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on Macroeconomics |
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Issue of 2018‒03‒26
102 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Michael Funke; Petar Mihaylovski; Adrian Wende |
| Abstract: | In view of regional house prices drifting apart, we examine whether regionally differentiated macroprudential policies can address financial stability concerns and moderate house price differences. To this end, we disaggregate both the household sector and the housing stock in a two-region DSGE model with out of sync subnational housing markets and compare four macroprudentail policy types: standard monetary policy by means of a standard Taylor rule, leaning against the wind monetary policy, national macroprudential policy or one that targets region-specific LTV ratios. In terms of reducing variances of house prices, regionally differentiated macroprudential policy performs best, provided the policy authorities are concerned with stabilising output and house prices rather than simply minimising the variance of inflation. Thus the findings point to a critical role for policy in regionalising macroprudential tools. |
| Keywords: | macroprudential policies, housing, DSGE, Great Britain |
| JEL: | E32 E44 E52 E58 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6887&r=mac |
| By: | Sabaj, Ernil |
| Abstract: | This paper studies the cyclical behavior of fiscal policy in the Western Balkans region, investigating empirically the fiscal policy response to business cycles for the period 2003-2016. Although there is a large empirical literature which has found that fiscal policy in developing countries is pro-cyclical, not many studies are found on the Western Balkans region, with only a few done at country level. We apply the Hodrick-Prescott (HP) filter and other filters to measure the potential output and output gap for each of the respective Western Balkans countries. By performing country regressions we find that one of the main determinants fiscal pro-cyclicality in the WB6 region is the quality of the government. We conduct a series of structural vector auto-regressions (SVAR) for each of the countries in an attempt to obtain further evidence on the reaction of fiscal policy to the business cycle. |
| Keywords: | Fiscal Policy, Business Cycles, Pro-cyclicality, Counter-cyclicality, Western Balkans |
| JEL: | E30 E32 E60 E62 H60 |
| Date: | 2018–02–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84279&r=mac |
| By: | BLINOV, Sergey |
| Abstract: | In March 2018, President of Russia Vladimir Putin designated the target of increasing per capita GDP of the Russian population 1.5 times by 2024. In order to meet this target, GDP would be required to grow by 6% a year between 2018 and 2024. This is a challenging task as the last time growth rate ever reached the 6% bar was in the far off 2008. However, this can be done with the help of “quantitative easing, Russian way”. For that purpose, the commonly used “technology” of quantitative easing has to be adapted to the Russian environment. В марте 2018 года президент России Владимир Путин обозначил цель увеличить ВВП на душу населения в России в 1,5 раза к 2024 году. Для выполнения этой задачи требуется рост ВВП в 2018-2024 годах на 6% в год. Задача сложная, так как последний раз рост достигал 6% в далёком 2008 году. Но эту задачу можно решить с помощью «количественного смягчения по-русски». Для этого надо общепринятую «технологию» количественного смягчения приспособить (адаптировать) к российским условиям. |
| Keywords: | бюджетная политика; доходы бюджета; спрос на денежные средства; денежно-кредитная политика; количественное смягчение; методы прогнозирования; ставка процента; Central Banks; Demand for Money; Fiscal Policy; Incomes Policy; Monetary Policy; Quantitative Easing; Forecasting and Prediction Methods; |
| JEL: | C54 E41 E52 E58 E62 E64 E65 |
| Date: | 2018–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:85241&r=mac |
| By: | Zbigniew Polanski |
| Abstract: | This paper contrasts the impact of the 1929 and 2008 world crises on the Polish economy. Her much better performance during the recent crisis can be explained by two groups of factors: first, by very different stabilization policies and second, by distinct structural developments (resulting both from authorities’ structural policies and spontaneous processes). It is emphasized that several factors responsible for Poland’s superior performance during the 2008 crisis also contributed to her economic success vis-a-vis other European Union countries. |
| Keywords: | Poland, economic and financial crises, stabilization policies, structural policies |
| JEL: | E31 E32 E58 E65 N14 |
| URL: | http://d.repec.org/n?u=RePEc:sec:worpap:0009&r=mac |
| By: | Dennis Bonam; Jakob de Haan; Duncan van Limbergen |
| Abstract: | Recently, the unemployment gap in the euro area has fallen markedly. However, wages increased less than predicted by traditional Phillips curves. Using Bayesian methods, we estimate the wage Phillips curve with time-varying parameters. We consider alternative measures for labor market slack, namely the unemployment gap and the European Commission's labor shortage indicator. Using the latter indicator, we find a steepening of the wage Phillips curve in Italy and France, and a stable Phillips curve in the Netherlands after the crisis. In Germany (Spain), both measures suggest a recent flattening (steepening) of the wage Phillips curve. |
| Keywords: | Wage Phillips curve; Labor shortage indicator; Time-varying parameters |
| JEL: | E24 E31 E58 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:587&r=mac |
| By: | Francesco D'Acunto; Daniel Hoang; Michael Weber |
| Abstract: | Unconventional fiscal policy uses announcements of future increases in consumption taxes to generate inflation expectations and accelerate consumption expenditure. It is budget neutral and time consistent. We provide preliminary evidence for the effectiveness of such policies using changes in value-added tax (VAT) and household survey data for Poland. We find households increased their inflation expectations and willingness to purchase durables before the increase in VAT. Future research has to ensure income, wealth effects, or intratemporal substitution channels cannot explain these results and ideally exploit exogenous variation in VAT in a fixed nominal interest rate environment. |
| JEL: | D12 D84 D91 E21 E31 E32 E52 E65 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6862&r=mac |
| By: | Dolado, Juan J.; Motyovszki, Gergo; Pappa, Evi |
| Abstract: | Contrary to previous beliefs, recent empirical work has found that the effects of monetary policy on inequality are far from modest. In order to improve our understanding of the channels through which monetary policy has distributional consequences, we build a New Keynesian model with incomplete asset markets, asymmetric search and matching (SAM) frictions across skilled and unskilled workers and, foremost, capital-skill complementarity (CSC) in the production function. Our main finding is that an unexpected monetary easing increases labor income inequality between high and low-skilled workers, and that the interaction between CSC and SAM asymmetry is crucial in delivering this result. This is so since the increase in labor demand driven by a monetary expansion leads to larger wage increases for high-skilled workers than for low-skilled workers since the former have smaller matching frictions (SAM-asymmetry channel). Moreover, the increase in capital demand amplifies this wage divergence due to skilled workers being more complementary to capital than substitutable unskilled workers are (CSC channel). Strict inflation targeting is often the most successful rule in stabilizing measures of earnings inequality even in the presence of shocks which introduce a trade-off between stabilizing inflation and aggregate demand. |
| Keywords: | capital-skill complementarity; inequality; monetary policy; Search and Matching |
| JEL: | E24 E25 E52 J64 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12734&r=mac |
| By: | Christoph Basten; Mike Mariathasan |
| Abstract: | We analyze the effect of negative monetary policy rates on banks, using detailed supervisory information from Switzerland. For identification, we compare changes in the behavior of banks that had different fractions of their central bank reserves exempt from negative rates. More affected banks reduce costly reserves and bond financing while maintaining non-negative deposit rates and larger deposit ratios. Higher fee and interest income successfully compensates for squeezed liability margins, but credit and interest rate risk increase. Portfolio rebalancing implies relatively more lending, also compared to an earlier rate cut within positive territory, and risk-taking reduces regulatory capital cushions and liquidity. |
| Keywords: | monetary policy transmission, negative interest rates, bank profitability, risk-taking, bank lending, Basel III |
| JEL: | E43 E44 E52 E58 G20 G21 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6901&r=mac |
| By: | Stefan Hohberger; Romanos Priftis; Lukas Vogel |
| Abstract: | This paper estimates an open-economy dynamic stochastic general equilibrium model with Bayesian techniques to analyse the macroeconomic effects of the European Central Bank’s (ECB’s) quantitative easing (QE) programme. Using data on government debt stocks and yields across maturities, we identify the parameter governing portfolio adjustment in the private sector. Shock decompositions suggest a positive contribution of ECB QE to annual euro area output growth and inflation in 2015-16 of up to 0.3 and 0.6 percentage points (pp) in the linearised version of the model. Allowing for an occasionally binding zero-bound constraint by using piecewise linear solution techniques raises the positive impact to up to 0.7 and 0.8 pp. |
| Keywords: | Economic models, Interest rates, Transmission of monetary policy |
| JEL: | E44 E52 E53 F41 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:18-11&r=mac |
| By: | Shesadri Banerjee (Madras Institute of Development Studies); Parantap Basu (Durham University, Durham University Business School); Chetan Ghate (Indian Statistical Institute); Pawan Gopalakrishnan (Reserve Bank of India); Sargam Gupta (Indian Statistical Institute) |
| Abstract: | We build and calibrate a New Keynesian monetary business cycle model to theIndian economy to understand why the aggregate demand channel of monetary transmission is weak. Our main Önding is that base money shocks have a larger and more persistent effect on output than an interest rate shock, as in the data. We show that Önancial repression, in the form of a statutory liquidity ratio and administered interest rates, does not weaken monetary transmission. This is contrary to the consensus view in policy discussions on Indian monetary policy. We show that the presence of an informal sector hinders monetary transmission. |
| Keywords: | Monetary Business Cycles, Monetary Transmission, Ináation Targeting. |
| JEL: | E31 E32 E44 E52 E63 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:dur:cegapw:2018_01&r=mac |
| By: | Honkapohja, Seppo; Mitra, Kaushik |
| Abstract: | We examine global dynamics under learning in a nonlinear New Keynesian model when monetary policy uses price-level targeting and compare it to inflation targeting. Domain of attraction of the targeted steady state gives a robustness criterion for policy regimes. Robustness of price-level targeting depends on whether a known target path is incorporated into learning. Credibility is measured by accuracy of this forecasting method relative to simple statistical forecasts. Credibility evolves through reinforcement learning. Initial credibility and initial level of target price are key factors influencing performance. Results match the Swedish experience of price level stabilization in 1920's and 30's. |
| Keywords: | Adaptive Learning; Inflation targeting; Limited Credibility; Zero Interest Rate Lower Bound |
| JEL: | E52 E58 E63 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12739&r=mac |
| By: | Kasey Buckles; Daniel Hungerman; Steven Lugauer |
| Abstract: | Many papers show that aggregate fertility is pro-cyclical over the business cycle. In this paper we do something else: using data on more than 100 million births and focusing on within-year changes in fertility, we show that for recent recessions in the United States, the growth rate for conceptions begins to fall several quarters prior to economic decline. Our findings suggest that fertility behavior is more forward-looking and sensitive to changes in short-run expectations about the economy than previously thought. |
| JEL: | E32 E37 J11 J13 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24355&r=mac |
| By: | Engelbert Stockhammer; Joel Rabinovich; Niall Reddy |
| Abstract: | Most empirical macroeconomic research limited to the period since World War II. This paper analyses the effects of changes in income distribution and in private wealth on consumption and investment covering a period from as early as 1855 until 2010 for the UK, France, Germany and USA, based on the dataset of Piketty and Zucman (2014). We contribute to the post-Keynesian debate on the nature of demand regimes, mainstream analyses of wealth effects and the financialisation debate. We find that overall domestic demand has been wage-led in the USA, UK and Germany. Total investment responds positively to higher wage shares, which is driven by residential investment. For corporate investment alone, we find a negative relation. Wealth effects are found to be positive and significant for consumption in the USA and UK, but weaker in France and Germany. Investment is negatively affected by private wealth in the USA and the UK, but positively in France and Germany. |
| Keywords: | historical macroeconomics, demand regimes, Bhaduri-Marglin model, wealth effects, financialisation |
| JEL: | B50 E11 E12 E20 E21 N10 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:imk:fmmpap:14-2018&r=mac |
| By: | Steven Fazzari; Piero Ferri; AnnaMaria Variato |
| Abstract: | This paper presents a "supermultiplier" model in which the growth of autonomous demand (demand independent of the state of the economy) determines the steady-state growth rate of output. With reasonable parameters, endogenous adjustment of labor supply and productivity causes supply to accommodate the demand-led growth path, reconciling Harrod's warranted rate of demand growth with the growth of supply. The model delivers a range of feasible aggregate growth paths and unemployment rates rather than a single "natural rate." The results explain how economies can become trapped with low growth due to weak demand or fiscal austerity and suggest policy responses to "secular stagnation." |
| Keywords: | demand-led growth, autonomous demand, supermultiplier, aggregate demand and supply reconciliation, secular stagnation |
| JEL: | E12 O40 E32 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:imk:fmmpap:15-2018&r=mac |
| By: | Corsetti, G.; Dedola, L.; Leduc, S. |
| Abstract: | What determines the optimal monetary trade-offs between internal objectives (inflation, and output gap) and external objectives (competitiveness and trade imbalances) when inefficient capital flows cause exchange rate misalignment and distort current account positions? We characterize this trade-offs analytically, using the workhorse model of modern monetary theory in open economies under incomplete markets–where inefficient capital flows and exchange rate misalignments can arise independently of nominal distortions. We derive a quadratic approximation of the utility-based global policy loss function under fairly general assumptions on preferences and openness, and solve for the optimal targeting rules under cooperation. We show that, in economies with a low degree of exchange rate pass-through, the optimal response to inefficient capital inflows associated with real appreciation is contractionary, above and beyond the natural rate: the optimal policy curbs excessive demand at the cost of exacerbating currency overvaluation. In contrast, a high degree of pass-through, and/or low trade elasticities, warrants expansionary policies that lean against exchange rate appreciation and competitive losses, at the cost of inefficient inflation. |
