nep-mac New Economics Papers
on Macroeconomics
Issue of 2019‒05‒20
71 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Measuring Inflation Uncertainty in Turkey By Eda Gulsen; Hakan Kara
  2. Shocking Interest Rate Floors By Fabio Canetg, Daniel Kaufmann
  3. Political-Business Cycles in BRICS Economies: Evidence from Brazil By Celso José Costa Junior; Alejandro C. García Cintado; Manuel Alejandro Hidalgo Pérez
  4. The Financial Instability Hypothesis and the Financial Crisis in Eastern European Emerging Economies By Grytten, Ola Honningdal; Koilo, Viktoriia
  5. On the Empirical (Ir)Relevance of the Zero Lower Bound Constraint By Davide Debortoli; Jordi Galí; Luca Gambetti
  6. Gains from Wage Flexibility and the Zero Lower Bound By Billi, Roberto; Galí, Jordi
  7. The Interaction Between Fiscal and Monetary Policies: Evidence from Sweden By Ankargren, Sebastian; Shahnazarian, Hovick
  8. The Struggle Towards Macroeconomic Stability: Analytical Essay By Assaf Razin
  9. The Shape of Eurozone’s Uncertainty: Its Impact and Predictive Value on GDP By Ralf Fendel; Nicola Mai; Oliver Mohr
  10. Target-Falle oder Empörungsfalle? – Zur deutschen Diskussion um die Europäische Währungsunion By Martin Hellwig
  11. Financial Stability and the Fed: Evidence from Congressional Hearings By Arina Wischnewsky; David-Jan Jansen; Matthias Neuenkirch
  12. Designing a Simple Loss Function for Central Banks: Does a Dual Mandate Make Sense? By Debortoli, Davide; Kim, Jinill; Lindé, Jesper; Nunes, Ricardo
  13. Identifying modern macro equations with old shocks By Régis Barnichon; Geert Mesters
  14. Migration Fear, Uncertainty, and Macroeconomic Dynamics By Michael Donadelli; Luca Gerotto; Marcella Lucchetta; Daniela Arzu
  15. Demographic Developments and Their Macroeconomic Impacts By M. Koray Kalafatcilar
  16. Implications of the permanent-transitory confusion for New-Keynesian modeling, inflation forecasts and the post-crisis era By Cukierman, Alex
  17. Tying down the anchor: monetary policy rules and the lower bound on interest rates By Mertens, Thomas M.; Williams, John C.
  18. Revisiting the Relationship between Financial Wealth, Housing Wealth, and Consumption: A Panel Analysis for the U.S. By Dimitra Kontana; Fotios Siokis
  19. What is the Impact of an Exogenous Shock to the Wage Share? VAR Results for the US Economy, 1973–2018 By Deepankar Basu; Leila Gautham
  20. Evaluating an old-age voluntary saving scheme under incomplete rationality By Artur Rutkowski
  21. Weather Shocks By Ewen Gallic; Gauthier Vermandel
  22. Beyond Okun's Law: Output Growth and Labor Market Flows By Guay C. Lim; Robert Dixon; Jan C. van Ours
  23. Biased Forecasts to Affect Voting Decisions? The Brexit Case By Cipullo, Davide; Reslow, André
  24. Extreme inflation and time-varying consumption growth By Dergunov, Ilya; Meinerding, Christoph; Schlag, Christian
  25. The financial stability index (4) – Estimated by the Institute of Financial Studies By Ion Stancu; Andrei Tudor Stancu; Iulian Panait
  26. The financial stability index (5) – Estimated by the Institute of Financial Studies By Ion Stancu; Andrei Tudor Stancu; Iulian Panait
  27. Crises and Emissions: New Empirical Evidence from a Large Sample By João Tovar Jalles
  28. Global Liquidity and the Impairment of Local Monetary Policy Transmission By Salih Fendoglu; Eda Gulsen; Josè-Luis Peydro
  29. "Democratizing Money" By Jan Kregel
  30. Reducing regional disparities for inclusive growth in Spain By Muge Adalet McGowan; Juan Antona San Millán
  31. Fiscal Austerity and Migration: A Missing Link By Guilherme Bandeira; Jordi Caballe; Eugenia Vella
  32. Consumption Smoothing Channels Within And Between Households By Simone Tedeschi; Luigi Ventura; Pierfederico Asdrubal
  33. Cross-Border Financial Effects of Global Warming In a Two-Area Ecological SFC Model By Emilio Carnevali; Matteo Deleidi; Riccardo Pariboni; Marco Veronese Passarella
  34. Research of inflation rate and its determinants: An analysis of GSK corporation in United States By meiyi, chen
  35. What are the effects of technology shocks on international labor markets? By Rujin, Svetlana
  36. The corporate saving glut and the current account in Germany By Klug, Thorsten; Mayer, Eric; Schuler, Tobias
  37. Inflation expectations and choices of households By Vellekoop, Nathanael; Wiederholt, Mirko
  38. Construction of a survey-based measure of output Gap By Michal Bencik
  39. Insulating property of the flexible exchange rate regime: A case of Central and Eastern European countries By Dąbrowski, Marek A.; Wróblewska, Justyna
