because these effects vary endogenously over the spell, the model delivers rich – and potentially nonmonotonic – dynamics in search behavior. I estimate the model and demonstrate that learning accounts for the empirical profiles of search time, offer arrivals, and hazard rates over the unemployment spell. |
| Keywords: | unemployment; search theory; learning |
| JEL: | D83 E24 J64 |
| Date: | 2017–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:ris:drxlwp:2017_006&r=mac |
| By: | de Ridder, M.; Pfajfar, D. |
| Abstract: | This paper studies the effect of wage rigidities on the transmission of fiscal and monetary policy shocks. We calculate downward wage rigidities across U.S. states using the Current Population Survey. These estimates are used to explain differences in the state-level economic effects of identical national shocks in interest rates and taxes. In line with the role of sticky wages in New Keynesian models, we find that contractionary monetary policy and tax shocks increase unemployment and decrease economic activity in rigid states considerably more than in flexible states. We also find larger and more persistent effects of monetary and tax policy shocks for states where the ratio between minimum and median wage is higher and for states that do not have right-to-work legislation. |
| Keywords: | Wage Rigidity, Monetary Policy, Tax Multipliers, U.S. states |
| JEL: | E52 E62 J30 |
| Date: | 2017–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1717&r=mac |
| By: | Caggiano, Giovanni; Castelnuovo, Efrem; Nodari, Gabriela |
| Abstract: | We investigate the role played by systematic monetary policy in tackling the real effects of uncertainty shocks in U.S. recessions and expansions. We model key indicators of the business cycle with a nonlinear VAR that allows for different dynamics in busts and booms. Uncertainty shocks are identi ed by focusing on historical events that are associated to jumps in nancial volatility. Uncertainty shocks hitting in recessions are found to trigger a more abrupt drop and a faster recovery in real activity than in expansions. Counterfactual simulations suggest that the effectiveness of systematic monetary policy in stabilizing real activity is greater in expansions. Finally, we provide empirical and narrative evidence pointing to a risk management approach by the Federal Reserve. |
| JEL: | C32 E32 |
| Date: | 2017–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:2017_008&r=mac |
| By: | Hyeongwoo Kim; Wen Shi |
| Abstract: | This paper empirically investigates the determinants of the two key benchmark interest rates in China using an array of constrained ordered probit models for quarterly frequency data from 1987 to 2013. Specifically, we estimate the behavioral equation of the People's Bank of China that models its decision-making process for revisions of the benchmark deposit rate and the lending rate. Our findings imply that the PBC's policy decisions are better understood as responses to changes in inflation and money growth, while output gaps and the exchange rate play negligible roles. We also implement in-sample fit analyses and out-of-sample forecast exercises. Our empirical findings show robust and reasonably good performances of our models in understanding dynamics of these benchmark interest rates. |
| Keywords: | Monetary Policy; People's Bank of China; Ordered Probit Model; Deposit Rate; Lending Rate; In-Sample Fit; Out-of-Sample Forecast |
| JEL: | E52 E58 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:abn:wpaper:auwp2017-04&r=mac |
| By: | Kang, Wensheng (Kent State University); Ratti, Ronald. A. (Economics, Finance and Property, Western Sydney University); Vespignani, Joaquin (Tasmanian School of Business & Economics, 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 papers 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 the 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. |
| Keywords: | global commodity prices, global stock volatility, output, heterogeneity |
| JEL: | D80 E44 E66 F62 G10 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tas:wpaper:23501&r=mac |
| By: | Wensheng Kang; Ronald A. Ratti; Joaquin Vespignani |
| 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 papers 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 the 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. |
| Keywords: | Global commodity prices, Global stock volatility, Output, Heterogeneity |
| JEL: | D80 E44 E66 F62 G10 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2017-36&r=mac |
| By: | Florian Brugger (University of Graz) |
| Abstract: | This paper outlines how foreign and domestic demand for U.S. Treasuries influences long-term Treasury yields. Previous studies outlined and estimated how enormous foreign Treasury purchases put downward pressure on long-term yields. After more than 10 years of heavy foreign demand for U.S. Treasuries, foreign purchases have become sluggish since 2012. Contrary to expectations, Treasury yield rates have not increased as foreign demand has declined. A possible reason for persistently low yield rates is that the demand of domestic institutional investors for Treasuries has changed. It will be shown that domestic institutional investors’ demand for Treasuries has increased strongly, decreasing yield rates significantly and thus counteracting the drop in foreign demand. |
| Keywords: | Foreign demand Treasury, Domestic demand Treasury, Treasury yields, Capital flows |
| JEL: | E43 E44 F21 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:grz:wpaper:2017-02&r=mac |
| By: | Peter K. Kruse-Andersen (Department of Economics, University of Copenhagen) |
| Abstract: | R&D-based growth models are tested using US data for the period 1953-2014. A general growth model is developed which nests the model varieties of interest. The model implies a cointegrating relationship between multifactor productivity, research intensity, and employment. This relationship is estimated using cointegrated VAR models. The results provide evidence against the widely used fully endogenous variety and in favor of the semi-endogenous variety. Forecasts based on the empirical estimates suggest that the slowdown in US productivity growth will continue. Particularly, the annual long-run growth rate of GDP per worker converges to between zero and 1.1 pct. |
| Keywords: | Endogenous growth, semi-endogenous growth, total factor productivity (TFP), research and development (R&D), time series econometrics, cointegration |
| JEL: | C32 E24 O31 O41 O47 O51 |
| Date: | 2017–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:1705&r=mac |
| By: | Brahim Gaies |
| Abstract: | In this article, we examine the impact of financial globalization on long-term economic growth. We test whether effects from different types of financial globalization: investment-globalization, indebtedness-globalization and financial globalization (investment plus indebtedness), are dependent until certain thresholds of macroeconomic stability and GDP per capita growth are attained. Estimates are performed with the two-step GMM system technique for dynamic panel data models for 72 developing countries from 1972 to 2011. Also, we use time-median calculation to capture the threshold effects in our sample. Our main results are the following. Financial globalization has a favorable impact on growth with the presence of minimum threshold effects in terms of macroeconomic stability and GDP per capita growth. A contrario, indebtedness-globalization negatively affects growth with the presence of minimum threshold effects in terms of macroeconomic stability and GDP per capita growth. If these thresholds are attained, they can decrease the negative impact of indebtedness-globalization and ultimately neutralize it. Finally, investment-globalization promotes economic growth with the potential existence of a maximum threshold effect in terms of GDP per capita growth. This maximum threshold corresponds to an inverted-U shape for the influence of investment-globalization on growth. |
| Keywords: | Globalization, Macroeconomic Instability, Threshold |
