nep-mac New Economics Papers
on Macroeconomics
Issue of 2017‒09‒24
sixty-six papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. The Rise of Non-Regulated Financial Intermediaries in the Housing Sector and its Macroeconomic Implications By Hélène Desgagnés
  2. Political Aspects of Household Debt By Yun K. Kim; Gilberto Tadeu Lima; Mark Setterfield
  3. Potential Impact of Financial Innovation on Financial Services and Monetary Policy By Marek Dabrowski
  4. Transmission of monetary policy and exchange rate shocks under foreign currency lending By Malgorzata Skibinska
  5. Aggregate Fluctuations and the Role of Trade Credit By Lin Shao
  6. Do Misperceptions about Demand Matter? Theory and Evidence By Kenza Benhima; Céline Poilly
  7. Monitoring the Spanish Economy through the Lenses of Structural Bayesian VARs By Danilo Leiva-Leon
  8. Why it makes economic sense to help the have-nots in times of a financial crisis By De Koning, Kees
  9. The Mortgage Rate Conundrum By Alejandro Justiniano; Giorgio E. Primiceri; Andrea Tambalotti
  10. Credit crunches from occasionally binding bank borrowing constraints By Holden, Tom D.; Levine, Paul; Swarbrick, Jonathan M.
  11. Climate change, financial stability and monetary policy By Yannis Dafermos; Maria Nikolaidi; Giorgos Galanis
  12. Global Banking and the Conduct of Macroprudential Policy in a Monetary Union By Poutineau, Jean-Christophe; Vermandel, Gauthier
  13. Business cycle phases in Spain By Maximo Camacho; Matias Pacce; Camilo Ulloa
  14. Macroprudential policies in a low interest-rate environment. By Fang Yao; Margarita Rubio
  15. Firms’ Retention Behavior, Debt, and Macroeconomic Dynamics By Yun K. Kim; Alan G. Isaac
  16. Economic policy, the international environment and the state of Poland’s public finances: Scenarios By Aleksander £aszek
  17. Complementarity between Merit Goods and Private Consumption: Evidence from estimated DSGE model for Japan By Go Kotera; Saisuke Sakai
  18. Uncertainty Shocks as Second-Moment News Shocks By David Berger; Ian Dew-Becker; Stefano Giglio
  19. The Impact of Taxes and Transfers on Skill Premium By Shuhei Takahashi; Ken Yamada
  20. Fiscal Stimulus and Fiscal Sustainability By Alan J. Auerbach; Yuriy Gorodnichenko
  21. The Macroeconomics of Rational Bubbles: A User's Guide By Alberto Martín; Jaume Ventura
  22. Stabilność fiskalna – przegląd metod analizy By Paczek-Jarmulska, Barbara
  23. Optimal Inflation Target: Insights from an Agent-Based Model By Jean-Philippe Bouchaud; Stanislao Gualdi; Marco Tarzia; Francesco Zamponi
  24. Macroeconomic effects of varied mortgage instruments studied using agent-based model simulations By Thorir Bjarnason; Einar Jón Erlingsson; Bulent Ozel; Hlynur Stefánsson; Jón Thor Sturluson; Marco Raberto
  25. A Central Bank's Optimal Balance Sheet Size? By Goodhart, Charles A
  27. Model uncertainty in macroeconomics: On the implications of financial frictions By Binder, Michael; Lieberknecht, Philipp; Quintana, Jorge; Wieland, Volker
  28. How was the Quantitative Easing Program of the 1930s Unwound? By Matthew Jaremski; Gabriel Mathy
  29. A Model of Secular Stagnation: Theory and Quantitative Evaluation By Eggertsson, Gauti B.; Mehrotra, Neil; Robbins, Jacob A.
  30. Monetary Policy and Digital Currencies: Much Ado about Nothing? By C. Pfister
  31. European spreads at the interest rate lower bound By Laura Coroneo; Sergio Pastorello
  32. Did QE Lead Banks to Relax Their Lending Standards? Evidence from the Federal Reserve's LSAPs By Robert J. Kurtzman; Stephan Luck; Thomas Zimmermann
  33. Small and Large Firms over the Business Cycle By Mehrotra, Neil; Crouzet, Nicolas
  34. Time-Varying Role of Macroeconomic Shocks on House Prices in the US and UK: Evidence from Over 150 Years of Data By Vasilios Plakandaras; Rangan Gupta; Constantinos Katrakilidis; Mark E. Wohar
  35. An economic model of metapopulation dynamics By Stefano BOSI; David DESMARCHELIER
  36. A Tourism Financial Conditions Index for Tourism Finance By Chia-Lin Chang; Hui-Kuang Hsu; Michael McAleer
  37. Growth and Bubbles: The Interplay between Productive Investment and the Cost of Rearing Children By Xavier Raurich; Thomas Seegmuller
  38. Alternative Land Price Indexes for Commercial Properties in Tokyo By Diewert, Erwin; SHIMIZU, Chihiro
  39. Do highly liquid banks insulate their lending behavior? By Supriya Kapoor
  40. Non-performing assets in Indian Banks: This time it is different By Sengupta, Rajeswari; Vardhan, Harsh
  41. The macroprudential policy framework in Colombia By Hernando Vargas; Pamela Cardozo; Andrés Murcia
  42. A simple method to study local bifurcations of three and four-dimensional systems: characterizations and economic applications By Stefano Bosi; David Desmarchelier
  43. Has inflation targeting anchored inflation expectations? Evidence from Peru By Miguel Saldarriaga; Pablo del Aguila; Kevin Gershy-Damet
  44. Monetary Policy and Asset Valuation By Bianchi, Francesco; Lettau, Martin; Ludvigson, Sydney
  45. Information heterogeneity, housing dynamics and the business cycle By Guo, Zi-Yi
  46. A Tale of Two Countries: A Story of the French and US Polarization By Albertini, Julien; Hairault, Jean-Olivier; Langot, François; Sopraseuth, Thepthida
  47. Where Modern Macroeconomics Went Wrong By Joseph E. Stiglitz
  48. Das deutsche Arbeitsmarktwunder: Eine Bilanz By Burda, Michael C.; Seele, Stefanie
  49. Liquidity, Monetary Policy and Unemployment: A New Monetarist Approach By Mei Dong; Sylvia Xiaolin Xiao
  50. Financialization in Commodity Markets By V.V. Chari; Lawrence Christiano
  51. The Evolution of Corporate Cash By John R. Graham; Mark T. Leary
  52. Currency demandand MIMIC models: towards a structured hybrid model-based estimation of the shadow economy size By Piotr Dybka; Michal Kowalczuk; Bartosz Olesinski; Marek Rozkrut; Andrzej Toroj
  53. Setor Agropecuário Brasileiro Pós-Novo Código Florestal: uma simulação de impactos econômicos By Mari Aparecida dos Santos; Joaquim Bento de Souza Ferreira Filho; José Eustáquio Ribeiro Vieira Filho; Alexandre Xavier de Carvalho Ywata
  54. Biodiversity, infectious diseases and the dilution effect By Stefano BOSI; David DESMARCHELIER; Manh Hung NGUYEN
  55. The U.S. economic outlook and the implications for monetary policy: remarks at Money Marketeers of New York University, New York City By Dudley, William
  56. Volatility Spillovers between Interest Rates and Equity Markets of Developed Economies: A Note By Wilson Donzwa; Rangan Gupta; Mark E. Wohar
  57. Default Risk, Sectoral Reallocation and Persistent Recessions By Arellano, Cristina; Bai, Yan; Mihalache, Gabriel
  58. Fiskalna konsolidacija: teorijski okvir i slučaj Republike Hrvatske By Paško Burnać
  59. Estimation bayésienne d'un modèle DSGE pour une petite économie ouverte : Cas de la RD Congo By UMBA, Gilles Bertrand
  60. Reforming housing rental market in a life-cycle model By Michal Rubaszek
  61. Fundos de Investimentos de 2003 a 2015: proxy de lucro e análise da composição da carteira por segmento de investidor, classe de fundos e categoria de ativos By Adriana Nunes Ferreira
  62. Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement By Lorenzo Caliendo; Fernando Parro; Luca David Opromolla; Alessandro Sforza
  63. Returns to Experience and the Elasticity of Labor Supply By Scott French; Tess Stafford
  64. Business cycles and acquisition policy: Analysis of M&A deals of metallurgical companies By Fomin, M.
  65. Export Geographical Diversification and Economic Growth Among ASEAN Countries By Hinlo, Jennifer E.; Arranguez, Grace Ivy S.
  66. Informe sociolaboral del Partido de General Pueyrredon. Informe de coyuntura macroeconómica By GrET

  1. By: Hélène Desgagnés
    Abstract: I examine the impact of non-regulated lenders in the mortgage market using a dynamic stochastic general equilibrium (DSGE) model. My model features two types of financial intermediaries that differ in three ways: (i) only regulated intermediaries face a capital requirement, (ii) non-regulated intermediaries finance themselves by selling securities and cannot accept deposits, and (iii) non-regulated intermediaries face a more elastic demand. This last assumption is based on empirical evidence for Canada revealing that non-regulated intermediaries issue loans at a lower interest rate. My results suggest that the non-regulated sector contributes to stabilize the economy by providing an alternative source of capital when the regulated sector in unable to fulfill the demand for credit. As a result, an economy with a large non-regulated sector experiences a smaller downturn after an adverse financial shock.
