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on Macroeconomics |
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Issue of 2018‒05‒21
71 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Barnett, William; Ftiti, Zied; Jawadi, Fredj |
| Abstract: | Since the publication of Friedman’s (1977) Nobel lecture, the relationship between the mean function of the inflation stochastic process and its uncertainty has been the subject of much research. Friedman postulated that high inflation causes increased inflation uncertainty. Ball (1992) produces macroeconomic theory that could justify that causality. But other researchers have found the converse causality, from increased inflation uncertainty to increased mean inflation, and postulated macroeconomic theory that could support their views. In addition, some researchers have found inverse correlation between mean inflation and inflation volatility with causation in either direction. These controversies are important, since they have different implications for economic theory and policy. We conduct a systematic econometric study of the relationship among the first two moments of the inflation stochastic process using state of the art approaches. We propose a time-varying inflation uncertainty measure based on stochastic volatility to take into account unpredictable shocks. Further, we extend previous related literature by providing a new econometric specification of this relationship using two semi-parametric approaches: the frequency evolutionary co-spectral approach and the continuous wavelet methodology. We theoretically justify their use through an extension of Ballʼs (1992) model. These frequency approaches have two advantages: they provide the analyses for different frequency horizons and do not impose restriction on the data. While related literature always focused on the US data, our study explores this relationship for five major developed and emerging countries (the US, the UK, the Euro area, South Africa, and China) over the last five decades to investigate robustness of our inferences and investigate sources of prior inconsistencies in inferences among prior studies. This selection of countries permits investigation of the inflation versus inflation uncertainty relationship under different hypotheses, including explicit versus implicit inflation targets, conventional versus unconventional monetary policy, independent versus dependent central banks, and calm versus crisis periods. Our findings depict a significant relationship between inflation and inflation uncertainty that varies with time and frequency and offer an improved comprehension of the ambiguous inflation versus inflation uncertainty relationship. This relationship seems positive in the short and medium terms during stable periods, confirming the Friedman-Ball theory, while it is negative during crisis periods. In addition, our analysis identifies the phases of leading and lagging inflation uncertainty. Our general approach nests within it the earlier approaches, permitting explanation of the prior appearances of ambiguity in the relationship and identifies the conditions associated with the various outcomes. |
| Keywords: | Inflation, Inflation uncertainty, Frequency approach, Wavelet, Semi-parametric approach, Stochastic volatility. |
| JEL: | C14 E31 |
| Date: | 2018–04–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86478&r=mac |
| By: | William Barnett (Department of Economics, The University of Kansas; Center for Financial Stability, New York City; IC2 Institute, University of Texas at Austin); Zied Ftiti (EDC Paris Business School, France); Fredj Jawadi (University of Evry, France) |
| Abstract: | Since the publication of Friedman’s (1977) Nobel lecture, the relationship between the mean function of the inflation stochastic process and its uncertainty has been the subject of much research. Friedman postulated that high inflation causes increased inflation uncertainty. Ball (1992) produces macroeconomic theory that could justify that causality. But other researchers have found the converse causality, from increased inflation uncertainty to increased mean inflation, and postulated macroeconomic theory that could support their views. In addition, some researchers have found inverse correlation between mean inflation and inflation volatility with causation in either direction. These controversies are important, since they have different implications for economic theory and policy. We conduct a systematic econometric study of the relationship among the first two moments of the inflation stochastic process using state of the art approaches. We propose a time-varying inflation uncertainty measure based on stochastic volatility to take into account unpredictable shocks. Further, we extend previous related literature by providing a new econometric specification of this relationship using two semi-parametric approaches: the frequency evolutionary co-spectral approach and the continuous wavelet methodology. We theoretically justify their use through an extension of Ball's (1992) model. These frequency approaches have two advantages, they provide the analyses for different frequency horizons and do not impose restriction on the data. While related literature always focused on the US data, our study explores this relationship for five major developed and emerging countries (the US, the UK, the Euro area, South Africa, and China) over the last five decades to investigate robustness of our inferences and investigate sources of prior inconsistencies in inferences among prior studies. This selection of countries permits investigation of the inflation versus inflation uncertainty relationship under different hypotheses, including explicit versus implicit inflation targets, conventional versus unconventional monetary policy, independent versus dependent central banks, and calm versus crisis periods. Our findings depict a significant relationship between inflation and inflation uncertainty that varies with time and frequency and offer an improved comprehension of the ambiguous inflation versus inflation uncertainty relationship. This relationship seems positive in the short and medium terms during stable periods, confirming the Friedman-Ball theory, while it is negative during crisis periods. In addition, our analysis identifies the phases of leading and lagging inflation uncertainty. Our general approach nests within it the earlier approaches, permitting explanation of the prior appearances of ambiguity in the relationship and identifies the conditions associated with the various outcomes. |
| Keywords: | Inflation; Inflation uncertainty; Frequency approach; Wavelet; Semi-parametric approach; Stochastic volatility |
| JEL: | C14 E31 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:kan:wpaper:201803&r=mac |
| By: | Ricardo Reis |
| Abstract: | Central banks have sometimes turned their attention to long-term interest rates as a target or as a diagnosis of policy. This paper describes two historical episodes when this happened - the US in 1942-51 and the UK in the 1960s - and uses a model of inflation dynamics to evaluate monetary policies that rely on going long. It concludes that these policies for the most part fail to keep inflation under control. A complementary methodological contribution is to re-state the classic problem of monetary policy through interest-rate rules in a continuous-time setting where shocks follow diffusions in order to integrate the endogenous determination of inflation and the term structure of interest rates. |
| Keywords: | Taylor rule, yield curve, pegs, ceilings, affine models |
| JEL: | E31 E52 E58 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6998&r=mac |
| By: | Jean-Luc Gaffard (Observatoire français des conjonctures économiques); Mauro Napoletano (Observatoire français des conjonctures économiques); Andrea Roventini (Laboratory of Economics and Management (LEM)) |
| Abstract: | The authors build a simple agent-based model populated by households with heterogenous and time-varying financial conditions in order to study how fiscal multipliers can change over the business cycle and are affected by the state of credit markets. They find that deficit-spending fiscal policy dampens the effect of bankruptcy shocks and lowers their persistence. Moreover, the size and dynamics of government spending multipliers are related to the degree and persistence of credit rationing in the economy. On the contrary, in presence of balanced-budget rules, output permanently falls below pre-shock levels and the ensuing multipliers fall below one and are much lower than the ones emerging from the deficit-spending policy. Finally, the authors show that different conditions in the credit market significantly affect the size and the evolution of fiscal multipliers |
| JEL: | E63 E21 C63 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/2d0r8783s48d1bllkeldav8hqp&r=mac |
| By: | Tanweer Akram; Huiqing Li |
| Abstract: | This paper employs a Keynesian perspective to explain why Japanese government bonds' (JGBs) nominal yields have been low for more than two decades. It deploys several vector error correction (VEC) models to estimate long-term government bond yields. It shows that the low short-term interest rate, induced by the Bank of Japan's (BoJ) accommodative monetary policy, is mainly responsible for keeping long-term JGBs' nominal yields exceptionally low for a protracted period. The results also demonstrate that higher government debt and deficit ratios do not exert upward pressure on JGBs' nominal yields. These findings are relevant to ongoing policy debates in Japan and other advanced countries about government bond yields, fiscal sustainability, fiscal policy, functional finance, monetary policy, and financial stability. |
| Keywords: | Japanese Government Bonds; Long-Term Interest Rate; Nominal Bond Yields; Monetary Policy; Bank of Japan; John Maynard Keynes |
| JEL: | E43 E50 E58 E60 G10 G12 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_906&r=mac |
| By: | Philip Molyneux (Bangor University); Alessio Reghezza (Bangor University); Ru Xie (University of Bath) |
| Abstract: | This paper investigates the influence of negative interest rate policy (NIRP) on bank margins and profitability. Using a dataset comprising 7242 banks from 33 OECD member countries over 2012-2016 and a difference-in-differences methodology, we find that bank margins and profits fell in NIRP-adopter countries compared to countries that did not adopt the policy. The results are robust to a variety of checks. This adverse NIRP effect appears to have been stronger for banks that were small, operating in competitive system as well as in countries where floating loan rates predominate. |
| Keywords: | Negative interest rates, bank profitability, NIMs, difference-in-differences estimation |
| JEL: | E43 E44 E52 G21 F34 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:bng:wpaper:18001&r=mac |
| By: | Mathias Drehmann; Mikael Juselius; Anton Korinek |
| Abstract: | Traditional economic models have had difficulty explaining the non-monotonic real effects of credit booms and, in particular, why they have predictable negative after-effects for up to a decade. We provide a systematic transmission mechanism by focusing on the flows of resources between borrowers and lenders, i.e. new borrowing and debt service. We construct the first cross-country dataset of these flows for a panel of household debt in 16 countries. We show that new borrowing increases economic activity but generates a pre-specified path of debt service that reduces future economic activity. The protracted response in debt service derives from two key analytic properties of credit booms: (i) new borrowing is auto-correlated and (ii) debt contracts are long term. We confirm these properties in the data and show that debt service peaks on average four years after credit booms and is associated with significantly lower output and higher crisis risk. Our results explain the transmission mechanism through which credit booms and busts generate non-monotonic and long-lasting aggregate demand effects and are, hence, crucial for macroeconomic stabilization policy. |