| JEL: | C23 C26 E44 F21 F36 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2017-25&r=mac |
| By: | Noel Rapa |
| Abstract: | This note studies the impact that the UK’s exit from the EU might have on the Maltese economy in the short-to-medium run using the Central Bank’s macro-econometric model. |
| JEL: | F47 F15 E02 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:ppaper:0117&r=mac |
| By: | Dosi, G.; Pereira, M. C.; Roventini, A.; Virgillito, M. E. |
| Abstract: | In this work we develop an agent-based model where hysteresis in major macroeconomic variables (e.g. GDP, productivity, unemployment) emerges out of the decentralized interactions of heterogenous firms and workers. Building upon the model in Dosi et al. (2016, 2017), we specify an endogenous process of accumulation of workers' skills and a state-dependent process of entry, studying their hysteretic impacts. Indeed, hysteresis is ubiquitous. However, this is not due to market imperfections, but rather to the very functioning of decentralised economies characterised by coordination externalities and dynamic increasing returns. So, contrary to the insider-outsider hypothesis (Blanchard and Summers, 1986), the model does not support the findings that rigid industrial relations may foster hysteretic behaviour in aggregate unemployment. On the contrary, in line with the recent discussion in Ball et al. (2014), this contribution provides evidence that during severe downturns, and thus declining aggregate demand, phenomena like lower investment and innovation rates, skills deterioration, and declining entry dynamics are better candidates to explain long-run unemployment spells and lower output growth. In that, more rigid labour markets dampen hysteretic dynamics by supporting aggregate demand, thus making the economy more resilient. |
| Keywords: | Hysteresis,Aggregate Demand,Multiple Equilibria,Skills Deterioration,Market Entry,Agent-Based Model |
| JEL: | C63 E02 E24 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:64&r=mac |
| By: | Camilo Ernesto Gómez; Daniel Felipe Cuervo |
| Abstract: | Este documento realiza un análisis descriptivo de los principales determinantes del consumo en Colombia. Asimismo, establece cuál de las dos teorías del consumo: ingreso disponible o ingreso permanente, se ajusta mejor a los datos durante el periodo 2000Q1-2016Q2. Para tal fin, primero se presenta una revisión de literatura sobre los principales determinantes del consumo en Colombia. Luego, partiendo de dos modelos teóricos bien definidos, se realiza el análisis y las pruebas econométricas para el caso colombiano. Por último, se encuentra que los principales determinantes del consumo de los hogares son: la riqueza, las restricciones de liquidez, tasa de desempleo y los términos de intercambio; igualmente, se obtiene que la teoría de ingreso permanente se ajusta mejor a los datos. |
| Keywords: | hipótesis del ingreso disponible, hipótesis del ingreso permanente, consumo |
| JEL: | E21 E27 D12 |
| Date: | 2017–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:col:000176:015560&r=mac |
| By: | Puriya Abbassi; Falk Brauning; Falko Fecht; José-Luis Peydró |
| Abstract: | We analyze how financial crises affect international financial integration, exploiting euro-area proprietary interbank data, crisis and monetary shocks, and loan terms to the same borrower-day by domestic versus foreign lenders. Crisis shocks reduce the supply of cross-border liquidity, with stronger volume than pricing effects, thereby impairing international financial integration. On the extensive margin, there is flight to home—but independently of quality. On the intensive margin, however, GIPS-headquartered debtor banks suffer in the Lehman crisis, but effects are stronger in the sovereign-debt crisis, especially for riskier banks. Nonstandard monetary policy improves interbank liquidity, but without fostering strong cross-border financial re-integration. |
| Keywords: | financial integration, financial crises, cross-border lending, monetary policy, euro area sovereign crisis, liquidity |
| JEL: | E58 F30 G01 G21 G28 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:965&r=mac |
| By: | Libman, Emiliano |
| Abstract: | During the last decades, the number of countries that adopted more fexible exchange rate regimes, in particular Inflation Targeting, has been increasing steadily. Latin-America was no exception. Some authors have argued that there is a flaw in the way in which the system has been conducted in the region. When inflation falls, the Central Bank is reluctant to cut interest rates, but when inflation increases, the Central Bank is willing to raise interest rates very aggressively, adding an unnecessary bias to monetary and exchange rate policies. This paper analyzes the asymmetry of monetary and exchange rate policies in the five largest Latin-American Inflation Targeting countries, Brazil, Chile, Colombia, Mexico, and Peru. Using different econometric techniques, I find that the Central Banks, with the exception of Chile, suffer from "fear of floating". This is a more pronounced phenomenon for the case of Brazil and Mexico, as the literature has argued. |
| Keywords: | Exchange Rates, Exchange Rate Regimes, Inflation Targeting, Asymmetric Policy Rule, Markov-Switching Models, GMM, STAR Models. |
| JEL: | E58 F30 F41 F43 |
| Date: | 2017–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78864&r=mac |
| By: | Ascari, Guido; Florio, Anna; Gobbi, Alessandro |
| Abstract: | Inflation depends on both monetary and fiscal policies and on how agents believe that these policies will evolve in the future. Can monetary policy control inflation, when both monetary and fiscal policies are allowed to change over time? To analyse this problem, we study a model in which both monetary and fiscal policies may switch according to a Markov process. Controlling inflation entails a unique and Ricardian solution. We propose a natural generalisation of the original Leeper (1991) taxonomy, introducing the concepts of globally active (or passive) and globally switching policies to define the conditions that allow monetary policy to control inflation under Markov switching. First, monetary and fiscal policies need to be globally balanced to guarantee a unique equilibrium: globally active monetary policies need to be coupled with globally passive fiscal policies, and switching monetary policies with switching fiscal policies. Second, this distinction characterises the nature of the solutions: a globally AM/PF regime is Ricardian, while a globally switching regime features expectation and wealth effects. Third, the strength of policy deviations across regimes is key, insofar a globally active (or passive) policy allows only timid deviations. Finally, our framework can rationalise the impulse responses from a Bayesian VAR on U.S. data for the recent zero lower bound period as being due to "timidity" in fiscal actions that have been unable to spur inflation. |
| JEL: | E58 E63 |
| Date: | 2017–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:2017_009&r=mac |
| By: | Puriya Abbassi; Falk Bräuning; Falko Fecht; José-Luis Peydró |
| Abstract: | We analyze how financial crises affect international financial integration, exploiting euro-area proprietary interbank data, crisis and monetary shocks, and loan terms to the same borrower-day by domestic versus foreign lenders. Crisis shocks reduce the supply of cross-border liquidity, with stronger volume than pricing effects, thereby impairing international financial integration. On the extensive margin, there is flight to home—but independently of quality. On the intensive margin, however, GIPS-headquartered debtor banks suffer in the Lehman crisis, but effects are stronger in the sovereign-debt crisis, especially for riskier banks. Nonstandard monetary policy improves interbank liquidity, but without fostering strong cross-border financial re-integration. |
| Keywords: | financial integration, financial crises, cross-border lending, monetary policy, euro area sovereign crisis, liquidity |
| JEL: | E58 F30 G01 G21 G28 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1566&r=mac |