    Keywords: Business fluctuations and cycles, Economic models, Financial system regulation and policies, Housing
    JEL: E32 E44 E47 E60 G21 G23 G28
    Date: 2017
  2. By: Yun K. Kim; Gilberto Tadeu Lima; Mark Setterfield
    Abstract: The recent literature has shown that income inequality is one of the main causes of borrowing and debt accumulation by working households. This paper explores the possibility that household indebtedness is an important cause of rising income inequality. If workers experience rising debt burdens, their cost of job loss may rise if they need labor-market income to continue borrowing and servicing existing debt. This, in turn, will reduce their bargaining power and increase income inequality, inducing workers to borrow more in order to maintain consumption standards, and so creating a vicious circle of rising inequality, job insecurity, and indebtedness. We believe that these dynamics may have contributed to observed simultaneous increases in income inequality and household debt prior to the recent financial crisis. To explore the two-way interaction between inequality and debt, we develop an employment rent framework that explicitly considers the impact of workers' indebtedness on their perceived cost of job loss. This is embedded in a neo-Kaleckian macro model in which inequality spurs debt accumulation that contributes to household consumption spending and hence demand formation. Our analysis suggests that: (1) workers' borrowing behavior plays a crucial role in understanding the character of demand and growth regimes; (2) debt and workers' borrowing behavior play an important role in the labor market by influencing workers' bargaining power; and (3) through such channels, workers' borrowing behavior can be a decisive factor in the determination of macroeconomic (in)stability.
    Keywords: Consumer debt, employment rent, cost of job loss, bargaining power, income distribution, growth, stability
    JEL: E12 E21 E24 E44 O41
    Date: 2017–09
  3. By: Marek Dabrowski
    Abstract: The recent wave of financial innovation, particularly innovation related to the application of information and communication technologies, poses a serious challenge to the financial industry’s business model in both its banking and non-banking components. It has already revolutionised financial services and, most likely, will continue to do so in the future. If not responded to adequately and timely by regulators, it may create new risks to financial stability, as occurred before the global financial crisis of 2007-2009. However, financial innovation will not seriously affect the process of monetary policymaking and is unlikely to undermine the ability of central banks to perform their price stability mission. The recent wave of financial innovation, particularly innovation related to the application of information and communication technologies, poses a serious challenge to the financial industry’s business model in both its banking and non-banking components. It has already revolutionised financial services and, most likely, will continue to do so in the future. If not responded to adequately and timely by regulators, it may create new risks to financial stability, as occurred before the global financial crisis of 2007-2009. However, financial innovation will not seriously affect the process of monetary policymaking and is unlikely to undermine the ability of central banks to perform their price stability mission.
    Keywords: monetary policy, financial innovation, electronic money
    JEL: E41 E44 E51 E52 E58 G21
    Date: 2017–07
  4. By: Malgorzata Skibinska
    Abstract: This paper analyses the di erences in reaction of domestic and foreign currency lending to monetary and exchange rate shocks, using a panel VAR model estimated for three biggest Central and Eastern European countries (Poland, the Czech Republic and Hungary). Our results point toward a drop in domestic currency loans and an increase of foreign currency credit in reaction to monetary policy tightening in Poland and Hungary, suggesting that the presence of foreign currency debt weakens the transmission of monetary policy. A currency depreciation shock leads to an initial decline in foreign currency lending, but also in loans denominated in domestic currency as central banks react to a weaker exchange rate by increasing the interest rates. However, after several quarters, credit in foreign currency accelerates, indicating that borrowers start using it to substitute for depressed domestic currency lending.
    Keywords: foreign currency loans, lending currency structure, monetary policy and exchange rate shocks, CEE countries
    JEL: E44 E52 E58
    Date: 2017–08
  5. By: Lin Shao
    Abstract: In an economy where production takes place in multiple stages and is subject to financial frictions, how firms finance intermediate inputs matters for aggregate outcomes. This paper focuses on trade credit—the lending and borrowing of input goods between firms—and quantifies its aggregate impacts during the Great Recession. Motivated by empirical evidence, our model shows how trade credit alleviates financial frictions through a process of credit redistribution and creation, thus leading to a higher output level in the steady state. However, in the face of financial market distress, suppliers cut back trade credit lending, further tightening their customers’ borrowing constraint. The decline in economic activities following financial shocks is in turn amplified by disruptions in trade credit. Our model simulation suggests that the drop in trade credit during the Great Recession can account for almost one-fourth of the observed decline in output.
    Keywords: Business fluctuations and cycles, Credit and credit aggregates, Firm dynamics
    JEL: E32 E44 E51
    Date: 2017
  6. By: Kenza Benhima (University of Lausanne, HEC-DEEP and CEPR); Céline Poilly (Aix-Marseille Univ. (Aix-Marseille School of Economics), CNRS, EHESS and Centrale Marseille)
    Abstract: We assess theoretically and empirically the consequences of demand misperceptions. In a New Keynesian model with dispersed information, agents receive noisy signals about both supply and demand. Firms and consumers have an asymmetric access to information, so aggregate misperceptions of demand by the supply side can drive economic fluctuations. The model’s predictions are used to identify empirically fundamental and noise shocks on supply and demand. We exploit survey nowcast errors on both GDP growth and inflation, fundamental and noise shocks affecting the errors with opposite signs. We show that demand-related noise shocks have a negative effect on output and contribute substantially to business cycles. Additionally, monetary policy plays a key role in the transmission of demand noise.
    Keywords: Business cycles, information frictions, noise shocks, SVARs with sign restrictions
    JEL: E32 D82 C32 E31
    Date: 2017–05
  7. By: Danilo Leiva-Leon (Banco de España)
    Abstract: This paper proposes a suite of Structural Bayesian Vector Autoregression (SBVAR) models used (i) to disentangle the main shocks driving the Spanish economy over time and (ii) to provide short and medium term forecasts of output and infl ation. The suite consists of a benchmark model, that includes output, prices and interest rate, along with four extensions that gather information from the labor, financial, and international markets, and from the fiscal sector. The identification of the structural shocks is achieved by relying on sign and exclusion restrictions. The models provide a narrative of the contribution of fundamental economic shocks that agrees with main historic events of the Spanish economy. Moreover, the proposed SBVAR models are used to provide forecasts of output and inflation conditional on different scenarios about the development of key macroeconomic variables. Therefore, the suite could be incorporated to the toolkit of quantitative models that the Banco de España uses to perform forecasts.
    Keywords: structural analysis, vector autoregressions, bayesian estimation, sign restrictions
    JEL: E32 C22 E27
    Date: 2017–09
  8. By: De Koning, Kees
    Abstract: August 9, 2007 is often regarded as the starting date of the global financial crisis. BNP Paribas stopped trading in three of its investment funds exposed to the U.S. sub-prime mortgage markets as the liquidity in these markets had all but dried up. Liquidity considerations are a symptom of the supply side of funds: the lenders’ side. The latter could be banks, hedge funds, asset managers or pension funds, but equally rich individuals who would invest directly in these markets. The financial crisis of 2007-2008 was a lenders’ crisis. Generally, banks had insufficient capital to absorb the losses created by the reduced liquidity levels in the financial markets. Central banks had to step in to rescue quite a few of them. The fact was, however, that the underlying cause of the financial crisis was a borrowers’ crisis. In the U.S., over the years 1997-2007, households had to borrow an ever-growing percentage of their earnings in order to get themselves on the property ladder or rent a home. Long before 2007, in fact by 2003, the additional amount that a household had to borrow to get a home was equal to a full year of earnings. Average income growth and mortgage volume growth were on a collision course. Borrowers had to allocate increasing percentages of their earnings to servicing mortgage debts or renting a home. The notion that lenders will rein in their lending as a consequence of free market competition is a fallacy. The key is not the price of funds borrowed, but the volume of funds lend per time period in comparison to average household’ nominal income growth. The consequences of a borrowers’ crisis are different from a financial markets’ liquidity one. When households have to allocate an increasing share of their income to either buy or rent a home, fewer funds are available to spend on other goods and services. When households are subsequently confronted with foreclosure and ultimately repossession of homes, they lose most or all past savings accumulated in the home. The poor get poorer, both in income and asset values terms. The gap between the haves and the have-nots widens dramatically. Volume of lending control and to some extent rent controls can prevent a new financial crisis occurring. More measures are needed to overcome a borrowers’ crisis.
    Keywords: financial crisis, lenders' crisis, borrowers' crisis, income-house price gap, U.S. mortgage lending levels 1996-2016, annual U.S.housing starts, average U.S. home sales price, median U.S. annual household' income, economic versus legal solutions
    JEL: E3 E4 E44 E5 E58
    Date: 2017–08–30
  9. By: Alejandro Justiniano; Giorgio E. Primiceri; Andrea Tambalotti
    Abstract: We document the emergence of a disconnect between mortgage and Treasury interest rates in the summer of 2003. Following the end of the Federal Reserve expansionary cycle in June 2003, mortgage rates failed to rise according to their historical relationship with Treasury yields, leading to significantly and persistently easier mortgage credit conditions. We uncover this phenomenon by analyzing a large dataset with millions of loan-level observations, which allows us to control for the impact of varying loan, borrower and geographic characteristics. These detailed data also reveal that delinquency rates started to rise for loans originated after mid 2003, exactly when mortgage rates disconnected from Treasury yields and credit became relatively cheaper.
    JEL: E32 E44 E52
    Date: 2017–09
  10. By: Holden, Tom D.; Levine, Paul; Swarbrick, Jonathan M.
    Abstract: We present a model in which banks and other financial intermediaries face both occasionally binding borrowing constraints, and costs of equity issuance. Near the steady state, these intermediaries can raise equity finance at no cost through retained earnings. However, even moderately large shocks cause their borrowing constraints to bind, leading to contractions in credit offered to firms, and requiring the intermediaries to raise further funds by paying the cost to issue equity. This leads to the occasional sharp increases in interest spreads and the counter-cyclical, positively skewed equity issuance that are characteristic of the credit crunches observed in the data.
