nep-mac New Economics Papers
on Macroeconomics
Issue of 2017‒08‒20
fifty-one papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Monetary Policy in a Low Interest Rate World By Michael T. Kiley; John M. Roberts
  2. Matching efficiency and labour market heterogeneity in the United Kingdom By Pizzinelli, Carlo; Speigner, Bradley
  3. The Housing Boom and Bust: Model Meets Evidence By Kaplan, Greg; Mitman, Kurt; Violante, Giovanni L.
  4. Human Capital in a Credit Cycle Model By Ingrid Kubin; Thomas O. Zörner
  5. Assessing the effectiveness of the monetary policy instrument during the inflation targeting period in South Africa By Bonga-Bonga, Lumengo
  6. Internal and External Factors Explaining Chilean Economic Activity By Acuña, Guillermo
  7. The propagation of industrial business cycles By Maximo Camacho; Danilo Leiva-Leon
  8. Does unemployment aggravate suicide rates in South Africa? Some empirical evidence By Phiri, Andrew; Mukuka, Doreen
  9. Monetary Policy in the Capitals of Capital By Gerko, Elena; Rey, Hélène
  10. International capital markets with time-varying preferences By Curatola, Giuliano; Dergunov, Ilya
  11. Income and Wealth Inequality in America, 1949-2013 By Kuhn, Moritz; Schularick, Moritz; Steins, Ulrike
  12. Level and Volatility Factors in Macroeconomic Data By Yuriy Gorodnichenko; Serena Ng
  13. Financial Regulation and Shadow Banking: A Small-Scale DSGE Perspective By Patrick Fève; Olivier Pierrard
  14. Firm Entry, Excess Capacity and Aggregate Productivity By Savagar, Anthony; Dixon, Huw David
  15. Macro and Micro Dynamics of Productivity: From Devilish Details to Insights By Lucia S. Foster; Cheryl A. Grim; John Haltiwanger; Zoltan Wolf
  16. How to Cope with Volatile Commodity Export Prices: Four Proposals By Jeffrey Frankel
  17. Commodity Price Co-movement: Heterogeneity and the Time Varying Impact of Fundamentals By Byrne, Joseph P; Sakemoto, Ryuta; Xu, Bing
  18. The risk-taking channel of monetary policy in the US : Evidence from corporate loan data By Delis, Manthos D.; Hasan, Iftekhar; Mylonidis, Nikolaos
  19. A Tourism Financial Conditions Index for Tourism Finance By Chia-Lin Chang; Hui-Kuang Hsu; Michael McAleer
  20. The Size of Fiscal Multipliers and the Stance of Monetary Policy in Developing Economies By Jair N. Ojeda-Joya; Oscar E. Guzman
  21. Why Are Banks Not Recapitalized During Crises? By Matteo Crosignani
  22. Labour Market Analysis Using VAR Models By Ana-Maria Ciuhu
  23. The Time-Varying Risk Price of Currency Carry Trades By Byrne, Joseph P; Ibrahim, Boulis Maher; Sakemoto, Ryuta
  24. Foreign Currency Debt and Fixed Exchange Rate Regimes: the importance of implicit guarantees against currency devaluations By Marcio M. Janot; Márcio G. P. Garcia
  25. Capital flows, money supply and property prices: The case of China By Taguchi, Hiroyuki; Tian, Lina
  26. The profitability of banks in a context of negative monetary policy rates: the cases of Sweden and Denmark By Madaschi, Christophe; Nuevo, Irene Pablos
  27. Shopping for Lower Sales Tax Rates By Scott R. Baker; Stephanie Johnson; Lorenz Kueng
  28. Oil Prices and Informational Frictions: The Time-Varying Impact of Fundamentals and Expectations By Byrne, Joseph P; Lorusso, Marco; Xu, Bing
  29. Is Industrial Production Still the Dominant Factor for the US Economy? By Andreou, Elena; Gagliardini, Patrick; Ghysels, Eric; Rubin, Mirco
  30. Firm Heterogeneity in Consumption Baskets: Evidence from Home and Store Scanner Data By Faber, Benjamin; Fally, Thibault
  31. NOWCASTING THE NEW TURKISH GDP By Baris Soybilgen; Ege Yazgan
  32. The Growth Disease at 50 – Baumol after Oulton By Jochen Hartwig; Hagen Krämer
  33. Incertidumbre acerca de la política fiscal y ciclo económico By Martha Elena Delgado-Rojas; Hernán Rincón-Castro
  34. 経済史から見た「異次元緩和」 By Tetsuji Okazaki
  35. Modelling oil price-inflation nexus: The role of asymmetries and structural breaks By Sam Olofin; Afees A. Salisu
  36. Optimal Estimation of Multi-Country Gaussian Dynamic Term Structure Models Using Linear Regressions By Antonio Diez de los Rios
  37. Mixed Causal-Noncausal Autoregressions with Strictly Exogenous Regressors By Hecq, Alain; Issler, João Victor; Telg, Sean
  38. Surplus Value Production and Realization in Marxian Theory - Applications to the U.S., 1987-2015 By Jonathan Cogliano
  39. Europa zwischen Globalisierung und Renationalisierung By Karl Aiginger
  40. Stigma of Sexual Violence and Womens Decision to Work By Chakraborty, Tanika; Mukherjee, Anirban; Rachapalli,Swapnika Reddy; Saha, Sarani
  41. Real effects of bank capital regulations : Global evidence By Deli, Yota D.; Hasan, Iftekhar
  42. Revisiting the forecasting accuracy of Phillips curve: the role of oil price By Afees A. Salisu; Idris Ademuyiwa; Kazeem Isah
  43. Measurement error of global production By van Bergeijk, P.A.G.
  44. Simulating Business Cash Flow Taxation: An Illustration Based on the “Better Way” Corporate Tax Reform By Seth G Benzell; Laurence J Kotlikoff; Guillermo LaGarda
  45. The labyrinth of the informal economy: measurement strategies and impacts By Victor Adame; David Tuesta
  46. Foreign Investment and Domestic Productivity: Identifying Knowledge Spillovers and Competition Effects By Fons-Rosen, Christian; Kalemli-Ozcan, Sebnem; Sørensen, Bent E; Villegas-Sanchez, Carolina; Volosovych, Vadym
  47. Social representations of money: Contrast between citizens and local complementary currency members By Ariane TICHIT
  48. Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement By Lorenzo Caliendo; Luca David Opromolla; Fernando Parro; Alessandro Sforza
  49. El laberinto de la economia informal: estrategias de medicion e impactos By Victor Adame; David Tuesta
  50. Why is South Africa Still a Developing Country? By Bakari, Sayef
  51. Wenig Unterschiede: Zur Treffsicherheit internationaler Prognosen und Prognostiker By Heilemann, Ullrich; Müller, Karsten

  1. By: Michael T. Kiley; John M. Roberts
    Abstract: Nominal interest rates may remain substantially below the averages of the last half-century, as central bank’s inflation objectives lie below the average level of inflation and estimates of the real interest rate likely to prevail over the long run fall notably short of the average real interest rate experienced over this period. Persistently low nominal interest rates may lead to more frequent and costly episodes at the effective lower bound (ELB) on nominal interest rates. We revisit the frequency and potential costs of such episodes in a low-interest-rate world in a dynamic-stochastic-general-equilibrium (DSGE) model and large-scale econometric model, the FRB/US model. Several conclusions emerge. First, monetary policy strategies based on traditional policy rules lead to poor economic performance when the equilibrium interest rate is low, with economic activity and inflation more volatile and systematically falling short of desirable levels. Moreover, the frequency and length of ELB episodes under such policy approaches is significantly higher than in previous studies. Second, a risk-adjustment to a simple rule in which monetary policymakers are more accommodative, on average, than prescribed by the rule ensures that inflation achieves its 2 percent objective and requires that policymakers aim at inflation near 3 percent when the ELB is not binding. Third, commitment strategies in which monetary accommodation is not removed until either inflation or economic activity overshoot their long-run objectives are very effective in both the DSGE and FRB/US model. Finally, our results suggest that the adverse effects associated with the ELB may be substantial at inflation targets near 2 percent if r* is low and monetary policy follows a traditional policy approach. Whether such adverse effects could justify a higher inflation target depends on whether monetary policy strategies substantially different from traditional approaches are feasible and an assessment of the effects of the inflation target on economic welfare.