| JEL: | E17 E44 G01 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24549&r=mac |
| By: | Paul Hubert (Observatoire français des conjonctures économiques) |
| Abstract: | Does the effect of monetary policy depend on the macroeconomic information released by the central bank? Because differences between central bank’s and private agents’ information sets affect private agents’ interpretation of policy decisions, this paper aims to investigate whether the publication of macroeconomic information by the central bank modifies private responses to monetary policy. We assess the non-linear effects of monetary shocks conditional on the Bank of England’s macroeconomic projections on UK private inflation expectations. We find that inflation projections modify the impact of monetary shocks. When contractionary monetary shocks are interacted with positive (negative) projections, the negative effect of policy on inflation expectations is amplified (reduced). This suggests that providing guidance about central bank future expected inflation helps private agents’ information processing, and therefore changes their response to policy decisions.. |
| Keywords: | Monetary policy; Information processing; Signal extraction; Market based inflation expectations; Central bank projections; Real time forecasts |
| JEL: | E52 E58 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/6mrhmte8no840p587hv7bkohtn&r=mac |
| By: | George-Marios Angeletos; Zhen Huo |
| Abstract: | We consider a stationary setting featuring forward-looking behavior, higher-order uncertainty, and learning. We obtain an observational equivalence result that recasts the aggregate dynamics of this setting as that of a representative-agent model featuring two distortions: myopia in the sense of extra discounting of the future; and anchoring of the current outcome to the past outcome, as in models featuring habit persistence, adjustment costs, or momentum. This builds a bridge to both the DSGE literature and an emerging literature on bounded rationality. We further show that the as-if distortions are larger when the general-equilibrium interaction is stronger; this property reflects the role of higher-order uncertainty and helps reduce the gap between macroeconomic and microeconomic estimates of adjustment frictions. We illustrate the quantitative potential of our theory in the context of inflation by showing how it can help rationalize existing estimates of the Hybrid NKPC while also matching survey evidence on expectations. We discuss additional applications to consumption, investment, and asset prices. |
| JEL: | D83 D84 E10 E32 G12 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24545&r=mac |
| By: | Ulrich Fritsche (Universität Hamburg (University of Hamburg)); Johannes Puckelwald (Universität Hamburg (University of Hamburg)) |
| Abstract: | We analyze a corpus of 564 business cycle forecast reports for the German economy. The dataset covers nine institutions and 27 years. From the entire reports we select the parts that refer exclusively to the forecast of the German economy. Sentiment and frequency analysis confirm that the mode of the textual expressions varies with the business cycle in line with the hypothesis of adaptive expectations. A calculated 'uncertainty index' based on the occurrence of modal words matches with the economic policy uncertainty index by Baker et al. (2016). The latent Dirichlet allocation (LDA) model and the structural topic model (STM) indicate that topics are significantly state- and time-dependent and different across institutions. Positive or negative forecast 'surprises' experienced in the previous year have an impact on the content of topics. |
| Keywords: | Sentiment analysis, text analysis, uncertainty, business cycle forecast, forecast error, expectation, adaptive expectation, latent Dirichlet allocation, structural topic model |
| JEL: | E32 E37 C49 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:hep:macppr:201804&r=mac |
| By: | Christophe Blot (Observatoire français des conjonctures économiques); Jérôme Creel (Observatoire français des conjonctures économiques); Paul Hubert (Observatoire français des conjonctures économiques); Fabien Labondance (Observatoire français des conjonctures économiques) |
| Abstract: | We investigate the role of both ECB’s asset purchases and market sentiment in the Eurozone sovereign debt crisis context. We explain the evolution of long-term interest rates in the Eurozone and in some Member States since the ECB started to purchase various securities for monetary policy purposes. We control for four categories of fundamentals: macroeconomic, international, financial and expectations. We show that unconventional monetary policies and country-specific market sentiment have significant negative and positive effects respectively. Our results suggest that ECB’s unconventional policies have been effective in mitigating the disruption in the channels of transmission across the different Eurozone countries. |
| Keywords: | Asset purchase programmes; ECB; Sovereign yields; Unconventional monetary policies; CISS |
| JEL: | E58 E52 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/8vns9so6b9pnqfo7eebjgfann&r=mac |
| By: | Marina Azzimonti; Pierre Yared |
| Abstract: | We develop a theory of optimal government debt in which publicly-issued and privately-issued safe assets are substitutes. While government bonds are backed by future tax revenues, privately-issued safe assets are backed by the future repayment of pools of defaultable private loans. We find that a higher supply of public debt crowds out privately-issued safe assets less than one for one and reduces the interest spread between borrowing and deposit rates. Our main result is that the optimal level of public debt does not fully crowd out private lending and maintains a positive interest spread. Moreover, the optimal level of public debt is higher the more severe are financial frictions. |
| JEL: | E21 E25 E62 H21 H63 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24534&r=mac |
| By: | Davide Debortoli; Ricardo Nunes; Pierre Yared |
| Abstract: | This paper considers optimal fiscal policy in a deterministic Lucas and Stokey (1983) economy in the absence of government commitment. In every period, the government chooses a labor income tax and issues any unconstrained maturity structure of debt as a function of its outstanding debt portfolio. We find that the solution under commitment cannot always be sustained through the appropriate choice of debt maturities, a result which contrasts with previous conclusions in the literature. This is because a government today cannot commit future governments to a particular side of the Laffer curve, even if it can commit them to future revenues. We find that the unique stable debt maturity structure under no commitment is flat, with the government owing the same amount of resources to the private sector at all future dates. We present examples in which the maturity structure converges to such a flat distribution over time. In cases where the commitment and no-commitment solutions do not coincide, debt converges to the natural debt limit. |
| JEL: | E62 H21 H63 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24522&r=mac |
| By: | Edgar A. Ghossoub (UTSA) |
| Abstract: | The objective of this manuscript is to study the strategic interaction between different types of financial institutions and its implications for economic activity and monetary policy. While commercial banks and credit unions provide similar financial services, they have different ownership structure and therefore have different objectives. For instance, banks are often perceived as profit maximizers, while credit unions act like cooperative entities seeking value and aim to maximize the welfare of their depositors. Following the 2007-2008 financial crisis, credit unions gained more market share and their role in the process of financial intermediation became more pronounced. Such changes raise some important questions that I attempt to address in this manuscript. First, how does the strategic interaction between credit unions and commercial banks affect risk sharing, total welfare, and capital formation? Second, will the effects of monetary policy become stronger if credit unions gain more market share? Finally, what is the optimal size of each financial institution? In order to address these important questions, I study a dynamic general equilibrium model with an important role for money and where different types of financial intermediaries interact strategically in deposit and capital markets. Length: 22 pages |
| Keywords: | Credit Union, Banking Competition, Monetary Policy |
| JEL: | E31 E41 E44 O42 |
| Date: | 2016–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:tsa:wpaper:0174eco&r=mac |
| By: | Amstad, Marlene; Ye, Huan; Ma, Guonan |
| Abstract: | Inflation in emerging markets is often driven by large, persistent changes in food and energy prices. Core inflation measures that neglect or under-weight volatile CPI subcomponents such as food and energy risk excluding information helpful in assessing current and future inflation trends. This paper develops an underlying inflation gauge (UIG) for China, extracting the persistent part of the common component in a broad dataset of price and non-price variables. Our proposed UIG for China avoids the excess volatility reduction that plagues traditional Chinese core inflation measures. When forecasting headline CPI, the proposed UIG outperforms traditional core inflation measures over a variety of samples. |
| JEL: | C13 C33 E31 E37 G15 C43 |
| Date: | 2018–04–27 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2018_011&r=mac |
| By: | Francesco Saraceno (Observatoire français des conjonctures économiques); E Brancaccio |
| Abstract: | This article traces the complex intellectual path of Olivier Blanchard, a personification of the controversial evolution of macroeconomic research over the last three decades. After contributing to consolidation of the core of mainstream macroeconomics, Blanchard recently suggested ‘rethinking’ some of its key aspects to take stock of the lessons of the 2008 Great Recession, which he witnessed as the International Monetary Fund’s Chief Economist. This welcome discussion, which according to Blanchard should open mainstream macroeconomics to heterodox thinking, has so far produced a certainly interesting albeit theoretically contradictory synthesis and limited policy consequences. The most paradigmatic aspect of this rethinking of macroeconomics is represented by the abandonment in teaching of aggregate supply and demand in favor of a revival of the IS–LM model complemented by the Phillips curve. While this change of perspective does allow for the instability of ‘natural’ equilibrium to be emphasized, a deeper reading may prove incompatible with the neoclassical foundations of the mainstream approach. |
| Keywords: | Alternative economic paradigms; Great recession; Mainstream macroeconomics; Neoclassical theory; Olivier Blanchard |
| JEL: | B31 B41 B50 E10 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/1hlgq13piu8cirvmd44v0hs2v1&r=mac |
| By: | Michel-Pierre Chélini; Georges Prat |