    Keywords: Occasionally binding constraints,Credit crunches,Financial crises,Spreads,Dividends,Equity,Banking
    JEL: E22 E32 E51 G2
    Date: 2017
  11. By: Yannis Dafermos; Maria Nikolaidi (University of Greenwich); Giorgos Galanis
    Abstract: Using a stock-flow-fund ecological macroeconomic model, we analyse (i) the effects of climate change on financial stability and (ii) the financial and global warming implications of a green QE programme. Emphasis is placed on the impact of climate change damages on the price of financial assets and the financial position of firms and banks. The model is estimated and calibrated using global data and simulations are conducted for the period 2015-2115. Four key results arise. First, by destroying the capital of firms and reducing their profitability, climate change is likely to gradually deteriorate the liquidity of firms, leading to a higher rate of default that could harm both the financial and the non-financial corporate sector. Second, climate change damages can lead to a portfolio reallocation that can cause a gradual decline in the price of corporate bonds. Third, financial instability might adversely affect credit expansion and the investment in green capital, with adverse feedback effects on climate change. Fourth, the implementation of a green QE programme can reduce climate-induced financial instability and restrict global warming. The effectiveness of this programme depends positively on the responsiveness of green investment to changes in bond yields.
    Keywords: ecological macroeconomics, stock-flow consistent modelling, climate change, financial stability, green quantitative easing
    JEL: E12 E44 E52 Q54
    Date: 2017–09
  12. By: Poutineau, Jean-Christophe; Vermandel, Gauthier
    Abstract: This paper questions the role of cross-border lending in the definition of national macroprudential policies in the European Monetary Union. We build and estimate a two-country DSGE model with corporate and interbank cross-border loans, Core-Periphery diverging financial cycles and a national implementation of coordinated macroprudential measures based on Countercyclical Capital Buffers. We get three main results. First, targeting a national credit-to-GDP ratio should be favored to federal averages as this rule induces better stabilizing performances in front of important divergences in credit cycles between core and peripheral countries. Second, policies reacting to the evolution of national credit supply should be favored as the transmission channel of macroprudential policy directly impacts the marginal cost of loan production and, by so, financial intermediaries. Third, the interest of lifting up macroprudential policymaking to the supra-national level remains questionable for admissible value of international lending between Eurozone countries. Indeed, national capital buffers reacting to the union-wide loan-to-GDP ratio only lead to the same stabilization results than the one obtained under the national reaction if cross-border lending reaches 45%. However, even if cross-border linkages are high enough to justify the implementation of a federal adjusted solution, the reaction to national lending conditions remains remarkably optimal.
    Keywords: Macroprudential Policy; Global Banking; International Business Cycles; Euro Area
    JEL: E58 F34 F4 F42
    Date: 2016–11–01
  13. By: Maximo Camacho; Matias Pacce; Camilo Ulloa
    Abstract: We characterize regional business cycles for Spain using monthly Social Security affiliations. Based on a set of Markov-switching models, we find substantial synchronization of regional business cycles, which has increased since the Great Recession. We do however evidence a regional leading and lagging performance that repeats itself across the different recessions.
    Keywords: Working Paper , Economic Analysis , Spain
    JEL: E32 C22 E27
    Date: 2017–09
  14. By: Fang Yao; Margarita Rubio (Reserve Bank of New Zealand)
    Abstract: In the aftermath of the global financial crisis, a new set of challenges has emerged for macroeconomic policy makers. One of the major changes in the post-crisis environment is a significant and permanent decline in interest rates. In many economies, the short-term nominal interest rate has been close to zero. Monetary policymakers have encountered difficulties in stimulating the economy because the interest rate cannot be lowered any further. Moreover, when interest rates are persistently low, agents tend to engage in speculative investment in assets, such as real estate. Therefore, low interest rates may also contribute to asset price bubbles and excessive leverage, which pose risks to financial stability. One of the policies that has become important after the crisis is the so-called macroprudential policy, aimed at ensuring a more stable financial system. In this paper, we focus on the use of macroprudential policies in an economic environment in which interest rates are low. We argue that, in a low interest-rate environment, the case for using macroprudential policies becomes even stronger. On the one hand, greater financial volatility due to low interest rates calls for macroprudential policies to contain excessive bank lending. On the other hand, macroprudential policy may also complement monetary policy when the interest rate is close to zero and cannot be used to stabilise the economy anymore. We build an economic model for policy evaluation that can take into account that nominal interest rates are subject to a zero lower bound and cannot become negative. We calibrate the model to characteristics of the US economy where the Federal funds rate has been close to zero for 7 years. Within this setting, we find that when the interest rate is persistently low, activity in the financial markets and the wider economy, becomes more volatile. Therefore, we propose macroprudential policy as a candidate to stabilise the economy in this context. On the one hand, we find that in a low interest-rate environment, tighter macroprudential policies can stabilise financial markets. We also find, on the other hand, that macroprudential policies could help monetary policy stimulate the economy when interest rates are close to zero.
    Date: 2017–09
  15. By: Yun K. Kim; Alan G. Isaac
    Abstract: Building upon Isaac and Kim (2013) and Charles (2008a), we incorporate endogenous retention behavior of firms into a a stock-flow consistent neo-Kaleckian growth model with both consumer and corporate debt. We adopt a logistic endogenous retention ratio, which is a realistic representation of firms retention behavior. We then explore the macrodynamic ramifications. Consumer credit expansion can enhance the stability of the system. Higher interest has a destabilizing effect, and can induce a rather dramatic instability. More prudent firms financial behavior by relying more on their retained earnings reduces the stability of the system although it promotes growth.
    Keywords: Consumer debt, corporate debt, endogenous retention ratio, stability
    JEL: E12 E44 O41
    Date: 2017–09
  16. By: Aleksander £aszek
    Abstract: Poland’s structural deficit is one of the largest in the EU. While other Member States are taking action to reduce their deficits, the Polish government has not only introduced costly projects, but has also announced additional projects that will further aggravate the state of Polish public finances. The aim of maintaining the nominal deficit under 3% of GDP, as declared by the government, is insufficient because it does not leave a margin of safety in case of an economic slowdown. In the meantime, the turbulent global economy and the structural challenges the Polish economy is facing make the scenario of an economic slowdown increasingly plausible. Dr. Aleksander £aszek evaluates the government’s current policy through the lens of the challenges that stand a head of Polish economy, and its resilience to shocks, in the new mBank-CASE Seminar Proceedings "Economic policy, the international environment and the state of Poland’s public finances: Scenarios".
    Keywords: Public finance, general government debt, general government deficit, structural deficit
    JEL: E20 E62 E66 G21 G28 H24 H25 H3 H6
    Date: 2017–03
  17. By: Go Kotera (Policy Research Institute, Ministry of Finance Japan); Saisuke Sakai (Policy Research Institute, Ministry of Finance Japan)
    Abstract: This study constructs a dynamic stochastic general equilibrium model and empirically investigates the effects of fiscal policy in Japan with focus on the functional difference in government expenditures. Specifically, we divide government consumption into merit and public goods and examine their external effect on private consumption. Our estimation using Japanese quarterly data from 1981:Q1 to 2012:Q4 indicates that merit goods are complements for private consumption, while public goods are substitutes, and consequently, the expenditure on merit goods has greater positive effects on the economy than public goods. Furthermore, we show that Japanese government expenditures are highly persistent and their response to the GDP gap and national debt accumulation is limited. These findings suggest that the complementarity between private consumption and merit goods is a major factor causing a fiscal crowding-in effect on private consumption.
    Keywords: Edgeworth complementarity; Fiscal policy; DSGE modeling; Bayesian estimation
    JEL: C11 E32 E62
    Date: 2017–09
  18. By: David Berger; Ian Dew-Becker; Stefano Giglio
    Abstract: We provide evidence on the relationship between aggregate uncertainty and the macroeconomy. Identifying uncertainty shocks using methods from the news shocks literature, the analysis finds that innovations in realized stock market volatility are robustly followed by contractions, while shocks to forward-looking uncertainty have no significant effect on the economy. Moreover, investors have historically paid large premia to hedge shocks to realized but not implied volatility. A model in which fundamental shocks are skewed left can match those facts. Aggregate volatility matters, but it is the realization of volatility, rather than uncertainty about the future, that has been associated with declines.
    JEL: E00 E32 G12
    Date: 2017–09
  19. By: Shuhei Takahashi (Institute of Economic Research, Kyoto University); Ken Yamada (Faculty of Economics,Kyoto University)
    Abstract: The level of wage inequality has varied across advanced industrial countries. One of the main reasons has been a significant difference in the skill wage premium. This study analyzes the impact of taxes and transfers on the skill wage premium and social welfare in the context of a heterogeneous-agents incomplete-markets model, in which the population consists of skilled workers and unskilled workers, and the production technology exhibits capital-skill complementarity. The analysis indicates that a significant fraction of the difference in the skill wage premium between the United States and Japan can be accounted for by differences in the tax system.
    Keywords: Skill premium, capital-skill complementarity, incomplete markets, capital income taxation, composition effect
    JEL: E13 E24 E62 H24 J31
    Date: 2017–08
  20. By: Alan J. Auerbach; Yuriy Gorodnichenko
    Abstract: The Great Recession and the Global Financial Crisis have left many developed countries with low interest rates and high levels of public debt, thus limiting the ability of policymakers to fight the next recession. Whether new fiscal stimulus programs would be jeopardized by these already heavy public debt burdens is a central question. For a sample of developed countries, we find that government spending shocks do not lead to persistent increases in debt-to-GDP ratios or costs of borrowing, especially during periods of economic weakness. Indeed, fiscal stimulus in a weak economy can improve fiscal sustainability along the metrics we study. Even in countries with high public debt, the penalty for activist discretionary fiscal policy appears to be small.