    Keywords: Interest rates ; Model comparison ; Monetary policy
    JEL: E52 E58
    Date: 2017–08–10
  2. By: Pizzinelli, Carlo (University of Oxford); Speigner, Bradley (Bank of England)
    Abstract: This paper investigates how compositional changes in the UK labour market affect the matching process between vacancies and job seekers. We augment a state space representation of the aggregate matching function with a measure of job seekers’ ‘search intensity’ that is recovered from micro-data on individual unemployment-to-employment transitions, in line with recent developments in the literature. The baseline results show that matching efficiency declined by around 15% between 1995 and 2010 but subsequently recovered by about 5 percentage points in the last six years. Compositional changes in the labour force that improved aggregate search intensity prior to the 2008 recession will tend to obscure the decline in aggregate matching efficiency unless controlled for properly. Considering broader definitions of job seekers that include marginally-attached workers and on-the-job searchers exacerbates the registered decline in matching efficiency. Changes in ‘recruiting intensity’ and the share of vacancies posted by different industries provide a potential explanation for some, but not all, of the initial fall in matching efficiency that preceded the 2007–08 recession. Finally, we quantitatively analyse how labour force heterogeneity and changes in matching efficiency have affected the shape and location of the UK Beveridge Curve.
    Keywords: Unemployment; labour heterogeneity; matching function; Beveridge Curve
    JEL: E24 E32 J64 J82
    Date: 2017–08–04
  3. By: Kaplan, Greg; Mitman, Kurt; Violante, Giovanni L.
    Abstract: We build a model of the U.S. economy with multiple aggregate shocks (income, housing finance conditions, and beliefs about future housing demand) that generate fluctuations in equilibrium house prices. Through a series of counterfactual experiments, we study the housing boom and bust around the Great Recession and obtain three main results. First, we find that the main driver of movements in house prices and rents was a shift in beliefs. Shifts in credit conditions do not move house prices but are important for the dynamics of home ownership, leverage, and foreclosures. The role of housing rental markets and long-term mortgages in alleviating credit constraints is central to these findings. Second, our model suggests that the boom-bust in house prices explains half of the corresponding swings in non-durable expenditures and that the transmission mechanism is a wealth effect through household balance sheets. Third, we find that a large-scale debt forgiveness program would have done little to temper the collapse of house prices and expenditures, but would have dramatically reduced foreclosures and induced a small, but persistent, increase in consumption during the recovery.
    Keywords: Consumption; Credit Conditions; Expectations; foreclosures; great recession; home ownership; House Prices; leverage; Long-Term Mortgages; Rental Markets
    JEL: E21 E30 E40 E51
    Date: 2017–08
  4. By: Ingrid Kubin (Department of Economics, Vienna University of Economics and Business); Thomas O. Zörner (Department of Economics, Vienna University of Economics and Business)
    Abstract: We augment a model of endogenous credit cycles by Matsuyama et al.(2016) with human capital to study the impact of human capital on the stability of central economic aggregates. Thus we offer a linkage between human capital formation and credit market instability on a macrolevel combined with an analysis of functional income distribution. Human capital is modelled as pure external effect of production following a learning-by-producing approach. Agents have access to two different investment projects, which differ substantially in their next generations spillover effects. Some generate pecuniary externalities and technological spillovers through human capital formation whereas others fail to do so and are subject to financial frictions. Due to this endogenous credit cycles occur and a pattern of boom and bust cycles can be observed. We explore the impact of human capital on the stability of the system by numerical simulations which indicate that human capital has an ambiguous effect on the evolution of the output. Depending on the strength of the financial friction and the output share of human capital it either amplifies or mitigates output fluctuations. This analysis shows that human capital is an essential factor for economic stability and sustainable growth as a high human capital share tends to make the system's stability robust against shocks.
    Keywords: Human capital, Learning-by-producing, Credit cycles, Financial instability
    JEL: C61 E32 E24 J24
    Date: 2017–08
  5. By: Bonga-Bonga, Lumengo
    Abstract: This paper assesses how inflation reacts to monetary policy shocks in South Africa during the inflation targeting period by making use of the structural vector error correction model (SVECM). The results of the impulse response function obtained from the SVECM show that, on average, contractionary monetary policy that intends to curb inflationary pressure has been impotent in South Africa. However, the contractionary monetary policy shocks managed to reduce output. The paper suggests that it is time a dual target, inflation and output, be considered in South Africa to avoid the harm caused on output growth from monetary policy actions related to the constraint of inflation targeting.
    Keywords: inflation targeting policy, structural vector error correction model, South Africa
    JEL: C50 E52 E58
    Date: 2017–01–14
  6. By: Acuña, Guillermo
    Abstract: The objective of this paper is to find which factors were the most important to explain the contraction of the economic activity in Chile during the last three years. The results show that: (1) the fall in the rate of growth of the economy is explained by external factors, like the end of the mining boom; (2) the subsequent and persistently low growth rates are explained by a combination of internal and external factors, where the internal factors were the most important.
    Keywords: business cycle, internal factors, external factors
    JEL: E00 E32
    Date: 2017–07–19
  7. By: Maximo Camacho (University of Murcia); Danilo Leiva-Leon (Banco de España)
    Abstract: This paper examines the evolution of the distribution of industry-specificc business cycle linkages, which are modelled through a multivariate Markov-switching model and estimated by Gibbs sampling. Using non parametric density estimation approaches, we find that the number and location of modes in the distribution of industrial dissimilarities change over the business cycle. There is a relatively stable trimodal pattern during expansionary and recessionary phases characterized by highly, moderately and lowly synchronized industries. However, during phase changes, the density mass spreads from moderately synchronized industries to lowly synchronized industries. This agrees with a sequential transmission of the industrial business cycle dynamics.
    Keywords: business bycles, output growth, time series.
    JEL: E32 C22 E27
    Date: 2017–08
  8. By: Phiri, Andrew; Mukuka, Doreen
    Abstract: Our study investigates the cointegration relationship between suicides and unemployment in South Africa using annual data collected between 1996 and 2015 applied to the ARDL model. Furthermore, our empirical analysis is gender and age specific in the sense that the suicide data is disintegrated into different ‘sex’ and ‘age’ demographics. Our empirical results indicate that unemployment is insignificantly related with suicide rates with the exception for citizens above 75 years. On the other hand, other control variables such as per capita GDP, inflation and divorce appear to be more significantly related with suicides. Collectively, these findings have important implications for policymakers.