| Keywords: | Currency misalignments, trade imbalances, asset markets and risk sharing, optimal targeting rules, international policy cooperation, exchange rate pass-through |
| JEL: | E44 E52 E61 F41 F42 |
| Date: | 2018–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1822&r=mac |
| By: | Bosi, Stefano; Ha-Huy, Thai; Le Van, Cuong; Pham, Cao-Tung; Pham, Ngoc-Sang |
| Abstract: | We consider an overlapping generations model à la Diamond (1965) with two additional ingredients: altruism and an asset (or land) bringing non-stationary positive dividends (or fruits). We study the global dynamics of capital stocks and asset values as well as the interplay between them. Asset price bubbles are also investigated. |
| Keywords: | Forward altruism, overlapping generations, capital accumulation, financial asset, positive dividends, rational bubbles |
| JEL: | C62 D50 D53 D64 E21 E44 G12 |
| Date: | 2018–02–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84429&r=mac |
| By: | Agata Szyma?ska (Institute of Economics, University of Lodz) |
| Abstract: | The impact of fiscal policy on the economy is a subject of special interest to the EU countries outside the Eurozone, mainly due to their position of ?countries with a derogation? and their future access to the Euro Area. In this context it seems appropriate to investigate the impact of fiscal policy shocks on the economy in the short-run in these countries.The aim of this study is to analyze the effectiveness of fiscal policy shocks in selected CEE countries. In accordance with the goal, the empirical fiscal SVAR models have been prepared. The study is based on a quarterly data for six CEE countries: Bulgaria, Croatia, Czech Republic, Hungary, Poland and Romania. The empirical model for each country includes three variables: GDP, government spending and net taxes. The identification scheme is based on the Blanchard and Perotti (2002) approach. According to the estimated results the impact response of GDP to government spending shock is positive (and statistically significant in most analyzed countries), whereas the response of GDP to the net tax shock is negative or positive (positive in the case of two countries: Croatia and Poland) however statistically insignificant in analyzed countries.The dynamic responses are presented by impulse response functions investigated for each country. The analysis of these functions demonstrates the effects of structural shocks on the economy over horizon considered for the fiscal IRF. The results show differences in GDP responses on structural shocks in analyzed CEE countries. |
| Keywords: | fiscal policy, fiscal SVAR, European Union, CEE countries, structural shocks |
| JEL: | E62 E60 C01 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:5908263&r=mac |
| By: | Jeromin Zettelmeyer (Peterson Institute for International Economics); Álvaro Leandro (Peterson Institute for International Economics) |
| Abstract: | This paper evaluates four approaches to creating "safe assets" or asset portfolios for the euro area: (1) a diversified portfolio of senior tranches of sovereign debt ("national tranching"); (2) a senior security backed by a diversified pool of national sovereign debt ("ESBies"); (3) debt issued by a senior financial intermediary, backed by a diversified pool of national debt ("E-bonds"); and (4) debt issued by a euro area budget or a leveraged wealth fund, based on member state contributions or dedicated direct revenue sources. None of these approaches envisages explicit guarantees by member states, and all could potentially produce safe assets in sufficient quantities to replace euro area sovereign bond holdings in euro area banks. At the same time, the four approaches differ across several important dimensions. A euro area budget or wealth fund could create the largest volume of safe assets, followed by ESBies, E-bonds, and national tranching. A euro area budget or wealth fund is also likely to have the lowest impact on the structure and liquidity of national bond markets, while national tranching would have the largest impact. ESBies and E-bonds occupy an intermediate position. ESBies and potentially bonds issued by a euro area budget would offer their holders greater protection from deep national defaults than the other two proposals. Both ESBies and national tranching would avoid cross-country redistribution by construction, whereas E-bonds and a euro area budget could have significant distributional consequences, depending on their design. E-bonds are unique in that they would raise the marginal cost of sovereign debt issuance at higher levels of debt, thereby exerting fiscal discipline, without necessarily raising average debt costs for lower-rated borrowers. |
| Keywords: | sovereign debt, banking crisis, euro crisis, safe assets, ESBies |
| JEL: | E43 E58 F34 G12 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp18-3&r=mac |
| By: | Sabaj, Ernil; Kahveci, Mustafa |
| Abstract: | Fiscal balance is one of the main concerns of fiscal policy. Although academic and political choices on budget deficit vary due to perspective differences, improving the quality of revenue and expenditure forecasting has become prominent. The seminal researches on this topic present that tax revenue forecasts suffer from high positive biases. As tax forecasts have chain implications on the expenditures side as well, this might lead to high unexpected deficits. According to the IMF 2016 country report on Albania, emerging market economies are suffering higher than advanced ones in tax revenue forecasting. The aim of this paper is to implement new forecasting models and to apply forecast combinations for Albania, where forecast errors are higher than average. The estimation results show that influence of internal and external factors on tax revenue forecasting create a significant improvement on tax revenue accuracy. The estimations and forecast combinations of this paper perform lower errors than official forecasts, which indicate that revision of tax forecasting methodology can increase the accuracy of predictions for emerging market economies. |
| Keywords: | Tax revenue, Forecasting, Combination, Emerging market |
| JEL: | C52 C53 E27 E6 E62 H68 |
| Date: | 2018–02–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84404&r=mac |
| By: | Nikolay Iskrev |
| Abstract: | We propose two measures of the impact of calibration on the estimation of macroeconomic models.The first quantifies the amount of information introduced with respect to each estimated parameter as a result of fixing the value of one or more calibrated parameters.The second is a measure of the sensitivity of parameter estimates to perturbations in the calibration values.The purpose of the measures is to show researchers how much and in what way calibration affects their estimation results – by shifting the location and reducing the spread of the marginal posterior distributions of the estimated parameters.This type of analysis is often appropriate since macroeconomists do not always agree on whether and how to calibrate structural parameters in macroeconomic models. The methodology is illustrated using the models estimated in Smets and Wouters (2007) and Schmitt-Grohé and Uribe (2012). |
| Keywords: | DSGE models,information content,calibration |
| JEL: | C32 C51 C52 E32 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp0342018&r=mac |
| By: | International Monetary Fund |
| Abstract: | Following a referendum in mid-2016, the UK government has started the process of exit from the European Union, aiming at broad agreement on the new economic relationship with the EU by March 2019. Sterling depreciated sharply after the referendum, pushing up inflation and depressing private consumption. Business investment growth has been constrained by continued uncertainty about the future trade regime. UK growth moderated in 2017 despite significant monetary policy accommodation and strong trading partner growth, and is expected to remain subdued in the near term. Over the medium term, growth prospects will depend on the extent of recovery of labor productivity, which has been very low since the financial crisis. |
| Date: | 2018–02–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/42&r=mac |
| By: | Cook, David (Asian Development Bank Institute); Devereux, Michael B. (Asian Development Bank Institute) |
| Abstract: | When monetary policy is constrained by the zero lower bound, fiscal policy can be used to achieve macro stabilization objectives. At the same time, fiscal policy is also a key policy variable within a single currency area that allow policy makers to respond to regional demand asymmetries. How do these two uses of fiscal policy interact with one another? Is there an inherent conflict between the two objectives? How do the answers to these questions depend on the degree of fiscal space available to different members of the currency area? This paper constructs a two-country New Keynesian model of a currency union to address these questions. We find that the answers depend sensitively on the underlying internal structure of the currency union, notably the degree of trade openness between the members of the union. |
| Keywords: | liquidity trap; monetary policy; fiscal policy; international spillovers |
| JEL: | E02 E50 E60 |
| Date: | 2018–01–26 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0801&r=mac |
| By: | Spahn, Peter |
| Abstract: | In recent years, various "unconventional" views have been advanced that promise to offer new analytical insights and policy approaches that are suited to control the value of money, particularly in a constellation of low growth and unemployment. Whereas Forward Guidance attempts to decrease the real interest rate by low nominal rates and by creating excessive inflationary expectations, the Neo-Fisherian approach suggests to increase nominal rates immediately to the long-run equilibrium value that corresponds to the inflation target. The Fiscal Theory of the Price Level believes that goods prices jump to a level that validates the long-run sustainability condition of government debt. All three views are criticized for analytical and empirical reasons. |
| Keywords: | interest rate policy,zero-lower bound,low-growth equilibrium |
| JEL: | E52 E58 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hohdps:022018&r=mac |
| By: | Martin Ellison (Centre for Economic Policy Research (CEPR); Centre for Macroeconomics (CFM); NuCamp; University of Oxford); Andreas Tischbirek (University of Lausanne) |
| Abstract: | A novel decomposition highlights the scope for information to influence the term structure of interest rates. Based on the law of total covariance, we show that real term premia in macroeconomic models contain a component that depends on covariances of realised stochastic discount factors and a component that depends on covariances of expectations of those stochastic discount factors. The impact of different informational assumptions can then be identified by looking at their effect on the second, expectational, component. If agents have full information about technology in a simple macro-finance model then the conditional covariance of expectations is low, which contributes to the real term premia implied by the model being at least an order of magnitude too small, a result that is unchanged if some components of technology are unobservable or observed with noise. To generate realistic term premia, we draw on the beauty contest literature by differentiating between private and public information and introducing the possibility of strategic complementarities in the formation of expectations. A quantitative version of the model is found to explain a significant proportion of observed term premia when estimated using data on expectations of productivity growth from the Survey of Professional Forecasters. |
| Keywords: | Yield curve, Term premia, Information friction, Beauty contest, Asset pricing |
| JEL: | E40 E43 G12 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:1807&r=mac |
| By: | Norberto Rodríguez-Niño (Banco de la República de Colombia); Alejandra Ramírez-Ramírez |
| Abstract: | Realizamos el cálculo de varias medidas (semi-)estructurales de inflación básica mensual de Colombia, para el periodo 2000:1-2017:11, a partir de dos metodologías semi-estructurales, a saber, modelos VAR estructurales (SVAR) y modelos macroeconómicos semiestructurales de tipo Neokeynesiano. Además, se realiza una evaluación de las medidas con base en siete criterios deseables para una medida de este tipo. Los resultados de evaluación individual favorecen la medida obtenida usando modelos Neokeynesianos semi-estructurales y luego la de un SVAR con restricción de signos; así mismo, auguran buen desempeño de promedios que incluyen cuatro medidas, entre ellas dos de las propuestas en este trabajo. Classification JEL: E31, E32, E58, E61 |
| Keywords: | Inflación básica, modelos Neo-Keynesianos semi-estructurales, SVAR, restricciones de corto y largo plazo, restricciones de signo. |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:1040&r=mac |
| By: | Levy, Daniel; Snir, Avichai |
| Abstract: | We use novel and unique data to study the effect of price changes in the market for luxury and middle class homes. We find that luxury home sales respond less to price changes than the middle-class home sales; in the market for luxury homes, past prices affect current prices; luxury home prices persist; and prices of luxury homes are stickier than prices of middle-class homes. Recent macroeconomic models predict that housing markets can have counter-cyclical effect, if home prices are flexible. Our findings imply that home prices, especially luxury home prices, may not be flexible enough to generate such effect. |
| Keywords: | Housing market,Luxury housing,Housing demand,Price rigidity,Sticky prices,Predictability,Veblen Effect |
| JEL: | E31 E32 R21 G14 D12 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:175843&r=mac |
| By: | Daniel Levy (Department of Economics, Bar-Ilan University, Israel; Department of Economics, Emory University, USA; Rimini Centre for Economic Analysis); Avichai Snir (Netanya Academic College, Israel) |
| Abstract: | We use novel and unique data to study the effect of price changes in the market for luxury and middle class homes. We find that luxury home sales respond less to price changes than the middle-class home sales; in the market for luxury homes, past prices affect current prices; luxury home prices persist; and prices of luxury homes are stickier than prices of middle-class homes. Recent macroeconomic models predict that housing markets can have counter-cyclical effect, if home prices are flexible. Our findings imply that home prices, especially luxury home prices, may not be flexible enough to generate such effect. |
| Keywords: | housing market, luxury housing, housing demand, price rigidity, sticky prices, predictability, Veblen effect |
| JEL: | E31 E32 R21 G14 D12 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:18-16&r=mac |
| By: | Nikolay Iskrev |