    JEL: E62 H62
    Date: 2017–09
  21. By: Alberto Martín; Jaume Ventura
    Abstract: This paper provides a guide to macroeconomic applications of the theory of rational bubbles. It shows that rational bubbles can be easily incorporated into standard macroeconomic models, and illustrates how they can be used to account for important macroeconomic phenomena. It also discusses the welfare implications of rational bubbles and the role of policy in managing them. Finally, it provides a detailed review of the literature.
    Keywords: Bubbles, credit, Business cycles, economic growth, ?nancial frictions, pyramid schemes
    JEL: E32 E44 O40
    Date: 2017–09
  22. By: Paczek-Jarmulska, Barbara (Ministerstwo Finansów, Szkoła Główna Handlowa w Warszawie)
    Abstract: Niniejszy przegląd metod i podejść do analizy stabilności fiskalnej posłużył jako podstawa wzmocnienia regularnego monitoringu stabilności polityki fiskalnej przeprowadzanego w polskim Ministerstwie Finansów. W szczególności, efekty tego monitoringu wykorzystywane są corocznie w aktualizacji Programu Konwergencji. W opracowaniu przedstawiono katalog definicji stanowiących podstawę analizy stabilności fiskalnej w różnych instytucjach oraz scharakteryzowano metody i podejścia wykorzystywane zarówno przez instytucje krajowe i międzynarodowe, jak i w opracowaniach naukowych. Przedstawiono również charakterystykę dotychczasowych analiz stabilności fiskalnej w Polsce przeprowadzanych przez Komisję Europejską, Międzynarodowy Fundusz Walutowy i Ministerstwo Finansów w oparciu o wystandaryzowane podejścia. Następnie wskazano zmiany wprowadzone w Programie Konwergencji w efekcie dokonanego przeglądu.
    Keywords: stabilność fiskalna; dług publiczny; wskaźniki stabilności; stochastyczne projekcje
    JEL: E62 E62 E63
    Date: 2016–08–30
  23. By: Jean-Philippe Bouchaud; Stanislao Gualdi; Marco Tarzia; Francesco Zamponi
    Abstract: Which level of inflation should Central Banks be targeting? We investigate this issue in the context of a simplified Agent Based Model of the economy. Depending on the value of the parameters that describe the micro-behaviour of agents (in particular inflation anticipations), we find a surprisingly rich variety of behaviour at the macro-level. Without any monetary policy, our ABM economy can be in a high inflation/high output state, or in a low inflation/low output state. Hyper-inflation, stagflation, deflation and business cycles are also possible. We then introduce a Central Bank with a Taylor-rule-based inflation target, and study the resulting aggregate variables. Our main result is that too low inflation targets are in general detrimental to a CB-controlled economy. One symptom is a persistent under-realisation of inflation, perhaps similar to the current macroeconomic situation. This predicament is alleviated by higher inflation targets that are found to improve both unemployment and negative interest rate episodes, up to the point where erosion of savings becomes unacceptable. Our results are contrasted with the predictions of the standard DSGE model.
    Date: 2017–09
  24. By: Thorir Bjarnason (School of Science and Engineering, Reykjavik University, Iceland); Einar Jón Erlingsson (School of Science and Engineering, Reykjavik University, Iceland); Bulent Ozel (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain); Hlynur Stefánsson (School of Science and Engineering, Reykjavik University, Iceland); Jón Thor Sturluson (School of Science and Engineering, Reykjavik University, Iceland); Marco Raberto (DIME-University of Genoa, Italy)
    Abstract: Mortgage instruments differ in many respects. Their microeconomic effects might be easily calculated but their effects on a macroeconomic level are not always easily understood. Agent-based models can be used to study the macroeconomic effects that emerge from the microeconomic behavior of multiple interacting agents. Using a macroeconomic model of a credit network economy we have found that inflation-indexed mortgages can mislead households’ expectations of risk, encouraging them to buy more housing due to their low initial amortizations which, in turn, stimulates housing prices. The results further hint that in long-run inflation-indexed mortgages create relatively more uneven housing wealth distribution in between households. We also find that the effectiveness of standard monetary policy tools is diminished when inflation-indexed mortgages are used. Banks partake in the interest rate risk with fixed rate mortgages but bear little or no risk with adjustable rate or inflation-indexed mortgages. We have seen in this study that mortgage types, macroprudential tools and other policy tools can be experimented on, give insights into the interplay between agents and insight into the effects that certain policy settings may have on a macroeconomic level.
    Keywords: Credit cycles, mortgage, housing market, agent-based model, inflation-indexation
    JEL: C63 E25 G21 R31 R38
    Date: 2017
  25. By: Goodhart, Charles A
    Abstract: Unlike other facets of monetary policy renormalisation, there has been little discussion yet of what principles should determine the optimum size of a Central Bank's balance sheet, the end-point to which on-going portfolio reductions should approach. In this note I start by addressing the arguments of those who would leave this balance sheet very large, much as now; and then continue with the counter-arguments, also stressing the nature of the relationships between monetary and fiscal policies, and between the Central Bank and the Treasury's Debt Management Office.
    Keywords: auction risk; Central Bank Balance Sheet; Debt Management; interest rate risk; liquidity; Monetary Policy Renormalisation; QE
    JEL: E50 E52 E63 H63
    Date: 2017–09
  26. By: Baris Soybilgen (Istanbul Bilgi University)
    Abstract: We propose a factor augmented neural network model to obtain short-term predictions of U.S. business cycle regimes. First, dynamic factors are extracted from a large-scale data set consisting of 122 variables. Then, these dynamic factors are fed into neural network models for predicting recession and expansion periods. We show that the neural network model provides good in sample and out of sample fits compared to the popular Markov switching dynamic factor model. We also perform a pseudo real time out of sample forecasting exercise and show that neural network models produce accurate short-term predictions of U.S. business cycle phases.
    Keywords: Dynamic Factor Model; Neural Network; Recession
    JEL: E37 E31
    Date: 2017–08
  27. By: Binder, Michael; Lieberknecht, Philipp; Quintana, Jorge; Wieland, Volker
    Abstract: For some time now, structural macroeconomic models used at central banks have been predominantly New Keynesian DSGE models featuring nominal rigidities and forwardlooking decision-making. While these features are widely deemed crucial for policy evaluation exercises, most central banks have added more detailed characterizations of the financial sector to these models following the Great Recession in order to improve their fit to the data and their forecasting performance. We employ a comparative approach to investigate the characteristics of this new generation of New Keynesian DSGE models and document an elevated degree of model uncertainty relative to earlier model generations. Policy transmission is highly heterogeneous across types of financial frictions and monetary policy causes larger effects, on average. The New Keynesian DSGE models we analyze suggest that a simple policy rule robust to model uncertainty involves a weaker response to inflation and the output gap in the presence of financial frictions as compared to earlier generations of such models. Leaning-against-the-wind policies in models of this class estimated for the Euro Area do not lead to substantial gains. With regard to forecasting performance, the inclusion of financial frictions can generate improvements, if conditioned on appropriate data. Looking forward, we argue that model-averaging and embracing alternative modelling paradigms is likely to yield a more robust framework for the conduct of monetary policy.
    Keywords: model uncertainty,model comparison,New Keynesian DSGE,financial frictions,monetary policy transmission,fiscal policy transmission,macroprudential policy transmission,robust monetary policy,forecasting
    Date: 2017
  28. By: Matthew Jaremski; Gabriel Mathy
    Abstract: Outside of the recent past, excess reserves have only concerned policymakers in one other period: the Great Depression. The data show that excess reserves in the 1930s were never actively unwound through a reduction in the monetary base. Nominal economic growth swelled required reserves while an exogenous reduction in monetary gold inflows due to war embargoes in Europe allowed excess reserves to naturally decline towards zero. Excess reserves fell rapidly in early 1941 and would have unwound fully even without the entry of the United States into World War II. As such, policy tightening was at no point necessary and could have contributed to the 1937-1938 Recession.
    JEL: E32 E58 N12
    Date: 2017–09
  29. By: Eggertsson, Gauti B. (Brown University); Mehrotra, Neil (Federal Reserve Bank of Minneapolis); Robbins, Jacob A. (Brown University)
    Abstract: This paper formalizes and quantifies the secular stagnation hypothesis, defined as a persistently low or negative natural rate of interest leading to a chronically binding zero lower bound (ZLB). Output-inflation dynamics and policy prescriptions are fundamentally different from those in the standard New Keynesian framework. Using a 56-period quantitative life cycle model, a standard calibration to US data delivers a natural rate ranging from -1.5% to -2%, implying an elevated risk of ZLB episodes for the foreseeable future. We decompose the contribution of demographic and technological factors to the decline in interest rates since 1970 and quantify changes required to restore higher rates.
    Keywords: Secular stagnation; Monetary policy; Zero lower bound
    Date: 2017–09–05
  30. By: C. Pfister
    Abstract: In spite of a still very low volume at the global level, in comparison with the main reserve currencies, digital currencies attract a lot of attention. The paper reminds that it is above all the exchange mechanism incorporated in digital currencies (the distributed ledger technology) which should contribute to their success. It is shown that a widespread use of these currencies is likely to materialize only under conditions that would essentially leave unchanged the capacity of the central bank to pursue the same inflation target using the same instruments as today, by setting an interest rate level. However, some adjustments may have to be made to the definition of monetary aggregates and possibly also to the base and/or the ratios of reserve requirements. Even in the most extreme and unlikely scenario, where the central bank would issue CBDC the public would have access to and massively adopt, banks’ role in distributing credit would likely not be seriously impaired. Banks might rather have less direct information on their clients. They would possibly also become more dependent on central bank refinancing, which would call for a clear and pre-announced lending of last resort policy in order to limit moral hazard considerations.