    Keywords: Unemployment; Suicide; Cointegration; Causality; South Africa; Sub Saharan Africa (SSA).
    JEL: C22 C51 E24 E31
    Date: 2018
  9. By: Gerko, Elena; Rey, Hélène
    Abstract: The importance of financial markets and international capital flows has increased greatly since the 1990s. How does this affect the effectiveness of monetary policy? We analyse the transmission of monetary policy in two important financial centres, the United States and the United Kingdom. Studying the responses of mortgage and corporate spreads, we find evidence in favour of an important financial channel in both countries. Our identification strategy allows us to study effects of the policy rate and of forward guidance, broadly defined. We also analyse international financial spillovers, which we find to be asymmetric.
    Keywords: high frequency identification; international financial spillovers; monetary policy
    JEL: E4 E52 E58 F41 G15
    Date: 2017–08
  10. By: Curatola, Giuliano; Dergunov, Ilya
    Abstract: We propose a 2-country asset-pricing model where agents' preferences change endogenously as a function of the popularity of internationally traded goods. We determine the effect of the time-variation of preferences on equity markets, consumption and portfolio choices. When agents are more sensitive to the popularity of domestic consumption goods, the local stock market reacts more strongly to the preferences of local agents than to the preferences of foreign agents. Therefore, home bias arises because home-country stock represents a better investment opportunity for hedging against future fluctuations in preferences. We test our model and find that preference evolution is a plausible driver of key macroeconomic variables and stock returns.
    Keywords: asset pricing,general equilibrium,heterogeneous agents,interdependent preferences,portfolio choice
    JEL: D51 D52 D53 E20 E21 F21 G11 G12
    Date: 2017
  11. By: Kuhn, Moritz; Schularick, Moritz; Steins, Ulrike
    Abstract: This paper studies the distribution of U.S. household income and wealth over the past seven decades. We introduce a newly compiled household-level dataset based on archival data from historical waves of the Survey of Consumer Finances (SCF). Complementing recent work on top income and wealth shares, the long-run survey data give a granular picture of trends in the bottom 90% of the population. The new data confirm a substantial widening of income and wealth disparities since the 1970s. We show that the main loser of rising income and wealth concentration at the top was the American middle class -- households between the 25th and 75th percentile of the distribution. The household data also reveal that the paths of income and wealth inequality deviated substantially. Differences in the composition of household portfolios along the wealth distribution explain this divergence. While incomes stagnated, the middle class enjoyed substantial gains in housing wealth from highly concentrated and leveraged portfolios, mitigating wealth concentration at the top. The housing bust of 2007 put an end to this counterbalancing effect and triggered the largest spike in wealth inequality in postwar history. Our findings highlight the importance of portfolio composition, leverage and asset prices for wealth dynamics in postwar America.
    Keywords: historical micro data; Household portfolios; Income and wealth inequality
    JEL: D31 E21 E44 N3
    Date: 2017–08
  12. By: Yuriy Gorodnichenko; Serena Ng
    Abstract: The conventional wisdom in macroeconomic modeling is to attribute business cycle fluctuations to innovations in the level of the fundamentals. Though volatility shocks could be important too, their propagating mechanism is still not well understood partly because modeling the latent volatilities can be quite demanding. This paper suggests a simply methodology that can separate the level factors from the volatility factors and assess their relative importance without directly estimating the volatility processes. This is made possible by exploiting features in the second order approximation of equilibrium models and information in a large panel of data. Our largest volatility factor V 1 is strongly counter-cyclical, persistent, and loads heavily on housing sector variables. When augmented to a VAR in housing starts, industrial production, the fed-funds rate, and inflation, the innovations to V 1 can account for a non-negligible share of the variations at horizons of four to five years. However, V 1 is only weakly correlated with the volatility of our real activity factor and does not displace various measures of uncertainty. This suggests that there are second-moment shocks and non-linearities with cyclical implications beyond the ones we studied. More theorizing is needed to understand the interaction between the level and second-moment dynamics.
    JEL: C3 C5 E3 E4
    Date: 2017–08
  13. By: Patrick Fève; Olivier Pierrard
    Abstract: In this paper, we revisit the role of regulation in a small-scale dynamic stochastic general equilibrium (DSGE) model with interacting traditional and shadow banks. We estimate the model on US data and we show that shadow banking interferes with macro-prudential policies. More precisely, asymmetric regulation causes a leak towards shadow banking which weakens the expected stabilizing effect. A counterfactual experiment shows that a regulation of the whole banking sector would have reduced investment fluctuations by 10% between 2005 and 2015. Our results therefore suggest to base regulation on the economic functions of financial institutions rather than on their legal forms.
    Keywords: Shadow Banking, DSGE models, Macro-prudential Policy
    JEL: C32 E32
    Date: 2017–07
  14. By: Savagar, Anthony (University of Kent); Dixon, Huw David (Cardiff Business School)
    Abstract: Slow firm entry over the business cycle causes measured TFP to vary endogenously because incumbent firms bear shocks. Our main theorem states that imperfect competition and dynamic firm entry are necessary and sufficient conditions for these endogenous productivity fluctuations. The result focuses on the short-run absence of entry and incumbents' output response given this quasi-fixity. Quantitatively we show the endogenous productivity effect is as large as a traditional capital utilization effect.
    Keywords: dynamic entry, endogenous productivity, endogenous sunk costs, business stealing, business cycle, continuous time
    JEL: E32 D21 D43 L13 C62
    Date: 2017–08
  15. By: Lucia S. Foster; Cheryl A. Grim; John Haltiwanger; Zoltan Wolf
    Abstract: Researchers use a variety of methods to estimate total factor productivity (TFP) at the firm level and, while these may seem broadly equivalent, how the resulting measures relate to the TFP concept in theoretical models depends on the assumptions about the environment in which firms operate. Interpreting these measures and drawing insights based upon their characteristics thus must take into account these conceptual differences. Absent data on prices and quantities, most methods yield ``revenue productivity" measures. We focus on two broad classes of revenue productivity measures in our examination of the relationship between measured and conceptual TFP (TFPQ). The first measure has been increasingly used as a measure of idiosyncratic distortions and to assess the degree of misallocation. The second measure is, under standard assumptions, a function of fundamentals (e.g., TFPQ). Using plant-level U.S. manufacturing data, we find these alternative measures are (i) highly correlated; (ii) exhibit similar dispersion; and (iii) have similar relationships with growth and survival. These findings raise questions about interpreting the first measure as a measure of idiosyncratic distortions. We also explore the sensitivity of estimates of the contribution of reallocation to aggregate productivity growth to these alternative approaches. We use recently developed structural decompositions of aggregate productivity growth that depend critically on estimates of output versus revenue elasticities. We find alternative approaches all yield a significant contribution of reallocation to productivity growth (although the quantitative contribution varies across approaches).