| By: | Diewert, Erwin; FOX, Kevin J.; Paul Schreyer |
| Abstract: | We provide a generalization of Becker's theory of the allocation of time. We assume that household time plays three roles: as leisure, household work and household labour supply, with separate utility valuations for each use of time. A case not considered by Becker, nor by Pollak and Wachter, is addressed; the case where the household does not provide external market labour. Various corner solutions to the household's time allocation problem are considered in detail, and we consider the econometric problems that these corner solutions create. We relate the analysis to the difficult problems associated with the valuation of household work at home. |
| Keywords: | Valuation of household time, replacement cost valuation of time, opportunity cost valuation of time, household production |
| JEL: | J22 E21 E01 |
| Date: | 2017–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:ubc:pmicro:erwin_diewert-2017-5&r=mac |
| By: | Leonardo Gambacorta; Andrés Murcia Pabón |
| Abstract: | This paper summarises the results of a joint research project by eight central banks in the Americas region to evaluate the effectiveness of macroprudential tools and their interaction with monetary policy. In particular, using meta-analysis techniques, we summarise the results for five Latin American countries (Argentina, Brazil, Colombia, Mexico and Peru) that use confidential bank-loan data. The use of granular credit registry data helps us to disentangle loan demand from loan supply effects without making strong assumptions. Results from another three countries (Canada, Chile and the United States) corroborate the analysis using data for credit origination and borrower characteristics. The main conclusions are that (i) macroprudential policies have been quite effective in stabilising credit cycles. The propagation of the effects to credit growth is more rapid (they materialise after one quarter) for policies aimed at curbing the cycle than for policies aimed at fostering resilience (which take effect within a year); and (ii) macroprudential tools have a greater effect on credit growth when reinforced by the use of monetary policy to push in the same direction. |
| Keywords: | macroprudential policies, bank lending, credit registry data, meta-analysis |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:636&r=mac |
| By: | Allan Wright; Kari Grenade; Ankie Scott-Joseph |
| Abstract: | This study contends that Caribbean countries cannot adequately surmount their fiscal and debt challenges in the absence of binding rules that are geared toward entrenching fiscal discipline, curbing fiscal procyclicality, and improving budget transparency and credibility. Distilling global lessons and taking due cognizance of Caribbean countries' idiosyncrasies, the paper explores key technical, operational and institutional issues in the design, implementation, and monitoring of fiscal rules that might be relevant for Caribbean countries that currently do not have legislated rules. Results from simulations carried out to determine welfare effects and the extent of volatility of key macroeconomic variables under various fiscal rules scenarios suggest that of the different types of simulated fiscal rules, expenditure rules perform best in terms of reducing macroeconomic volatility, and in that regard, appear to be the most welfare-enhancing. This is believed to be the first study to carry out such a simulation exercise for Caribbean countries. The findings of the study evince useful insights for policymakers on how to improve the design and conduct of fiscal policy for better fiscal and, by extension, development outcomes. |
| Keywords: | Fiscal rules, Public debt, Public Financial Management, Fiscal deficit, fiscal deficit, public debt, fiscal policy, fiscal sustainability |
| JEL: | H60 E62 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:98117&r=mac |
| By: | Tamara Vovchak |
| Abstract: | This paper provides evidence about the transmission of banking sector problems to the real sector, and examines the impact of bank credit supply frictions on firm performance. I exploit differences in the composition of banks' liabilities structure during the financial crisis of 2007-2009 as a source of exogenous variation in the availability of bank credit to nonfinancial firms, in order to identify the causal relationship between bank credit supply and firm performance, measured by firms' stock returns. My evidence indicates that banking relationships are important for firms. Firms whose banks relied more on core deposit financing had a lower decline in bank credit during the crisis than those whose banks were mainly financed by noncore sources of funding. I document a positive relationship between changes in bank credit and firms' stock returns during the crisis: a one standard deviation decline in bank credit to a firm causes a stock return reduction of 3.5 percentage points, while firms that had lending relationships with healthier banks had a lower decline in bank credit and thereby lower reductions in their stock returns during the crisis. |
| Keywords: | bank credit; bank liquidity shock; financial crisis; relationship lending; firm financial constraints; firm performance; |
| JEL: | E44 G21 G32 L25 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp584&r=mac |
| By: | Israël, Jean-Marc; Damia, Violetta; Bonci, Riccardo; Watfe, Gibran |
| Keywords: | analytical credit dataset, central bank statistics., central credit registers, credit risk, loan-by-loan data |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2017187&r=mac |
| By: | Ho, Sin-Yu; Njindan Iyke, Bernard |
| Abstract: | The impact of financial development on poverty reduction has received attention in the literature recently. While the connection between financial development and poverty may appear straight forward in theory, in empirics it may be much complicated. This study attempted at empirically assessing the causal links between financial development and poverty reduction in China for the period 1985–2014. The study used the Toda-Yamamoto causality test to avoid pretesting bias that has featured majority of the existing studies. The study utilized two standard proxies for financial development, namely: the domestic private credit by banks as percentage of GDP, and money supply (M2) as percentage of GDP; and a standard proxy for poverty reduction namely: the household final consumption expenditure per capita growth (annual percentage). The study found a bidirectional causal flow between financial development and poverty reduction, implying that the causal flow between these important variables is independent of the proxy for financial development. This means that financial sector reforms and poverty reduction programmes are more of “win-win” strategies in the case of China. Therefore policymakers in China should continue to implement robust financial sector reforms and poverty reduction strategies. |
| Keywords: | Financial Development; Poverty Reduction; Toda-Yamamoto Test; China |
| JEL: | C32 E44 I32 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78922&r=mac |
| By: | Cascaldi-Garcia, Danilo (Warwick Business School, University of Warwick) |
| Abstract: | Kurmann and Otrok (2013) show that the effects on economic activity from news on future productivity growth are similar to the effects from unexpected changes in the slope of the yield curve. This comment shows that these results do not hold in the light of a recent update in the utilization-adjusted total factor productivity series produced by Fernald (2014). |
| Keywords: | news shocks ; JEL Classification Numbers: E32 ; |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:wrkemf:15&r=mac |
| By: | Doppelhofer, G.; Moe Hansen, O-P.; Weeks, M. |