    Keywords: Digital currencies, Money, Monetary policy.
    JEL: E52 E58
    Date: 2017
  31. By: Laura Coroneo; Sergio Pastorello
    Abstract: This paper analyzes the effect of the interest rate lower bound on long term sovereign bond spreads in the Euro area. We specify a joint shadow rate term structure model for the risk-free, the German and the Italian sovereign yield curves. In our model, the behavior of long term spreads becomes strongly nonlinear in the underlying factors when interest rates are close to the lower bound, which in the data occurs since the beginning of 2012. We fit the model by Quasi-Maximum Likelihood and highlight three important consequences of sovereign spreads’ nonlinear behavior: i) their distribution is skewed, ii) they are affected by (possibly exogenous) changes in the lower bound, and iii) they become less informative about the countries’ sovereign risk. Shadow spreads, however, still provide reliable information.
    Keywords: lower bound; sovereign risk; shadow rate term structure model.
    JEL: E43 E44 E52 G12
    Date: 2017–09
  32. By: Robert J. Kurtzman; Stephan Luck; Thomas Zimmermann
    Abstract: Using confidential loan officer survey data on lending standards and internal risk ratings on loans, we document an effect of large-scale asset purchase programs (LSAPs) on lending standards and risk-taking. We exploit cross-sectional variation in banks’ holdings of mortgage-backed securities to show that the first and third round of quantitative easing (QE1 and QE3) significantly lowered lending standards and increased loan risk characteristics. The magnitude of the effects is about the same in QE1 and QE3, and is comparable to the effect of a one percentage point decrease in the Fed funds target rate.
    Keywords: Banks ; QE ; Risk ; SLOOS ; STBL
    JEL: E43 E52 G21
    Date: 2017–09–06
  33. By: Mehrotra, Neil (Federal Reserve Bank of Minneapolis); Crouzet, Nicolas (Northwestern University)
    Abstract: Drawing from confidential firm-level data of US manufacturing firms, we provide new evidence on the cyclicality of small and large firms. We show that the cyclicality of sales and investment declines with firm size. The effect is primarily driven by differences between the top 0.5% of firms and the rest. Moreover, we show that, due to the skewness of sales and investment, the higher cyclicality of small firms has a negligible influence on the behavior of aggregates. We argue that the size asymmetry is unlikely to be driven by financial frictions given 1) the absence of statistically significant differences in the behavior of production inputs or debt in recessions, 2) the survival of the size effect after directly controlling for proxies of financial strength, and 3) the predictions of a simple financial frictions model, in which unconstrained (large) firms contract more in recessions than constrained (small) firms.
    Keywords: Firm size; Business cycles; Financial accelerator
    JEL: E23 E32 G30
    Date: 2017–09–05
  34. By: Vasilios Plakandaras (Department of Economics, Democritus University of Thrace, Greece); Rangan Gupta (University of Pretoria, Pretoria, South Africa); Constantinos Katrakilidis (Department of Economics, Aristotle University of Thessaloniki, 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: In this paper, we study the effect of macroeconomic shocks in the determination of house prices. Focusing on the U.S. and the U.K. housing market, we employ time-varying Vector Autoregression models using Bayesian methods covering the periods of 1830-2016 and 1845-2016 respectively. We consider real house prices, output growth, short-term interest rates and inflation as input variables in order to unveil the effect of macroeconomic shocks on house prices. From the examination of the impulse responses of house prices on macroeconomic shocks, we find that technology shocks dominate in the U.S. real estate market, while their effect is unimportant in the U.K. In contrast, monetary policy drives most of the evolution of the U.K. house prices, while transitory house supply shocks are unimportant in either country. These findings are further corroborated with the analysis of conditional volatilities and correlations to macroeconomic shocks. Overall, we are able to better understand the dynamic linkages in the relationship of the macro economy and house prices. Over time, we analyze the variations in economic events happening at the imposition of the shock and uncover characteristics missed in the time-invariant approaches of previous studies.
    Keywords: time-varying VAR, house prices, macroeconomic shocks
    JEL: C32 R30
    Date: 2017–09
  35. By: Stefano BOSI; David DESMARCHELIER
    Abstract: In this paper, we aim to model the impact of human activities on the wildlife habitat in a general equilibrium framework by embedding the Levins model (1969) of metapopulation dynamics into a Ramsey model (1928) with a pollution externality. In the long run, as in Levins (1969), two steady states coexist: a zero one with mass extinction and anotherone with positive wildlife when the migration rate of the metapopulation exceeds the rate of extinction. A green tax always increases the wildlife and lowers the consumption demand. It is welfare-improving if and only if agents overweight the wildlife. In the short run, we show that a sufficiently negative effect of wildlife habitat on consumption demand can lead to the emergence of a limit cycle near the positive steady state through a Hopf bifurcation. We show also that the negative pollution effect on wildlife habitat works as a destabilizing force in the economy by promoting limit cycles.
    Keywords: metapopulation dynamics, pollution, Ramsey model, Hopf bifurcation.
    JEL: C61 E32 O44
    Date: 2017
  36. 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 (Department of Quantitative Finance National Tsing Hua University, Taiwan and Econometric Institute Erasmus School of Economics Erasmus University Rotterdam, The Netherlands and Department of Quantitative Economics Complutense University of Madrid, Spain And Institute of Advanced Sciences 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: 2017–07
  37. By: Xavier Raurich (Departament de Teoria Econòmica and CREB, Universitat de Barcelona); Thomas Seegmuller (Aix-Marseille Univ. (Aix-Marseille School of Economics), CNRS, EHESS and Centrale Marseille)
    Abstract: As it is documented, investment of households in human capital is negatively related to the number of children individuals will have and requires some loans to be financed. We show that this negative relationship contributes to explain episodes of bubbles that are associated to higher growth rates. This conclusion is obtained in an overlapping generations model where agents choose to invest in a productive asset, that can be interpreted as human capital, and decide their number of children. A bubble allows to smooth consumption and expenses over the life-cycle, and can therefore be used to finance either productive investment or the cost of rearing children. The time cost of rearing children plays a key role in the analysis. If the time cost per child is sufficiently large, households have only a small number of children. The bubble then has a crowding-in effect because it is used to finance productive investment. On the contrary, if the time cost per child is low enough, households have a large number of children. Then, the bubble is mainly used to finance the total cost of rearing children and has a crowding-out effect on investment. Therefore, the new mechanism we highlight shows that a bubble enhances growth only if the economy is characterized by a high rearing time cost per child.
    Keywords: bubble, sustained growth, fertility
    JEL: E44 G12 J11
    Date: 2017
  38. By: Diewert, Erwin; SHIMIZU, Chihiro
    Abstract: The SNA (System of National Accounts) requires separate estimates for the land and structure components of a commercial property. Using transactions data for the sales of office buildings in Tokyo, a hedonic regression model (the Builder’s Model) was estimated and this model generated an overall property price index as well as subindexes for the land and structure components of the office buildings. The Builder’s Model was also estimated using appraisal data on office building REITs for Tokyo. These hedonic regression models also generated estimates for net depreciation rates which can be compared. Finally, the Japanese Government constructs annual official land prices for commercial properties based on appraised values. The paper compares these official land prices with the land prices generated by the hedonic regression models based on transactions data and on REIT data. The results revealed that commercial property indexes based on appraisal and assessment prices lag behind the indexes based on transaction prices.
    Keywords: Commercial property price indexes, System of National Accounts, the builder’s model, transaction-based indexes, appraisal prices
    JEL: C2 C23 C43 D12 E31 R21
    Date: 2017–09–11
  39. By: Supriya Kapoor (UCD Geary Institute for Public Policy)
    Abstract: The role of banks in the transmission of monetary policy has been of significance lately. We aim to analyse the bank lending behaviour during changes in monetary policy. We test for loan supply shifts by segregating banks based on their liquidity along with size and capital ratio. This paper employs uninsured, non-reservable liabilities such as time deposits and investigates whether banks are able to insulate themselves during a monetary policy change. We find that the loan supply shock can be neutralized post monetary policy changes. Furthermore, the less liquid and small banks are unable to carry out such operations and are more affected by monetary shocks. This has important implication in the working of commercial banks and effects of monetary policy.
    Keywords: bank lending channel, time deposits, monetary policy, liquidity
    JEL: E52 G21 E50
    Date: 2017–11–09
  40. By: Sengupta, Rajeswari; Vardhan, Harsh
    Abstract: Growing non-performing assets is a recurrent problem in the Indian banking sector. Over the past two decades, there have been two such episodes when the banking sector was severely impaired by balance sheet problems. In this paper we do a comparative analysis of the two banking crisis episodes-the one in the late 1990s and one that started in the aftermath of the 2008 Global Financial Crisis and is yet to be resolved. We describe the macroeconomic and banking environment preceding the episodes, the degree and nature of the crises and also discuss the policy responses that have been undertaken. We conclude by drawing policy lessons from this discussion and suggest some measures that can be adopted to better deal with a future balance sheet related crisis in the banking sector such that the impact on the real economy is minimal.
    Keywords: Non-performing assets, Public-sector banks, Capital adequacy, Bank recapitalisation, Balance-sheet crisis.