    JEL: E24 L22 O4
    Date: 2017–08
  16. By: Jeffrey Frankel
    Abstract: Countries where exports are relatively concentrated in oil, gas, minerals and agricultural commodities experience terms of trade that are highly volatile. This volatility is one of the possible explanations for the famous Natural Resource Curse.1 The aim in this keynote address is to offer four policy proposals to help countries manage commodity volatility and thereby help make sure that commodity wealth is a blessing rather than a curse. Two of the ideas fall in the area of microeconomic policy: specific financial contracts structured so as to hedge risk. Two of the ideas fall in the area of macroeconomic policy institutions: ways to make fiscal and monetary policy counter-cyclical rather than pro-cyclical.2 It is always hard to make policy proposals that are convincing and at the same time are original. I will try to strike a balance between being convincing and being original. Of the four ideas, two are tried and tested. Two have not been tried much. The question then becomes: why not? Let us first pause to ask: Don’t commodity-exporters already use financial markets to smooth trade fluctuations? If international financial markets worked well, countries facing temporary adverse trade shocks could borrow to finance current account deficits, and vice versa. But they don’t work that well. Capital flows to developing countries tend, if anything, to be pro-cyclical. The appropriate theory usually builds on the assumption that borrowing requires collateral, in the form of commodity export proceeds. The important point for policy-makers is that some careful thought is required to design institutions that can protect against the volatility. Many other policies and institutions for dealing with commodity volatility have been proposed and tried in various countries, some successful, some much less so. Many of the ideas that tend to work poorly can be described as seeking to suppress price volatility rather than manage it. I see them as akin to King Canute commanding the tide not to come in. I am thinking, for example, of price controls, commodity marketing boards, and controls on exports. Better to accept fluctuations in demand and supply as a fact of life, and to devise policies and institutions to equip the economy to cope with them. 1 Brueckner and Carneiro (2016), Blattman, Hwang, and Williamson (2007), Hausmann and Rigobon (2003), Mendoza (1997) and Poelhekke and van der Ploeg (2007). Terms of trade volatility hurts growth in the presence of investment irreversibilities and credit constraints (Aghion, Angeletos, Banerjee & Manova, 2010). Frankel (2012a) surveys the Natural Resource Curse. 2 E.g., Kaminsky, Reinhart and Végh {2005).
    Keywords: agriculture, commodities, currency basket, fiscal, hedging, indexed bonds, minerals, monetary, oil
    JEL: E F O
    Date: 2017–07
  17. By: Byrne, Joseph P; Sakemoto, Ryuta; Xu, Bing
    Abstract: This paper extends the topical literature on the co-movement and determinants of primary commodity prices, by considering heterogeneity in commodities and time variation in the impact of fundamentals. We account for heterogeneity by employing a dynamic hierarchical factor model, which decomposes commodities into global and sectoral factors. Using a time varying parameter factor augmented VAR model, we shock global and sector-specific factors over time. We present plausible impulse responses to demand shocks, real interest rate shocks, and to elevated risks during the global financial crisis. We also identify that materials, food and metals respond heterogeneously to these shocks.
    Keywords: Commodity Prices; Co-movement; Dynamic Hierarchical Factor Models; Time Varying Parameter Factor Augmented VAR.
    JEL: E3 F3 F4 G1
    Date: 2017–07–12
  18. By: Delis, Manthos D.; Hasan, Iftekhar; Mylonidis, Nikolaos
    Abstract: To study the presence of a risk-taking channel in the US, we build a comprehensive dataset from the syndicated corporate loan market and measure monetary policy using different measures, most notably Taylor (1993) and Romer and Romer (2004) residuals. We identify a negative relation between monetary policy rates and bank risk-taking, especially in the run up to the 2007 financial crisis. However, this effect is purely supply-side driven only when using Taylor residuals and an ex ante measure of bank risk-taking. Our results highlight the sensitivity of the potency of the risk-taking channel to the measures of monetary policy innovations.
    JEL: G21 G01 E43 E52
    Date: 2017–08–07
  19. By: Chia-Lin Chang (Department of Applied Economics, Department of Finance, National Chung Hsing University, Taiwan); Hui-Kuang Hsu (Department of Finance, National Pingtung University, Taiwan); Michael McAleer (National Tsing Hua University, Taiwan; University of Sydney Business School, Australia; Erasmus University Rotterdam, The Netherlands;Complutense University of Madrid, Spain; Yokohama National University, Japan)
    Abstract: The paper uses monthly data on tourism related factors from April 2005 - June 2016 for Taiwan that applies factor analysis and Chang’s (2015) novel approach for constructing a tourism financial indicator, namely the Tourism Financial Conditions Index (TFCI). The TFCI is an adaptation and extension of the widely-used Monetary Conditions Index (MCI) and Financial Conditions Index (FCI) to tourism stock data. However, the method of calculation of the TFCI is different from existing methods of constructing the MCI and FCI in that the weights are estimated empirically. The empirical findings show that TFCI is statistically significant using the estimated conditional mean of the tourism stock index returns (RTS). Granger Causality tests show that TFCI shows strong feedback on RTS. An interesting insight is that the empirical results show a significant negative correlation between F1_visistors and RTS, implying that tourism authorities might promote travel by the “rich†, and not only on inbound visitor growth. The use of market returns on the tourism stock sub-index as the sole indicator of the tourism sector, as compared with the general activity of economic variables on tourism stocks, is shown to provide an exaggerated and excessively volatile explanation of tourism financial conditions.
    Keywords: Monetary Conditions Index; Financial Conditions Index; Model-based Tourism Financial Conditions Index; Unbiased Estimation
    JEL: B41 E44 E47 G32
    Date: 2017–08–04
  20. By: Jair N. Ojeda-Joya (Banco de la República de Colombia); Oscar E. Guzman (Contraloría de la República)
    Abstract: In this paper we estimate the effect of government consumption shocks on GDP using a panel of 21 developing economies. Our goal is to better understand the reasons for the low fiscal multipliers found in the literature by performing estimations for alternative exchange rate regimes, business-cycle phases, and monetary policy stances. In addition, we perform counterfactual simulations to analyze the possible gains from fiscal-monetary policy coordination. The results imply that government consumption shocks are usually followed by monetary policy tightening in developing economies with flexible regimes. Our simulations show that this reaction partially explains the presence of low fiscal multipliers in these economies. Government consumption shocks imply lower multipliers in developing economies during flexible regimes, economic slowdowns or monetary contractions. In addition, implementing fiscal programs during monetary expansions seems to improve significantly their economic stimulus. Classification JEL: E62, E63, F32
    Keywords: Fiscal Policy, Monetary Policy, Structural Vector Autoregression, Exchange Rate Regime, Panel VAR
    Date: 2017–08
  21. By: Matteo Crosignani
    Abstract: I develop a model where the sovereign debt capacity depends on the capitalization of domestic banks. Low-capital banks optimally tilt their government bond portfolio toward domestic securities, linking their destiny to that of the sovereign. If the sovereign risk is sufficiently high, low-capital banks reduce private lending to further increase their holdings of domestic government bonds, lowering sovereign yields and supporting the home sovereign debt capacity. The model rationalizes, in the context of the eurozone periphery, the increase in domestic government bond holdings, the reduction of bank credit supply, and the prolonged fragility of the financial sector.
    Keywords: Bank Capital ; Bank Credit ; Government Bonds ; Risk-Shifting ; Sovereign Crises
    JEL: E44 F33 G21 G28
    Date: 2017–08–16
  22. By: Ana-Maria Ciuhu (Ecological University of Bucharest - Faculty of Economics)
    Abstract: This paper aims to emphasize the way of conducting a multivariate vector autoregressive model for analyzing the labour market in Romania. The quarterly data used in the analysis comprises the following variables: social productivity, employment rate, real wage and unemployment rate. The analysis is conducted by using the vars package in R. The vector autoregressive model is one of the most flexible and easy to use models for the analysis of multivariate time series.