| Abstract: | Standard economic intuition suggests that asset prices are more sensitive to news than other economic aggregates.This has led many researchers to conclude that asset price data would be very useful for the estimation of business cycle models containing news shocks.This paper shows how to formally evaluate the information content of observed variables with respect to unobservedshocks in structural macroeconomic models.The proposed methodology is applied to two different real business cycle models with news shocks.The contribution of asset prices is found to be relatively small.The methodology is general and can be used to measure the informational importance of observables with respect to latent variables in DSGE models.Thus,it provides a framework for systematic treatment of such issues,which are usually discussed in an informal manner in the literature. |
| Keywords: | DSGE models,News Shocks,Asset prices,Information,Identification |
| JEL: | C32 C51 C52 E32 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp0332018&r=mac |
| By: | Nymand-Andersen, Per |
| Abstract: | The European Central Bank (ECB), as part of its forward-looking strategy, needs high-quality financial market statistical indicators as a means to facilitate evidence-based and sound decision-making. Such indicators include timely market intelligence and information to gauge investors’ expectations and reaction functions with regard to policy decisions. The main use of yield curve estimations from an ECB monetary policy perspective is to obtain a proper empirical representation of the term structure of interest rates for the euro area which can be interpreted in terms of market expectations of monetary policy, economic activity and inflation expectations over short-, medium- and long-term horizons. Yield curves therefore play a pivotal role in the monitoring of the term structure of interest rates in the euro area. In this context, the purpose of this paper is twofold: firstly, to pave the way for a conceptual framework with recommendations for selecting a high-quality government bond sample for yield curve estimations, where changes mainly reflect changes in the yields-to-maturity rather than in other attributes of the underlying debt securities and models; and secondly, to supplement the comprehensive – mainly theoretical – literature with the more empirical side of term structure estimations by applying statistical tests to select and produce representative yield curves for policymakers and market-makers. JEL Classification: G1, E4, E5 |
| Keywords: | data quality, term structure, yield curve models |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbsps:201827&r=mac |
| By: | S. Béreau; V. Faubert; K. Schmidt |
| Abstract: | In this paper, we study the fit and the predictive performance of the Phillips curve for euro area inflation with regard to different inflation series, time periods and predictor variables, notably different global factors. We compare the relative performance of a large set of alternative global factors in the Phillips curve, such as commodity prices, import prices, global consumer inflation, global economic slack and foreign demand. We find that traditional global indicators such as oil prices and import prices provide more accurate information for euro area headline inflation than global slack measures. In what regards the forecast ability of the Phillips curve for headline inflation, we show that it is unstable and depends strongly on the time period. Global factors provide only limited additional information for forecasting. In addition, we explore whether domestic demand and global factors are useful for analysing the entire conditional distribution of euro area inflation. We find that their impact varies across inflation quantiles (low vs. high inflation) and that inflation is more persistent at the low end of the distribution. We provide evidence that quantile information can lead to more accurate forecasts in periods of persistently low inflation. |
| Keywords: | Inflation; Forecasting; Phillips curve; Quantile regression. |
| JEL: | E31 E37 C22 C53 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:663&r=mac |
| By: | Karlsson, Sune (Örebro University School of Business); Österholm, Pär (Örebro University School of Business) |
| Abstract: | We use Bayesian techniques to estimate bivariate VAR models for Swedish unemployment rate and inflation. Employing quarterly data from 1995Q1 to 2017Q3 and new tools for model selection, we compare a model with time-varying parameters and stochastic volatility to a specification with constant parameters and covar-iance matrix. We find strong evidence in favour of the specification with time-varying parameters and sto-chastic volatility. Our results indicate that the Swedish Phillips curve has not been stable over time. However, our findings do not suggest that the Phillips curve has been flatter in more recent years. |
| Keywords: | Inflation; Unemployment; Time-varying parameters; Stochastic volatility |
| JEL: | C11 C32 E32 |
| Date: | 2018–03–14 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:oruesi:2018_006&r=mac |
| By: | Peter Skott (University of Massachusetts - Amherst) |
| Abstract: | Post-Keynesian macroeconomics faces several challenges. The labor market and the supply side, first, have not been getting the attention that they deserve in post-Keynesian growth theory. The failings of the Lucas-type microeconomic foundations, second, must not lead to a neglect of microeconomic behavior. Convincing macroeconomic theories must recognize and address the connections between macroeconomic relations and the microeconomic behavior whose aggregate manifestation the relations represent. Microeconomic behavior, third, takes place within an institutional structure that shapes economic behavior and economic outcomes. Macroeconomic theory must be both behavioral and structuralist. |
| Keywords: | Neo-Pasinetti theorem, mature economy, induced technical change, autonomous demand, instability, goal orientation |
| JEL: | E12 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2018-03&r=mac |
| By: | Bernardino Adao; Andre C. Silva |
| Abstract: | We find that the Friedman rule is not optimal with government transfers and distortionary taxation. This result holds for heterogeneous agents, standard homogeneous preferences, and constant returns to scale production functions. The presence of transfers changes the standard optimal taxation result of uniform taxation. As transfers cannot be taxed, a positive nominal net interest rate is the indirect way to tax the additional income derived from transfers. The higher the transfers, the higher is the optimal inflation rate. We calibrate a model with transfers to the US economy and obtain optimal values for inflation substantially above the Friedman rule. JEL codes: E52, E62, E63 |
| Keywords: | Friedman rule, fiscal policy, monetary policy, taxes, transfers, inflation |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:unl:unlfep:wp623&r=mac |
| By: | Dieppe, Alistair; Gilhooly, Robert; Han, Jenny; Korhonen, Iikka; Lodge, David |
| Abstract: | China’s rise has been the economic success story of the past four decades but economic growth has been slowing and domestic imbalances have widened. This paper analyses the recent evolution of China’s imbalances, the risks they pose to the economic outlook and the potential impact of a transition to sustainable growth in China on the global and euro area economies. The paper documents China’s heavy reliance on investment and credit as drivers of growth, which has created vulnerabilities in a number of sectors and has been accompanied by increased complexity and leverage in the financial system. China retains some buffers, including policy space, to cushion against adverse shocks for the time being, but additional structural reforms would facilitate a shift of China’s economy onto a sustainable and strong growth trajectory in the medium term. China’s size, trade openness, dominant position as consumer of commodities and growing financial integration mean that its transition to sustainable growth is crucial for the global economic outlook. Simulation analysis using global macro models suggests that the spillovers to the euro area would be limited in the case of a modest slowdown in China’s GDP growth, but significant in the case of a sharp downturn. Sensitivity analysis underscores that the spillovers are dependent on the strengths of the various transmission channels, as well as the policy reaction by central banks and governments. JEL Classification: E21, E22, E27, F10, F47, O11, O53 |
| Keywords: | China, economic growth, imbalances, rebalancing, spillovers |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2018206&r=mac |
| By: | Belke, Ansgar; Klose, Jens |
| Abstract: | Is the Euro area as a whole, or are individual Euro-area member countries facing a period of sustained lower economic growth, a phenomenon known as secular stagnation? We tackle this question by estimating equilibrium real interest rates and comparing them to actual real rates. Since the financial crisis has altered the degree of leverage in several European economies, we expand our model to incorporate the financial cycle. We estimate the model for the Euro area as a whole and for nine Euro-area member countries. Incorporating the financial cycle changes the estimated equilibrium real interest rates: For some Euro-area member countries, estimates of the equilibrium real interest rate are substantially higher than the standard estimates. In other cases, including our estimates for the Euro area as a whole, the estimated equilibrium real rates are slightly lower than without taking the financial cycle into account but are still higher than the actual rates. This indicates that real monetary policy rates were set even more systematically and consistently below (or not as far above) the natural real rate. Comparing the sequence of actual and equilibrium real rates, only Belgium, France, and Greece are likely to face a period of secular stagnation. |
| Keywords: | equilibrium real interest rate,Euro area,financial cycle,heterogeneity,monetary policy,secular stagnation |
| JEL: | E43 C32 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:743&r=mac |
| By: | Ludger Schuknecht; Holger Zemanek |
| Abstract: | Based on the observation of an unabated trend towards higher social spending ratios in advanced countries, the study analyzes the risk of “social dominance”, where social expenditures dominate fiscal policy, and undermine growth and fiscal sustainability. We scrutinize this risk by analyzing drivers of social expenditures and their interaction with other fiscal variables. Results show, that social expenditure expansion is largely ageing driven, it crowds out other primary expenditures and there is evidence of unsustainability. These findings and the accelerating trend of population ageing and particularly high political costs to reforming social expenditure suggest significant and rising risks of “social dominance". |
| Keywords: | fiscal policy, social expenditures, political economy, crowding out, fiscal sustainability |
| JEL: | E62 H30 H55 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6894&r=mac |
| By: | WGEM Team on Real and Financial Cycles; Rünstler, Gerhard; Balfoussia, Hiona; Burlon, Lorenzo; Buss, Ginters; Comunale, Mariarosaria; De Backer, Bruno; Dewachter, Hans; Guarda, Paolo; Haavio, Markus; Hindrayanto, Irma; Iskrev, Nikolai Ivanov; Jaccard, Ivan; Kulikov, Dmitry; Kunovac, Davor; Lenarcic, Crt; Lequien, Matthieu; Lozej, Matija; Mandler, Martin; Papageorgiou, Dimitris; Pedersen, Jesper; Perez-Quiros, Gabriel; Rannenberg, Ansgar; Rots, Eyno; Scharnagl, Michael; Welz, Peter |
| Abstract: | This paper studies the cyclical properties of real GDP, house prices, credit, and nominal liquid financial assets in 17 EU countries, by applying several methods to extract cycles. The estimates confirm earlier findings of large medium-term cycles in credit volumes and house prices. GDP appears to be subject to fluctuations at both business-cycle and medium-term frequencies, and GDP fluctuations at medium-term frequencies are strongly correlated with cycles in credit and house prices. Cycles in equity prices and long-term interest rates are considerably shorter than those in credit and house prices and have little in common with the latter. Credit and house price cycles are weakly synchronous across countries and their volatilities vary widely – these differences may be related to the structural properties of housing and mortgage markets. Finally, DSGE models can replicate the volatility of cycles in house and equity prices, but not the persistence of house price cycles. JEL Classification: C32, E32, E44 |
| Keywords: | DSGE models, financial cycles, real-time estimates, synchronicity |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2018205&r=mac |
| By: | J. Barthélemy; V. Bignon; B. Nguyen |
| Abstract: | With the European debt crisis, the role of assets accepted by the Eurosystem as collateral for refinancing operations took on a new place in the public debate, as, against a backdrop of shifting demand for refinancing, movements in European bond prices led to significant fluctuations in the collateral constraints of credit institutions. This paper documents the change in and heterogeneity of these constraints. We assess the impact attributable to the downgrade of sovereign ratings and the decline in asset prices during the European debt crisis on the valuation of collateral available for refinancing. We also construct indicators that track the change in the quality and liquidity of posted collateral. Our findings suggest that the flexibility of the Eurosystem collateral framework enabled credit institutions to cushion the shock created by the European debt crisis by depositing assets that were less liquid than bonds without causing a relative deterioration in the average rating of assets posted as collateral compared with the average rating on the market, as measured by eligible marketable assets. |
| Keywords: | Collateral; Eurosystem; Transmission of monetary policy; European debt crisis. |
| JEL: | E52 E58 G10 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:669&r=mac |
| By: | Punnoose Jacob; Martin Wong (Reserve Bank of New Zealand) |
| Abstract: | Indicators of labour market slack such as the unemployment rate provide an important input into the Reserve Bank’s assessment of capacity pressures in the economy, and therefore wage and price inflation. A measure of capacity pressure in the labour market is the unemployment gap, the difference between the headline rate of unemployment and some ‘equilibrium’ level of unemployment. Economists typically refer to this underlying level as the natural rate of unemployment or the Non-Accelerating Inflation Rate of Unemployment (NAIRU), and the two terms are sometimes used inter-changeably. In this Analytical Note, we distinguish between these two unobservable measures of equilibrium unemployment. Then, using estimated macroeconomic relationships, we filter the data to obtain measures of the NAIRU and the natural rate for New Zealand. While the natural rate of unemployment and the NAIRU are synonymous in the long run, there is an important distinction between the two concepts over shorter horizons. The natural rate is essentially a steady-state concept – it is the level of unemployment that reflects the structure of the labour market (for example, its demographic make-up, institutional and contractual factors, and technology), and after transitory shocks have fully worked through labour and product markets. The NAIRU concept is similar to the extent that it is affected by similar structural forces in the economy. However it is not a steady-state concept – instead it represents the level of unemployment consistent with stable inflation in the short to medium term. The NAIRU takes into account the influence of structural changes and other shocks in the economy, and how they interact with frictions in labour and product markets. In the long run, the NAIRU converges to the natural rate of unemployment once the effects of the shocks hitting the economy have faded. Much of this Analytical Note focuses on the NAIRU, which is the more relevant concept for understanding inflationary pressure over the medium-term time horizon relevant for monetary policy. The focus of monetary policy is to minimise fluctuations in cyclical unemployment, as indicated by the gap between the unemployment rate and the NAIRU, while also maintaining its objective of price stability. Monetary policy has limited influence on the natural rate of unemployment. However, since the natural rate can be influenced via structural policies, it is the more relevant measure of equilibrium unemployment for the long-term objectives of the Government. For 2017Q3, the end-point of our sample, our NAIRU estimates correspond to an unemployment gap that is around zero. This is consistent with other measures of capacity pressures. However, we emphasise that point estimates of the NAIRU and the natural rate are imprecise and highly sensitive to sample periods, data choices, and model specifications. The confidence interval of our estimates approximately spans from 4.0 to 5.5 percent. This imprecision suggests that other observable indicators are needed to supplement estimates of equilibrium unemployment in assessing the overall degree of labour market slack. |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:nzb:nzbans:2018/04&r=mac |