| Abstract: | This paper estimates determinants of long-run growth rates of GDP per capita in a cross section of countries. We propose a novel Measurement Error Model Averaging (MEMA) approach that accounts for measurement error in international income data as well as model uncertainty. Estimating the model using eight vintages of the Penn World Tables (PWT) together with other proposed growth determinants, we identify 18 variables related to economic growth. In addition, the results are robust to allowing for outliers in the form of heteroscedastic model errors. |
| Keywords: | growth regression, robust growth determinants, measurement error, Bayesian modelling |
| JEL: | C11 C82 E01 O47 |
| Date: | 2017–01–09 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1702&r=mac |
| By: | Zi-Yi Guo (Wells Fargo Bank, N.A.) |
| Abstract: | Standard international real business cycle (IRBC) models formulated by Backus, Kehoe, and Kydland (BKK, 1992) have been considered a natural starting point to assess the quantitative implications of dynamic stochastic general equilibrium (DSGE) models in an open economy environment. Since the standard IRBC model under assumptions of flexible prices and perfect competition cannot replicate all the observed characteristics of international business cycles, a number of extended models with more realistic features have been developed in the past two decades. We introduce a noisy information structure into an otherwise standard international real business cycle model with two countries. When domestic firms observe current foreign technology with some noise, predictions of the model on international correlation can be very different from those of a standard perfect information model. We show that the model can explain: (i) positive output correlation both in complete and incomplete market models; (ii) consumption correlation smaller than output correlation with an introduction of information-constrained consumers; and (iii) observation of both positive and negative productivity-hours correlation in two countries. |
| Keywords: | Cross-country correlations; Imperfect information; Incomplete markets |
| JEL: | E32 F41 G15 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:4507458&r=mac |
| By: | Rafael Doménech; José Manuel González Páramo |
| Abstract: | We analyse the fiscal policy lessons from the recent recession in the Spanish economy and the options for the future. Our results indicate that budget balance and public debt trends showed clear signs of unsustainability between 2009 and 2011, with few alternatives available other than reducing the fiscal deficit. |
| Keywords: | Economic Analysis , Spain , Working Paper |
| JEL: | E62 H62 H63 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:bbv:wpaper:17/11&r=mac |
| By: | Gadea Rivas, Maria Dolores; Gómez Loscos, Ana; Pérez-Quirós, Gabriel |
| Abstract: | We propose a set of new quantitative measures to characterise more fully the features of economic recoveries. We apply these measures to postwar US expansions and use cluster analysis to determine that there are two different types of recoveries in recent US economic history, with most expansions before 1984 (Great Moderation) looking quite different from those after. |
| Keywords: | Business Cycles; recoveries |
| JEL: | C22 E32 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11997&r=mac |
| By: | Simona V?eti?ková (University of Economics, Faculty of Economics, Department of Economics, Prague) |
| Abstract: | This article examines the effect of the government expenditure structure on the economic growth. The objective is to determine which components of public expenditures are growth enhancing and which growth retarding. The theoretical model is set into the endogenous growth framework and describes the growth mechanism of productive and unproductive government expenditures. The growth impact of public spending composition is analysed for 18 European countries from 1996 to 2012. The empirical part is based on the panel data analysis. The empirical findings suggest that reallocating public resources towards education and health can promote growth. On the contrary higher expenditures on social spending and defence are likely to be growth-retarding. |
| Keywords: | Government expenditure, Economic growth, Endogenous growth theory |
| JEL: | E62 H10 H50 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:4507467&r=mac |
| By: | Santiago Acerenza; Néstor Gandelman |
| Abstract: | This paper characterizes household spending in education using microdata from income and expenditure surveys for 12 Latin American and Caribbean countries and the United States. Bahamas, Chile and Mexico have the highest household spending in education while Bolivia, Brazil and Paraguay have the lowest. Tertiary education is the most important form of spending, and most educational spending is performed for individuals 18-23 years old. More educated and richer household heads spend more in the education of household members. Households with both parents present and those with a female main income provider spend more than their counterparts. Urban households also spend more than rural households. On average, education in Latin America and the Caribbean is a luxury good, while it may be a necessity in the United States. No gender bias is found in primary education, but households invest more in females of secondary age and up than same-age males. |
| Keywords: | Household Expenditure, Household Income, Education Expenditure, Primary & Secondary Education, Children, School Attendance, gender bias, Educational Level, Household Expenditure, Household Income, Household Education Spending |
| JEL: | D12 I2 E21 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:98120&r=mac |
| By: | Gabriel Jiménez; Steven Ongena; José-Luis Peydró; Jesús Saurina |
| Abstract: | We analyze the impact of balance-sheet strength on credit availability. Bank balance sheets are weak in crisis times, but so are those of firms, and credit demand is then also weak. For identification, we exploit an administrative dataset of loan applications matched with bank and firm variables covering Spain from 2002 to 2010. Bank balance-sheet strength determines the granting of loan applications only in crisis times, while firm balance-sheet strength – notably leverage – determines strongly this granting in both good and crisis times. Our findings underscore the importance of the strength of corporate balance sheets over credit supply for credit availability. |
| Keywords: | firm balance-sheet channel, credit demand, bank lending channel, credit supply, business cycle, credit crunch, leverage. |
| JEL: | E44 G01 G21 G28 G32 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1567&r=mac |
| By: | Alvarez, Inmaculada; Casavecchia, Fabio; Luca, Marino De; Duering, Alexander; Eser, Fabian; Helmus, Caspar; Hemous, Christophe; Herrala, Niko; Jakovicka, Julija; Russo, Michelina Lo; Pasqualone, Filippo; Rubens, Marc; Prior Soares, Rita Isabel; Zennaro, Fabrizio |
| Keywords: | Central bank liquidity management, Central bank operational framework, monetary policy implementation, Non-standard monetary policy measures |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2017188&r=mac |
| By: | Danthine, Jean-Pierre |
| Abstract: | The Swiss National Bank has introduced negative interest rates of minus 75bp in mid-January 2015. Large exemptions on commercial bank holdings at the SNB result in the average rate being significantly less negative than the marginal rate. With this constellation the policy transmission to the real economy is asymmetric. It fully satisfies the needs of a SOE in search of a negative interest differential, not those of an economy aiming at "classical" monetary stimulus at the zero bound. While the Swiss design would make it possible to impose rates that are significantly more negative with modest complementary features, the unpopularity of negative rates makes it likely that the ambition to totally free monetary policy of the ZLB will be thwarted by democratic realities in the near future. |
| Keywords: | Cashless economy; Negative Interest Rates; Zero-Lower-Bound |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11969&r=mac |
| By: | Gabriel Jiménez; Steven Ongena; José-Luis Peydró; Jesús Saurina |