    Keywords: Employment, Labour market, Vector autoregressive models, R
    JEL: C32 C51 E24 J21
    Date: 2017–04
  23. By: Byrne, Joseph P; Ibrahim, Boulis Maher; Sakemoto, Ryuta
    Abstract: Recent studies show that carry trade returns are predictable and this predictability reflects changes in expected returns. Changes in expected returns may be related to time variation in betas and risk prices. We investigate this issue in carry trades and find clear evidence of time-varying risk prices for the carry factor (HMLFX). The results further indicate that time-varying risk prices are more important than time-varying betas for the carry trade asset pricing model. This suggests that investors overreact to changes in economic states.
    Keywords: Currency Carry Trades; Exchange Rate; Risk Price; Time-varying Betas; Factor Model; Nonparametric Model; FX market.
    JEL: C58 E44 F31 G12 G15
    Date: 2017–08–14
  24. By: Marcio M. Janot; Márcio G. P. Garcia
    Abstract: Since the mid 1990s, theories of speculative attacks have argued that fixed exchange rate regimes induce excessive borrowing in foreign currency as an optimal response to implicit guarantes that the government will not devalue the domestic currency. Using data on Brazilian firms before and after the end of the fixed exchange rate regime in 1999, we estimate the relevance of the implicit guarantees by comparing the changes in foreign debt of two groups of firms: those that hedged their foreign currency debt prior to the exchange rate float and those that did not. Using the difference-in-differences approach, in which firm-specific characteristics are introduced as control variables, we exclude macroeconomic effects of the change in the exchange rate regime and possible differences in foreign debt trends of the two groups of firms, thus obtaining an estimate of the impact of the implicit guarantees on borrowing in foreign currency. The results suggest that the implicit guarantees do not induce excessive borrowing in foreign currency
    Date: 2017–08
  25. By: Taguchi, Hiroyuki; Tian, Lina
    Abstract: This article examines the interaction among capital flows, money supply and property prices with a focus of Chinese economy by using a vector auto-regression (VAR) estimation as an analytical framework. The key research questions were, first, whether money supply has been determined independently from capital flows, and then which factor, capital flows or money supply, has given a dominant effect on property prices. The contributions of this study are to investigate the impacts on property prices jointly from capital flows as an external factor and from money supply as a domestic factor, and to count on the differences in the trends in property prices of seventy regional cities in China. The main findings through the VAR estimations were as follows. First, domestic money supply has been determined exclusively from external capital flows through the authority’s perfect sterilization of foreign-exchange-market intervention. Second, the main contributor to property prices’ movement has been domestic money supply rather than external capital flows. Third, some deviations of property prices from the trend in money supply were found in big cities and/or coastal advanced cities.
    Keywords: Capital flows, Money supply, Property prices, China, Seventy reginal cities, Vector auto-regression estimation
    JEL: E51 F32 O53
    Date: 2017–07
  26. By: Madaschi, Christophe; Nuevo, Irene Pablos
    Abstract: This paper looks at how the profitability of banks in Sweden and Denmark has evolved in the context of negative interest rates. Overall, it finds that profitability has continued to improve, even with negative monetary policy rates. Data and modelbased evidence confirm that the monetary policy transmission to bank lending rates has so far not been impaired, though they point to a downward stickiness in the bank deposit rate. Swedish and Danish banks rely mainly on wholesale funding to finance their activities, and the fall in wholesale funding costs has led to a significant decline in interest expenses, thereby bolstering the resilience of the net interest income margin. All in all, this has created the prerequisites for positive credit supply developments, and possible unintended consequences of negative monetary policy rates, such as a reduction in credit supply, have not materialised. However, according to Sveriges Riksbank and Danmarks Nationalbank, the prevailing low level of interest rates has aggravated financial stability risks stemming from the large exposure of the banking sector to the housing market in both economies, in a context of rapidly rising housing prices and the resultant growing indebtedness of the household sector. JEL Classification: E58
    Keywords: banks’ profitability, monetary policy pass-through
    Date: 2017–08
  27. By: Scott R. Baker; Stephanie Johnson; Lorenz Kueng
    Abstract: Using comprehensive high-frequency state and local sales tax data, we show that household spending responds strongly to changes in sales tax rates. Even though sales taxes are not observed in posted prices and have a wide range of rates and exemptions, households adjust in many dimensions, stocking up on storable goods before taxes rise and increasing online and cross-border shopping. Interestingly, households adjust spending similarly for both taxable and tax-exempt goods. We embed an inventory problem into a continuous-time consumption-savings model and demonstrate that this seemingly irrational behavior is optimal in the presence of shopping trip fixed costs. The model successfully matches estimated short-run and long-run tax elasticities with a reasonable implied reservation wage of $7-10. We provide additional empirical evidence in favor of this new shopping-complementarity mechanism. While our results reject non-salience of sales tax changes, on average, we also show that upcoming tax changes that are more salient prompt larger responses.
    JEL: D12 E21 H31
    Date: 2017–08
  28. By: Byrne, Joseph P; Lorusso, Marco; Xu, Bing
    Abstract: This paper accounts for informational frictions when modelling the time-varying relationship between crude oil prices, traditional fundamentals and expectations. Informational frictions force a wedge between oil prices and supply and/or demand shocks, especially during periods of elevated risk aversion and uncertainty. In such a context expectations can be a key driver of oil price movements. We utilize a variety of proxies for forward-looking expectations, including business confidence, consumer confidence and leading indicators. In addition, our paper implements a time-varying parameter approach to account empirically for time-varying informational frictions. Our results illustrate firstly that oil supply shocks played an important role in both the 1970’s and coinciding with the recent shale oil boom. Secondly, demand had a positive impact upon oil prices, especially from the mid-2000’s. Finally, we provide evidence that oil prices respond strongly to expectations but the source of the shock matter: business leaders’ expectations are positively related, while markets’ expectations are not strongly linked to oil prices.
    Keywords: Crude Oil Prices; Informational Frictions; Fundamentals; Expectations; Time-Varying Parameters
    JEL: C30 E30 F00 Q43
    Date: 2017–06–10
  29. By: Andreou, Elena; Gagliardini, Patrick; Ghysels, Eric; Rubin, Mirco
    Abstract: We propose a new class of large approximate factor models which enable us to study the full spectrum of quarterly Industrial Production (IP) sector data combined with annual non-IP sectors of the economy. We derive the large sample properties of the estimators and test statistics for the new class of unobservable factor models involving mixed frequency data and common as well as frequency-specific factors. Despite the growth of service sectors, we find that a single common factor explaining 90% of the variability in IP output growth index also explains 60% of total GDP output growth fluctuations. A single low frequency factor unrelated to manufacturing explains 14% of GDP growth. The picture with a structural factor model featuring technological innovations is quite different. Last but not least, our identification and inference methodology rely on novel results on group factor models that are of general interest beyond the mixed frequency framework and the application of the paper.