| By: | Juraj Zeman (National Bank of Slovakia) |
| Abstract: | The relationship between income inequality and economic growth is an ambiguous one but most mainstream economists view real wage increases as a drag on economic growth as they lead to higher labor costs, lower competitiveness and reduction of employment. In this study we provide an alternative view and show that a labor income increase may also have a positive effect on growth. Which of these two effects dominates in a particular country depends on the institutional and legal environment of that country, its macroeconomic conditions and also its economic policies. We apply a general Keynesian growth model that combines demand and productivity regimes to test empirically two distinct economies – the small, very open economy of Slovakia and the large, relatively closed economy of the euro area. We find that an income rise increases domestic demand and reduces external trade in both economies. But the total effect of income inequality on economic activity is opposite in both economies in the short run. In the Slovak case the positive effect of lower income inequality on domestic demand is surpassed by its negative effect on net exports. Hence higher income inequality is associated with higher economic growth; the Slovak economy is profit-led. In the case of the euro area the positive effect of income rises on domestic demand is larger than the negative effect on net exports. Hence higher income inequality is associated with lower economic growth; the euro area is wage-led. In the long run, however, both economies are wage-led. The regime switch in the Slovak economy is caused by the inclusion of the positive impact of a wage increase on productivity. We also partially analyze the economies of the Slovak trading partners and doing so we get results for new EU member economies that are compared and contrasted with the old EU members. |
| Keywords: | Inequality, wage led growth, profit led growth, Slovakia |
| JEL: | E12 E25 E60 |
| URL: | http://d.repec.org/n?u=RePEc:svk:wpaper:1054&r=mac |
| By: | Kolcunova, Dominika; Havranek, Tomas |
| Abstract: | The paper focuses on the estimation of the effective lower bound for the Czech National Bank's policy rate. The effective lower bound is determined by the value below which holding and using cash would be more convenient than deposits with negative yields. This bound is approximated based on storage, the insurance and transportation costs of cash and the costs associated with the loss of the convenience of cashless payments and complemented with the estimate based on interest charges, which present direct costs to the profitability of the bank. Overall, the estimated value is below -1% and is approximately in the interval -1.6%, -1.1%. In addition, by means of a vector autoregression, we show that the potential of negative rates would not be sufficient to deliver monetary policy easing with effects similar to those of the exchange rate commitment. |
| Keywords: | effective lower bound,negative interest rates,costs of holding cash,transmission of monetary policy |
| JEL: | E52 E58 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:175753&r=mac |
| By: | International Monetary Fund |
| Abstract: | Solomon Islands has made considerable gains in establishing macroeconomic stability and strengthening institutions in the past six years. The Australia-led Regional Assistance Mission to Solomon Islands (RAMSI) withdrew this year after fourteen years, having succeeded, together with the authorities, in restoring law and order and re-establishing public institutions. However, Solomon Islands faces numerous challenges common to many small states in the Pacific— it is remote, highly vulnerable to natural disasters and climate change, has a narrow production base, a large infrastructure gap, and administrative capacity constraints. The government is gearing up for elections in early 2019 and the fiscal position has deteriorated. |
| Date: | 2018–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/57&r=mac |
| By: | Giorgio Nuzzo (Bank of Italy) |
| Abstract: | The paper provides a critical analysis of the indicators most widely used at international level to measure the size and risk of the securitization market and its contribution to shadow banking. The analysis outlines the reasons why measuring the size of the market on the basis of the total assets of Financial Vehicle Corporations (FVCs) is likely to result in an overestimation of the phenomenon. An alternative measure is proposed, based on the stock of securities issued by FVCs, net of those repurchased by the banks. The paper argues against an approach to measuring the risk of shadow banking by applying the same measures for different non-bank financial intermediaries. In particular, it is suggested that some of them, such as leverage, interconnection with the banking system and credit intermediation, may be misleading if they are applied to the securitization market and assessed through the FVCs’ balance sheet. The analysis, however, highlights the degree of opacity/complexity of a specific area for the analysis of risks from securitizations and proposes two new indicators. According to the proposed indicators, at the end of 2016, the Italian securitization market is smaller and less risky than that of other euro-area countries. |
| Keywords: | shadow banking system, securitizations, risk measures |
| JEL: | E44 E58 G00 G01 G23 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_403_17&r=mac |
| By: | Bevan Cook; Daan Steenkamp (Reserve Bank of New Zealand) |
| Abstract: | Prior to the global financial crisis (GFC), there was a relatively stable relationship between the Official Cash Rate (OCR) and retail mortgage rates. Changes in the OCR were typically accompanied by a proportional change in floating mortgage rates. However, this relationship has deteriorated since the GFC and the OCR on its own has not been a good proxy for bank funding costs. This paper examines the change in the transmission of the OCR, and the role of other funding costs for retail mortgage rates since the GFC. Banks now place greater reliance on more stable (but more costly) sources of funding. They rely on domestic deposits and long-term wholesale funding more, and less on short-term wholesale funding. This has resulted in a wider and more volatile spread between mortgage rates and the OCR. Not all changes in the OCR have passed through one-for-one into floating mortgage rates, as funding costs from other sources have sometimes been offsetting. We construct a comprehensive estimate of bank funding costs using a weighted average of the cost of domestic deposits, short-term wholesale funding and long-term wholesale funding. This weighted-average measure is further decomposed into a monetary policy rate component and a funding spread component. We use an error correction framework to measure the relative contributions of the policy rate and funding spreads to the level of mortgage rates in New Zealand, and estimate the speed of pass-through to mortgage rates from changes in funding costs. Our results suggest that funding spreads have been larger post-GFC, and have had a larger impact on the level of fixed-rate mortgages than on floating rates. There has also been a significant slowdown in the pass-through from policy and funding spreads to the floating mortgage rate. The speed of pass-through to fixed-rate mortgages has slowed only slightly. |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:nzb:nzbans:2018/02&r=mac |
| By: | Pablo Hernández de Cos (Banco de España); David López Rodríguez (Banco de España); Javier J. Pérez (Banco de España) |
| Abstract: | Los niveles de deuda pública sobre el PIB en una mayoría de países de la UEM, incluida España, se encuentran en niveles muy elevados de acuerdo con los registros históricos disponibles. La literatura económica es concluyente en señalar que el mantenimiento de ratios de deuda pública muy elevadas durante períodos temporales prolongados puede resultar perjudicial para el crecimiento económico y suponer una fuente de vulnerabilidad para la economía, además de reducir la capacidad estabilizadora del presupuesto público. En este contexto, las reformas del Pacto de Estabilidad y Crecimiento europeo y de la Ley de Estabilidad Presupuestaria española acometidas durante la reciente crisis reforzaron el papel de esta variable en el marco presupuestario. Las simulaciones realizadas en el presente trabajo muestran que, bajo determinados supuestos macroeconómicos, un proceso de desapalancamiento público como el exigido por el Pacto de Estabilidad para el caso de la economía española exigirá un esfuerzo de consolidación fiscal todavía significativo y que debe perdurar en el tiempo. |
| Keywords: | deuda pública, consolidación fiscal, estabilización macroeconómica |
| JEL: | H63 E61 E62 H12 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:bde:opaper:1803&r=mac |
| By: | Victor Pontines |
| Abstract: | Along the lines of the treatment effects literature, this paper empirically revisits the issue of the so-called “intervention effect”, i.e., the effectiveness of official foreign exchange intervention on the movement of the exchange rate. We extended in a continuous treatment setting the inverse probability weights estimator developed by Jorda and Taylor (2015) and Angrist, Jorda and Kuersteiner (forthcoming) to control for self-selection bias. We then illustrate the application of this technique by examining the effectiveness of official daily interventions by Japanese monetary authorities in the JPY/USD market. In accordance with existing evidence using this intervention data, this paper finds that periods of intervention characterized by large, infrequent and sporadic interventions are effective in moving the changes in the exchange rate in the desired direction. We also find evidence that the intervention effect does not last longer than two days after the intervention takes place. |
| Keywords: | Foreign Exchange Intervention, Self-selection, JPY/USD Exchange Rate, Censored Data, Tobit, Inverse Probability Weights, Local Projections |
| JEL: | C14 C32 E52 E58 F31 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2018-13&r=mac |
| By: | Adamopoulou, Effrosyni (Efi) (Bank of Italy); Bobbio, Emmanuele (Bank of Italy); De Philippis, Marta (Bank of Italy); Giorgi, Federico (Bank of Italy) |
| Abstract: | Aggregate wages display little cyclicality compared to what a standard model would predict. Wage rigidities are an obvious candidate but a recent strand of the literature has emphasized the need to take into account the growing importance of worker composition effects during downturns. With reference to the Italian case we document that also firm composition effects increasingly matter in explaining the aggregate wage dynamics, i.e. aggregate wage growth has been lifted up by the increase in the employment weight of high wage firms. To the extent that this reallocation occurs towards more productive firms, the composition effects may also reflect an efficiency enhancing mechanism. We use a newly available dataset based on social security records covering the universe of Italian employers be-tween 1990 and 2013 and employ a standard measure of allocative efficiency on wages paid across firms. We show that this measure has improved over time since prior to the recent downturn and that it is aligned, at the sectoral level, with measures of productivity growth and market openness to competition. We then focus on the recent downturn and find that large firms were able to adjust wages more than small firms, and that small firms instead adjusted employment to a larger extent. Finally, we document that the continued improvement in the measure of allocative efficiency over this period correlates positively with measures of economic activity (evolution of employment and value added) across sectors. |
| Keywords: | aggregate wage dynamics, reallocation, allocative efficiency, firm composition effects |
| JEL: | D61 E24 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11313&r=mac |
| By: | Kaminska, Iryna (Bank of England); Roberts-Sklar, Matt (Bank of England) |
| Abstract: | Asset pricing models assume the risk-free rate to be a key factor for equity prices. Hence, there should be a strong link between monetary policy rate uncertainty and equity return volatility, both in theory and data. This paper uses regression-based projections for realized variance to examine the relationship between short horizon forecasts of equity variance and proxies for monetary policy rate uncertainty. By assessing various projection models for UK, US and euro-area equity indices, we show that the proxies for monetary policy rate uncertainty have a significant and positive predictive power for the equity return variance. Adding monetary policy rate uncertainty variables can significantly improve forecasting models for equity variance and volatility at weekly, monthly and even quarterly horizons. The findings imply that market views of short-term interest rate developments may indeed be embedded in equity prices and their variations. |
| Keywords: | Equity indices; monetary policy rate uncertainty; option implied volatility; realized volatility; risk-free interest rates; volatility forecasting |
| JEL: | C22 C52 E52 G12 |
| Date: | 2017–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0700&r=mac |
| By: | Lise Pichette; Marie-Noëlle Robitaille; Mohanad Salameh; Pierre St-Amant |
| Abstract: | We use a new real-time database for Canada to study various output gap measures. This includes recently developed measures based on models incorporating many variables as inputs (and therefore requiring real-time data for many variables). We analyze output gap revisions and assess the usefulness of these gaps in forecasting total CPI inflation and three newly developed measures of core CPI inflation: CPI-median, CPI-trim and CPI-common. We also study whether labour-input gaps, projected output gaps, and simple combinations of output gaps can add useful information for forecasting inflation. We find that estimates of excess capacity (the extent to which the economy is below potential) were probably too large around the 2008-2009 recession, as they subsequently tended to be revised down. In addition, we find that, when forecasting CPI-common and CPI-trim, some gaps appear to provide information that reduces forecast errors when compared with models that use only lags of inflation. However, forecast improvements are rarely statistically significant. In addition, we find little evidence of the usefulness of output gaps for forecasting inflation measured by total CPI and CPI-median. |