  40. Welfare and Political Economy Aspects of a Central Bank Digital Currency By Cukierman, Alex
  41. Finance and Wealth Inequality By Iftekhar Hasan; Roman Horvath; Jan Mares
  42. Tobin’s Q and Its Determinants: A Study of Market Valuation in MISC Berhad By Syazwani, Anis
  43. A game theory approach to optimizing the banking and financial resolution framework By Gabriel Mitache
  44. Immigrant-owned, Local and Global Firms in the Finnish Job and Production Restructuring By Maliranta, Mika; Nurmi, Satu
  45. The North-South Divide, the Euro and the World By Konstantinos Chisiridis; Kostas Mouratidis; Theodore Panagiotidis
  46. Reacting to the Lucas Critique: The Keynesians' Pragmatic Replies By Aurélien Goutsmedt; Erich Pinzón-Fuchs; Matthieu Renault; Francesco Sergi
  47. Stagflation and the crossroad in macroeconomics: the struggle between structural and New Classical macroeconometrics By Aurélien Goutsmedt
  48. Updates to Household Inflation Expectations: Signal or Noise? By Yongchen Zhao
  49. Corporate Governance Index And Its Determinants In Samsung Company By Lim, Guan Ta
  50. Technology Choice, Financial Sector and Economic Integration under the Presence of Efficiency Wages By Wen, Lei; Zhou, Haiwen
  51. The Stability of Demand for Money in the Proposed Southern African Monetary Union By Simplice A. Asongu; Oludele E. Folarin; Nicholas Biekpe
  52. Double-Counting of Investment By Robert J. Barro
  53. The financial stability index (3) – Estimated by the Institute of Financial Studies By Ion Stancu; Andrei Tudor Stancu; Iulian Panait
  54. The Effect of Executive Constraints on Reform Implementation: An Empirical Analysis By María Clara Arroyo
  55. The impact of forecast errors on fiscal planning and debt accumulation By Ademmer, Martin; Boysen-Hogrefe, Jens
  56. Anatomy of Regional Price Differentials: Evidence From Micro Price Data By Sebastian Weinand; Ludwig von Auer
  57. The Fed’s Balance Sheet: The 37th Annual Monetary and Trade Conference By Harker, Patrick T.
  58. How has globalisation affected the economic growth, structural change and poverty reduction linkages? Insights from international comparisons By Aggarwal, Aradhna
  59. The Maturity of Sovereign Debt Issuance in the Euro Area By Beetsma, Roel; de Jong, Frank; Giuliodori, Massimo; Hanson, Jesper
  60. Does fiscal consolidation hurt economic growth? Empirical evidence from Spanish regions By Lago Peñas, Santiago; Vaquero-Garcia, Alberto; Sanchez-Fernandez, Patricio; Lopez-Bermudez, Beatriz
  61. Pension Funds and Risk-sharing in the Finnish Earnings-related Pension System By Lassila, Jukka; Valkonen, Tarmo
  62. Improving Our Monetary Policy Strategy By Mester, Loretta J.
  63. Working Paper 10-18 - Le fonctionnement du modèle HERMES - Description à l’aide de variantes By Delphine Bassilière; Ludovic Dobbelaere; Filip Vanhorebeek
  64. Optimal investment with vintage capital: equilibrium distributions By Silvia Faggian; Fausto Gozzo; Peter M. Kort
  65. Pushing One's Luck: Petroleum ownership and discoveries By Christa N. Brunnschweiler; Steven Poelhekke
  66. Working Paper 09-18 - Economic impact of professional services reform in Belgium - A DSGE simulation By Chantal Kegels; Dirk Verwerft
  67. Do Fundamentals Drive Cryptocurrency Prices? By Bhambhwani, Siddharth; Delikouras, Stefanos; Korniotis, George
  68. Study on the correlation between the development of the capital market and the economic growth by groups of countries By Ioana-Maria Dobjanschi
  69. Réduire les divergences en zone euro en régulant les cycles financiers By Jézabel Couppey-Soubeyran; Salim Dehmej
  70. Employment protection reform in European labor markets: the collective bargaining regime matters. By Francesco De Palma; Yann Thommen
  71. Tax Mechanisms and Gradient Flows By Stefan Steinerberger; Aleh Tsyvinski

  1. By: Eda Gulsen; Hakan Kara
    Abstract: Measuring and monitoring inflation uncertainty is an essential ingredient of monetary policy analysis. This study constructs survey measures of inflation uncertainty for the Turkish economy. Using density and point inflation forecasts in the CBRT Survey of Expectations, we derive various uncertainty measures through standard deviation, entropy, and disagreement among forecasters. Our results suggest that survey-based inflation uncertainty measures are broadly consistent with market-implied indicators of inflation risk. Moreover, we find that an increase in observed inflation is associated with higher inflation uncertainty across all empirical specifications.