| Abstract: | A standard specification of the WS-PS model based on wage bargaining between unions and firms makes it possible to understand the main features of long-term dynamics of unemployment and wages in France at the macroeconomic level. This result is conditional on auxiliary hypotheses made on the representations of the degree of rigidity in the labour market (depicted by a stochastic state variable), of the reservation wage (depending on the legal minimum wage), and on the nature of “other factors” pertaining to wages and prices that are not a priori specified in the WS-PS theoretical framework (summarized by the output gap). We find that the observed unemployment adjusts gradually to its equilibrium value, which is composed of three components: a “chronic” component due to the repartition in the added-value (real reservation wage, social contributions, productivity, profit margins of companies), a “cyclical” component depending on the output gap, and a “frictional” component due to the imperfect mobility of labour and technical progress. The observed wage also adjusts gradually to its negotiated value, the latter depending on the reservation wage, the social contributions, the price level, the labor productivity, the profit margins of companies, the unionization rate and on the unemployment rate whose influence is time-varying. Our results suggest that, in the average, the power of firms dominates that of unions during the negotiations, while, as predicted by the theory, change in employment intervenes effectively in the adjustment between wage desired by employees and wage offered by employers to achieve equilibrium. |
| Keywords: | equilibrium unemployment, wages, France |
| JEL: | E24 J2 J30 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2018-22&r=mac |
| By: | Tatyana Bulavskaya (The Netherlands Organisation for Applied Scientific Research (TNO)); Frédéric Reynés (Observatoire français des conjonctures économiques) |
| Abstract: | This study evaluates the economic impact of a shift towards renewable electricity mix in the Netherlands using the neo-Keynesian CGEM ThreeME (Multi-sector Macroeconomic Model for the Evaluation of Environmental and Energy policy). This scenario has been inspired by the Urgenda's report ‘Energy 100% Sustainable in the Netherlands by 2030’, which have been quantified using the Energy Transition Model (ETM) developed by Quintel. Using the output of the ETM regarding the change in the electricity generation shares as input in ThreeME, we derive the impact in terms of key economic variables (GDP, employment, investment, value-added, prices, trade, tax revenue, etc.). We find that transition to renewable energy may have a positive impact on the Dutch economy, creating almost 50 000 new jobs by 2030 and adding almost 1% of gross domestic product |
| Keywords: | Energy transition; Climate policy; Energy-economy modeling; Netherlands |
| JEL: | E12 E17 E27 E47 D57 D58 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/11505qn4ak95irt0cafaeim81j&r=mac |
| By: | Michalis Nikiforos |
| Abstract: | The paper discusses the Sraffian supermultiplier (SSM) approach to growth and distribution. It makes five points. First, in the short run the role of autonomous expenditure can be appreciated within a standard post-Keynesian framework (Kaleckian, Kaldorian, Robinsonian, etc.). Second, and related to the first, the SSM model is a model of the long run and has to be evaluated as such. Third, in the long run, one way that capacity adjusts to demand is through an endogenous adjustment of the rate of utilization. Fourth, the SSM model is a peculiar way to reach what Garegnani called the "Second Keynesian Position." Although it respects the letter of the "Keynesian hypothesis," it makes investment quasi-endogenous and subjects it to the growth of autonomous expenditure. Fifth, in the long run it is unlikely that "autonomous expenditure" is really autonomous. From a stock-flow consistent point of view, this implies unrealistic adjustments after periods of changes in stock-flow ratios. Moreover, if we were to take this kind of adjustment at face value, there would be no space for Minskyan financial cycles. This also creates serious problems for the empirical validation of the model. |
| Keywords: | Sraffian Supermultiplier; Long Run; Utilization; Autonomous Demand |
| JEL: | B22 B5 E12 E32 O4 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_907&r=mac |
| By: | Yi Huang (IHEID, Graduate Institute of International and Development Studies); Ugo Panizza (IHEID, Graduate Institute of International and Development Studies, Geneva and CEPR); Richard Varghese (IHEID, Graduate Institute of International and Development Studies) |
| Abstract: | Using data for advanced and emerging economies, we show that there is a negative correlation between public debt and corporate investment. Industry-level regressions show that high levels of government debt are particularly damaging for industries that need more external ?financial resources. Firm-level regressions show that government debt increases the sensitivity of corporate investment to cash ?flow. These results indicate that the relationship between public debt and investment is likely to be causal and that public debt crowds out corporate investment by tightening credit constraints. |
| Keywords: | Investment, Public Debt, Crowding Out, Credit Constraints |
| JEL: | E22 E62 H63 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp08-2018&r=mac |
| By: | Carolin Pflueger; Emil Siriwardane; Adi Sunderam |
| Abstract: | We document a strong and robust positive relationship between real rates and the contemporaneous valuation of volatile stocks, which we contend measures the economy’s risk appetite. Our novel proxy for risk appetite explains 41% of the variation in the one-year real rate since 1970, while the valuation of the aggregate stock market explains just 1%. In addition, the real rate forecasts returns on volatile stocks, confirming our interpretation that changes in risk appetite drive the real rate. Increases in our measure of risk appetite are followed by a boom in investment and output. |
| JEL: | E22 E44 G12 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24529&r=mac |
| By: | Yousafzai, Essa; Masih, Mansur |
| Abstract: | This paper aims to investigate whether shariah stock index, exchange rate and macroeconomic forces in Japan have any long run relationship or not. If the relationship exists, does the Shariah stock index lead or lag? The paper is likely to be the first study that investigates the causal relationship of aforementioned variables and the Shariah Index in Japan. Current literature on the topic in different countries gives either contradictory or inclusive results. This study will try to fill two gaps, one relating to Japan, and another relating to Islamic Indices. This study employed quarterly data from 2007 to 2017. Auto-Regressive Distributed lag (ARDL) time series technique is applied to conduct the study. This technique is free from major limitations of the conventional cointegrating tests which suffer from the pre-test biases involved in the unit roots and cointegration.The empirical evidence tends to suggest that both in the short- and long- run, money supply, exchange rate, and GDP have a significant relationship with Japan’s Shariah stock prices. However, ARDL’s long run coefficients suggest that inflation does not have such impact on the Shariah stock price. The findings of the study tend to indicate that investors of shariah stocks in Japan and the Japanese government need to be more attentive to the money supply and exchange rate of the country. The findings of this study are plausible and have strong policy implications for an export-oriented country such as Japan. |
| Keywords: | Shariah stock index, macrovariables, lead-lag, ARDL |
| JEL: | C58 E44 |
| Date: | 2017–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86373&r=mac |
| By: | Tony Chernis; Calista Cheung; Gabriella Velasco |
| Abstract: | This paper estimates a three-frequency dynamic factor model for nowcasting Canadian provincial gross domestic product (GDP). Canadian provincial GDP is released by Statistics Canada on an annual basis only, with a significant lag (11 months). This necessitates a mixed-frequency approach that can process timely monthly data, the quarterly national accounts and the annual target variable. The model is estimated on a wide set of provincial, national and international data. We assess the extent to which these indicators can be used to nowcast annual provincial GDP in a pseudo real-time setting and construct indicators of unobserved monthly GDP for each province that can be used to assess the state of regional economies. The monthly activity indicators fit the data well in-sample, are able to track business-cycle turning points across the provinces, and showcase the significant regional heterogeneity that characterizes a large diverse country like Canada. They also provide more timely indications of business-cycle turning points and are able to pick up shorter periods of economic contraction that would not be observed in the annual average. In a pseudo real-time exercise, we find the model outperforms simple benchmarks and is competitive with more sophisticated mixedfrequency approaches such as MIDAS models. |
| Keywords: | Business fluctuations and cycles, Econometric and statistical methods, Regional economic developments |
| JEL: | C53 E32 E37 R11 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:17-8&r=mac |
| By: | Fanti, Lucrezia |
| Abstract: | This paper introduces the classical idea about the so-called directed and induced technical change (ITC) within a Keynesian demand-side and evolutionary endogenous growth model in order to analyze the interplay among technical change, long-run economic growth and functional income distribution. An ITC process is analyzed within an Agent-Based Stock-Flow Consistent (AB-SFC) model, wherein credit-constrained heterogeneous firms choose both the intensity and the direction of the innovation towards a labor- or capital-saving choice of technique. In the long-run, the model reproduces the so-called Kaldor stylized facts (i.e. with a purely labor-saving technical change), however during the transitional phase the model shows a labor-saving/capital-using innovation pattern, as the aggregate output-capital ratio decreases until it stabilizes in the long-run, as well as declining labor share for long time periods and we can ascribe these evidences mainly to the directed technical change process. In order to stress the effective role of the innovation bias on the model dynamics, we compare the baseline scenario with a counterfactual scenario wherein a neutral technical progress is at work. |
| Keywords: | Agent-Based Macroeconomics; Stock-Flow Consistent Models; Induced Technical Change; Directed Innovation; Choice of Techniques; Labor Share; Growth and Distribution. |
| JEL: | E24 E25 O33 O41 |
| Date: | 2018–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86645&r=mac |
| By: | Al-Dailami, Mohammed Abdullah; Masih, Mansur |
| Abstract: | A lot of advanced economies have reached a stage of stale economic growth and very low inflation rates or even occasionally deflation. Their policy maker’s response was to stimulate the economy through monetary easing in order to make funds available for potential businesses to borrow and grow. Countries such as Japan for example have reduced their interest rates to negative nominal rates in order to try to push the money back into the economy but so far all efforts were futile. This calls for a relook at the real situation and whether interest rates are actually the right tool to stimulate the economy or not. This paper takes a completely different perspective on economic development and attempts to discover the relationship between interest rates and entrepreneurship indicators in Japan with the latter being taken as a proxy for economic development as it is a major driver for economic activity – a proxy that was totally neglected by previous literature. The study performs a time series regression to determine the relationship between interest rates and four drivers of entrepreneurship in order to determine whether interest rates actually stimulate these or not. The study showed that interest rates are rather a driven factor, not a driver when it comes to entrepreneurship and efforts done on interest rates won’t have an impact on the real economic entrepreneurship. |