| Keywords: | Econometric and statistical methods, Inflation and prices, Potential output |
| JEL: | C53 E37 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:18-10&r=mac |
| By: | DEGUENONVO, Cédric |
| Abstract: | Is there an overvaluation of the real exchange rate? What is the effect of devaluation on economic growth? This empirical study attempts to answer these two important questions in the economic context of Senegal, using 1980 - 2014 data. To answer the first question, we used the BEER (Behavioral Equilibrium Exchange Rate) approach and Rodrik's approach. As for the second question, we used the ARDL (AutoRegressive Distributed Lag) cointegration model. Our results show that since 2008, there has been a trend towards the overvaluation of the CFAF in Senegal. Senegal, for example, recorded an overvaluation of the real exchange rate estimated at between 10% and 35% in 2013 and 2014. In addition, our results show that misalignment has a positive impact on long-term economic growth, in particular devaluation in situations of overvaluation. In addition, a devaluation of 10% leads to an increase in economic growth of 0.64 percentage points. Our results are based on all the robustness tests performed. |
| Keywords: | Exchange rate misalignment, Senegal, ARDL, Fully modified OLS |
| JEL: | E42 E52 |
| Date: | 2017–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84338&r=mac |
| By: | International Monetary Fund |
| Abstract: | The economy is recovering after Cyclone Winston struck in February 2016. GDP growth is estimated to have rebounded to 3.8 percent in 2017 from 0.4 percent in 2016. It is projected to reach 3.5 percent in 2018 and stabilize at 3–3.5 percent in the medium term. The outlook is subject to significant downside risks related to natural disasters, a possible sharp adjustment in China, vulnerabilities in the financial sector, and capital outflows triggered by tighter global financial conditions. |
| Date: | 2018–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/34&r=mac |
| By: | International Monetary Fund |
| Abstract: | Macroeconomic conditions in Bosnia and Herzegovina (BiH) are stable but growth has been insufficient for lowering unemployment and achieving income convergence with EU. Internal and external imbalances have been lowered in recent years. Economic activity has begun recovering with the turnaround in Europe and is expected to pick up further over the medium term, driven by public infrastructure investment and implementation of structural reforms. Job creation is key to reducing high unemployment and achieving income convergence with the EU. Domestic politics poses downside risks while external risks are more balanced. Policies should aim to enhance growth potential and address structural weakness, while maintaining economic and financial stability: these include (i) structural reforms to boost growth potential and employment by improving investment climate; (ii) reorienting the composition of public spending from wage bill to capital investments; and (iii) improving financial regulation framework and enhancing financial stability, and (iv) strengthening the country’s single economic space. |
| Date: | 2018–02–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/39&r=mac |
| By: | Richhild Moessner |
| Abstract: | We study the effects of the announcements of ECB asset purchases and of financial stability measures in the euro area in the wake of the global financial crisis and the euro area sovereign debt crisis on ten-year government bond term premia in eleven euro area countries. We find that the term premia of euro area countries with higher sovereign risk, as measured by sovereign CDS spreads, decreased more in response to the announcements of asset purchases and financial stability measures. Term premia of countries with lowest sovereign risk either increased as in Germany, or were not significantly affected or fell slightly, as in the Netherlands and Finland. |
| Keywords: | Monetary policy, asset purchases, financial stability, term premia |
| JEL: | E58 G15 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:489&r=mac |
| By: | Ayres,; Navarro, Gaston; Nicolini, Juan Pablo; Teles, Pedro |
| Abstract: | In the standard model of sovereign default, as in Aguiar and Gopinath (2006) or Arellano (2008), default is driven by fundamentals alone. There is no independent role for expectations. We show that small variations of that model are consistent with multiple interest rate equilibria, similar to the ones found in Calvo (1988). For distributions of output that are commonly used in the literature, the high interest rate equilibria have properties that make them fragile. Once output is drawn from a distribution with both good and bad times, however, it is possible to have robust high interest rate equilibria. |
| Keywords: | Sovereign default; multiple equilibria; good and bad times. |
| JEL: | E44 F34 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12750&r=mac |
| By: | Chu, Angus C.; Cozzi, Guido; Fan, Haichao; Furukawa, Yuichi; Liao, Chih-Hsing |
| Abstract: | This study develops a Schumpeterian growth model with heterogeneous households and heterogeneous firms to explore the effects of monetary policy on innovation and income inequality. Household heterogeneity arises from an unequal distribution of wealth. Firm heterogeneity arises from random quality improvements and a cost of entry. We find that under endogenous firm entry, inflation has inverted-U effects on economic growth and income inequality. We also calibrate the model for a quantitative analysis and find that the model is able to match the growth-maximizing inflation rate and the inequality-maximizing inflation rate that we estimate using cross-country panel data. |
| Keywords: | inflation, income inequality, economic growth, heterogeneity |
| JEL: | D3 E41 O3 O4 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84711&r=mac |
| By: | BENKRAIEM, Ramzi; Lahiani, Amine; MILOUDI, Anthony; Shahbaz, Muhammad |
| Abstract: | This paper investigates the relationship between S&P 500 prices, viewed as a US economic barometer, and a set of energy prices, including WTI, gasoline, heating, diesel and natural gas prices, using the Quantile Autoregressive Distributed Lags (QARDL) model recently developed by Cho et al. (2015). The empirical results show a negative long-and short-run relationship between WTI crude oil and Henry Hub natural gas prices on the one side and S&P 500 stock prices on the other side, only for medium and high quantiles. The findings of Wald tests indicate a nonlinear and asymmetric pass-through from energy price shocks to aggregate US stock market prices. These results show that crude oil and natural gas are key economic variables to explain short run and long run stock market dynamics. They provide further insights into how energy price shocks are transmitted to stock market prices. |
| Keywords: | Energy Price Shocks, Stock Market Prices, Quantile ARDL, Cointegration |
| JEL: | A10 |
| Date: | 2018–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84778&r=mac |
| By: | Grzegorz Poniatowski |
| Abstract: | The objective of this paper is to derive the characteristics of an effective fiscal governance framework, focusing on the incentives that ensure a commitment to the fiscal rules. We study this problem with the use of econometric tools, complementing this analysis with formal modelling through the lens of a dynamic principal-agent framework. |
| Keywords: | Principal-Agent, Moral Hazard, Fiscal Effort, Fiscal Rules, Cyclically-Adjusted Balance |
| JEL: | D82 E61 H60 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:sec:report:0493&r=mac |
| By: | Leonel Muinelo-Gallo (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Andreas P. Kyriacou (Universitat de Girona (Spain). Departament d’Economia); Oriol Roca-Sagalés (Universitat Autònoma de Barcelona (Spain). Departamentd’Economia Aplicada) |
| Abstract: | In this paper, we analyze the performance over the economic cycle of different items of social-type fiscal expenditures in Uruguay during the period 1988:1 to 2015:4. The study is organized as follows. Section 2 provides a descriptive analysis of the regulations and composition governing the current system of public transfers in Uruguay. Section 3 analyses the performance of the structure of the tax-transfer system in Uruguay. Section 4 details the behavior of the different tax transfers for Uruguay, identifying their pro- or countercyclical nature. In section 5, we analyze how the way in which fiscal transfers have been updated or indexed has been able to influence the cyclical behavior of public transfers. Finally, section 6 outlines conclusions and policy recommendations. |
| Keywords: | Business cycles, Fiscal policy, Uruguay |
| JEL: | E62 H50 H60 H70 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:ulr:wpaper:dt-01-18&r=mac |
| By: | Mario Holzner (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Econometric Investigation into the Impact of Institutions on the Wage Share of Industrialised Nations The aim of this paper is to evaluate the changing impact of corporatism – cooperation between business, labour and state interest groups – over the period 1960-2010 and across industrialised economies on the development of the share of labour in national income. Also due to data issues this relationship has not been extensively analysed in the literature so far. A new time-variant corporatism index developed by Jahn (2016) allows us to fill this gap. Using different panel data techniques, samples and control variables, our main results suggest that there is a robust non-linear relationship at work. While the linear effects of both corporatism and the public sector share are positive, the coefficient of the interaction term of these two institutional indicators is negative and hence indicates a negative slope for countries with both a high level of corporatism and a large government share in GDP in explaining the change as well as the level of the adjusted wage share in the long run. To a certain extent the two institutions can be seen as substitutes. In countries where the role of the state has been reduced, the existence of a more centralised wage bargaining system has limited the extent of the fall in the share of labour in national income. In countries with less prevalent collective bargaining systems, a similar effect can be achieved by higher government spending. We therefore argue for a stronger role for centralised wage bargaining in economic policy-making, especially in countries where the share of government spending in GDP is low. |
| Keywords: | labour income share, corporatism, public sector share |
| JEL: | D33 E25 E64 H11 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:wii:wpaper:144&r=mac |
| By: | Njindan Iyke, Bernard; Ho, Sin-Yu |
| Abstract: | Inflation and inflation uncertainty are critical factors influencing the functioning of markets, and thus the efficient flow of economic activities. In this study, we investigated the effects of inflation and inflation uncertainty on growth in Ghana. Unlike majority of the previous studies, we distinguished the short-run effects of inflation and inflation uncertainty on growth from the long-run effects. Also, unlike the previous studies, we examined whether increases in inflation uncertainty have the same effects on growth as decreases in it. By taking linear and nonlinear specifications to a dataset covering the period 1963 to 2015, we found that inflation has both short and long-run negative effects on growth. Inflation uncertainty has differential short-run effect and a negative long-run effect on growth. Increases in inflation uncertainty hurt growth, while decreases may reverse this pattern but slowly. Both inflation and inflation uncertainty are critical determinants of growth in the country. To promote growth, policymakers should continue to pursue a lower inflation target, while ensuring minimum inflation uncertainty. |
| Keywords: | Inflation; Inflation Uncertainty; Growth; Ghana |
| JEL: | C22 E31 O47 O55 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:85191&r=mac |
| By: | International Monetary Fund |
| Abstract: | As part of the Regional Project on Harmonizing External Sector Statistics (Proyecto Regional de Armonización de las Estadísticas del Sector Externo - PRAESE) of the Technical Assistance Center for Central America, Panama, and the Dominican Republic, a technical assistance mission on balance of payments, international investment position (IIP), and secondary income statistics visited the city of San Salvador over the period July 14–22, 2014. The purpose of the technical assistance mission was to help the Central Reserve Bank of El Salvador (BCRES), the institution responsible for compiling the balance of payments, the IIP, and external debt statistics, to improve external sector statistics in accordance with the guidelines of the sixth edition of the Balance of Payments and International Investment Position Manual. The mission focused on reviewing practical topics related to the compilation and recording of secondary income and following up on the recommendations provided to the BCRES regarding the Coordinated Direct Investment Survey (CDIS) and the Coordinated Portfolio Investment Survey (CPIS). At the request of the authorities, the mission also reviewed methodology and compilation topics related to financial derivatives and manufacturing services on inputs owned by others. |
| Date: | 2018–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/38&r=mac |
| By: | Fabrizio Venditti (Bank of Italy); Francesco Columba (Bank of Italy); Alberto Maria Sorrentino (Bank of Italy) |
| Abstract: | In this paper we describe an analytical framework to assess financial stability risks in the Italian economy. We use a large number of indicators, selected to take into account the peculiarities of the Italian economy, to monitor risks in seven areas: interlinkages, the credit markets, the macroeconomic environment, funding conditions, the financial markets, and the banking and insurance sectors. Based on thresholds selected on the basis of either expert judgment or historical distributions, we construct risk heatmaps and derive aggregate scores for each of the above risk categories. By providing timely information on the buildup of risks, the proposed dashboard usefully complements other analytical tools currently used for developing and implementing macroprudential policy. |
| Keywords: | early warning indicators, financial stability risks, heatmaps, macroprudential policy |
| JEL: | G12 G21 G23 G28 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_425_18&r=mac |
| By: | International Monetary Fund |
| Abstract: | A cyclical recovery is underway, with limited impact from the recent geopolitical tensions. Inflation has rebounded to around the Bank of Korea’s 2-percent target, although it displayed some volatility. The current account surplus narrowed in 2017, but is expected to remain large above 5 percent in the medium term. Potential growth has slowed down and its prospects are hampered by unfavorable demographics and slowing productivity growth, driven by structural weaknesses. Income equality and polarization are worsening, partly reflecting inadequate social protection as well as labor and product market duality. The government’s program aims to address impediments to growth and income inequality. |
| Date: | 2018–02–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/40&r=mac |
| By: | Chari, V. V.; Nicolini, Juan Pablo; Teles, Pedro |
| Abstract: | We study cooperative optimal Ramsey equilibria in the open economy addressing classic policy questions: Should restrictions be placed to free trade and capital mobility? Should capital income be taxed? Should goods be taxed based on origin or destination? What are desirable border adjustments? How can a Ramsey allocation be implemented with residence-based taxes on assets? We characterize optimal wedges and analyze alternative policy implementations. |