    Keywords: Inflation uncertainty, Inflation, Survey data, Density forecasts, Disagreement
    JEL: C53 E31 E37 E58
    Date: 2019
  2. By: Fabio Canetg, Daniel Kaufmann
    Abstract: We identify the dynamic causal effects of interest rate floor shocks, exploiting regular auctions of Swiss central bank debt securities (SNB Bills). A theoretical model shows that variation in the volume of, and yield on, central bank debt changes the interest rate floor. In addition, the model establishes the equivalence between central bank debt and interest-bearing reserves when reserves are ample. Based on these insights, the empirical analysis identifies an interest rate floor shock in a dynamic event study of SNB Bill auctions. A restrictive interest rate floor shock causes an increase in the money market rate, a persistent appreciation of the Swiss franc, a decline in long-term interest rates, and a decline in stock prices. We then perform policy experiments under various identifying assumptions in which the central bank raises the interest rate floor from 0% to 0.25%. Such a policy change causes a 3-6% appreciation of the Swiss franc and a 5-20% decline in stock prices
    Keywords: Exit strategies, interest rate floors, central bank debt securities, interest on reserves, monetary policy shocks, identification through heteroscedasticity
    JEL: E41 E43 E44 E52 E58 C32
    Date: 2019–05
  3. By: Celso José Costa Junior (Ministerio de Economía, Universidad Estadual de Ponta Grossa (UEPG) & Fundação Getúlio Vargas (FGV), Brasil); Alejandro C. García Cintado (Universidad Pablo de Olavide (UPO) & UEPG); Manuel Alejandro Hidalgo Pérez (UPO & Secretaría General de Economía – Junta de Andalucía)
    Abstract: This paper uses a DSGE model with political-regime-dependent fiscal and monetary policies so as to examine political-business cycles in an emerging market such as Brazil under three different regimes – an "opportunistic regime" and "two partisan ones". The former regime seeks to identify whether within the period of seven quarters prior to the elections, the government manipulated the economy to increase the chances of getting reelected (or securing a successor). As for the latter two, they try to verify whether the macroeconomic strategies pursued by the "more leftist" governments differed from their "more right-wing" predecessors’ monetary and fiscal policies. Our results show that there exists an opportunistic behavior by all the governments studied as regards fiscal policy, and that from a macroeconomic viewpoint, President Rouseff’s administration fared differently than previous governments. However, monetary policy turns out to be independent of the regimes considered.
    Keywords: political cycles, monetary policy, fiscal policy, Oaxaca model, Dynamic Stochastic General Equilibrium (DSGE) model.
    JEL: E32 E52 E62
    Date: 2019–05
  4. By: Grytten, Ola Honningdal (Dept. of Economics, Norwegian School of Economics and Business Administration); Koilo, Viktoriia (HSM/NLA)
    Abstract: The present paper applies the financial instability hypothesis in order to explain the financial crises of 2008-2010 in eleven emerging Eastern European economies Also, it seeks to map if institutional frameworks of these countries enabled them to stand against the factors leading into the financial crisis. The paper maps cycles of three macroeconomic indicators representing the real economy, and four indicators representing financial markets. A cycle analysis is conducted with the help of a Hoderick-Prescott filter, made to isolate cycles from trends in time series. The paper concludes that there were substantial positive financial cycles previous to the financial crisis mirrored by similar cycles in the real economy. Similarly, the results show negative cycles in the same parameters during the years of crisis. It seems as an uncontrolled increase in money and credit caused the economy to overheat and thereafter contract in both substantial financial and real economy crises. Also, the paper compiles twelve different indices of institutional development. These are standardized and presented in an institutional development matrix, showing that the institutional framework for the eleven economies was weak previous to and under the melt down of the economy. The construction of an integrated institutional development index on the basis of the same twelve parameters confirm institutional shortcomings, which may have made the economies less able to guard themselves from a crisis initiated by both domestically and internationally financial instability.