| Keywords: | interest rates, entrepreneurship, Variance Decompositions |
| JEL: | C58 E44 |
| Date: | 2017–12–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86387&r=mac |
| By: | Gabor Pinter (Centre for Macroeconomics (CFM); Bank of England) |
| Abstract: | This paper integrates models of empirical asset pricing with structural vector autoregressions (VAR) to explore the macroeconomic forces behind the cross-sectional and time-series variation in expected excess returns. First, I use an unconditional asset pricing framework to find an orthogonal shock in a macroeconomic VAR that best explains the cross-sectional variation in expected returns. The obtained “λ-shock” closely resembles identified monetary policy surprises and does not explain the recent US recessions. Second, I integrate return-forecasting methods to construct a second shock in the VAR, which best explains time-variation in expected returns. The obtained “γ-shock” turns out to be virtually orthogonal to the λ-shock, closely resembles demand-type financial shocks identified by macroeconomists, and explains most US recessions. I find that the λ-shock and the γ-shock jointly explain up to 80% of aggregate consumption fluctuations in the US. |
| Keywords: | SDF, VAR, Shocks, Cross-section of returns, Time-varying risk premia |
| JEL: | C32 G12 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:1812&r=mac |
| By: | Christopher Busch; David Domeij; Fatih Guvenen; Rocio Madera |
| Abstract: | This paper studies the business-cycle variation in higher-order (labor) income risk—that is, risks that are captured by moments higher than the variance. We examine the extent to which such risks can be smoothed within households or with government social insurance and tax policies. We use panel data from three countries that differ in many aspects relevant for our analysis: the United States, Germany, and Sweden. Our analysis has three main results. First, using individual gross income, we document that skewness is procyclical and dispersion (variance) is flat and acyclical in Germany and Sweden, as was previously documented for the United States. The same patterns hold true for groups defined by education, gender, public- versus private-sector jobs, among others. Second, household-level income displays cyclical patterns that are very similar to individual income, indicating that within-household smoothing is not very effective at mitigating business cycle fluctuations in skewness. Third, government tax and transfer programs blunt some of the largest declines in incomes, reducing procyclical fluctuations in skewness, especially in Germany and Sweden. The resulting welfare gain—through the lens of a structural model—amounts to 1.3% in consumption-equivalent terms for Sweden (for which we are able to perform this calculation). However, the remaining risk (in household disposable income) is still substantial: households are willing to pay 4.6% of their consumption to completely eliminate procyclical fluctuations in skewness. |
| JEL: | D52 E32 J31 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24569&r=mac |
| By: | T. Aksoy; P. Manasse |
| Abstract: | The “great recession” has affected labor markets in Euro-area countries in very different ways. This chapter documents two important aspects of their response: the impact effect of the recession on the rate of unemployment, and the persistence of high unemployment. We find that countries lie on a trade-off between “resilience” and “persistence”: countries where the rate of unemployment is less affected on impact by output shocks (resilience) typically show higher unemployment persistence. We investigate the role of labor and product market institutions, and find evidence that more protected markets are associated to more resilience at the expense of more persistence. This suggests that implementing front loaded “structural reforms” at times of a fiscal consolidation, as many Southern European countries did during the recent crisis, may foster the rise in unemployment and possibly undermine the political support for the reforms. When we estimate the contribution of product and labor market reforms to the rise of unemployment in Southern Europe, however, we find positive, but relatively small effects that are quickly reversed. |
| JEL: | E02 E65 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp1121&r=mac |
| By: | Iván Alfaro; Nicholas Bloom; Xiaoji Lin |
| Abstract: | We show how real and financial frictions amplify the impact of uncertainty shocks. We build a model with real frictions, and find adding financial frictions roughly doubles the impact of uncertainty shocks. Higher uncertainty alongside financial frictions induces the standard real-options effects on investment and hiring, but also leads firms to hoard cash, further reducing investment and hiring. We then test the model using a panel of US firms and a novel instrumentation strategy for uncertainty exploiting differential firm exposure to exchange rate and price volatility. These results highlight why in periods with greater financial frictions uncertainty can be particularly damaging. |
| JEL: | E0 G0 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24571&r=mac |
| By: | Enrique Moral-Benito (Banco de España) |
| Abstract: | The Spanish growth experience over the 1995-2007 period was characterized by the remarkable surge in employment and investment as well as the dismal evolution of productivity. These macroeconomic fluctuations were coupled with an unprecedented credit boom fueled by a housing bubble. This article reviews a line of research that investigates the connection between these developments using micro-level data on Spanish firms and banks. The evidence suggests that the abundant availability of credit, partially induced by the real estate bubble, and its propagation through the Spanish production network explain a sizable part of the massive accumulation of labor and capital. Also, the deterioration in the allocation of resources across firms is the main responsible of the fall in aggregate productivity. The allocation of credit across firms and municipalities, the softening of banks lending standards, and the low productivity of Spanish firms can partly explain this deterioration. |
| Keywords: | Spain, firm level data, TFP, misallocation, input-output linkages |
| JEL: | D24 O11 O47 E44 G21 L25 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:bde:opaper:1805&r=mac |
| By: | Atsushi Tanaka (School of Economics, Kwansei Gakuin University) |
| Abstract: | In this paper, the problem that a central bank might face after exiting monetary quantitative easing policy is examined. This paper develops a simple dynamic optimization model of a central bank, and the model finds that if the bank needs to absorb a substantial amount of excess reserves at the exit, then the monetary base might become uncontrollable. In this case, the bank has no option but to increase the monetary base by more than the target amount, which leads to undesirable money supply expansion and ultimately to inflation pressures. The model derives the condition that a central bank falls into such a difficult situation. |
| Keywords: | central bank, monetary base, quantitative easing, exit strategy |
| JEL: | E5 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:181&r=mac |
| By: | Juliane Begenau; Maryam Farboodi; Laura Veldkamp |
| Abstract: | One of the most important trends in modern macroeconomics is the shift from small firms to large firms. At the same time, financial markets have been transformed by advances in information technology. We explore the hypothesis that the use of big data in financial markets has lowered the cost of capital for large firms, relative to small ones, enabling large firms to grow larger. Large firms, with more economic activity and a longer firm history offer more data to process. As faster processors crunch ever more data – macro announcements, earnings statements, competitors' performance metrics, export demand, etc. – large firms become more valuable targets for this data analysis. Once processed, that data can better forecast firm value, reduce the risk of equity investment, and thus reduce the firm's cost of capital. As big data technology improves, large firms attract a more than proportional share of the data processing, enabling large firms to invest cheaply and grow larger. |
| JEL: | E2 G1 D8 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24550&r=mac |
| By: | Felipe Benguria; Felipe Saffie; Sergio Urzúa |
| Abstract: | We examine the channels through which commodity price super-cycles affect the economy. Exploiting regional variation in exposure to commodity price shocks and administrative firm-level data from Brazil we disentangle two transmission channels. Higher commodity prices increase domestic demand (wealth channel), disproportionately benefiting nonexporters, and induce wage increases (cost channel) especially among unskilled workers, hurting unskilled-intensive industries. We introduce a dynamic model with heterogeneous firms and workers to quantify these mechanisms and evaluate welfare. The cost channel explains two-thirds of intersectoral labor reallocation, while the wealth channel explains two-thirds of the labor reallocation between exporters and nonexporters. |
| JEL: | E32 F16 F42 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24560&r=mac |
| By: | Jean Barthélemy (Département d'économie); Eric Mengus (HEC Paris - Recherche - Hors Laboratoire) |
| Abstract: | This paper revisits the ability of central banks to manage private sector's expectations depending on its credibility and how this affects the use of interest rate rules and pegs to achieve monetary policy objectives. When private agents can only provide limited incentives for the central bank to follow a policy, we show that resulting limited credibility allows a central bank to prevents the inflation from diverging by defaulting on past promises if necessary. As a result, the Taylor rule, when expected, anchors inflation expectations on a unique equilibrium path as long as the Taylor principle is satisfied. Finally, we also show that limited credibility restricts the impact of long-term interest rate pegs, so as to make current conditions less dependent on future policy changes. |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/1lu2rbsv0n8pkqid81q0tfof3f&r=mac |
| By: | Sarah Guillou (Observatoire français des conjonctures économiques); Tania Treibich (Maastricht University) |
| Abstract: | The objective of this paper is to show that part of the fixed cost of firms’ trade expansion is due to the acquisition of new internal capabilities (e.g. technology, production processes or skills), which imply a costly change in the firm’s internal labor organisation. We investigate the relationship between a firm’s structure of labor, in terms of relative number of managers, and the scope of its export portfolio, in terms of product-destination varieties. The empirical analysis is based on a matched employer- employee dataset covering the population of French firms from tradable sectors over the period 2009-2014. Our analysis suggests that market expansion, and in particular export diversification, is associated with a change in the firm’s workforce composition, namely an increase in the number of managerial layers and in the ratio of managers. We show how these results are consistent with a simple model where the complexity of a firm’s operations increases in the number of product-destination couples exported, and where managers’ role is to address the unsolved problems arising from such increased complexity of operations |
| Keywords: | Export diversification; Managers; Occupations; Employer -employee data |
| JEL: | F16 E24 C14 D2 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/46os5smni49ctrjp4k4b64p5ur&r=mac |