| Keywords: | Capital income tax; free trade; value-added taxes; border adjustment; origin- and destination-based taxation; production e |
| JEL: | E60 E61 E62 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12753&r=mac |
| By: | International Monetary Fund |
| Abstract: | Macroeconomic vulnerabilities have declined since 2012, but growth remains subdued and sensitive to volatile agricultural output. External imbalances are contained and fiscal consolidation resumed in 2017 after a pause in 2016. Job creation has improved but unemployment remains high, particularly among the youth. Social tensions increased in 2017, and in response, the authorities took steps to accelerate local social programs and investment projects. The government appointed in April 2017 remains committed to implementing sound policies and reforms have resumed. However, the outlook is subject to significant risks, including geopolitical risks in the region, weaker-than-expected growth in the euro area and delays in implementing key reforms. To achieve higher, sustainable, and more inclusive growth, reform implementation needs to accelerate, particularly in the areas of governance, the business environment, education, and the labor market. |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/58&r=mac |
| By: | Hentze, Tobias; Kolev, Galina V. |
| Abstract: | Höhere öffentliche Ausgaben können einen Beitrag zur wirtschaftlichen Dynamik in Deutschland leisten. Öffentliche Investitionen erweitern die gesamtwirtschaftlichen Produktionskapazitäten, sodass sie langfristig reale Einkommenssteigerungen mit sich bringen. In vielen Bereichen, beispielsweise beim Ausbau des Glasfasernetzes, der Modernisierung der Verkehrsinfrastruktur oder im Bildungssystem, besteht ein Investitionsdefizit, das die Entwicklung des Wachstumspotenzials in Deutschland bremst. Eine Ausweitung der Investitionstätigkeit des Staates ist aus strukturellen Gründen daher sinnvoll. Angesichts der bereits relativ hohen Kapazitätsauslastung würde ein sehr kräftiger Anstieg der staatlichen Investitionsausgaben allerdings mittelfristig zu wesentlich höheren Preisen führen und daher einen Teil der realen Wirkung auf die Wirtschaftskraft verfehlen. Ein Nebeneffekt steigender Preise wäre der Verlust der preislichen Wettbewerbsfähigkeit deutscher Unternehmen. Die unerwünschten Effekte treten umso mehr ein, je stärker die Steigerung der Staatsausgaben durch eine Anhebung der Transferzahlungen oder des staatlichen Konsums statt durch ein Plus an Investitionen erfolgt. Dies ist das Ergebnis von Simulationsrechnungen anhand des Oxford Global Economic Model (OGEM). Hieraus kann die Schlussfolgerung gezogen werden, dass öffentliche Investitionen zwar verstärkt, aber eben auch gezielt eingesetzt werden müssen, um die Attraktivität Deutschlands als Produktionsstandort und den Wohlstand des Landes zu sichern. Aufgrund der unmittelbaren Konkurrenz bei der Verwendung von Haushaltsmitteln ist abzuwägen, inwieweit diese in der aktuellen Situation eher für einen Abbau der Staatsverschuldung oder für eine systematische Steuerreform genutzt werden sollten. |
| JEL: | E17 E62 F41 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwkpps:22018&r=mac |
| By: | International Monetary Fund |
| Abstract: | Context. Australia has enjoyed a comparatively robust economic performance while adjusting to the end of the large mining boom of the 2000s. But the economy has not yet returned to full employment, and inflation is below its target range. Housing market imbalances and high household debt have become important vulnerabilities. As in other advanced economies, average growth has been lower since the Global Financial Crisis. Outlook and risks. With stronger global economic prospects, recent strong employment growth, and higher infrastructure spending as a catalyst, conditions for an acceleration in activity and above-trend growth seem in place. Near-term risks to growth are broadly balanced, but large negative shocks, most likely external, and their interaction with domestic housing markets remain concerns on the downside. |
| Date: | 2018–02–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/44&r=mac |
| By: | Mirko Wiederholt (Goethe University Frankfurt); Nathanael Vellekoop (Goethe University Frankfurt) |
| Abstract: | How do households form inflation expectations? And do households' inflation expectations affect their choices? To address the first question, we study longitudinal survey data on inflation expectations over a 24 year period. To address the second question, we link the survey data on inflation expectations at the level of the individual to administrative data on income, assets, and liabilities. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed017:1449&r=mac |
| By: | Florian Morvillier |
| Abstract: | The link between exchange rate undervaluations and growth has been an important source of concern over the past years, but the role of undervaluations on the inflation-growth nexus has not been yet studied. We fill up this gap by showing to what extent undervaluation's level change the effect of inflation on growth. Our analysis is based on a sample of 62 countries over the period 1980-2015. In a first time, we rely on the Bayesian Model Averaging (BMA) methodology to select the relevant growth determinants. Then, using the System Generalized Method of Moments (GMM), we find evidence that higher is the lagged undervaluation, higher is the negative effect of inflation on growth. This result is robust to the exclusion of currency crises episodes. |
| Keywords: | Exchange rate undervaluation, Inflation, Growth, GMM |
| JEL: | F41 O47 E31 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2018-15&r=mac |
| By: | Claudiu Tiberiu Albulescu; Dominique Pépin (CRIEF - Centre de Recherche sur l'Intégration Economique et Financière - Université de Poitiers) |
| Abstract: | This paper first shows that the long-run money demand in Central and Eastern European (CEE) countries is better described by an open-economy model (OEM), which considers a currency substitution effect, than by a closed-economy model (CEM) used in several previous studies. Second, from the estimated models we derive two different measures of monetary overhang. Then we compare the ability of the OEM-based and the CEM-based measures of monetary overhang to predict inflation in the CEE countries, namely the Czech Republic, Hungary and Poland. While we cannot detect a significant difference of forecast accuracy between the two competing models, we show that the OEM-based forecast model that reveals a stable long-run money demand encompasses the CEM-based version for the CEE countries. |
| Keywords: | CEE countries ,currency substitution,money demand stability,monetary overhang,inflation forecasts |
| Date: | 2018–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01720319&r=mac |
| By: | Vigninou GAMMADIGBE (Université de Lomé); Ismaël ISSIFOU (Université d’Orléans); Daouda SEMBENE (Fonds monétaire international); Sampawende J.-A. TAPSOBA (Fonds monétaire international) |
| Abstract: | La théorie de l’endogénéité des Zones Monétaires Optimales (ZMO) a identifié deux canaux de justification ex-post du critère de synchronisation des cycles : l’intensité commerciale et la convergence budgétaire des pays membres. Dans ce papier, nous analysons dans une perspective empirique le rôle des Unions Économiques et Monétaires africaines dans la convergence budgétaire des pays membres sur la période de 1990 à 2015. Les résultats de nos estimations montrent que les Communautés Économiques Régionales (CER) africaines réduisent significativement la divergence budgétaire des pays membres. En usant d’une approche séquentielle d’estimation, l’étude démontre que les Zones Monétaires africaines sont plus efficaces que les autres Communautés Économiques Régionales (CER) en matière d’accélération de la convergence des indicateurs budgétaires. Ces résultats mettent en lumière la vraisemblance et la pertinence de l’hypothèse d’auto-validation dans le temps des Unions Monétaires africaines existantes et prospectives malgré les faibles niveaux de synchronisation des cycles et d’intensité commerciale. |
| Keywords: | Politique Budgétaire, Zone Monétaire, Convergence, Afrique |
| JEL: | E62 F15 O55 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:fdi:wpaper:4218&r=mac |
| By: | Vigninou GAMMADIGBE (Université de Lomé); Ismaël ISSIFOU (Université d’Orléans); Sampawende J.-A. TAPSOBA (International Monetary Fund (IMF)); Daouda SEMBENE (International Monetary Fund) |
| Abstract: | La théorie de l’endogénéité des Zones Monétaires Optimales (ZMO) a identifié deux canaux de justification ex-post du critère de synchronisation des cycles : l’intensité commerciale et la convergence budgétaire des pays membres. Dans ce papier, nous analysons dans une perspective empirique le rôle des Unions Économiques et Monétaires africaines dans la convergence budgétaire des pays membres sur la période de 1990 à 2015. Les résultats de nos estimations montrent que les Communautés Économiques Régionales (CER) africaines réduisent significativement la divergence budgétaire des pays membres. En usant d’une approche séquentielle d’estimation, l’étude démontre que les Zones Monétaires africaines sont plus efficaces que les autres Communautés Économiques Régionales (CER) en matière d’accélération de la convergence des indicateurs budgétaires. Ces résultats mettent en lumière la vraisemblance et la pertinence de l’hypothèse d’auto-validation dans le temps des Unions Monétaires africaines existantes et prospectives malgré les faibles niveaux de synchronisation des cycles et d’intensité commerciale. |
| Keywords: | Politique Budgétaire, Zone Monétaire, Convergence, Afrique |
| JEL: | E62 F15 O55 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:fdi:wpaper:4222&r=mac |
| By: | G. Cette; S. Corde; R. Lecat |
| Abstract: | The productivity slowdown has been analysed as an effect of weaker technological progress, of the digital economy or of a less efficient reallocation process. Using data on firms operating in France, we highlight that, at the technological frontier, productivity has accelerated, especially over the recent period, which contradicts the hypothesis of a decline in innovation. The most productive firms in a given year do not, however, improve their relative advantage. The convergence of firms’ productivity does not seem to have slowed down in the 2000s, which does not confirm the hypothesis of a decrease in the dissemination of innovation. On the other hand, the dispersion of productivity between firms has increased, which suggests growing difficulties in reallocating production factors, labour and capital, between firms. |
| Keywords: | total factor productivity, dissemination of innovation. |
| JEL: | E22 L11 O47 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:662&r=mac |
| By: | International Monetary Fund |
| Abstract: | Bulgaria has made major progress since joining the European Union (EU) ten years ago despite being hit by the global and Euro-area crises. However, per capita income is still only half of the EU average and more than one in five people is at risk of poverty. The economy is recovering strongly, with the fiscal and external current account balances in surplus. The main challenge is to translate this recovery into sustained and inclusive economic growth amid unfavorable demographic trends. This will require continued efforts to improve government as well as further strengthening financial stability. |
| Date: | 2018–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/46&r=mac |
| By: | Aaron Sojourner (University of Minnesota); José Pacas (University of Minnesota) |
| Abstract: | This paper develops the first evidence on how individuals’ union membership status affects their net fiscal impact, the difference between taxes they pay and cost of public benefits they receive, enriching our understanding of how labor relations interacts with public economics. Current Population Survey data between 1994 and 2015 in pooled cross-sections and individual first-difference models yield evidence that union membership has a positive net fiscal impact through the worker-level channels studied. |
| Keywords: | labor union, taxes, public economic, labor relations, industrial relations, public benefits, collective bargaining, net fiscal impact, social insurance |
| JEL: | J50 H25 J31 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2018-015&r=mac |
| By: | Robert Kollmann (ECARES, Université Libre de Bruxelles & CEPR) |
| Abstract: | The business cycles of the major advanced economies are synchronized. Standard macro models fail to explain that fact. This paper presents a simple two-country, two-good, complete-markets dynamic general equilibrium model in which country-specific productivity shocks generate highly correlated business cycles. The structure here differs from standard open economy macro models by assuming recursive intertemporal preferences, and a weak wealth effect on labor supply. Recursive preferences magnify the terms of trade response to shocks. In the model here, a persistent productivity (and GDP) increase in a given country triggers a strong improvement of the foreign country’s terms of trade. When the wealth effect on labor supply is weak, this induces a rise in foreign hours worked and GDP, i.e. domestic and foreign real activity comove positively. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed017:1489&r=mac |
| By: | Kohnert, Dirk |
| Abstract: | ABSTRACT & RÉSUMÉ & ZUSAMMENFASSUNG: The demand for political alternance, initiated by institutional and electoral reforms, constituted the major contentious issue between the government and the challengers of the Gnassingbé regime throughout the year. Civil society organizations and representatives of the Christian church supported the demands of the opposition. The protest of the notorious divided opposition took a new momentum since August with the lead by a hitherto hardly known opposition party and its charismatic leader, Tikpi Atchadam. He organized huge demonstrations of all the 14 opposition parties in the second half of the year which put the government progressively under pressure. Foreign affairs were dominated by the impact of increased aid by the international donor community. Socio-economic development was marked by diminishing human development and economic freedom. ------------------------------------------------------------ RÉSUMÉ: La demande d'alternance politique, initiée par des réformes institutionnelles et électorales, constitue le principal contentieux entre le gouvernement et les challengers du régime Gnassingbé tout au long de l'année. Les organisations de la société civile et les représentants de l'église chrétienne ont soutenu les demandes de l'opposition. La protestation de l'opposition divisée notoire a pris un nouvel élan depuis le mois d'août avec à sa tête un parti d'opposition jusqu'alors méconnu et son leader charismatique, Tikpi Atchadam. Il a organisé d'énormes manifestations de l'ensemble des 14 partis d'opposition au cours de la seconde moitié de l'année, ce qui a mis le gouvernement sous pression. Les affaires étrangères ont été dominées par l'impact de l'aide accrue de la communauté internationale des donateurs. Le développement socio-économique a été marqué par la diminution du développement humain et de la liberté économique. ------------------------------------------------------------ ZUSAMMENFASSUNG: Die Forderung nach politischer Alternanz, initiiert durch institutionelle und Wahlreformen, war das größte Streitthema zwischen der Regierung und den Herausforderern des Gnassingbé-Regimes während des ganzen Jahres. Zivilgesellschaftliche Organisationen und Vertreter der christlichen Kirche unterstützten die Forderungen der Opposition. Der Protest der zerstrittenen Opposition nahm ab August mit der Führung einer bisher kaum bekannten Oppositionspartei und ihres charismatischen Führers Tikpi Atchadam eine neue Dynamik an. Er organisierte in der zweiten Jahreshälfte große Demonstrationen aller 14 Oppositionsparteien, die die Regierung zunehmend unter Druck setzten. Auswärtige Angelegenheiten waren von den Auswirkungen der verstärkten Hilfe der internationalen Gebergemeinschaft geprägt. Die sozioökonomische Entwicklung war von abnehmender menschlicher Entwicklung und wirtschaftlicher Freiheit geprägt. |