    JEL: E44 G21 G28
    Date: 2017–03–01
  41. By: Hernando Vargas (Banco de la República de Colombia); Pamela Cardozo (Banco de la República de Colombia); Andrés Murcia (Banco de la República de Colombia)
    Abstract: Macroprudential policy in Colombia is described along with a discussion of the main challenges faced by the authorities in implementing it and a review of episodes in which macroprudential measures were taken. An overview and some estimates of their effectiveness in preventing the buildup of imbalances, increasing buffers and cushioning downswings are presented. Classification JEL: E51, E58, F32, F38, G18, G28.
    Keywords: macroprudential policy, financial stability, financial regulation, financial safety net, central banking, Colombia
    Date: 2017–09
  42. By: Stefano Bosi (EPEE, University of Evry); David Desmarchelier (BETA, University of Lorraine)
    Abstract: We provide necessary and sufficient conditions to detect local bifurcations of three and four-dimensional dynamical systems in continuous time. We characterize not only the bifurcations of codimension one but also those of codimension two. The added value of this methodology rests on its generality and tractability. To illustrate the simplicity of our approach, we provide two analytical applications of dimension three and four to environmental economics, complemented with numerical simulations.
    Keywords: local bifurcations, codimensions one and two, pollution, natural capital,
    JEL: C61 E32 O44
    Date: 2017–09
  43. By: Miguel Saldarriaga (Central Reserve Bank of Peru); Pablo del Aguila (Central Reserve Bank of Peru); Kevin Gershy-Damet (Central Reserve Bank of Peru)
    Abstract: Inflation expectations play a key role in inflation dynamics and monetary policy effectiveness. Thus, anchoring inflation expectations have become paramount for Central Banks across the world, mainly for inflation-targeting Central Banks. Yet, the evidence that inflation targeting has anchored inflation expectations in all inflation targeting economies is mixed. Although inflation volatility declined after the inflation-targeting regime came into force in most countries, inflation expectations may still be not anchored, and might just exhibit lower dispersion. The Central Bank of Peru conducts a monthly survey among 350 representative firms from the non-financial sector and 45 professional forecasters since 2002. Following Kumar et al. (2015) we evaluate how anchored inflation expectations in Peru are using four measures: (i) closeness to the Central Bank inflation target, (ii) dispersion across agents, (iii) forecast revisions, and (iv) co-movement between long-run inflation expectations and short-run inflation expectations. Although inflation expectations seem to be somehow anchored to the upper limit of the target band, they do not achieve some of the basic properties required under weaker definitions of anchored expectations. This ‘imperfect anchoring’ may seem precarious as any shock can move away inflation expectations from the Central Bank target and can limit monetary policy success.
    Date: 2017–09
  44. By: Bianchi, Francesco; Lettau, Martin; Ludvigson, Sydney
    Abstract: This paper presents evidence of infrequent shifts, or "regimes," in the mean of the consumption-wealth variable cay_{t} that are strongly associated with low frequency fluctuations in the real value of the Federal Reserve's primary policy rate, with low policy rates associated with high asset valuations, and vice versa. By contrast, there is no evidence that infrequent shifts to high asset valuations and low policy rates are associated with higher economic growth or lower economic uncertainty; indeed the opposite is true. Additional evidence shows that low interest rate/high asset valuation regimes coincide with significantly lower equity market risk premia.
    Keywords: Asset Pricing; monetary policy; Real interest rate; Risk premium
    JEL: G10 G12 G17
    Date: 2017–09
  45. By: Guo, Zi-Yi
    Abstract: Empirical evidence shows that house prices are highly volatile and closely correlated with the business cycle, and the fact is at odds with the evidence that rental prices are relatively stable and almost uncorrelated with the business cycle. To explain the fact, we introduce information heterogeneity into a standard dynamic stochastic general equilibrium (DSGE) model with financial frictions. Agents are endowed with heterogeneous shocks, and rationally extract information from market activities. Since agents are confused by changes in average private signals about future fundamentals, the model generates an amplified effect of technology shocks on house prices, which accounts for the disconnect between house prices and the discounted sum of future rents. In addition, the model provides insights for the lead-lag relationship between residential and nonresidential investment over the business cycle. The solution method developed in this paper can be applied in other DSGE models with heterogeneous information.
    Date: 2017
  46. By: Albertini, Julien (University of Lyon 2); Hairault, Jean-Olivier (University of Paris 1 Panthéon-Sorbonne); Langot, François (University of Le Mans); Sopraseuth, Thepthida (University of Cergy-Pontoise)
    Abstract: This study investigates job polarization in the United States and in France. In the data, the dynamics of employment shares for abstract, routine, and manual jobs appear very similar in the two countries. This similarity actually hides major differences in the dynamics of employment levels by tasks. In particular, the routine employment level fell significantly in France until the mid-1990s, and then rebounded until 2007. The evolution of US routine employment went in opposite directions to that of the French economy. We then develop a multi-sectorial search and matching model with endogenous occupational choice to disentangle the respective contributions of task-biased technological change (TBTC), labor market institutions (LMI), and rising educational attainment to job polarization. For the US economy, we find that TBTC and the rising supply of skilled labor are the main drivers of polarization in a context of growing employment levels. In France, in contrast, polarization is driven mainly by LMI changes. This led to a sharp drop in routine employment in a context of declining aggregate employment until the mid-1990s, which then reversed when the impact of the minimum wage was alleviated by a subsidy policy targeted at low wage earners. Next, we quantify the welfare consequences of job polarization. Abstract and manual workers are the main winners of job polarization in both countries. Welfare gains and losses are more dispersed in the routine group. The most productive French routine workers would have been worse off without LMI changes. In contrast, displaced low-ability, routine French workers would have preferred a more flexible labor market to improve their employment prospects in their occupational change. All US routine workers suffered as a result of the drop in LMI generosity.
    Keywords: search and matching, job polarization, labor market institutions
    JEL: E24 J62 J64 O33
    Date: 2017–09
  47. By: Joseph E. Stiglitz
    Abstract: This paper provides a critique of the DSGE models that have come to dominate macroeconomics during the past quarter-century. It argues that at the heart of the failure were the wrong microfoundations, which failed to incorporate key aspects of economic behaviour, e.g. incorporating insights from information economics and behavioural economics. Inadequate modelling of the financial sector meant they were ill-suited for predicting or responding to a financial crisis; and a reliance on representative agent models meant they were ill-suited for analysing either the role of distribution in fluctuations and crises or the consequences of fluctuations on inequality. The paper proposes alternative benchmark models that may be more useful both in understanding deep downturns and responding to them.
    JEL: A1 A2 E0 E1
    Date: 2017–09
  48. By: Burda, Michael C. (Humboldt University Berlin); Seele, Stefanie (Humboldt University Berlin)
    Abstract: Dem deutschen Arbeitsmarkt ging es noch nie seit der Wiedervereinigung so gut wie heute. Die nachhaltige Entwicklung seit 2005 ist auf zwei entscheidende Treiber zurückzuführen: die Umverteilung eines beinahe gleichbleibenden Arbeitsstundenvolumens auf mehr Beschäftigte und die massive Ausweitung der Teilzeitarbeit. Die Lohnzurückhaltung der Tarifparteien war dabei eine notwendige, jedoch nicht hinreichende Bedingung für diesen Erfolg. Die Kovarianz von Lohn und Erwerbsindikatoren deutet darauf hin, dass die Arbeitsmarktreformen der sogenannten Agenda 2010 die erwerbsfähige Bevölkerung ab 2005 zur Teilnahme am Arbeitsmarkt aktiviert haben. Insbesondere die Reform der Arbeitslosenunterstützung hat die Ausweitung des Arbeitsangebots im unteren Lohnsegment ermöglicht und bewerkstelligt, dass die sozialversicherungspflichtige Teil- und Vollzeitarbeit zunahm. Ein Rückbau der Reformen könnte diesen Erfolg gefährden.
    Keywords: Deutsches Arbeitsmarktwunder, Hartz-Reformen, Lohnungleichheit, Teilzeitbeschäftigung
    JEL: E24 J08 J21 J31
    Date: 2017–09
  49. By: Mei Dong (Department of Economics, University of Melbourne); Sylvia Xiaolin Xiao (School of Economics, Auckland University of Technology)
    Abstract: We discover a consumption channel of monetary policy in a model with money and government bonds. When the central bank withdraws government bonds (short-term or long-term) through open market operations, it lowers re- turns on bonds. The lower return has a direct negative impact on consumption by households that hold bonds, and an indirect negative impact on consumption by households that hold money. As a result, fi rms earn less pro fits from production, which leads to higher unemployment. The existence of such a consumption channel can help us understand the e¤ects of unconventional monetary policy.
    Keywords: interest rate, monetary policy, consumption, unemployment
    Date: 2017–07
  50. By: V.V. Chari; Lawrence Christiano
    Abstract: The financialization view is that increased trading in commodity futures markets is associated with increases in the growth rate and volatility of commodity spot prices. This view gained credence because in the 2000s trading volume increased sharply and many commodity prices rose and became more volatile. Using a large panel dataset we constructed, which includes commodities with and without futures markets, we find no empirical link between increased futures market trading and changes in price behavior. Our data sheds light on the economic role of futures markets. The conventional view is that futures markets provide one-way insurance by allowing outsiders, traders with no direct interest in a commodity, to insure insiders, traders with a direct interest. The data are not consistent with the conventional view and we argue that they point to an alternative mutual insurance view, in which all participants insure each other. We formalize this view in a model and show that it is consistent with key features of the data.