| By: | Armin Seibert (National Research University Higher School of Economics); Andrei Sirchenko (National Research University Higher School of Economics); Gernot Muller (National Research University Higher School of Economics) |
| Abstract: | This paper introduces a model that addresses the key worldwide features of modern monetary policy making: the discreteness of policy interest rates both in magnitude and in timing, the preponderance of status quo decisions, policy inertia and regime switching. We capture them by developing a new dynamic discrete-choice model with switching among three latent policy regimes (dovish, neutral and hawkish), estimated via the Gibbs sampler with data augmentation. The simulations and an application to federal funds rate target demonstrate that ignoring these features leads to biased estimates, worse in- and out-of-sample fit, and qualitatively different inference. Using all Federal Open Market Committee?s (FOMC) decisions made both at scheduled and unscheduled meetings as sample observations, we model the Federal Reserve?s response to real-time data available right before each meeting, and control for the endogeneity of monetary policy shocks. The new model, fitted for Greenspan?s tenure, correctly predicts the directions of about 90% of the next decisions on the target rate (hike, no change, or cut) out of sample during Bernanke?s term including the status quo decisions after reaching the zero lower bound, while the conventional linear model fails to adequately tackle the zero bound and wrongly predicts further cuts. |
| Keywords: | Federal funds rate target, FOMC, discrete ordered choice, regime switching, endogeneity, MCMC, Gibbs sampler, data augmentation, autoregressive ordered probit, real-time data |
| JEL: | C11 C34 C35 E52 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:192/ec/2018&r=mac |
| By: | Check, Adam J.; Nolan, Anna K.; Schipper, Tyler C. |
| Abstract: | This paper investigates the informational content of regular revisions to real GDP growth and its components. We perform a real-time forecasting exercise for the advance estimate of real GDP growth using dynamic regression models that include GDP and GDP component revisions. Echoing other work in the literature, we find little evidence that including aggregate GDP growth revisions improves forecast accuracy relative to an AR(1) baseline model; however, when we include revisions to components of GDP (i.e. C, I, G, X, and M) we find improvements in forecast accuracy. Overall, nearly 68\% of all models that contain subsets of component revisions outperform our baseline model. The "best" component-augmented model forecasts roughly 0.2 percentage points better, and a large subset of models improve RMSFE by more than 5%. Finally, we use Bayesian model comparison to demonstrate that differences in forecast performance are unlikely to be the result of statistical noise. Our results imply that component revisions, in particular to consumption, contain important information for forecasting GDP growth. |
| Keywords: | Data revisions, real-time data, forecasting, GDP |
| JEL: | C11 C53 C82 E01 |
| Date: | 2018–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86194&r=mac |
| By: | Pierre Aldama (Université Paris 1 Panthéon-Sorbonne); Jérôme Creel (Observatoire français des conjonctures économiques) |
| Abstract: | Historical data on US debt and primary surplus suggest the existence of different fiscal regimes which imply that, from time to time, US fiscal policy may have violated the government’s intertemporal budget constraint. But does evidence of locally unsustainable regimes eventually jeopardize the global sustainability of US public debt? We apply a Regime-Switching Model-Based Sustainability test which derives sufficient conditions on a regime-switching fiscal policy feeback rule such that fiscal policy can globally be sustainable while allowing for persistent unsustainable regimes. We find significant evidence of a globally Ricardian US fiscal policy, despite periodic and persistent unsustainable fiscal regimes. This conclusion remains valid after controlling for the reverse causality between the primary balance and the output gap. |
| Keywords: | Fiscal rules; Fiscal regimes; Public debt sustainability; Time varyins parameters; Markov switching models; Model based sustainability |
| JEL: | E6 H6 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/4718gto3ar8s3r4k307p0bvbcs&r=mac |
| By: | Amat Adarov (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | The paper reports estimation results and technical details on the estimation of financial cycles for a global sample of 34 advanced and developing countries over the period 1960Q1–2015Q4, as well as introduces a database of financial cycles. We estimate several versions of financial cycles for credit, housing, bond and equity markets as well as aggregate financial cycles for each country in the sample. To this end we use stationary and non-stationary dynamic factor models and state-space techniques to extract financial cycles as a common factor from a large number of variables conveying price, quantity and risk characteristics of financial markets. |
| Keywords: | financial cycles, global and regional financial cycles, asset bubbles, housing prices, equity, debt securities, credit, capital markets, Kalman filter, factor models |
| JEL: | F30 E44 G15 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:wii:spaper:statr:7&r=mac |
| By: | Rebecca Riley; Ana Rincon-Aznar; Lea Samek |
| Abstract: | We analyse new industry-level data to re-examine the UK productivity puzzle. We carry out an accounting exercise that allows us to distinguish general macroeconomic patterns from sector trends and idiosyncrasies, providing a roadmap for anyone interested in explaining the puzzle. We focus on the UK market sector. Average annual labour productivity growth was 2.5 percentage points lower during the period 2011-2015 than in the decade before the financial crisis that began in 2007. We find that several years on from the financial crisis stagnation remains widespread across detailed industry divisions, pointing to economy-wide explanations for the puzzle. With some exceptions, labour productivity growth lost most momentum in those industries that experienced strong growth before the crisis. Three fifths of the gap is accounted for by a few industries that together account for less than one fifth of market sector value added. In terms of why we observe continued stagnation, we find that capital shallowing has become increasingly important in explaining the labour productivity growth gap in service sectors, as the buoyancy of the UK labour market has not been sufficiently matched by investment, although our figures suggest that the majority of the productivity gap is accounted for by a TFP gap. The collapse in labour productivity growth has been more pronounced in the UK than elsewhere, but the broad sector patterns of productivity stagnation are in many respects similar across other advanced economies, emphasising the importance of global explanations for the puzzle. UK industries that saw the biggest reductions in productivity growth tended to be internationally competitive and more dependent on global demand than other industries. They were also industries where productivity is difficult to measure. |
| Keywords: | productivity, competitiveness, sector studies |
| JEL: | E22 E23 L60 L70 L80 L90 O47 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:escoed:escoe-dp-2018-06&r=mac |
| By: | Andreu Arenas, Clément Malgouyres |
| Abstract: | We study how economic conditions at the time of choosing post-compulsory education affect intergenerational mobility. Exploiting local variation in birthplace unemployment rate at age 16 across 23 cohorts in France, we find that cohorts deciding on post-compulsory education in bad economic times are more educationally intergenerationally mobile – their level of educational attainment is less related to having a white-collar father. These cohorts are also more occupationally intergenerationally mobile; and a large fraction of this effect is explained by business cycle-induced differences in educational attainment. Results are robust to accounting for differential spatial mobility between birth and age 16 by parental occupation. Finally, we provide additional evidence that high local unemployment at age 16 increases the relative school enrollment rate of children of blue collar workers the year after – at age 17. |
| Keywords: | Intergenerational mobility, business cycle, human capital, occupational choice |
| JEL: | J24 I21 E24 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:679&r=mac |
| By: | Bertrand Garbinti, Jonathan Goupille-Lebret & Thomas Piketty |
| Abstract: | We combine national accounts, tax and survey data in a comprehensive and consistent manner for France, to build homogenous annual series on the distribution of national income by percentiles, from 1900 to 2014, with detailed breakdown by age, gender and income categories over the 1970-2014 period. Our new series deliver higher inequality levels for the recent decades, because the usual tax-based series miss a rising part of capital income. Growth incidence curves look dramatically different for the 1950-1983 and 1983-2014 periods. We also show that it has become increasingly difficult to access top wealth groups with labor income only. Next, gender inequality in labor income declined in recent decades, albeit fairly slowly among top labor incomes. Finally, we compare the evolution of income inequality between France and the U.S. |
| Keywords: | income distribution, income inequality, national accounts |
| JEL: | D31 E01 H2 N34 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:677&r=mac |
| By: | Wolfgang Britz (Institute for Food and Resource Economics, University of Bonn); Roberto Roson (Department of Economics, University Of Venice Cà Foscari; IEFE Bocconi University) |
| Abstract: | We motivate and detail the newly developed G-RDEM recursive-dynamic Computable General Equilibrium model as a tool for long-term counterfactual analysis and baseline generation from given GDP and population projections. It encompasses an AIDADS demand system with non-linear Engel curves, debt accumulation from foreign saving and introduces sector specific productivity changes, endogenous aggregate saving rates, as well as time-varying input-output coefficients. Parameters for these relationships are econometrically estimated or taken from published work. The core of the model is derived from the GTAP standard model and seamlessly incorporated into the modular and flexible CGEBox modelling platform. Accordingly, it can be applied with various other extensions such as GTAP-AEZ, GTAP-Water or a regional breakdown for Europe to 280 NUTS2 regions. G-RDEM maintains the flexible aggregation from the GTAP data base. It is open source, encoded in GAMS and can be steered by a Graphical User Interface, which also encompasses a tool to analyse results with tables, graphs and maps. Existing GDP and population projections for the Socio-Economic Pathways 1-5 can be directly incorporated for baseline construction. A comparison of the generated long-term structural composition of the economy against a simple recursive-dynamic variant, using the basic CDE demand system of the standard GTAP model, uniform productivity growth, fixed saving rates and technology parameters, and no debt accumulation shows that G-RDEM brings about much more plausible results, as well as a more realistic, internally consistent representation of the economic structure in a hypothetical future. |
| Keywords: | Computable General Equilibrium models; Long-run economic scenarios; Structural change |
| JEL: | C68 C82 C88 D58 E17 F43 O11 O40 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2018:11&r=mac |
| By: | Tetsuo Ono (Graduate School of Economics, Osaka University); Yuki Uchida (Faculty of Economics, Seikei University) |