    Keywords: GDP growth; Group Factor models; MIDAS
    JEL: C32 C33 C38 E32
    Date: 2017–08
  30. By: Faber, Benjamin; Fally, Thibault
    Abstract: A growing literature has documented the role of firm heterogeneity within sectors in accounting for nominal income inequality. This paper explores the implications for household price indices across the income distribution. Using detailed matched US home and store scanner microdata, we present evidence that rich and poor households source their consumption from different parts of the firm size distribution within disaggregated product groups. We use the microdata to examine alternative explanations, propose a tractable quantitative model with two-sided heterogeneity that rationalizes the observed moments, and calibrate it to explore general equilibrium counterfactuals. We find that larger, more productive firms endogenously sort into catering to the taste of wealthier households, and that this gives rise to asymmetric effects on household price indices. These effects matter for real income inequality. We find that they amplify observed changes in nominal inequality over time, lead to a more regressive distribution of the gains from international trade, and give rise to new distributional implications of business regulations.
    Keywords: Firm Heterogeneity; household price indices; real income inequality; scanner data
    JEL: E31 F15
    Date: 2017–08
  31. By: Baris Soybilgen (Istanbul Bilgi University); Ege Yazgan (Istanbul Bilgi University)
    Abstract: In this study, we predict year-over-year Turkish GDP growth rates between 2012:Q1 and 2016:Q4 with a medium-scale dataset. Our proposed model improves upon \citet{Modugno2016} and outperforms both the competing dynamic factor model (DFM) and univariate benchmark models. Our results suggest that in nowcasting current GDP, all relevant information is released within the contemporaneous quarter; hence, information content regarding leading variables is limited. Moreover, we show that the inclusion of financial variables deteriorates the forecasting performance of the DFM, whereas credit variables improve the prediction accuracy of the DFM.
    Keywords: Dynamic factor model; Nowcasting; Gross domestic product
    JEL: E37 C33
    Date: 2017–08
  32. By: Jochen Hartwig (Faculty of Economics and Business Administration, Chemnitz University of Technology, Germany); Hagen Krämer (Faculty of Management Science and Engineering, Karlsruhe University of Applied Sciences, Germany)
    Abstract: The year 2017 marks the 50th anniversary of William J. Baumol’s seminal model of ‘unbalanced growth’, which predicts the so-called ‘Growth Disease’, i.e., the tendency of aggregate productivity growth to slow down in the process of tertiarisation. In an important contribution published in 2001, however, Nicholas Oulton showed that the shift of resources to the service sector may raise rather than lower aggregate productivity growth if the service industries produce intermediate rather than final products. While Oulton’s reasoning is logically consistent, the question arises whether it is also valid from an empirical point of view. We use the 2011 release of EU KLEMS data to determine whether the shift of resources to services has raised or lowered aggregate productivity growth in the G7 countries.
    Keywords: Baumol’s Disease, productivity growth, EU KLEMS
    JEL: E24 O14 O41 O47 O57
    Date: 2017–07
  33. By: Martha Elena Delgado-Rojas (Banco de la República de Colombia); Hernán Rincón-Castro (Banco de la República de Colombia)
    Abstract: El estudio de los efectos de la incertidumbre sobre la actividad económica de economías avanzadas es reciente, aunque copioso, pero el de economías pequeñas es aún escaso. Este documento analiza los efectos de una perturbación inesperada y temporal de la incertidumbre acerca de la política fiscal sobre el ciclo económico de una economía pequeña (Colombia). Para cumplir este objetivo, primero, construye tasas efectivas de tributación sobre el consumo y los ingresos de los factores de producción, trabajo y capital, más un indicador de la política de gasto. Luego, introduce reglas fiscales para cada uno de los instrumentos, y modela y estima una medida de la incertidumbre fiscal. Por último, estima el impacto de perturbaciones de dicha incertidumbre sobre el ciclo económico. El modelo econométrico es un SVAR que se identifica mediante restricciones de signo, derivadas de las predicciones de un modelo DSGE neokeynesiano. La estimación se realiza por métodos bayesianos. Los resultados muestran que la incertidumbre acerca del comportamiento de los instrumentos fiscales distorsiona las decisiones de los agentes económicos y repercute de manera negativa sobre el ciclo económico. La principal implicación de política es que la autoridad fiscal debe mantener una política tributaria y de gasto estable, predecible y que responda a objetivos de largo plazo. Classification JEL: E32, E62, H3, C32, C51
    Keywords: incertidumbre, política fiscal, ciclo económico, GARCH, SVAR, métodos bayesianos.
    Date: 2017–08
  34. By: Tetsuji Okazaki
    Abstract: This paper compares the new dimension monetary easing by the Bank of Japan under the Abe administration since April 2013 with the Takahashi Policy in the 1930s. Korekiyo Takahashi, who was appointed to be the Minister of Finance under the Great Depression, implemented a distinctive set of macro-economic policies including suspension of the gold standard, monetary easing, and fiscal spending based on underwriting of public bonds by the Bank of Japan. Those scholars who promoted the radical monetary easing in recent years, referred to the Takahashis policy to justify their argument. By comparing the basic macro-economic variables between the 1930s and the 2010s, we found that the impacts of these two policies are substantially different. It is suggested that the difference reflects the difference in the condition of the financial market as well as the long-term momentum of economic growth.
    Date: 2017–08
  35. By: Sam Olofin (Centre for Econometric and Allied Research, University of Ibadan); Afees A. Salisu (Centre for Econometric and Allied Research, University of Ibadan)
    Abstract: In this paper, we model the relationship between oil price and inflation for selected OPEC and EU countries using monthly data from 2000 to 2014. We employ both the Linear (Symmetric) ARDL by Pesaran et al. (2001) and Nonlinear (Asymmetric) ARDL by Shin et al. (2014) and we also account for structural breaks using the Bai and Perron (2003) test that allows for multiple structural changes in regression models. Six findings are discernible from our analyses. First, the relationship between oil price and inflation tends to change over short periods. Secondly, the oil price-inflation nexus is stronger in oil exporting countries than oil importing countries. Thirdly, oil price asymmetries seem to matter more when dealing with oil exporting nations. Fourthly, it may be necessary to pre-test for structural breaks when modelling the relationship between oil price and inflation regardless of the category being analyzed. Fifth, while asymmetric effect for the oil exporting (OPEC) is not sensitive to structural breaks, the effect seems to diminish for oil-importing (EU) countries in the presence of breaks. Sixth, while the results are largely insensitive to the nature of data frequency, the behaviour of asymmetry suggests otherwise.
    Keywords: Oil price, Inflation, Asymmetry, Structural breaks, Linear ARDL, Non-linear ARDL
    JEL: C12 C22 E31
    Date: 2017–08
  36. By: Antonio Diez de los Rios
    Abstract: This paper proposes a novel asymptotic least-squares estimator of multi-country Gaussian dynamic term structure models that is easy to compute and asymptotically efficient, even when the number of countries is relatively large—a situation in which other recently proposed approaches lose their tractability. We illustrate our estimator within the context of a seven-country, 10-factor term structure model.
    Keywords: Asset pricing; Econometric and statistical methods; Exchange rates; Interest rates
    JEL: E43 F31 G12 G15
    Date: 2017
  37. By: Hecq, Alain; Issler, João Victor; Telg, Sean
    Abstract: The mixed autoregressive causal-noncausal model (MAR) has been proposed to estimate economic relationships involving explosive roots in their autoregressive part, as they have stationary forward solutions. In previous work, possible exogenous variables in economic relationships are substituted into the error term to ensure the univariate MAR structure of the variable of interest. To allow for the impact of exogenous fundamental variables directly, we instead consider a MARX representation which allows for the inclusion of strictly exogenous regressors. We develop the asymptotic distribution of the MARX parameters. We assume a Student's t-likelihood to derive closed form solutions of the corresponding standard errors. By means of Monte Carlo simulations, we evaluate the accuracy of MARX model selection based on information criteria. We investigate the influence of the U.S. exchange rate and the U.S. industrial production index on several commodity prices.