    JEL: E02 G12 G21
    Date: 2017–09
  51. By: John R. Graham; Mark T. Leary
    Abstract: We put the recent increase in corporate cash in historic perspective by studying nearly 100 years of average and aggregate cash holdings. Corporate cash more than doubled in the first 25 years of our sample before returning to 1920 levels by 1970. Since then, average and aggregate patterns diverge. To understand these patterns, we examine both time-series and cross-sectional variation in cash policies and draw several conclusions. First, the increase in average cash ratios since 1980 is driven entirely by a shift in the cash policies of new entrants, while within-firm changes have been negative or flat since WW II. Second, the cross-sectional relations documented on modern data are remarkably stable back to the 1920s. Third, despite the stability of these relations, firm characteristics explain little of the time series variation in aggregate cash holdings over the century. Macroeconomic conditions, corporate profitability and investment, and (since 2000) repatriation tax incentives help fill this gap.
    JEL: E41 G32 H32 N0
    Date: 2017–09
  52. By: Piotr Dybka; Michal Kowalczuk; Bartosz Olesinski; Marek Rozkrut; Andrzej Toroj
    Abstract: Model-based econometric techniques of the shadow economy estimation have been increasingly popular, but a systematic approach to getting the best of their complementarities has so far been missing. We review the dominant approaches in the literature –currency demand analysis (CDA) and MIMIC model – and propose a novel hybrid procedure that addresses their previous critique, in particular the misspecification issues in CDA equations and the vague transformation of the latent variable obtained via MIMIC model into interpretable levels and paths of the shadow economy. Our proposal is based on a new identification scheme for the MIMIC model, referred to as 'reverse standarizaton'. It supplies the MIMIC model with the panel-structured information on the latent variable's mean and variance obtained from the CDA estimates, treating this information as given in the restricted full information maximum likelihood function. This approach allows us to avoid some controversial steps, such as choosing an externally estimated reference point for benchmarking or adopting other ad hoc identifying assumptions. We estimate the shadow economy for up to 43countries, with the results obtained in the range of 2.8% to 29.9% of GDP. Various versions of our models remain robust as regards changes in the level of the shadow economy over time and the relative position of the analysed countries. We also find that the contribution of (a correctly specified) MIMIC model to the measurement of trends in the shadow economy is marginal as compared to the contribution of the CDA model.
    Keywords: Shadow economy, MIMIC,Currency Demand Approach, Restricted Full Information Maximum Likelihood
    JEL: C10 C51 C59 E26 H26 O17
    Date: 2017–09
  53. By: Mari Aparecida dos Santos; Joaquim Bento de Souza Ferreira Filho; José Eustáquio Ribeiro Vieira Filho; Alexandre Xavier de Carvalho Ywata
    Abstract: O objetivo desta pesquisa foi comparar os impactos econômicos no Brasil de alterações do Novo Código Florestal, considerando dois cenários possíveis: o primeiro, em que não há cotas de reserva ambiental (CRA); e o segundo, em que não se tem anistia para pequenos proprietários de terra. A metodologia integra dois modelos: Globiom-Brasil e Term-BR. Os resultados mostraram que o valor dos agregados macroeconômicos, no período acumulado de 2005 a 2030, comparado com a linha de base para o primeiro (sem CRA) e o segundo cenário (sem anistia), respectivamente, reduziu-se em: 0,12% e 0,51% no produto interno bruto (PIB) real; 0,11% e 0,43% no consumo; 0,11% e 0,45% no gasto do governo; 0,84% e 3,09% no investimento real; e 0,14% e 0,4% nas importações. Não obstante, para o mesmo período de análise, houve aumento das exportações em 0,43% e 1,89%. No primeiro cenário, o estado mais afetado economicamente foi Mato Grosso (-4,52% no PIB) e no segundo cenário, Goiás (-4,25% no PIB). Além disso, foi observado que a soja e a criação de bovinos são os mais afetados negativamente por tais mudanças na política ambiental. The objective of this research was to compare the economic impacts, in Brazil, of the New Forest Code considering two possible scenarios: in the first case there is no Environmental Reserve Quotas (ERQ); and in the second case there is no amnesty to small landowners. The methodology integrates two models: Globiom-Brazil and Term-BR. The results showed that the impacts in the value of macroeconomic aggregates, in the cumulative period from 2005 to 2030, compared to the baseline, for the first (without ERQ) and second scenario (without amnesty), respectively decrease in: 0.12% and 0.51% in real GDP; 0.11% and 0.43% in consumption; 0.11% and 0.45% in government expenditure; 0.84% and 3.09% in real investment; 0.14% and 0.4% in imports. Although, for the same period of analysis, there were exports increased by 0.43% and 1.89%. In the first scenario, the most economically affected state was Mato Grosso (-4.52% in GDP) and in the second scenario Goias (-4.25% in GDP). In addition, it was observed that soy and cattle breeding are the most negatively affected by such changes in environmental policy.
    Date: 2017–08
  54. By: Stefano BOSI; David DESMARCHELIER; Manh Hung NGUYEN
    Abstract: Biologists point out that biodiversity loss contributes to promote the transmission of diseases. In epidemiology, this phenomenon is known as dilution effect. Our paper aims to model this effect in an economic model where the spread of an infectious disease is considered. More precisely, we embed a SIS model into a Ramsey model (1928) where a pollution externality coming from production affects the evolution of biodiversity. Biodiversity is assimilated to a renewable resource and affects the infectivity of the disease (dilution effect). A green tax is levied on production at the firm level to finance depollution according to a balanced budget rule. In the long run, a disease-free and an endemic regime are possible. We focus only on the second case and we find that the magnitude of the dilution effect determines the number of steady states. When the dilution effect remains low, there are two steady states with high and low biodiversity respectively. Conversely, when the dilution effect becomes high, the steady state is always unique. Moreover, under a low dilution effect, a higher green-tax rate always impairs biodiversity at the low steady state, while this green paradox is over under a high dilution effect. In the short run, limit cycles can arise in both the cases even if only a low dilution effect can lead to the occurrence of Bogdanov-Takens and generalized Hopf bifurcations.
    Keywords: dilution effect, pollution, SIS model, Ramsey model, local bifurcations of codimension one and two.
    JEL: C61 E32 O44
    Date: 2017
  55. By: Dudley, William (Federal Reserve Bank of New York)
    Abstract: Remarks at Money Marketeers of New York University, New York City.
    Keywords: structural changes; labor resource utilization; Hurricane Harvey; financial conditions; Federal Reserve criticism; asset purchases; financial asset bubbles; monetary policy predictability; balance sheet normalization; floor system; corridor system; FOMC
    Date: 2017–09–08
  56. By: Wilson Donzwa (University of Pretoria, Pretoria, South Africa); Rangan Gupta (University of Pretoria, Pretoria, South Africa); 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: This study employs the recently developed Lagrange multiplier-based causality-in-variance test by Hafner and Herwartz (2006), to determine the volatility spillovers between interest rates and stock returns for the US, Euro Area, UK and Japan. The investigation pays careful attention to volatility transmissions between stock returns and interest rates before and after these economies reached the Zero Lower Bound (ZLB), which is permitted via the use of Shadow Short Rates (SSR), used as a proxy for monetary policy decisions. The results based on daily data, imply that while bi-directional causality is observed, the volatility spillover from interest rates to stock markets are more prominent for the full-sample, as well as the sub-samples cover the pre- and during-ZLB periods. In addition, the relationship between the volatility spillovers, based on a Grey correlation analysis, was found to be consistently positive over time.
    Keywords: Interest Rates, Stock Markets, Volatility Spillover
    JEL: C32 C58 E43 G1
    Date: 2017–09
  57. By: Arellano, Cristina (Federal Reserve Bank of Minneapolis); Bai, Yan (University of Rochester); Mihalache, Gabriel (Stony Brook University)
    Abstract: Sovereign debt crises are associated with large and persistent declines in economic activity, disproportionately so for nontradable sectors. This paper documents this pattern using Spanish data and builds a two-sector dynamic quantitative model of sovereign default with capital accumulation. Recessions are very persistent in the model and more pronounced for nontraded sectors because of default risk. An adverse domestic shock increases the likelihood of default, limits capital inflows, and thus restricts the ability of the economy to exploit investment opportunities. The economy responds by reducing investment and reallocating capital toward the traded sector to support debt service payments. The real exchange rate depreciates, a reflection of the scarcity of traded goods. We find that these mechanisms are quantitatively important for rationalizing the experience of Spain during the recent debt crisis.
    Keywords: European debt crisis; Traded and nontraded production; Real exchange rate; Capital accumulation; Sovereign default with production economy
    JEL: E30 F30
    Date: 2017–09–13
  58. By: Paško Burnać (Ekonomski fakultet, Sveučilište u Splitu)
    Abstract: Fiskalna konsolidacija ili fiskalna prilagodba pojmovi su kojima se u makroekonomiji označava proces usklađivanja javnih prihoda i javnih rashoda, putem smanjenja rashoda i/ili povećanja prihoda. Istraživanja koja proučavaju makroekonomske i fiskalne efekte konsolidacije u razvijenim zemljama nisu česta niti imaju dugu povijest, dok su isti efekti u Republici Hrvatskoj nedovoljno istraženi. Ovaj rad mali je korak u pravcu rasvjetljavanja te veze. U radu se statistički analiziraju makroekonomske i fiskalne varijable prije, za vrijeme i nakon razdoblja konsolidacije. Rezultati istraživanja ne idu u prilog tezi o ekspanzivnom djelovanju fiskalne konsolidacije. Stoga, deskriptivna analiza upućuje na zaključak da fiskalna konsolidacija u Republici Hrvatskoj nije ostvarila makroekonomske ciljeve kao što su ekonomski rast i smanjenje nezaposlenosti.