| Abstract: | This study considers the politics of public education and its impacts on economic growth and welfare across generations. Public education is funded by taxing the labor income of the working generation and capital income of the retired. We employ probabilistic voting to demonstrate the politics of taxes and expenditure and show that aging results in a shift of the tax burden from the old to the young and a slowdown of economic growth. We then consider three alternative constraints that limit the choice of taxes and/or expenditure: a minimum level of public education expenditure, an upper limit of the capital income tax rate, and a combination of the two. These constraints all create a trade-off between current and future generations in terms of welfare. |
| Keywords: | Public education, Economic growth, Capital income tax, Political equilibrium |
| JEL: | D70 E24 H63 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1805&r=mac |
| By: | Jose Maria Fanelli (Universidad de Buenos Aires, University of San Andrés, University of San Andrés) |
| Abstract: | The chapter develops a methodology to analyze the inter-temporal implications of "fiscal interventions" – i.e., taxes and transfers that are intended to produce changes in income distribution and/or protect the poor. These concern both fiscal sustainability and the distribution of wealth across generations. First, we use the income concepts developed by the CEQ project to define fiscal interventions and show what the sustainability conditions are for a given set of fiscal interventions. We also examine the role of depleting natural capital and the consequences of assuming that the contributions to social security are forced savings rather than a tax. Second, we investigate the relationship between fiscal sustainability, fiscal interventions, and income strata. Third, we address the demographic dimension and study the relationship between fiscal interventions and the cross-cohort distribution of income and wealth. The methodology utilizes the NTA (National Transfers Accounts) concepts to model the demographic transition. Finally, we extend the methodology to integrate strata distribution and the cohort distribution of income and wealth. The Annex presents Excel files with empirical evidence on fiscal sustainability. |
| Keywords: | fiscal policy, demographics |
| JEL: | E62 J11 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:tul:ceqwps:77&r=mac |
| By: | Koji Nakamura (Bank of Japan); Sohei Kaihatsu (Bank of Japan); Tomoyuki Yagi (Bank of Japan) |
| Abstract: | This paper summarizes recent discussion on labor productivity which is the source of medium- to long-term economic growth and observes the characteristics of recent productivity developments using relevant statistical data. Furthermore, the paper examines the background of recent Japan's low labor productivity growth and analyzes issues regarding Japan's sustainable growth.Labor productivity in major advanced countries has been experiencing a slowdown in recent years. This is mainly affected by the slowdown of Total Factor Productivity (TFP). In Japan, there are two reasons behind the slowdown: first, technology and ideas accumulated by research and development (R&D) and management resources such as capital and labor are not utilized efficiently; and second, these resources are not efficiently reallocated among corporations.In order to improve Japan's productivity in the medium to long-term, it is desirable to encourage the flexible reallocation of management resources such as capital and labor by changing working process at the corporate level in accordance with changes in the socio-economic environment and the advent of new technologies, as well as by improving efficiency in the labor and capital markets. |
| Keywords: | Productivity; Potential growth; Intangible assets; Resource reallocation |
| JEL: | E20 O30 O47 |
| Date: | 2018–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojwps:wp18e10&r=mac |
| By: | Rodrigo Octávio Orair (IPC-IG); Sergio Wulff Gobetti (IPC-IG) |
| Abstract: | "This paper analyses the changes in orientation and composition of Brazilian fiscal policy, focusing on three recent periods and seeking to explore their relationship with economic performance. The first period (2005?2010) was characterised by fiscal expansion, with public investment and redistributive transfers as its main drivers. Economic performance was extraordinary. During the second period of fiscal expansion (2011?2014), the fiscal space was reoriented towards tax cuts and subsidies to private investment, while public investment stagnated. This new fiscal policy mix proved ineffective in preventing the economy from entering a downturn. The third period (from 2015 onwards) has been characterised by a shift to fiscal austerity and by the worst recession ever recorded in the countrys history. Finally, the paper presents some concluding remarks on challenges and socio-economic risks resulting from the recent and radical shift towards fiscal austerity". (?) |
| Keywords: | Brazilian, fiscal, policy, perspective, from, expansion, austerity |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:ipc:wpaper:160&r=mac |
| By: | Mashabela, Juliet; Raputsoane, Leroi |
| Abstract: | This paper analyses the importance of competitiveness factors in international competitiveness ranking of South Africa. In particular, the paper investigates the odds in favour of an improved, as opposed to a deteriorated, Overall international competitiveness ranking due to a change in selected competitiveness factors. The results show that the autonomous improvement in Overall international competitiveness ranking is statistically insignificant while the effect of a change in Government efficiency also has a statistically insignificant effect on the odds in favour of an improved Overall international competitiveness ranking. The results further show that a change in Economic performance, Business efficiency and Infrastructure increase the odds in favour of an improved Overall international competitiveness ranking. Finally, a change in Infrastructure has the biggest odds in favour of an improvement in Overall international competitiveness ranking compared to a change in Economic performance and Business efficiency. |
| Keywords: | Competitiveness factors, International competitiveness ranking |
| JEL: | C12 E02 F23 I31 |
| Date: | 2018–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86477&r=mac |
| By: | Antolin-Diaz, Juan; Drechsel, Thomas; Petrella, Ivan |
| Abstract: | Using a dynamic factor model that allows for changes in both the long-run growth rate of output and the volatility of business cycles, we document a significant decline in long-run output growth in the United States. Our evidence supports the view that most of this slowdown occurred prior to the Great Recession. We show how to use the model to decompose changes in long-run growth into its underlying drivers. At low frequencies, a decline in the growth rate of labor productivity appears to be behind the recent slowdown in GDP growth for both the United States and other advanced economies. When applied to real-time data, the proposed model is capable of detecting shifts in long-run growth in a timely and reliable manner. |
| JEL: | J1 N0 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:81869&r=mac |
| By: | Unal, Huseyin; Masih, Mansur |
| Abstract: | The purpose of this study is to identify the causality relationship between bank profits and operational expense for the commercial banks in Turkish banking sector. A robust time series technique, ARDL is applied by using the monthly data for the year between 2007 and 2017, which is collected from the website of Banking Regulation and Supervision Agency of Turkey. While Net Profits (PR) and Operational Expense (OE) are determined as focus variables, Total Asset (TA) and Liquidity (LQ) are chosen as control variables. The results indicate that there is long-term causality relationship between PR and OE. We found OE as an exogenous variable leading PR which is an endogenous variable. Operational expense as the most exogenous variable leads the bank profits in the long run. Findings suggest that efficient operational investments will provide more profitability. Therefore, investing in sales and marketing, new branches, advertisement, human forces, IT services which are called efficient operational cost is suggested for more profitability in the long-term. |
| Keywords: | Operational Expense, Bank Profit, Causality Relationship, ARDL |
| JEL: | C58 G21 |
| Date: | 2017–12–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86391&r=mac |
| By: | Simerský, Mojmír |
| Abstract: | This paper presents some results of the yield curve (YC) estimation method proposed in ([Sim]). We focus on the Czech Government Bond market in the period 2014-2017, when the Czech National Bank (CNB) weakened the CZK exchange rate by long-term currency interventions. The input data is the Czech daily fixing published online by MTS ([Mts1]). These quotations suffer, however, from a large bid-ask or YTM spreads, a fact that reflects itself in the YC estimation errors. Some 700 YCs were computed and histograms of yield estimation errors and of YC smoothness are given. Of interest is the comparison of the Czech benchmark zero-coupon yields at 1, 5, and 10 years with the ECB AAA yields ([Ecb]). Selected YCs in 2017 show that the outstanding depression of the short-term bond yields occurred in mid-January, some two months before the CNB announced the end of interventions (April 6). The termination itself influenced the Czech bond yields only moderately. |
| Keywords: | yield curve estimation, zero-coupon yields, Czech bond market, Czech National Bank, ECB |
| JEL: | C51 E43 G12 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86476&r=mac |
| By: | Malik, Meheroon Nisa Abdul; Masih, Mansur |
| Abstract: | This study aims to examine the short-run and long-run relationship between economic growth, energy consumption, financial development, capital formation and population by using data set of Malaysia for the period 1971–2014. An emerging economy like Malaysia has high energy consumption which is intensified by its growing population. Economic growth and energy consumption in Malaysia have been rising over the past several years. The motivation to this study is related to four policy objectives of Malaysia; economic growth, financial development, energy conservation and reduction on pollution. The auto regressive distributed lag (ARDL) bounds testing approach to test the long run relationship among the variables, while short run dynamics were investigated using the Vector Error Correction Model (VECM). Variance decomposition (VDC) technique was used to provide Granger causal relationship between the variables. The findings suggest that energy consumption is influenced by economic growth and financial development, both in the short and the long run. The population–energy relationship however only holds in the long run. The results have important policy implications for balancing economic growth vis-à-vis energy consumption for Malaysia, and other emerging nations to explore new and alternative sources of energy to meet the rising demand of energy to sustain economic growth. |
| Keywords: | GDP, Energy consumption, Financial Development, Capital, Population Growth, Malaysia |
| JEL: | C58 E44 |
| Date: | 2017–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86374&r=mac |
| By: | Xiaodong Zhu |