    Keywords: Mixed causal-noncausal process, non-Gaussian errors, identification, rational expectation models, commodity prices
    JEL: C22 E31 E37
    Date: 2017–08–11
  38. By: Jonathan Cogliano (Department of Economics, Dickinson College)
    Abstract: This paper highlights the separation between surplus value production and realization in Marx's work. A new method of estimating surplus value production at the industry level is proposed and implemented. Marx's procedure of transforming labor values into prices of production shows that capitalist competition to equalize the profit rate entails transfers of surplus value across industries, thus differentials between surplus value created and surplus value realized as profit can exist at the industry level. These types of transfers can also exist between productive and unproductive activities in the circuit of capital. First, to trace out these transfers, a framework linking money value added to surplus value production by industry is established. Second, data on value added by industry for the U.S. are used to estimate surplus value production at the industry level. The analysis allows comparison of surplus value production and realization in each industry. The pattern of differentials between surplus value creation and realization across industries points to a potential source of instability for capitalist economies.
    Keywords: Circuit of Capital, Labor Theory of Value, Productive and Unproductive Labor, Surplus Value, Transfers of Surplus Value
    JEL: B5 B51 E11
    Date: 2017–08
  39. By: Karl Aiginger (Department of Economics, Vienna University of Economics and Business)
    Abstract: Der Widerstand gegen die Globalisierung in den Industriestaaten wächst, populistische Bewegungen in Europa und den USA gewinnen an Bedeutung wobei rechte, linke und wachstumskritische Bewegungen mit unterschiedlichen Motiven eine Renationalisierung der Politik unterstützen. Die ökonomische Theorie betont die Vorteile der Globalisierung, durch verstärkte Arbeitsteilung, bessere Nutzung der Ressourcen und raschere Dissemination von Wissen und Technologien. Sie betont aber auch dass es Verlierer des Prozesses gibt, wenn Ungleichheiten und Ungleichgewichte sich verschärfen und Globalisierung wirtschaftspolitisch begleitet werden muss. Dieser Artikel untersucht ob die Vorteile aber auch die Ungleichgewichte in der letzten Globalisierungsphase eingetreten. Er berichtet über die fehlende politischen Begleitung, die zunehmende Globalisierungskritik in den Industrieländern und die Forderung nach Renationalisierung der Politik. Die falsche Verherrlichung der Vergangenheit und egoistischen Reaktionen verschärfen allerdings die Probleme und gefährden die Wohlfahrt. Kriterien einer verantwortungsbewussten Globalisierung werden entwickelt. Globale Herausforderungen verlangen internationale Regeln, sie dürfen jedoch nicht in zentralistische Maßnahmen münden die als Fremdbestimmung empfunden werden. Europäische Ziele und Rahmenbedingungen sollen so gewählt werden, dass sie den nationalen Spielraum erweitern und Bottom-Up-Initiativen fördern. Dieser „Empowermentansatz“ sollte in die strategische Neuausrichtung Europas einfließen und könnte den Beginn einer europäischen Globalisierungsstrategie darstellen, die Standards nach oben angleicht und die bisherigen Verlierer befähigt, an den Vorteilen der Globalisierung teilzuhaben.
    Keywords: Globalisierungsfolgen, wohlfahrtsorientiere Globalisierung, Empowermentstrategie
    JEL: E02 E61 F13 F42 O10
    Date: 2017–08
  40. By: Chakraborty, Tanika; Mukherjee, Anirban; Rachapalli,Swapnika Reddy; Saha, Sarani
    Abstract: Our study is motivated by two disturbing evidences concerning women in India. On one hand, crime against women is on the rise while on the other, women's labor force participation rate (WLFPR) has been declining over the last three decades. We estimate the extent to which the decline in WLFPR can be assigned to increasing instances of crime against women. We argue that an increase in crime against women, increases the non-pecuniary costs of traveling to work, particularly in a traditional society marked by stigma against victims of sexual crimes. Our findings suggest that women are less likely to work away from home in regions where the perceived threat of sexual harassment against girls is higher. The estimate is robust to various sensitivity checks. Moreover, the deterrence effect of crime responds to the opportunity cost of work on one hand and the stigma cost of sexual crimes on the other.
    Keywords: Crime-against-women,Labor-force-participation,stigma-cost
    JEL: E24 J16 J18
    Date: 2017
  41. By: Deli, Yota D.; Hasan, Iftekhar
    Abstract: We examine the effect of the full set of bank capital regulations (capital stringency) on loan growth, using bank-level data for a maximum of 125 countries over the period 1998-2011. Contrary to standard theoretical considerations, we find that overall capital stringency only has a weak negative effect on loan growth. In fact, this effect is completely offset if banks hold moderately high levels of capital. Interestingly, the components of capital stringency that have the strongest negative effect on loan growth are those related to the prevention of banks to use as capital borrowed funds and assets other than cash or government securities. In contrast, compliance with Basel guidelines in using Basel- and credit-risk weights has a much less potent effect on loan growth.
    JEL: G21 G28 E6 O4
    Date: 2017–08–12
  42. By: Afees A. Salisu (Centre for Econometric and Allied Research, University of Ibadan); Idris Ademuyiwa (Centre for International Governance Innovation (CIGI), Waterloo, Canada); Kazeem Isah (Centre for Econometric and Allied Research, University of Ibadan)
    Abstract: In this paper, we query whether stock prices of non-integrated firms in upstream and downstream sectors of global oil supply chain respond similarly to changes in oil prices. This enquiry relates to “homogenous expectation†assumption among investors and fund managers pertaining to returns and variances of assets of specialized firms operating in upstream and downstream sectors of the supply chain. Using theoretical framework underpinned by the arbitrage pricing theory in conjunction with heterogeneous panel ARDL regression models, we find that stock prices of upstream and downstream firms move in contrasting directions in response to changes in benchmark crude oil prices in the long-run. Specifically, we show that stock prices of upstream sector firms increased in response to increase in oil prices, while the reverse holds for stock prices of downstream firms. In the short run, returns on stock of firms in both sectors increase following increase in oil prices; but downstream firms stock returns decreased in response to negative oil price shocks. Findings further show that both sectors respond differently to episodic changes in market conditions which emanated from the global financial crisis. However, upstream firms show stronger response to changing market conditions than their downstream counterparts.
    Keywords: OECD countries, Phillips Curve, Oil price, Inflation forecasts, Forecast evaluation
    JEL: C53 E31 E37 Q41 Q47
    Date: 2017–08
  43. By: van Bergeijk, P.A.G.
    Abstract: This working paper discusses the need and possibility to report measurement error together with key (macroeconomic) statistics as shown by a case study of the real rate of growth of world GDP (Gross Planet Product). The IMF estimates for individual years since 1980 and continue to change when a new vintage of the World Economic Outlook data base is published (each year in October). The different vintages provide an indication of the extent of measurement error. According to two measures for measurement error the IMF data for Gross Planet product on average have an implicit minimal measurement error (IMME) of four percent and maximum ratio (MR) of eighteen percent. Even for long-term growth rates that are calculated over two decades growth rates have a substantial measurement error, namely an IMME of 1.7% and an MR of 8.0%. Measurement error of Gross Planet Product is thus economically and statistically significant and needs to be addressed in studies that analyse or use global production data. Measurement error in economics currently is significant, is not showing improvement over time and could be reported transparently without technical or budgetary problems.