    Keywords: fiskalna konsolidacija, Republika Hrvatska, ekonomski rast
    JEL: E62 H62 H69
    Date: 2017–09–21
  59. By: UMBA, Gilles Bertrand
    Abstract: The aim of this work was to estimate a DSGE-SOE model for the DR Congo by referring to the Bayesian techniques for the quarterly data from 2002q1 to 2016q4 in order to analyze the relations between the main macroeconomic variables and to simulate the " impact of some major shocks on their evolution. The results of model estimation were generally satisfactory, especially with respect to the convergence tests of Brooks and Gelman (1998). The results of the analysis of historical decomposition have revealed the influence of exchange rate and output shocks on internal and external productivity shocks as the main determinants of the policy rate and interest rate movements. domestic inflation. An analysis of the historical decomposition of the rate of exchange rate depreciation has indicated the notorious influence of exchange rate and monetary policy shocks in the explanation of exchange rate depreciation during the last three quarters of the year 2016.
    Keywords: Open economy, Dynamic stochastic general equilibrium models, Bayesian techniques, New Keynesian models
    JEL: C32 C51 E52 F41
    Date: 2017–09–09
  60. By: Michal Rubaszek
    Abstract: Housing rental market share in most countries around the world is low. We explore the reasons behind this underdevelopment with a survey conducted among a representative group of 1005 Poles. It turns out that strong tenure preferences of households toward owning can be attributed to both economic and psychological factors. Building on these findings, we develop a life-cycle model and evaluate the effect of the following reforms aimed at improving the functioning of the rental market: (i) changing the quality of rental services, (ii) reducing the risk of investment in rental housing and (iii) removing fiscal incentives for owning. The results indicate that the reforms, if introduced simultaneously, significantly increase the rental market share.
    Keywords: Housing rental market, survey data, life-cycle model, heterogenous agent model.
    JEL: D91 E21 R21
    Date: 2017–09
  61. By: Adriana Nunes Ferreira
    Abstract: Os fundos de investimentos são instituições fundamentais para a compreensão da dinâmica da riqueza financeira de um país, e uma peça essencial para examinar a interação entre os donos desta riqueza e a gestão da política macroeconômica. Este texto tem três objetivos fundamentais. Em primeiro lugar, busca-se uma proxy de lucro do setor de fundos de investimento para a análise de sua evolução no Brasil, no período de 2003 a 2015. A primeira tarefa é de conceituação, e a segunda, de mensuração sob os vários recortes possíveis, dada a disponibilidade de dados. Em segundo lugar, busca-se investigar como se moveu a riqueza gerida pelo setor em três recortes distintos: classe de fundos, tipo de ativos e segmento de investidor. Por fim, analisam-se as mudanças das carteiras administradas pelas cinco maiores gestoras de fundos, que, juntas, eram responsáveis, em dezembro de 2015, pela administração de 70% do patrimônio líquido total dos seguintes fundos de investimentos: Banco do Brasil-Distribuidora de Títulos e Valores Mobiliários S.A. (BB-DTVM), Bradesco Asset Management (Bram), Caixa, Itaú e Santander. Investment funds are key institutions for understanding the dynamics of a country’s financial wealth and for analysing the interaction between wealth owners and the macroeconomic policy management. This text has three fundamental objectives: firstly, it seeks to construct a profit proxy of the investment fund industry for the analysis of its evolution in Brazil, from 2003 to 2015. The first task is to conceptualize it, the second is its measurement under the various possible cuts, given the availability of data. Secondly, it seek to analyse how the wealth managed by the sector moved, under three distinct lenses: by class of funds, by type of assets and by segment of investor. Finally, the changes in the portfolios managed by the five largest fund managers – which in December 2015 were responsible for the management of 70% of the total net assets of the investment funds – BB-DTVM, BRAM (Bradesco Asset Manager), Caixa, Itaú and Santander are examined. The final section of the paper brings the main conclusions of the research.
    Date: 2017–09
  62. By: Lorenzo Caliendo (Yale University); Fernando Parro (Johns Hopkins University); Luca David Opromolla (Banco de Portugal); Alessandro Sforza (London School of Economics)
    Abstract: The economic e?ects from labor market integration are crucially a?ected by the extent to which countries are open to trade. In this paper we build a multi-country dynamic general equi¬librium model with trade in goods and labor mobility across countries to study and quantify the economic e?ects of trade and labor market integration. In our model trade is costly and features households of di?erent skills and nationalities facing costly forward-looking relocation decisions. We use the EU Labour Force Survey to construct migration ?ows by skill and na¬tionality 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 ?ows 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 tari?s, to quantify the e?ects from the EU enlargement. We ?nd that new member state countries are the largest winners from the EU enlargement, and in particular unskilled labor. We ?nd smaller welfare gains for EU-15 countries. However, in the absence of changes to trade policy, the EU-15 would have been worse o? after the enlargement. We study even further the interaction e?ects between trade and migration policies and the role of di?erent mechanisms in shaping our results. Our results highlight the importance of trade for the quanti?cation of the welfare and migration e?ects from labor market integration
    Keywords: International trade, Factor mobility, Market integration, EU enlargement, Welfare
    JEL: F16 F22 F13 J61 R13 E24
    Date: 2017–09
  63. By: Scott French (School of Economics, UNSW Business School, UNSW); Tess Stafford (School of Economics, UNSW Business School, UNSW)
    Abstract: When wages increase with work experience, estimation of standard labor supply models that assume exogenous wage formation suffers from omitted variable bias and produces downward-biased estimates of the intertemporal elasticity of substitution (IES). We test this theory in a novel way. Using a large data set of the daily labor supply decisions of Florida fishermen, we identify a sample of highly-experienced, near-retirement fishermen, for whom the returns to experience are negligible and the standard model is a close approximation. Using this sample, we estimate an IES of 2.7, more than twice estimates that ignore the role of learning-by-doing.
    Keywords: intertemporal elasticity of substitution, human capital, learning by doing, Frisch, extensive margin, endogenous
    JEL: D91 E24 J22 J24 J31
    Date: 2017–05
  64. By: Fomin, M.
    Abstract: Business and management literature pointed out on the existence of business cycles and on the importance of conducting countercyclical mergers and acquisition policy. However, according to the merger wave theory in practice acquisitions are likely to be procyclical because of real and behavioral factors. The majority of empirical papers finds positive link between M&A activity and state of the cycle, suggesting that acquisitions are procyclical. This paper tests whether M&A deals of metallurgical companies in China, Russia and India are procyclical. The results show that deals are indeed procyclical, but only at a glance. Introducing intermediate state of valuation in the metal market indicates that the majority of acquisitions were made when prices where close to the neutral state. As the result, acquisition policy can be characterized as neutral to the state of the cycle.
    Keywords: mergers and acquisitions, M&A, business cycle, metal prices, metallurgical industry, emerging markets,
    Date: 2016
  65. By: Hinlo, Jennifer E.; Arranguez, Grace Ivy S.
    Abstract: The study investigated the relationship of export geographical diversification and economic growth among ASEAN countries for the period 1980-2014. With a sample of 5 countries- Indonesia, Malaysia, Philippines, Singapore and Thailand- the study computed for the geographical diversification of countries using the Herfindahl index. Using time series analysis, with Vector Autoregressive (VAR) analysis and Granger causality tests, the relationship of the two variables among ASEAN countries were tested. The results showed a generally decreasing trend of HHI values of all 5 countries. Results of the analysis of the relationship showed a bidirectional relationship for Malaysia and a unidirectional relationship from export geographical diversification to economic growth in the case of Philippines. For countries Indonesia, Singapore and Thailand, results showed no causality which indicates that the variables are independent for these countries. Based on the results, the study recommendeds the followng: (1) formulation and implementation of appropriate strategies to improve export structure and improve economies for Malaysia and Philppines; and (2) diversification of export structure in terms of market destinations for Philippines to improve its economy.
    Keywords: ASEAN, Export geographical Diversification, Herfindahl index
    JEL: E01 F1 F13
    Date: 2017–04–14
  66. By: GrET
    Abstract: Los primeros meses de 2017 exhiben una tenue recuperación en los niveles de producto, consumo e inversión. Sin embargo, tal repunte no llega a compensar el retroceso experimentado durante 2016. El consumo privado se ve afectado por el deterioro en la situación del mercado laboral, caracterizado por el estancamiento en la generación de puestos de trabajo registrados, el aumento del desempleo y la pérdida del poder de compra de los salarios. En lo que respecta al plano fiscal, los resultados deficitarios tienden a agravarse como consecuencia de la pérdida de ingresos tributarios y la mayor carga que representan los intereses de la deuda pública, lo que se vincula a su vez con el acelerado proceso de endeudamiento puesto en marcha por el actual gobierno. El frente externo también presenta dificultades, tanto por los saldos deficitarios del comercio exterior como por la salida de capitales en concepto de rentas de la inversión y formación de activos externos del sector privado. Hasta el momento la pérdida de divisas por estos canales es compensada por un creciente endeudamiento público y privado en moneda extranjera. La disponibilidad de crédito externo, aunada a la completa desregulación del mercado cambiario, posibilitó el resurgimiento de un proceso de valorización financiera vehiculizado por la emisión de LEBACs por parte del BCRA. No obstante, como enseña la historia argentina reciente, estos esquemas no son sustentables y su agotamiento generalmente se traduce en una crisis económica y social de magnitud.
    Keywords: Coyuntura Económica; Análisis de Coyuntura; Argentina;
    Date: 2017–08

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