| Abstract: | The rapid rise of shadow banking activities in China since 2009 has attracted a great deal of attention in both academia and policy circles. Most existing studies and commentary on China’s shadow banking have treated it as a recent phenomenon that appeared after the Global Financial Crisis and China’s response to it. In this paper, I argue that shadow banking is not a new phenomenon; it has always been a part of China’s financial system since the 1980s, and arose from the need to get around various lending restrictions imposed by the central government on banks. I also emphasize that there are two types of shadow banking activities, those initiated by banks and those initiated by local governments or state-owned enterprises. I provide evidence suggesting that the shadow banking activities initiated by banks tend to be efficiency enhancing, but those initiated by local governments and state-owned enterprises are more likely to be associated with misallocation of capital. The policy implication is that the central government should implement policies and regulations that break the link between financial institutions and local governments or state-owned enterprises. |
| Keywords: | China, Banking System, Shadow Banking, Capital Allocation |
| JEL: | G21 G23 G28 E44 O16 |
| Date: | 2018–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-605&r=mac |
| By: | Frankel, Jeffrey (Harvard University) |
| Abstract: | Countries that specialize in commodities have in recent years been hit by high volatility in world prices for their exports. This paper suggests four ways that commodity-exporters can make themselves less vulnerable. (1) They can use option contracts to hedge against short-term declines in the commodity price without giving up the upside, as Mexico has shown. (2) Commodity-linked bonds can hedge longer-term risk, and often have a natural ultimate counter-party in multinational corporations that depend on the commodity as an input. (3) The well-documented pro-cyclicality of fiscal policy among commodity exporters can be reduced by insulating official forecasters against optimism bias, as Chile has shown. (4) Monetary policy can be made automatically more counter-cyclical, judged by the criterion of currency appreciation in reaction to positive terms-of-trade shocks, under either of two regimes: Peggers can add the export commodity to a currency basket (CCB, for “Currency-plus-Commodity Basket†) and others can target Nominal Income instead of the CPI. |
| JEL: | E00 F00 G00 O00 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp17-033&r=mac |
| By: | Alessia De Stefani |
| Abstract: | Using the Michigan Survey of Consumers, I show that American households have heterogeneous expectations about the future of house prices, which largely depend upon the history of past house price realizations in the local area of residence. House price expectations are also systematically biased and inefficient, and as such inconsistent with even weak forms of the rational expectations hypothesis. In particular, house price forecasts display an extrapolative component: expectations are over-optimistic in good times and over-pessimistic in bad ones. This systematic bias matters because consumers make financial decisions on the basis of their house price beliefs. Exploiting an exogenous shift in housing sentiment I show that when individuals expect the value of their properties to rise, they borrow against the anticipated increase in home equity. One standard deviation increase in house price expectations changes the average leverage ratios on long-term fixed-rates mortgages by 6% of a standard deviation. The magnitude of this effect doubles when considering only home equity mortgages. |
| Keywords: | house price, mortgage |
| JEL: | D14 D84 G02 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:edn:esedps:282&r=mac |
| By: | Paul Hubert (Observatoire français des conjonctures économiques); Mathilde Le Moigne (École normale supérieure - Paris) |
| Abstract: | La dynamique de l’inflation après la crise de 2007-2009 est-elle atypique ? Selon Paul Krugman : « si la réaction de l’inflation (ndlr : aux Etats-Unis) avait été la même à la suite de la Grande Récession que lors des précédentes crises économiques, nous aurions dû nous trouver aujourd’hui en pleine déflation… Nous ne le sommes pas. » En effet, après 2009, l’inflation aux Etats-Unis est demeurée étonnamment stable au regard de l’évolution de l’activité réelle. Ce phénomène a été qualifié de « désinflation manquante ». Un tel phénomène s’observe-t-il dans la zone euro ? [Premier paragraphe] |
| Keywords: | Théorie économique; Courbe de Philips; Désinflation; Inflation |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/9pfqu3qcd90b899mr93c3dnfd&r=mac |
| By: | Luisina Almada (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración.); Paula Barreto (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración.) |
| Abstract: | The present work studies and compares the impact of international and regional shocks on Uruguayan economic growth. International shocks are characterized by a slowdown in China's GDP growth rate of 0.6% and an increase in the US short-term interest rate of 0.62bp. Meanwhile, regional shocks from Argentina and Brazil are represented by the 1.34% and 3% fall in GDP growth in both countries, respectively. The shocks are simulated using the GVAR methodology, a multi-country global model with quarterly data between 1979Q4 and 2015Q4. The results show that the simulated contractions in the growth rate of the neighbour countries are significant and negative on the Uruguayan growth rate, and that the shock of Brazil, which is simulated as greater than the one from Argentina, is the one that would cause more pronounced recessive effects on the Uruguayan variable. While the deceleration in China's growth rate and the simulated US interest rate increase would not cause significant and recessive effects on Uruguay's GDP, nor would it imply significant depreciation effects. It is concluded that in the simulated context, the analysed period and under the methodology used, the economic growth of Uruguay is presumably more vulnerable to the shocks coming from the region than to the international ones. |
| Keywords: | Regional shocks, International shocks, economic growth, Uruguay, GVAR, multi-country model |
| JEL: | E17 F43 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:ulr:tpaper:die-04-17&r=mac |
| By: | Iorember, Paul; Usar, Terzungwe; Ibrahim, Kabiru |
| Abstract: | The study looked into the stochastic properties of CPI-inflation rate for Nigeria from 1995Q1 to 2016Q4. The study employed an autoregressive fractionally integrated moving average and a general autoregressive conditional heteroskedasticity (ARFIMA-GARCH) methodology as well as ADF/KPSS to investigate the long-memory properties of CPI-Inflation for Nigeria. The study found that CPI-inflation in Nigeria is shock dissipating at a geometric rate (fast mean reverting ability). The ARFIMA-GARCH process showed that CPI inflation in Nigeria is a heteroskedastic fractionally integrated process with quick mean reverting ability. The study therefore concludes that shocks to CPI-inflation in Nigeria such as sudden hikes in prices of energy products will not cause a permanent change in general price level but will eventually return to its mean state, and therefore having an implication for the Inflation-Unemployment tradeoff of the Philips curve. |
| Keywords: | Inflation, AFIMA, GARCH, Fractional Integrated and Long Memory, ADF and KPSS |
| JEL: | B26 |
| Date: | 2018–01–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:85655&r=mac |
| By: | Hanlon, Joseph |
| Abstract: | Strenuous efforts by donors and lenders over four decades turned Mozambique from a socialist success story into a neoliberal capitalist one. The private sector dominates; a domestic elite dependent on foreign companies has been created. But a secret US$2.2 billion arms and fishing boat deal involving Swiss and Russian banks and Mozambican purchases from France, Germany, and Israel, with large profits on all sides, was a step too far down the donor’s capitalist road. The International Monetary Fund cut off its programme and western donors ended budget support. |
| Keywords: | Mozambique; Ematum; secret loan; donor; IMF; corruption; neoliberal; tuna |
| JEL: | N0 E6 |
| Date: | 2017–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:68130&r=mac |
| By: | Alain Coen; Benoit Lefebvre; Arnaud Simon |
| Abstract: | Since the financial crisis Central Banks have used unconventional monetary policy and increased the quantity of money available in the economy. The purpose of this paper is to study the effect of money supply on commercial real estate prices. The paper uses a panel estimation to determine the relationship between office price indexes and explanatory variables, both at different locations and at different periods. The panel analysis allows understanding price movements across the 15 main office markets in continental Europe between 2005 and 2015. To pick-up the relation between prices and money supply, we have constructed, for each market a monetary index adapted to commercial real estate. Results show that office prices are driven by economic variables, but there is also a positive relationship between the monetary index and the office prices. Restricting the analysis between 2010 and 2015 we found a reinforced causal relation between prices and money. Quantitative easing has an important impact on real estate. |
| Keywords: | European real estate market; Monetary supply; office prices; Panel Estimation |
| JEL: | R3 |
| Date: | 2017–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2017_55&r=mac |
| By: | Malin Gardberg (Erasmus University Rotterdam); Lorenzo (L.C.G.) Pozzi (Erasmus University Rotterdam) |
| Abstract: | The ratio of consumption to total household wealth (i.e., tangible assets plus unobserved human wealth) is commonly calculated from the estimation of a log-linear version of the household intertemporal budget constraint as a cointegrating relationship between consumption, assets and earnings (i.e., the variable "cay"). The evidence in favor of a stable cointegrating relationship between these variables in the US is weak however. This paper follows an alternative empirical approach using an unobserved component model applied to US data over the period 1951Q4-2016Q4. The regression of consumption on assets and earnings is augmented with an integrated unobserved component. The results strongly support the presence of such an integrated component in the consumption equation. The consumption-to-wealth ratio calculated from this model is much less persistent than the traditional "cay" variable. Its predictive ability for future excess stock returns - while diminished compared to that of the standard "cay" variable - is statistically and economically significant. We further show that - contrary to what has been suggested in the literature recently - the non-stationarity of the standard "cay" variable cannot be dealt with by allowing for regime shifts in its mean. |
| Keywords: | consumption; wealth; cay; stationarity; excess returns; unobserved component; Bayesian |
| JEL: | E21 C32 C11 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20180046&r=mac |
| By: | Atkinson, Tyler (Federal Reserve Bank of Dallas); Richter, Alexander (Federal Reserve Bank of Dallas); Throckmorton, Nathaniel (College of William & Mary) |
| Abstract: | This paper evaluates the accuracy of linear and nonlinear estimation methods for dynamic stochastic general equilibrium models. We generate a large sample of artificial datasets using a global solution to a nonlinear New Keynesian model with an occasionally binding zero lower bound (ZLB) constraint on the nominal interest rate. For each dataset, we estimate the nonlinear model—solved globally, accounting for the ZLB—and the linear analogue of the nonlinear model—solved locally, ignoring the ZLB—with a Metropolis-Hastings algorithm where the likelihood function is evaluated with a Kalman filter, unscented Kalman filter, or particle filter. In datasets that resemble the U.S. experience, the nonlinear model estimated with a particle filter is more accurate and has a higher marginal data density than the linear model estimated with a Kalman filter, as long as the measurement error variances in the particle filter are not too big. |