    Keywords: measurement error, IMF, GDP, world production, implicit minimal measurement error, maximum ratio
    Date: 2017–08–08
  44. By: Seth G Benzell; Laurence J Kotlikoff; Guillermo LaGarda
    Abstract: The U.S., according to some measures, has one of the highest marginal effective corporate tax rates (METRs) of any developed country. Yet the tax collects less than 2 percent of GDP. This paper studies the impact of replacing the U.S. corporate tax with a Business Cash Flow Tax (BCFT). Our paper studies BCFT reform with reference to a particular, but reasonably generic, proposal, namely the House Republican “Better Way” tax plan. We use the Global Gaidar Model – a 17-region, global, overlapping-generations model, calibrated to U.N. demographic and IMF fiscal data – to simulate the dynamic, general equilibrium impact of this reform. In the short run, the U.S. capital stock, pre-tax wage rates, and GDP rise by roughly 25 percent, 8 percent, and 9 percent, respectively. Over time, the capital stock and wage rates remain significantly above their baseline values. There is a smaller long-run increase in GDP as workers spend some of their higher wages on additional leisure. The tax reform produces enough additional revenues to permit a reduction in personal income tax rates while maintaining the economy's initial debt-to-GDP ratio. The beneficiaries of the House plan are today's and tomorrow's workers. We also simulate a matching METR cut by the rest of the world, which raises the world interest rate. The short-run increases in the capital stock, pre-tax wage rates, and GDP are smaller. However, along the transition path, all U.S. agents experience slightly higher welfare than under the House plan. This reflects the combination of a higher post-corporate tax world interest rate and Americans' disproportionately large holdings of global assets
    JEL: E02 F43 H2 H6
    Date: 2017–08
  45. By: Victor Adame; David Tuesta
    Abstract: One of the factors of the greatest upheaval to a country’s economic prospects is the substantial presence of the informal economy. The aim of this paper is to articulate a detailed statistical approach to identify the significance of such factors by examining key econometric strategies and availing ourselves of several different samples for over 160 countries.
    Keywords: Financial Inclusion , Global , Working Paper
    JEL: O17 E26
    Date: 2017–08
  46. By: Fons-Rosen, Christian; Kalemli-Ozcan, Sebnem; Sørensen, Bent E; Villegas-Sanchez, Carolina; Volosovych, Vadym
    Abstract: We study the impact of foreign direct investment (FDI) on total factor productivity (TFP) of domestic firms using a new, representative firm-level data set spanning six countries. A novel finding is that firm-level spillovers from foreign firms to domestic companies can be significantly positive, non-existent, or even negative, depending on which sectors receive FDI. When foreign firms produce in the same narrow sector as domestic firms, the latter are negatively affected by increasing competition and positively affected by knowledge spillovers. We find that the positive spillovers dominate if foreign firms enter sectors where firms are "technologically close,'' controlling for the endogeneity of their entry decision into such sectors. Positive technology spillovers also affect firms in other sectors, if those sectors are technologically close to the sectors receiving FDI. Increasing FDI in sectors that are technologically close to other sectors boosts TFP of domestic firms by twice as much as increasing FDI by the same amount across all sectors.
    Keywords: competition; FDI; multinationals; selection; technology; TFP
    JEL: E32 F15 F36 O16
    Date: 2017–08
  47. By: Ariane TICHIT (Centre d'Etudes et de Recherches sur le Développement International(CERDI))
    Abstract: This article analyses the social representations of money from survey data. More specifically, it tests how organizers of a complementary currency system have a distinct perception of money compared to other citizens. The main results confirm the existence of significant differences between the two groups. The structure of their representations shows that for the local currency members money is less tied to official institutions, to the symbol of the sovereign State, to labour and to wages than for the representative population segment. This confirms a number of theoretical studies that see these social innovations as forms of protest against the standard system, questioning the sovereign State currency and close to the concept of unconditional income. Local currencies, through the different social representations of money they contain, could well be drivers of societal change.
    Keywords: Social representations of money, Survey data, Abric method, Complementary currencies.
    JEL: Z13 E42
    Date: 2017–08
  48. By: Lorenzo Caliendo; Luca David Opromolla; Fernando Parro; Alessandro Sforza
    Abstract: The economic effects from labor market integration are crucially affected by the extent to which countries are open to trade. In this paper we build a multi-country dynamic general equilibrium model with trade in goods and labor mobility across countries to study and quantify the economic effects of trade and labor market integration. In our model trade is costly and features households of different skills and nationalities facing costly forward-looking relocation decisions. We use the EU Labour Force Survey to construct migration flows by skill and nationality across 17 countries for the period 2002-2007. We then exploit the timing variation of the 2004 EU enlargement to estimate the elasticity of migration flows to labor mobility costs, and to identify the change in labor mobility costs associated to the actual change in policy. We apply our model and use these estimates, as well as the observed changes in tariffs, to quantify the effects from the EU enlargement. We find that new member state countries are the largest winners from the EU enlargement, and in particular unskilled labor. We find smaller welfare gains for EU-15 countries. However, in the absence of changes to trade policy, the EU-15 would have been worse off after the enlargement. We study even further the interaction effects between trade and migration policies and the role of different mechanisms in shaping our results. Our results highlight the importance of trade for the quantification of the welfare and migration effects from labor market integration.
    Keywords: international trade, factor mobility, market integration, EU enlargement, welfare
    JEL: F16 F22 F13 J61 R13 E24
    Date: 2017–08
  49. By: Victor Adame; David Tuesta
    Abstract: Uno de los factores que mayores trastornos genera a las perspectivas economicas de un pais es la alta presencia de economia informal. El objetivo de este trabajo es realizar una aproximacion estadistica detallada que permita identificar la importancia de estos factores considerando estrategias econometricas relevantes, empleando diferentes muestras de mas de 160 paises.
    Keywords: Documento de Trabajo , Global , Inclusion Financiera
    JEL: O17 E26
    Date: 2017–08
  50. By: Bakari, Sayef
    Abstract: Despite the abundance of goods and natural resources that characterize South Africa, and despite the remarkable progress in the field of industry and manufacturing, it is still in the list of developing countries. The aim of this article is to re-examine the causes of this node by studying the basic pillars for the creation of solid economic growth as is the case for all developing countries by looking at the impact of domestic investment, exports and imports on South Africa's economic growth in the short and long term. Our empirical analyses show that imports present the main barrier of prosperity and progress in South Africa.
    Keywords: Domestic Investment, Exports, Imports, Economic growth, South Africa.
    JEL: E22 F11 F14 O47
    Date: 2017–08
  51. By: Heilemann, Ullrich; Müller, Karsten
    Keywords: Prognosegenauigkeit,Evaluierung makroökonomischer Prognosen,Determinanten der Prognosegenauigkeit,macroeconomic forecasts,forecast evaluation,turning points,forecast revision
    JEL: E37
    Date: 2017

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