| Abstract: | We analyze the impact of balance-sheet strength on credit availability. Bank balance sheets are weak in crisis times, but so are those of firms, and credit demand is then also weak. For identification, we exploit an administrative dataset of loan applications matched with bank and firm variables covering Spain from 2002 to 2010. Bank balance-sheet strength determines the granting of loan applications only in crisis times, while firm balance-sheet strength – notably leverage – determines strongly this granting in both good and crisis times. Our findings underscore the importance of the strength of corporate balance sheets over credit supply for credit availability. |
| Keywords: | firm balance-sheet channel, credit demand, bank lending channel, credit supply, business cycle, credit crunch, leverage |
| JEL: | E44 G01 G21 G28 G32 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:966&r=mac |
| By: | Mohaddes, K.; Raissi, M. |
| Abstract: | This paper studies the impact of commodity terms of trade (CToT) volatility on economic growth (and its sources) in a sample of 69 commodity-dependent countries, and assesses the role of Sovereign Wealth Funds (SWFs) and quality of institutions in their long-term growth performance. Using annual data over the period 1981.2014, we employ the Cross-Sectionally augmented Autoregressive Distributive Lag (CS-ARDL) methodology for estimation to account for cross-country heterogeneity, cross-sectional dependence, and feedback effects. We find that while CToT volatility exerts a negative impact on economic growth (operating through lower accumulation of physical capital and lower TFP), the average impact is dampened if a country has a SWF and better institutional quality (hence a more stable government expenditure). |
| Keywords: | Economic growth, commodity prices, volatility, sovereign wealth funds. |
| JEL: | C23 E32 F43 O13 O40 |
| Date: | 2017–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1710&r=mac |
| By: | José Emilio Boscá; Rafael Doménech; Javier Ferri; José R García |
| Abstract: | En este artículo construimos una serie homogénea de vacantes para la economía española desde 1980 a 2016, lo que nos permite realizar un análisis de los efectos del ciclo económico sobre la relación entre desempleo y vacantes. |
| Keywords: | Análisis Macroeconómico , Documento de Trabajo , España |
| JEL: | E24 J6 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:bbv:wpaper:17/12&r=mac |
| By: | Heer, Burkhard; Polito, Vito; Wickens, Michael R. |
| Abstract: | We study the sustainability of pension systems using a life-cycle model with distortionary taxation that sets an upper limit to the real value of tax revenues. This limit implies an endogenous threshold dependency ratio, i.e. a point in the cross-section distribution of the population beyond which tax revenues can no longer sustain the planned level of transfers to retirees. We quantify the threshold using a computable life-cycle model calibrated on the United States and on 14 European countries which have dependency ratios among the highest in the world. We examine the effects on the threshold and welfare of a number of policies often advocated to improve the sustainability of pension systems. New tax data on dynamic Laffer effects are provided. |
| Keywords: | Dependency Ratio; Fiscal space; Laffer Effects; Pensions |
| JEL: | E62 H20 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11978&r=mac |
| By: | Roberto Alvarez; Erwin Hansen |
| Abstract: | This paper examines a panel (1994-2014) of Chilean non-financial firms, both publicly listed and private, which was built to analyze the determinants of the use of foreign currency debt and their potential consequences for firm investment and profitability. It is found that foreign assets and the use of FX derivatives are positively associated with firms' use of foreign currency debt. Also, depending on the estimation method, exports appear as an important determinant of the use of foreign currency debt. In terms of the potential effect of holding foreign currency debt on firms' performance after an exchange rate devaluation, no statistical differential effect is identified on either firm profitability or firm investment. This (lack of) result is interpreted as evidence that firms match liabilities and assets denominated in foreign currency and that firms actively involved in hedging aim to reduce their exposure to foreign exchange fluctuations. |
| Keywords: | Foreign Currency Debt, Foreign exchange, Bonds, Interest rates, Macroeconomics, Export Sales, Foreign Assets, Firm performance, non-financial firms, foreign exchange, interest rate |
| JEL: | E22 G31 F34 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:97976&r=mac |
| By: | Hwa, Tng Boon (Bank Negara Malaysia); Raghavan, Mala (Tasmanian School of Business & Economics, University of Tasmania); Huey, Teh Tian (Bank Negara Malaysia) |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:tas:wpaper:23512&r=mac |
| By: | Toshiyuki Uemura (School of Economics, Kwansei Gakuin University); Yoshimi Adachi (Department of Economics, Konan University); Tomoki Kitamura (Finance Research Group, NLI-Research Institute) |
| Abstract: | We empirically investigate whether the Japanese individual resident tax causes a reduction in the consumption of near-retired households. In contrast to the income tax, the individual resident tax is levied on income from the previous year, and we found it has a negative effect on the consumption of three types of near-retired households: those who maintain regular employment, who move from regular to irregular employment, and who move from employment (regular, irregular, or self) to unemployment. Particularly, for the second type, the individual resident tax caused a larger reduction in household consumption |
| Keywords: | Individual resident tax, Consumption, Retirement, Life-Cycle model, Panel data |
| JEL: | D12 D91 E21 H24 H31 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:161&r=mac |
| By: | Esteban Gómez; Angélica Lizarazo; Juan Carlos Mendoza; Andrés Murcia Pabón |
| Abstract: | Macroprudential tools have been used around the world to counter potential risks and imbalances in the financial sector. Colombia is a good example of a country that has employed a variety of regulatory measures to manage systemic risks in the economy. The purpose of this paper is to evaluate the effectiveness of two such policies with a view to increasing systemic resilience and curbing excesses in the credit supply. The first measure, the countercyclical reserve requirement, was implemented in 2007 to control excessive credit growth. The second was the dynamic provisioning scheme for commercial loans, which was designed to establish a countercyclical buffer through loan loss provision requirements. To perform this analysis, a rich dataset based on loan-by-loan information for Colombian banks during the 2006-09 period is used. A fixed effects panel model is estimated using the characteristics of debtors, banks and the macroeconomy as control variables. In addition, a difference in differences estimation is performed to evaluate the policies' impact. The findings suggest that the dynamic provisions and the countercyclical reserve requirement had a negative effect on credit growth, and that this effect varies according to bank-specific characteristics. Results also suggest that the aggregate macroprudential policy stance in Colombia has worked effectively to stabilize credit cycles, with some preliminary evidence also pointing towards significant effects in reducing bank risk-taking. Moreover, evidence is found that macroprudential policies have worked as a complement to monetary policy, as both have a moderating effect on credit growth when tightened. |
| Keywords: | Macroprudential policies, reserve requirements, credit growth, dynamic provisioning, credit registry data |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:634&r=mac |
| By: | Pavel Potuzak (University of Economics, Prague) |