| Keywords: | Togo;West Africa;governance;foreign affairs; |
| JEL: | D31 D63 D74 E24 E26 E66 F22 F24 F35 F52 F54 H11 N47 O17 O55 Z13 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84518&r=mac |
| By: | María T. Alvarez-Martínez; Salvador Barrios; Diego d'Andria; Maria Gesualdo; Gaëtan Nicodème; Jonathan Pycroft |
| Abstract: | This paper estimates the size and macroeconomic effects of base erosion and profit shifting (BEPS) using a computable general equilibrium model designed for corporate taxation and multinationals. Our central estimate of the impact of BEPS on corporate tax losses for the EU amounts to €36 billion annually or 7.7% of total corporate tax revenues. The USA and Japan also appear to loose tax revenues respectively of €101 and €24 billion per year or 10.7% of corporate tax revenues in both cases. These estimates are consistent with gaps in bilateral multinationals´ activities reported by creditor and debtor countries using official statistics for the EU. Our results suggest that by increasing the cost of capital, eliminating profit shifting would slightly reduce investment and GDP. It would however raise corporate tax revenues thanks to enhanced domestic production. This in turn could reduce other taxes and increase welfare. |
| Keywords: | BEPS, corporate taxation, profit shifting, tax avoidance, CGE model |
| JEL: | C68 E62 H25 H26 H87 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6870&r=mac |
| By: | Dan Andrews; Peter Gal; William Witheridge |
| Abstract: | Declining inflation in many countries over the past few decades at the same time as rising global competition has led to a debate on the importance of globalisation for domestic inflation. This paper explores the implications of global value chain (GVC) integration and market contestability for inflation using a range of industry-level and micro-data sources. We provide evidence that rising participation in GVCs has placed downward pressure on producer price inflation, by increasing the ability of firms to substitute domestic inputs with cheaper foreign equivalents. We investigate the channels, which suggests that increased GVC participation contributed to lower inflation via downward pressures on unit labour costs – by raising productivity and reducing wages – in the importing country, especially when low-wage countries are integrated in supply chains. We then present industry-level evidence to support the conjecture that a higher level of GVC integration dampens producer price inflation by accentuating the impact of global economic slack on domestic inflation. However, we also find an increasing trend in mark-ups, suggestive of rising market power, particularly in services sectors. Thus, looking forward, there is a risk that stalling globalisation since the crisis, coupled with stronger aggregate demand and declining market contestability, could lead to inflationary pressures in the medium term, thereby letting the inflation genie out of the bottle. |
| Keywords: | competition, globalisation, inflation, market power |
| JEL: | E31 L16 |
| Date: | 2018–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1462-en&r=mac |
| By: | Lars P. Feld; Christoph A. Schaltegger; Janine Studerus |
| Abstract: | This paper analyses the importance of fiscal mechanisms for regional risk sharing and redistribution in Switzerland. Switzerland is a particularly interesting setting in this context because it features both a high level of fiscal autonomy for Swiss cantons and explicit fiscal transfers between the federal government and the cantons. Based on panel-data analysis we study the redistributive and stabilizing properties of fiscal equalization transfers, federal government transfers in general, direct federal taxation, the unemployment insurance scheme and the first pillar pension scheme. We find a combined redistributive effect of these mechanisms of about 20%. This means that long-run income differentials of 1 Swiss Franc between cantons translate into differences of long-run disposable income after taxes and transfers of about 80 cents. The combined contemporary stabilization effect with respect to short-term income fluctuations amounts to less than 10%, which is a small effect compared to previous findings for other countries. |
| Keywords: | regional risk sharing, redistribution, fiscal transfers |
| JEL: | E62 H10 H70 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6902&r=mac |
| By: | YOUNSI, Moheddine; BECHTINI, Marwa |
| Abstract: | The purpose of this paper is to examine the causal relationship between economic growth, financial development and income inequality for the BRICS countries, namely; Brazil, Russia, India, China, and South Africa, using annual panel data covering the period 1995-2015. We construct a composite financial sector development index for these countries by applying the principal component method on the main four proxies of financial development, that is, domestic credit to private sector to GDP ratio, domestic credit given by banks sector to GDP ratio, M2/GDP, and stock market capitalization to GDP ratio. Results of Pedroni panel cointegration and Kao residual panel cointegration tests confirm the valid long-run cointegration relationship between the considered variables. Fixed effects estimation results show that GDP per capita growth has a positive and significant effect on income inequality, while the coefficient of its squared term has negative and significant effect on income inequality. Similarly, financial development index appears to have a positive and statistically significant effect on income inequality, while its squared term has negative and statistically significant effect on income inequality. Our empirical findings support the financial Kuznets hypothesis of an inverted U-shaped relationship between economic growth, financial sector development and inequality in the BRICS countries over the study period. Our results are robust by employing POLS and GMM estimators. Results of Granger causality test shown that there is a unidirectional causality running from financial development index to income inequality, but a bidirectional causality between inflation and income inequality is found. However, there is no causal relationship between income inequality and economic growth. These findings are expected to help policymakers to reduce inequality in these countries through the improvement of taxation policies financial system. |
| Keywords: | Economic growth, financial development, income inequality, financial Kuznets hypothesis, BRICS countries. |
| JEL: | D63 G20 O11 |
| Date: | 2018–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:85182&r=mac |
| By: | Antonio Ciccone |
| Abstract: | A new dataset by Bazzi and Blattman (2014) allows examining the effects of international commodity prices on the risk of civil war outbreak with more comprehensive data. I find that international commodity price downturns sparked civil wars in Sub-Saharan Africa. Another finding with the new dataset is that commodity price downturns also sparked civil wars beyond Sub-Saharan Africa since 1980. Effects are sizable relative to the baseline risk of civil war outbreak. My conclusions contrast with those of Bazzi and Blattman, who argue that the new dataset rejects that commodity price downturns cause civil wars. The reason is that I calculate commodity price shocks using time-invariant (fixed) export shares as commodity weights. Bazzi and Blattman also calculate commodity price shocks using export shares as commodity weights but the exports shares they use are time-varying. Using time-invariant export shares as commodity weights ensures that time variation in price shocks solely reflects changes in international commodity prices. Price shocks based on time-varying export shares partly reflect (possibly endogenous) changes in the quantity and variety of countries’ exports, which jeopardizes causal estimation. I also show that setting time-invariant export shares equal to average export shares over the sample period, can be a way of dealing with attenuation bias due to mismeasured export shares. When I differentiate between agricultural commodities on the one hand and minerals, oil, and gas on the other, I find stronger increases in the risk of civil war outbreak following downturns in agricultural commodity prices. |
| Keywords: | civil wars, commodity price downturn |
| JEL: | E30 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6866&r=mac |
| By: | António Afonso; Florence Huart; João Tovar Jalles; Piotr Stanek |
| Abstract: | We revisit the twin deficit relationship for a sample of 193 countries over the period 1980-2016, using a panel fixed effect (within-group) estimator, bias-corrected least-squares dummy variable, system GMM, and common correlated effects pooled estimation procedures. The analysis accounts also for the existence of fiscal rules in place, their features, and their interaction with the budget balance. In the absence of fiscal rules, the twin deficit hypothesis is confirmed. The size of the estimated coefficient on the budget balance is between 0.68 and 0.79. However, the existence of fiscal rules strongly reduces the effect of budget balance on the current account balance (the coefficient is reduced to 0.1). In fact, the twin deficits relationship does not hold with some specific kinds of rules: debt rules, rules with monitoring of compliance, as well as budget balance rules and debt rules in emerging market economies and lowest income countries, and in the post-crisis period. |
| Keywords: | current account, fiscal balance, fiscal rules, panel data, system GMM |
| JEL: | E62 F32 F41 H87 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp0312018&r=mac |
| By: | JOYDEB SASMAL (DEPARTMENT OF ECONOMICS, VIDYASAGAR UNIVERSITY); RITWIK SASMAL (DEPARTMENT OF ECONOMICS, UNIVERSITY OF CONSTANZ) |
| Abstract: | This paper has examined the impact of public expenditure on economic growth and viability of fiscal policy when the public expenditure is financed by public borrowing. The ratio of gross fiscal deficit to net national product and the ratio of gross fiscal deficit to total expenditure have been considered as indicators of solvency in fiscal balance. The study is based on theoretical framework and results of econometric analyses. The basic argument of this paper is that if public expenditure is financed by government borrowing, but expenditure fails to generate sufficient growth in income, it will be difficult to repay the loan and fiscal balance will deteriorate. As a result, the viability of the fiscal policy will be under question. The data in the Indian context show that revenue expenditure has increased significantly over time. Since revenue expenditure includes many non-developmental and less productive components, it may not be helpful for economic growth. The results of time series analysis show that the ratio of gross fiscal deficit to net national product (NNP) has increased with increase in total expenditure of the government indicating non-sustainability of fiscal balance. The study also shows that private capital has significant positive impact on NNP but the effect of fiscal deficit on economic growth is not clear. |
| Keywords: | government, budget, revenue expenditure, public debt, economic growth,fiscal deficit, interest payment, fiscal balance, sustainability |
| JEL: | H11 H50 H54 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:5908111&r=mac |
| By: | Antonio Ciccone |
| Abstract: | I examine whether transitory events can tip the scales against authoritarian regimes and lead to persistent democratization. I think of situations where this is a possibility as democratic tipping points. The transitory events I focus on are rainfall shocks in the most agricultural countries in the world. I show that while these shocks only affect agricultural output contemporaneously, they have persistent effects on political institutions. Authoritarian regimes experiencing negative rainfall shocks are more likely to be democratic three, five, and ten years later. |
| Keywords: | transitory events, persistent democratization |
| JEL: | E02 O1 Q1 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1026&r=mac |
| By: | Antonio Ciccone |
| Abstract: | I examine whether transitory events can tip the scales against authoritarian regimes and lead to persistent democratization. I think of situations where this is a possibility as democratic tipping points. The transitory events I focus on are rainfall shocks in the most agricultural countries in the world. I show that while these shocks only affect agricultural output contemporaneously, they have persistent effects on political institutions. Authoritarian regimes experiencing negative rainfall shocks are more likely to be democratic three, five, and ten years later. |
| Keywords: | transitory events, persistent democratization |
| JEL: | E02 O1 Q1 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1602&r=mac |
| By: | International Monetary Fund |
| Abstract: | Following the sharp fall in SACU revenues, the fiscal deficit is likely to exceed 6 percent of GDP for the second year. The government has financed the deficit by using its deposits at the Central Bank of Lesotho (CBL), which is the root cause of the sharp drop in the CBL’s international reserves. Political fragility has created a difficult environment for fiscal adjustment. The third government in five years was elected in June 2017 and formed a coalition of four parties. While some progress has been made in political and military reforms laid out by a SADC Commission report after a coup attempt in 2014, building a consensus on the fiscal policy response to the SACU revenue shortfall has been challenging. |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/54&r=mac |
| By: | International Monetary Fund |
| Abstract: | As part of the Regional Project on Harmonizing External Sector Statistics (ESS) developed by the Technical Assistance Sector for Central America, Panama, and the Dominican Republic, a technical assistance mission on ESS visited San Salvador during the period April 21–29, 2014. The purpose of the mission was to support the Central Reserve Bank of El Salvador (BCRES) in its efforts to make further improvements in the compilation and dissemination of balance of payments and international investment position (IIP) statistics. Particular emphasis was placed on the compilation of the Coordinated Direct Investment Survey (CDIS) and the Coordinated Portfolio Investment Survey (CPIS). In El Salvador, ESS are processed and disseminated by the Balance of Payments Department (DBP), which reports to the Office of Economic Studies and Statistics. The BCRES does not have legal instruments empowering it to request information from the country’s various economic agents, or to apply effective sanctions for failure to comply. Currently, the legal mandate of the BCRES to request information to compile the ESS is based on Article 64 of its 2011 Organic Law, which establishes, on the one hand, the obligation of the BCRES to publish macroeconomic statistics, with specific mention of the balance of payments and, on the other hand, the obligation of public sector, financial sector, and nonfinancial private sector entities to provide the information requested of them for this purpose. |