| Keywords: | Bayesian estimation; nonlinear solution; particle filter; unscented Kalman filter |
| JEL: | C11 C32 C51 E43 |
| Date: | 2018–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:1804&r=mac |
| By: | Gantungalag Altansukh; Ralf Becker; George Bratsiotis; Denise R. Osborn |
| Abstract: | This paper studies the link between domestic inflation for 19 OECD countries and a corresponding country-specific global inflation series. This is achieved through an iterative methodology, which iterates between coefficient and variance tests, while taking account of outliers. This procedure is applied to both univariate and bivariate inflation models that relate domestic and global inflation, with the latter is calculated as a trade-weighted average of inflation in a country's trading partners. The empirical analysis uses monthly consumer price inflation over 1970 to 2010 and the following key results emerge. First, the univariate analysis yields breaks in the conditional mean that are broadly consistent with the existing literature. Second, we document clusters of variance breaks occurring around the mid 1970s, early 1980s and early 1990s, casting doubt on the claim in the literature that changes of the in inflation has been mainly in the mean. Third, bivariate models show a positive and strengthening contemporaneous relationship between domestic and country specific global inflation. Although the dates and extent of change vary over countries, our results imply increased co-movements of inflation, particularly during the 1980s and 1990s. Fourth, we demonstrate that the above results crucially depend on an appropriate treatment of outliers. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:man:cgbcrp:240&r=mac |
| By: | Juan Mao (Department of Accounting, UTSA); Baolei Qi (Xi’an Jiaotong University) |
| Abstract: | This study investigates why auditors leave one audit firm (and bring their clients) to another and the consequences of such turnover. Using a Chinese sample of 470 auditor-years with turnovers and 7,485 auditor-years without such turnovers from 2001 to 2014, we find that auditors’ professional competency is positively associated with a departure decision in additional to their demographics. Specifically, younger auditors, auditors who are industry specialists, and auditors who audit more clients and have better education background, are more likely to move, suggesting that “rising stars” in the accounting industry are more likely to move from one audit firm to another. However, female auditors, older auditors, and auditors with established status in the current audit firm are less likely to do so. Interestingly, Big 4 signing auditors in China are less likely to move relative to non-Big 4 auditors. We also find that auditors with lower audit quality are less likely to move from one audit firm to another, suggesting that the job market is penalizing auditors for bad quality audits. In terms of consequences, we find that the audit firm is more likely to lose clients whose incumbent auditor moves to another audit firm and it tends to lower audit fees for clients that stay with the audit firm, assign better auditors to them, and treat them more leniently. Our study provides insights that should be of interest to the audit profession, audit firms, and regulators. |
| Keywords: | auditor turnover, audit partners, individual auditors, audit fees, audit quality, audit switch |
| JEL: | M42 O15 E24 |
| Date: | 2017–01–09 |
| URL: | http://d.repec.org/n?u=RePEc:tsa:wpaper:0138acc&r=mac |
| By: | Sunde, Tafirenyika |
| Abstract: | This study examines the relationship between education expenditure and economic growth in Mauritius. The study employed the ARDL bounds testing methodology for the period 1976 to 2016. The study found that education expenditure Granger causes economic growth in Mauritius in the short run. In addition, the study also found that economic growth does not Granger cause education expenditure in Mauritius in the short run. However, in the long-run, the study found that there are long-run relationships between education expenditure and economic growth in both equations; and this means that an increase in either of the variables will eventually lead to an increase in the other variable. The study, therefore, found support for the hypothesis that investment in education raises economic growth. This means that Mauritius has the potential to benefit from further investments in education in the future. |
| Keywords: | Education expenditure; economic growth; Granger causality; ARDL; Mauritius |
| JEL: | C5 E6 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86667&r=mac |
| By: | Céline Antonin (Observatoire français des conjonctures économiques) |
| Abstract: | Comme l’a souligné le rapport n°4019 de l’Assemblée Nationale sur l’offre automobile française, « la France est un des pays d’Europe dont le parc roulant est le plus diésélisé et où l’écart de fiscalité appliqué à l’essence et au gazole reste parmi les plus importants. » Or plusieurs arguments plaident pour un alignement des fiscalités. Tout d’abord, alors que l’avantage conféré au gazole s’expliquait par son utilisation majoritairement professionnelle, le diesel a massivement investi la sphère des voitures particulières, rendant cet avantage indu. En outre, le gazole présente des dangers pour la santé publique. En 2012, l’Organisation mondiale de la santé a classé les gaz d’échappement des moteurs diesel comme cancérogènes, avec un coût sanitaire estimé par la Cour des comptes entre 20 et 30 milliards d’euros[1]. L’argument économique plaide également pour un rééquilibrage : la forte diésélisation du parc automobile français conduit à un fort besoin d’importation en gazole alors que la France est exportateur net d’essence raffinée. Enfin, le manque à gagner fiscal est conséquent : la Cour des comptes chiffre la perte de recettes fiscales liées au diesel à 6,9 milliards d’euros pour l’année 2011. [Premier paragraphe] |
| Keywords: | Energie; Fiscalité; Gazole; Prix du carburant; TICPE; TVA |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/6n1crma5r49n4p36c82ebqvt4f&r=mac |
| By: | Congshan Zhang; John M. de Figueiredo |
| Abstract: | Utilizing a large dataset on U.S. federal government employees covering 24 years, we estimate and analyze the persistent wage effect of entering government employment during recessions for recent college graduates and other new employees. Contrary to previous results in the literature for private sector employees, we document a significant and long-term wage increase for federal civil servants who enter government service in recessions. We show this result is robust to alternative samples and model specifications. We conclude by examining agency occupation composition and job matching as mechanisms for these results. |
| JEL: | H11 H83 J28 J31 J45 K0 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24538&r=mac |
| By: | Giacomo Domini; Daniele Moschella |
| Abstract: | According to the `cleansing hypothesis', recessions are periods in which productivity-enhancing reallocation intensifies, shifting resources away from less efficient to more efficient firms at a greater pace. Does the Great Recession of 2008-2010 fit this view? We address this question, studying the case of the French manufacturing sector. Based on a panel of firms, built by matching data from several sources, we investigate the contribution of productivity to firm growth and survival over the period 2002-2013. Our results show that, during the recent global crisis, more productive firms decreased their advantage with respect to less productive firms, in terms of both employment growth and probability to survive, in disagreement with the cleansing hypothesis. |
| Keywords: | firm productivity, selection, employment growth, global crisis |
| Date: | 2018–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2018/11&r=mac |
| By: | Jesús Fernández-Villaverde; David Zarruk Valencia |
| Abstract: | This guide provides a practical introduction to parallel computing in economics. After a brief introduction to the basic ideas of parallelization, we show how to parallelize a prototypical application in economics using, on CPUs, Julia, Matlab, R, Python, C++-OpenMP, Rcpp–OpenMP, and C++-MPI, and, on GPUs, CUDA and OpenACC. We provide code that the user can download and fork, present comparative results, and explain the strengths and weaknesses of each approach. We conclude with some additional remarks about alternative approaches. |
| JEL: | C63 C68 E37 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24561&r=mac |
| By: | Xue, Dong (Cardiff Business School); Minford, Patrick (Cardiff Business School); Meenagh, David (Cardiff Business School) |
| Abstract: | The UK has been a net debtor over the past two decades and the sterling exchange rates are sensitive to any chaos that might occur in the Financial market. This paper examines the importance of the inter-national financial imperfections in the sterling exchange rate dynamics. We build a small open economy DSGE model with the constrained international financial institutions that intermediate capital flows, and derive tractable analytical solutions. The constraint works to introduce a wedge between lending and borrowing rates, which compensates financiers for their currency risk-taking. The model has been estimated by using a simulation-based Indirect Inference approach, which provides a natural framework for testing the hypothesis implied by the model. We find that the model cannot be rejected by the UK data. Shocks to financial forces are the main driving forces behind the large and sudden depreciation of the Sterling exchange rates in the aftermath of the collapse of Lehman Brothers and the Brexit vote. Furthermore, the optimal policy rules have been proposed. |
| Keywords: | Small open economy DSGE model, International financial imperfections, Sterling exchange rates, Indirect Inference, Crisis, Policy rules |
| JEL: | E63 F31 F34 F41 F47 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2018/11&r=mac |
| By: | Schreiber, Sven |
| Abstract: | Applied time series research often faces the challenge that (a) potentially relevant variables are unobservable, (b) it is fundamentally uncertain which covariates are relevant. Thus cointegration is often analyzed in partial systems, ignoring potential (stationary) covariates. By simulating hypothesized larger systems Benati (2015) found that a nominally significant cointegration outcome using a bootstrapped rank test (Cavaliere, Rahbek, and Taylor, 2012) in the bivariate sub-system might be due to test size distortions. In this note we review this issue systematically. Apart from revisiting the partial-system results we also investigate alternative bootstrap test approaches in the larger system. Throughout we follow the given application of a long-run Phillips curve (euro-area inflation and unemployment). The methods that include the covariates do not reject the null of no cointegration, but by simulation we find that they display very low power, such that the (bivariate) partial-system approach is still preferred. The size distortions of all approaches are only mild when a standard HP-filtered output gap measure is used among the covariates. The bivariate trace test p-value of 0.027 (heteroskedasticity-consistent wild bootstrap) therefore still suggests rejection of non-cointegration at the 5% but not at the 1% significance level. The earlier findings of considerable test size distortions can be replicated when instead an output gap measure with different longer-run developments is used. This detrimental effect of large borderline-stationary roots reflects an earlier insight from the literature (Cavaliere, Rahbek, and Taylor, 2015). |
| Keywords: | bootstrap,cointegration rank test,empirical size |
| JEL: | C32 C15 E31 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fubsbe:20188&r=mac |