| Abstract: | Ludwig von Mises in his magnum opus Human Action claimed that the absence of time preference would lead the consumer to postpone the act of consumption to indefinite future. Olson and Bailey (1981) demonstrated that zero time preference is consistent with positive real interest rate and positive present consumption if the marginal utility of consumption is rapidly decreasing and the income endowment is rising over time.This paper shows that zero time preference does not restrict present consumption to nil even if positive interest rate enables future consumption to be very large. Dynamic neoclassical model is applied to confirm that low intertemporal elasticity of substitution leads to positive present consumption even in the case of patient consumers. Determinants of the optimum present consumption are derived, and it is proved that labour income might not be increasing over time to confirm the approach of Olson and Bailey and to disprove the Mises theory. |
| Keywords: | time preference, Ludwig von Mises, postponement of consumption, intertemporal elasticity of substitution |
| JEL: | E21 B53 D90 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:4507367&r=mac |
| By: | Centre for European Economic Research (ZEW) |
| Abstract: | This study provides a general insight into the effect of different profit shifting strategies on effective tax rates for cross-border investments between the 28 EU member states and the US. In particular, this study enhances the baseline findings of ongoing research conducted by ZEW on behalf of the European Commission. Specifically, this report presents the cost of capital (CoC) and the effective average tax rates (EATR) for cross-border investments between the 28 EU member states and the US distinguishing between scenarios that involve seven different tax planning strategies. |
| Keywords: | corporate taxation, effective tax rates, cross-border investment, profit shifting, tax planning |
| JEL: | H21 H26 E43 |
| Date: | 2016–10 |
| URL: | http://d.repec.org/n?u=RePEc:tax:taxpap:0064&r=mac |
| By: | Sergio Mayordomo (Banco de España); Antonio Moreno (University of Navarra); Steven Ongena (University of Zurich, Swiss Finance Institute, KU Leuven, and CEPR); María Rodríguez-Moreno (Banco de España) |
| Abstract: | Little is known about the drivers and effectiveness of personal as opposed to real loan guarantees provided by firms. This paper studies a dataset of 477,209 loan contracts granted over the 2006-2014 period by one Spanish financial institution consisting of several distinguishable organisational units. While personal guarantees are mostly driven by the economic environment as reflected in firm and bank conditions, real guarantees are mostly explained by loan characteristics. In response to higher capital requirements imposed by the European authorities in 2011, personal guarantee requirements increased significantly more than their real counterparts. Our results imply that personal guarantees can discipline firms in their risk-taking, but their overuse can limit this positive effect and damage their performance. |
| Keywords: | banks, asymmetric information, real guarantees, personal guarantees, risk-taking, capital requirements |
| JEL: | D43 E32 G21 G32 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1715&r=mac |
| By: | Pierre-Richard Agénor; Luiz A. Pereira da Silva |
| Abstract: | The effects of capital requirements on risk-taking and welfare are studied in a stochastic overlapping generations model of endogenous growth with banking, limited liability, and government guarantees. Capital producers face a choice between a safe technology and a risky (but socially inefficient) technology, and bank risk-taking is endogenous. Setting the capital adequacy ratio above a structural threshold can eliminate the equilibrium with risky loans (and thus inefficient risk-taking), but numerical simulations show that this may entail a welfare loss. In addition, the optimal ratio may be too high in practice and may concomitantly require a broadening of the perimeter of regulation and a strengthening of financial supervision to prevent disintermediation and distortions in financial markets. |
| Keywords: | Capital Requirements, Bank risk-taking, Investment, Financial Stability, Economic Growth, Capital Goods, Financial Regulation, Financial Intermediaries, Financial Markets, risky investments, financial regulation, financial stability |
| JEL: | O41 G28 E44 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:98078&r=mac |
| By: | Bahal, G. |
| Abstract: | Rural development programs in India are implemented for a variety of reasons. A key question is whether such transfer spending by the government is consequential for the local economic activity. This chapter estimates the multiplicative effects of rural transfer spending on state agricultural output using a novel dataset of statewise expenditure on all major rural development programs that were operational between 1980-2010. Using government reports as narrative evidence we show that the principal motivation to introduce a new scheme is either (i) to replace old inefficient programs or (ii) to address a deep-rooted social or economic issue that has not been addressed by any existing program. Importantly, the introduction of a new scheme is largely independent of the current or prospective output fluctuations. Using this narrative evidence we isolate the “introductory variation” that occurs every time a new program is introduced as a measure of change in transfer spending that is exogenous to local output fluctuations. The results suggest that local variations in rural transfer spending can be quite consequential for the local economic activity in rural areas. |
| Keywords: | Employment Guarantee, Wage Rigidity, Welfare, NREGA, India |
| JEL: | E62 H53 I38 O13 |
| Date: | 2017–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1709&r=mac |
| By: | Centre for European Economic Research (ZEW) |
| Abstract: | This study analysis current interest deduction limitation rules in the EU28 Member States and assesses the effect of interest deduction limitation rules on effective tax rates, provides insights on the effects of the fundamental tax reform options on current tax systems, considers a revenue-neutral implementation of the reforms and possible consequences for the level of investment in the EU28 Member States. |
| Keywords: | corporate taxation, effective tax rates, dept-bias, tax reforms |
| JEL: | H21 H26 E43 |
| Date: | 2016–10 |
| URL: | http://d.repec.org/n?u=RePEc:tax:taxpap:0065&r=mac |
| By: | Valentina Meliciani (University Luiss Guido Carli, Rome, Italy); Grzegorz Tchorek (Narodowy Bank Polski and University of Warsaw) |
| Abstract: | This paper studies the determinants of companies’ performance during the crisis based on their short-term (sales changes) and medium-term (exit) reaction, using firms’ data from the EFIGE survey and combining them with balance-sheet statistics. The results show that vulnerability to the crisis depended on a company’s position within a GVC and modes of international operation. While exporters were more affected than nonexporters during the first crisis, their survival rates were not lower five years later. Moreover, more sophisticated internationalization modes increased firms’ resilience in the first and second waves of the crisis. The paper also investigates the mediating role of intangible assets and financial constraints in the relationship between internationalization and companies’ response to the crisis. While intangible assets were very important for preventing a drop in sales for internationalized firms immediately after 2008, they amplified the probability of firms’ exit five years after the crisis in weaker European countries (Spain and Italy). At the same time, financial constraints increased companies’ probability of exit. Innovation prevented a drop in firms’ sales and firms’ exit. |
| Keywords: | global value chains, crisis, intangible assets, financial constraints |
| JEL: | O3 E22 G01 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:nbp:nbpmis:259&r=mac |
| By: | Şen, Hüseyin; Bulut-Çevik, Zeynep Burcu; Kaya, Ayşe |