| Date: | 2018–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/37&r=mac |
| By: | Thiem, Christopher |
| Abstract: | This paper analyses the interdependence of policy uncertainty from 1985 to 2017 across six different categories of US economic policy: Monetary, fiscal, healthcare, national security, regulatory, and trade policy. To this end, we apply the Diebold and Yilmaz (2012, 2014) connectedness index methodology to the newspaper-based uncertainty indices developed by Baker et al. (2016). We find that, in total, the category-specific uncertainties are indeed closely interrelated. However, some policy categories are strong net transmitters of uncertainty spillovers (e.g. fiscal policy), while others show only a low degree of average connectedness and are predominantly net receivers (e.g. trade policy). A modified rolling-window approach further reveals that the intensity and direction of spillovers change significantly over time. The total connectedness index not only shows strong bursts related to certain events, but also exhibits a positive long-run trend. The latter is particularly driven by an increasing average connectedness of both healthcare and regulatory policy uncertainty. Finally, we highlight the different characteristics of the uncertainty network across presidential administrations, as well as before and after the most recent election. |
| Keywords: | economic policy uncertainty,network connectedness,spillovers,US presidents,variance decomposition,vector autoregression |
| JEL: | C32 D80 E65 H00 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:744&r=mac |
| By: | Makram El-Shagi; Steven Yamarik (California State University Long Beach; Center for Financial Development and Stability at Henan University, Kaifeng, Henan) |
| Abstract: | This paper presents updated estimates for state-level capital and investment for 1950 to 2015. We improve upon the procedure of Garofalo and Yamarik (2002) and Yamarik (2013) by using quantity measures to apportion the mining capital stock and a geometric pattern of depreciation to derive investment data. In an empirical application we use our data to estimate the production function and a simple growth model. We find coefficient estimates that support constant returns to scale and a 1/3 output elasticity of capital. These results are consistent with past regional and cross-country papers, supporting the plausibility of our data. |
| Keywords: | capital stock, investment, production function, Solow |
| JEL: | O47 O51 R11 |
| URL: | http://d.repec.org/n?u=RePEc:fds:dpaper:201801&r=mac |
| By: | Grömling, Michael |
| Abstract: | Surveys of businesses provide important data for an analysis of economic development. In addition to the statistical offices in the respective states, private sector institutions such as re-search institutes or associations provide a diverse range of economic data. The following article presents the business survey conducted by the German Economic Institute (Institut der deutschen Wirtschaft, IW). It provides comprehensive information on the current situation and the outlook of German companies and serves as an important basis for the half-year economic forecast by the German Economic Institute (Grömling, 2005). |
| JEL: | C82 E32 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwkrep:52018&r=mac |
| By: | Herr, Hansjörg |
| Abstract: | Keynes, following the tradition of Marx, argued that all values are created by labour and profits. However, functional income distribution between wages and profits is explained differently. In Marx's explanation of functional income distribution, wages are given as a basket of goods needed for the reproduction needs of the working class. Profits are then the remaining part of income creation. Given the capital stock, the profit rate can be calculated. The paper shows that Marx's explanation of functional income distribution has several theoretical and practical shortcomings. The Keynesian paradigm in the tradition of the original Keynes provides an alternative. Here the profit rate is given by processes in the financial market, and, among other things, by the interest rate. Monopolistic or oligopolistic structures, following the tradition of Kalecki, can also influence the profit rate. In addition, financialisation can push up the profit rate. Given the capital stock the consumption basket of workers depends on the level of productivity and the profit rate explained in a Keynesian and Kaleckian way. |
| Keywords: | Marxism,functional income distribution,Sraffa,Keynesianism |
| JEL: | B24 B51 E25 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ipewps:1012018&r=mac |
| By: | Katarina Borovickova (New York University); Jaroslav Borovicka (New York University) |
| Abstract: | We study the role of fluctuations in discount rates for the joint dynamics of expected returns in the stock market and employment dynamics. We construct a stochastic discount factor with a time-varying compensation for risk, and analyze the pricing of cash flows earned by stock market investors and firms hiring workers. Decomposition of the value of a job to the firm into its stochastic components and cash flows earned at alternative maturities yields insights for the understanding of firms' incentives to hire workers in frictional labor markets. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed017:1428&r=mac |
| By: | World Bank Group |
| Keywords: | Macroeconomics and Economic Growth - Fiscal & Monetary Policy Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Economic Forecasting Poverty Reduction - Achieving Shared Growth Environment - Air Quality & Clean Air |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:25865&r=mac |
| By: | International Monetary Fund |
| Abstract: | As part of the regional Central America-Panama-Dominican Republic Regional Technical Assistance Center (CAPTAC-DR) project to harmonize external sector statistics, a technical assistance mission on the Coordinated Direct Investment Survey (CDIS) and Coordinated Portfolio Investment Survey (CPIS) visited San Jose, Costa Rica, during March 6–14, 2014. The mission’s main objective was to support the Central Bank of Costa Rica (BCCR) in continuing to improve the compilation and dissemination of balance of payments statistics, with emphasis on coverage, identification and responses from diverse sources of information, and to review the data collection instruments currently in use. The context of those efforts was the adoption of methodological guidelines set out in the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6). During its visit, the mission observed that the practices followed to prepare external statistics employed adequate data collection instruments and appropriate methodologies. The review also identified areas for improvement. Some of the most important improvements depend on expanding the coverage of the “Balance of Payments Survey and Coordinated Direct Investment Survey†(BPS) to capture information from additional nonfinancial private sector firms. The units involved in this effort are the External Sector Statistics Area (AESE) and the Economic Statistics Area (AEE), which is the administrative unit responsible for management of economic information. |
| Date: | 2018–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/36&r=mac |
| By: | Viktor O. Ledenyov; Dimitri O. Ledenyov |
| Abstract: | The business cycles are generated by the oscillating macro-/micro-/nano- economic output variables in the economy of the scale and the scope in the amplitude/frequency/phase/time domains in the economics. The accurate forward looking assumptions on the business cycles oscillation dynamics can optimize the financial capital investing and/or borrowing by the economic agents in the capital markets. The book's main objective is to study the business cycles in the economy of the scale and the scope, formulating the Ledenyov unified business cycles theory in the Ledenyov classic and quantum econodynamics. |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1803.06108&r=mac |
| By: | Sebastiaan Pool |
| Abstract: | Since the 1980s, the global banking sector has been characterized by three trends: i) a secular decline in interest rates, ii) a reallocation of bank investments from corporate loans towards mortgages and iii) the rise of shadow banking relative to regulated banking. This paper builds a general equilibrium framework that connects, analyzes and explains these trends in a causal way. In the model, exogenous downward pressure on real interest rates increases the share of mortgage investments. Consequently, the interbank market for mortgage securities becomes more liquid. This increases funding liquidity and shadow banks gain comparative advantage over regulated banks with respect to the supply of mortgage loans. In relative terms, the shadow banking sector grows. Meanwhile, the economy becomes more vulnerable to financial crises as shadow banks issue too many uninsured deposits. To enhance financial stability, I consider restrictions on admissible loan-to-value ratios for mortgage loans to reduce house price and mortgage supply fluctuation. Finally, I suggest to introduce interest-paying central bank deposits for households to raise the costs for banks to finance themselves with uninsured deposits. |
| Keywords: | Shadow Banking; Regulated Banking; Financial Stability |
| JEL: | E44 G10 G21 G23 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:588&r=mac |
| By: | Anders Aslund |
| Abstract: | Over time, the necessary economic reforms have become so obvious that they have become politically possible in most places. The great problem has become the establishment of real property rights. By and large, Central and Eastern Europe have managed to accomplish that not least thanks to support from the European Union. In the former Soviet Union, however, only Georgia succeeded in that endeavor. The big question today is whether Ukraine will manage to do so, or whether it will be caught in a low-economic-growth trap. The three main elements that are needed are independent courts, autonomous prosecutors, and a law-abiding law enforcement, while no old secret police structures should be allowed to sabotage them. |
| Keywords: | Ukraine, economic reforms, judicial reforms, democratic reforms, corruption, property rights, election law |
| JEL: | E02 E26 K11 K12 K42 P14 P26 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:sec:mbanks:0153&r=mac |
| By: | Hana Polá?ková (University of Economics in Bratislava) |
| Abstract: | We can look at the impacts of globalization on agriculture and food security from different angles. However, not all findings can be positive. Looking at the growth of international trade and the amount of pollutants released into the air when transporting goods or protecting crops against pests, globalization contributes to disruption of global ecosystem and climate change. As a result, climatic fluctuations and extreme weather events - droughts, floods or torrential rainfalls that cause arable soil leakage - are becoming more and more frequent. Subsequent non-crops can negatively affect GDP (especially in the case of agricultural economies) and endanger the food security of the country. Secondly the changes in structure of economies in favor of production with higher labor productivity and smaller proportion of agriculture can force some countries to import even basic food. These facts are also indirectly reflected in the social environment. The paper draws attention to the fact that such structure of economy is cyclically very sensitive and may adversely affect the development of the underlying macroeconomic indicators. It focuses on certain weaknesses in this trend. The sources come from databases of statistical offices and a genetic-historical analysis was used in the paper. |
| Keywords: | Food security, gross domestic product, structure of the economy, food imports |
| JEL: | Q18 E24 F18 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:5908324&r=mac |
| By: | Aditya Aladangady; Laura Feiveson |
| Abstract: | Historically, aggregate consumption has closely tracked disposable personal income, government transfers, and household net wealth. In this note, we show that this empirical relationship has broken down in recent years and explore potential explanations for why consumers--at least in the aggregate--may not be spending in line with recent income and wealth gains. |
| Date: | 2018–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfn:2018-03-08&r=mac |
| By: | Massimo CINGOLANI (Banque Européenne d’Investissement) |
| Abstract: | The role of public banks in financing necessary investment should be discussed with reference to a causal system linking public and private expenditure in sequential time. The text starts by presenting a simple variant of such a model and uses it to interpret the causes of the recent financial crisis. The evidence shows that the latter was not caused by public debt but by the fast accumulation of private debt. The facts observed can be interpreted within a simple causality structure where public expenditure plays a causal role in driving economic activity. The model is then used to discuss the role of public banks, introducing the distinction between the creation of primary incomes, or new wealth, and the recycling of past savings, or circulation of wealth already accumulated. The role of public banks is generally discussed only with reference to the circuit of primary incomes, in which banks play only a non-monetary financial intermediary role. The text illustrates a proposal showing that public banks could be used also in their monetary financial intermediary role to create new wealth at European level. Alternatively, one can look at the role of public banks in recycling existing savings for public policy purposes, on which some references are given to the recent literature. The case of investment for climate change mitigation is taken as an example to show that, in the absence of other incentives, the level of environmental investment will be limited to that portion of the necessary investment that the market considers profitable, i.e. it would not be sufficient to reduce the climate change risk. If the necessary investment in environment is to be realized without reducing other necessary public investments, public banks should engage also in monetary financial intermediary’s activities aimed at creating new wealth. The text concludes by examining briefly the main logical consequences of the analysis developed. |
| Keywords: | Public banks, Development Banks, EU policy, Climate Change, Investment, Public Expenditure, Public debt, Private Debt |
| JEL: | E61 G21 O16 O23 Q51 Q52 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:crc:wpaper:1707&r=mac |
| By: | Aneta Hryckiewicz; Piotr Mielus; Karolina Skorulska; Malgorzata Snarska |
| Abstract: | The crisis has shown that a drop in liquidity, as well as the shortened maturity of interbank transactions, has caused many problems for banks. We analyze how the introduction of a bank levy on bank assets in Poland has affected the interbank market, as well as money market pricing. Analyzing daily volume and number of interbank transactions, along with daily bank quotes, we document that the bank levy has significantly reduced trading intensity on the market, shortening the maturity of transactions. We also find that it has increased the dispersion of bank quotes for short-term transactions, while at the same time ''killing'' interbank long-term transactions, including the pricing for this market. The regulators should re-think the nature of bank levies in several countries, as they negatively affect the functioning of the interbank market and brings intoquestion the credibility of interbank benchmarks. |
| Keywords: | C32, G28, E43, C54 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:sgh:kaewps:2018033&r=mac |