| Abstract: | The objective of this paper is to revisit as well as empirically examine an old but still discussed postulate, the Khaldun-Laffer curve, on the basis of personal income tax by making use annual time-series data for Turkey for the period 1970-2015. The findings of the paper confirm the validity of the Khaldun-Laffer curve hypothesis. In addition, we infer that the optimal tax rate that maximizes the tax revenue generated from personal income taxation in Turkey is 15.03 percent. This rate is well-below than the current rate which we estimate as 15.37 percent, implying that Turkey’s current tax rate for personal income tax takes place in the prohibitive range of the Khaldun-Laffer curve. These findings suggest that the current tax rate should be lowered and to its optimal level to collect more tax revenue. Getting down the current rate to its revenue-maximizing rate not only would it enable the Turkish authorities to collect more revenues with a relatively lower rate, but also would allow them to minimize the substitution effects of personal income tax while maximizing the income revenues from it. |
| Keywords: | Tax Policy, Khaldun-Laffer Curve, Laffer Curve, Optimal Tax Rate, Personal Income Tax, Turkey |
| JEL: | E62 H2 H20 |
| Date: | 2017–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78850&r=mac |
| By: | Gorga, Carmine |
| Abstract: | In Concordian economics, a bubble is defined as a separation of monetary values from values of real wealth. This separation is effected by the fundamental proposition of Concordian economics: Investment is income minus hoarding. This definition, in turn, allows us to identify a set of crucial relationships that exist in the economic process, namely more hoarding, less investment and less growth; more hoarding, more inflation; more hoarding, more poverty. |
| Keywords: | A10, B40, B59, C18, D84, E01, E19, G01, K40 |
| JEL: | A10 A19 B40 B59 C18 D84 E1 E19 G01 K40 |
| Date: | 2016–08–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78696&r=mac |
| By: | Schwärzler, Marion Cornelia; Legler, Benno |
| Abstract: | The National Health Account quantifies the economic contribution of the German health economy for national GVA, employment and international trade. Underlying methodology and concepts were developed in the course of several projects commissioned by the German Federal Ministry for Economic Affairs and Energy. Due to a revision of statistical standards in the context of national accounts in 2014, results from earlier calculations are no longer comparable to recently calculated indicators. This paper hence pursues to indicate changes due to the new statistical standard of national accounts, ESA 2010, and present results from recent calculations. In addition, results from input-output analysis enable a more thorough analysis of the health economy and its interdependencies with the overall economy. |
| Keywords: | Gesundheitswirtschaft, Volkswirtschaftliche Gesamtrechnungen, Input-Output Analyse, ESVG 2010, Deutschland |
| JEL: | C67 E01 I11 I18 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:79066&r=mac |
| By: | Verbrugge, Randal (Federal Reserve Bank of Cleveland); Gallin, Joshua H. (Board of Governors of the Federal Reserve System) |
| Abstract: | The housing rental market offers a unique laboratory for studying price stickiness. This paper is motivated by two facts: 1. Tenants’ rents are remarkably sticky even though regular and expected recontracting would, by itself, suggest substantial rent flexibility. 2. Rent stickiness varies significantly across structure type; for example, detached unit rents are far stickier than large apartment unit rents. We offer the first theoretical explanation of rent stickiness that is consistent with these facts. In this theory, search and bargaining with incomplete information generates stickiness in the absence of menu costs or other commonly used modeling assumptions. Tenants’ valuations of their units, and whether they are considering other units, are both private information. At lease end, the behavior of risk-averse landlords differs according to the number of units managed. Multi-unit landlords, aided by the law of large numbers, exploit tenant moving costs. When renegotiating rent contracts, they set rent increases that exceed the inflation rate; while the majority of tenants stay, those who place low value on the unit search elsewhere and leave. Landlords with one unit loathe vacancy and offer tenants the identical contract to pre-empt search; only those who really hate the unit leave. |
| Keywords: | Price stickiness; Bargaining; Search; Incomplete information; |
| JEL: | C7 C78 D4 D83 D9 E3 R31 |
| Date: | 2017–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:1705&r=mac |
| By: | I Doun Kuo (Tunghai University) |
| Abstract: | Campbell and Shiller (1991) find the presence of term structure anomaly, in which the slope of the term structure predicts inconsistently to the change in yield of longer-term bonds over the life of shorter-term bonds during 1952-1987. Focusing on the post Campbell and Shiller period, our findings suggest that the anomaly is not only attributed to term premia, but also relates to expectation errors. We found that macroeconomic surprises and irrationality from investors? behavior are important determinants of expectation errors. These factors are capable of explaining the rejection of the expectation hypothesis and the US term structure anomaly in long-term securities. |
| Keywords: | Irrationality; Term structure anomaly: Expectation hypothesis; Term structure of interest rates |
| JEL: | E43 G12 G14 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:4507033&r=mac |
| By: | Ho, Sin-Yu; Njindan Iyke, Bernard |
| Abstract: | This paper reassesses the nexus between bank-based financial development and economic growth in Hong Kong during the period 1990 – 2014. That is, it tests whether Hong Kong follows a supply-leading or a demand-following hypothesis. Empirically, economists have generally disagreed on the nexus between bank-based financial development and economic growth. Hong Kong is a typical economy which has experienced both bank-based financial expansion and economic expansion in the last three decades. It therefore serves as a quintessence for testing this overarching debate. Using the Toda-Yamamoto test for causality and two indicators of bank-based financial development – in order to report robust results – the paper finds Hong Kong to follow the supply-leading hypothesis. This implies that the banking sector is vital in driving economic growth in Hong Kong during the study period. Policymakers in this economy will only enhance economic growth further by targeting and ensuring efficient performance of bank-based financial institutions. |
| Keywords: | Bank-based Financial Development; Economic Growth; Causality; Hong Kong |
| JEL: | C32 E44 G21 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78920&r=mac |
| By: | Diego Alejandro Guevara Castañeda |
| Abstract: | Este trabajo presenta un análisis de los cambios de las finanzas en Colombia en las últimas cuatro décadas desde un enfoque de la financiarización y la relación de este fenómeno con la desigualdad en la distribución del ingreso. Así, en la primera parte se realiza un acercamiento teórico a las diferentes dimensiones, momentos e interpretaciones de la financiarización mostrando de manera contundente el origen heterodoxo del concepto asociado a dimensiones problemáticas de las finanzas. Posteriormente se analizan las transformaciones del sistema financiero colombiano y de diferentes políticas en una propuesta de perspectiva histórica definiendo y analizando 3 momentos de financiarización para Colombia. El capítulo final reflexiona sobre los vínculos de las finanzas y la desigualdad primero en un enfoque teórico y finalmente con un ejercicio de construcción de índices de Theil y un ejercicio de modelamiento computacional SFC (Stock Flow Consistent) para Colombia con el fin de mostrar algunas relaciones entre la financiarización y la desigualdad en la periferia. |
| Keywords: | Financiarización, Distribución del Ingreso, Desigualdad, Consistencia Stock-Flujo, Economía Colombiana |
| JEL: | D63 D31 E44 F36 G15 N26 O16 O15 |
| Date: | 2017–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:col:000430:015562&r=mac |
| By: | Asatryan, Zareh; Debrun, Xavier; Heinemann, Friedrich; Horvath, Michal; Ódor, Ľudovít; Yeter, Mustafa |
| Abstract: | Following numerous reforms of fiscal governance in the eurozone since 2011, the year 2016 saw another important innovation: the founding of the European Fiscal Board (EFB) with the selection and appointment of its five members. The EFB was one of the elements envisaged by the Five Presidents' Report in June 2015 (Juncker et al., 2015) for a future "Fiscal Union". It is the only element among those in the report to have been established within such a remarkably short time span. The decision to create this new institution was taken by the European Commission (EC) in October 2015. The Board began operating shortly after its members were appointed in October 2016. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewpbs:32017&r=mac |
| By: | Raju Huidrom; M. Ayhan Kose; Franziska Ohnsorge |
| Abstract: | The seven largest emerging market economies - China, India, Brazil, Russia, Mexico, Indonesia, and Turkey - constituted more than one-quarter of global output and more than half of global output growth during 2010-15. These emerging markets, which we call EM7, are also closely integrated with other countries, especially with other emerging and frontier markets. Given their size and integration, growth in EM7 could have significant cross-border spillovers. We provide empirical estimates of these spillovers using a Bayesian vector autoregression model. We report three main results. First, spillovers from EM7 are sizeable: a 1 percentage point increase in EM7 growth is associated with a 0.9 percentage point increase in growth in other emerging and frontier markets and a 0.6 percentage point increase in world growth at the end of three years. Second, sizeable as they are, spillovers from EM7 are still smaller than those from G7 countries (Group of Seven of advanced economies). Specifically, growth in other emerging and frontier markets, and the global economy would increase by one-half to three times more due to a similarly sized increase in G7 growth. Third, among the EM7, spillovers from China are the largest and permeate globally. |
| Keywords: | Business cycles, spillovers, external shocks, China, EM7, G7 |
| JEL: | E32 F20 F42 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2017-37&r=mac |
| By: | Goel, Rajeev K. (Illinois State University); Saunoris, James W. (Eastern Michigan University); Schneider, Friedrich (University of Linz) |
| Abstract: | This paper provides a long-term view by studying the effect of the underground or shadow economy on economic growth in the Unites States over the period 1870 to 2014. Shadow activities might spur or retard economic growth depending on their interactions with the formal sector and impacts on the provision of public goods. Nesting the analysis in a standard neo-classical growth model, we use a relatively new time-series technique to estimate the short-run dynamics and long-run relationship between economic growth and its determinants. Results suggest that prior to WWII the shadow economy had a negative effect on economic growth; however, post-WWII the shadow economy was beneficial for growth. This ambiguity regarding the overall growth impact of the shadow economy is consistent with underlying theoretical arguments. |
| Keywords: | economic growth, shadow economy, United States, time series |
| JEL: | E26 O43 O51 K42 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10705&r=mac |
| By: | Raju Huidrom (WorldBank, Development Prospects Group); M. Ayhan Kose (WorldBank, Development Prospects Group; Brookings Institution; CEPR, and CAMA); Franziska L. Ohnsorge (WorldBank, Development Prospects Group; CAMA) |
| Abstract: | The seven largest emerging market economies China, India, Brazil, Russia, Mexico, Indonesia, and Turkey constituted more than one-quarter of global output and more than half of global output growth during 2010-15.These emerging markets, which we call EM7,are also closely integrated with other countries, especially with other emerging and frontier markets. Given their size and integration, growth in EM7 could have significant cross-border spillovers. We provide empirical estimates of these spillovers using a Bayesian vector auto regression model. We report three main results. First, spillovers from EM7 are sizeable: a 1 percentage point increase in EM7 growth is associated with a 0.9 percentage point increase in growth in other emerging and frontier markets and a 0.6 percentage point increase in world growth at the end of three years. Second, sizeable as they are, spillovers from EM7 are still smaller than those from G7 countries (Group of Seven of advanced economies). Specifically, growth in other emerging and frontier markets, and the global economy would increase by one-half to three times more due to a similarly sized increase in G7 growth. Third, among the EM7, spillovers from China are the largest and permeate globally. |
| Keywords: | Business cycles; spillovers; external shocks; China; EM7; G7. |
| JEL: | E32 F20 F42 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:1710&r=mac |
| By: | Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Christos Kollias (Department of Economics, University of Thessaly, Volos, Greece); Stephanos Papadamou (Department of Economics, University of Thessaly, Volos, Greece); Mark E. Wohar (College of Business Administration, University of Nebraska at Omaha, Omaha, USA and School of Business and Economics, Loughborough University, Leicestershire, UK) |
| Abstract: | Using monthly stock and bond returns data from both the USA and the UK, this study addresses the issue of whether news implied volatility and its main components have affected in any significant manner the time-varying stock–bond covariance, their returns and their variances. The time varying association between the two markets has attracted considerable attention due to its important implications for asset allocation, portfolio selection and risk management. The issue at hand is addressed using a VAR(p)-BEKK-GARCH(1,1)-in-mean model and the results reported herein indicate that different types of news implied volatility as quantified by the NVIX developed by Manela and Moreira (2017) affects differently USA and UK returns, variances and covariance. |
| Keywords: | NVIX index, Stock-bond covariance, GARCH models |
| JEL: | E44 G10 G15 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:201730&r=mac |
| By: | Bitros, George C. |
| Abstract: | The economic constitutions of Germany and Greece have resulted in the postwar period in two economies that are based on two vastly different philosophies. Germany has built a highly competitive, outward looking economy based essentially on the principles of the so-called “Social Market Economy”, whereas Greece has set up a “state-managed economy” by drawing on the principles of central planning and administrative controls. This divide is equally stark, if assessed on the basis of the performance of the two economies. For, as it is known by now, Germany has become once again the powerhouse of Europe while Greece has gone bankrupt. As to the implications of this great divide for the future of the EU, its identification and mapping helps understand why convergence criteria on the basis of economic performance and living standards should be abandoned in favor of criteria based on the widening and deepening of the four European freedoms. A multi-speed Euroland enmeshed in these freedoms is going to be more democratic, more cohesive and a much happier union for the European citizens to call homeland. |
| Keywords: | Social market economy, central planning, economic performance, structural differences, four European freedoms. |
| JEL: | E02 F02 H1 L5 P51 |
| Date: | 2017–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:79039&r=mac |
| By: | Toda, Alexis Akira |
| Keywords: | Social and Behavioral Sciences |
| Date: | 2016–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsdec:qt4gm143d8&r=mac |