    Keywords: Financial Crisis; Financial Instability Hypothesis; Institutional Development; Crisis Anatomy; Financial History; Eastern European Economies; Emerging Economies
    JEL: E32 E44 E51 E52 G15 N14 N24
    Date: 2019–04–27
  5. By: Davide Debortoli; Jordi Galí; Luca Gambetti
    Abstract: The zero lower bound (ZLB) irrelevance hypothesis implies that the economy's performance is not affected by a binding ZLB constraint. We evaluate that hypothesis for the recent ZLB episode experienced by the U.S. economy (2009Q1-2015Q4). We focus on two dimensions of performance that were likely to have experienced the impact of a binding ZLB: (i) the volatility of macro variables and (ii) the economy's response to shocks. Using a variety of empirical methods, we find little evidence against the irrelevance hypothesis, with our estimates suggesting that the responses of output, inflation and the long-term interest rate were hardly affected by the binding ZLB constraint, possibly as a result of the adoption and fine-tuning of unconventional monetary policies. We can reconcile our empirical findings with the predictions of a simple New Keynesian model under the assumption of a shadow interest rate rule.
    JEL: E44 E52
    Date: 2019–05
  6. By: Billi, Roberto (Research Department, Central Bank of Sweden); Galí, Jordi (CREI, UPF and Barcelona GSE)
    Abstract: We analyze the welfare impact of greater wage exibility while taking into account explicitly the existence of the zero lower bound (ZLB) constraint on the nominal interest rate. We show that the ZLB constraint generally amplifies the adverse effects of greater wage exibility on welfare when the central bank follows a conventional Taylor rule. When demand shocks are the driving force, the presence of the ZLB implies that an increase in wage exibility reduces welfare even under the optimal monetary policy with commitment.
    Keywords: labor market exibility; nominal rigidities; optimal monetary policy with commitment; Taylor rule; ZLB
    JEL: E24 E32 E52
    Date: 2019–03–01
  7. By: Ankargren, Sebastian (Uppsala University); Shahnazarian, Hovick (Monetary Policy Department, Central Bank of Sweden)
    Abstract: This paper estimates the interaction between monetary- and fiscal policy using a structural VAR model with time-varying parameters. For demand and supply shocks, the two policies are estimated to be complementary, while for monetary and fiscal policies shocks the two policies act as substitutes. The budget elasticity varies between 0.3–0.6, indicating that an economic downturn can get a non-negligible negative impact on public finances. The fiscal multiplier is estimated to be stable and higher than one suggesting that fiscal policy can be used to support monetary policy to stabilize the economy in case monetary policy is constrained by the lower effective bound.
    Keywords: Fiscal policy; monetary policy; time-varying parameter structural VAR; zero and sign restrictions; Bayesian estimation
    JEL: C11 C32 E52 E62 E63
    Date: 2019–02–01
  8. By: Assaf Razin
    Abstract: This essay offers an economic-history perspective of the long struggle towards macroeconomic stability. The paper is a broad analytical overview of major exogenous shocks and shifts in macroeconomic policy and institutions in Israel since the 1977-1985 great inflation through the global financial crisis and the effects of those shifts on long term growth, inflation, the business cycle, the Phillips curve and related economic developments. The paper will discuss three main issues. The first one on the inflation crisis focuses on the 1985 stabilization and on its impact on subsequent reform of monetary institutions. The second discusses the impact of globalization on growth, inflation and the Phillips curve. The third contains a discussion of the reasons for the relatively good performance of Israel during the 2008 global crisis, including foreign exchange market intervention. Henceforth we highlight: (1) the role of macro-populism in generating hyperinflation; (2) the role of seigniorage revenue in generating the hyperinflation; (3) distributive effects of inflation stabilization, which are political driving forces behind the need for across-the-broad-coalition for a successful stabilization policy; (4) the effects of globalization on the Philips Curve and thereby on domestic inflation-- means of transforming an inflation regime to a one with price stability; (5) the role of financial prudence regulatory institutions, which serve to explain the Israeli macroeconomic robustness in the face of the 2008 external depression-deflation global forces; and, (6) Israel’s government-deficit and money-creation experience, which help evaluate recent theory—the Modern Monetary Theory (MMT).
    JEL: E0 F0
    Date: 2019–05
  9. By: Ralf Fendel; Nicola Mai; Oliver Mohr
    Abstract: This paper examines the role of uncertainty in the context of the business cycle in the Eurozone. To gain a more granular perspective on uncertainty, the paper decomposes uncertainty along two dimensions: First, we construct the four different moments of uncertainty, including the point estimate, the standard deviation, the skewness and the kurtosis. The second dimension of uncertainty spans along three distinct groups of economic agents, including consumers, corporates and financial markets. Based on this taxonomy, we construct uncertainty indices and assess the impact on real GDP via impulse response functions and further investigate their informational value in rolling out-of-sample GDP forecasts. The analysis lends evidence to the hypothesis that higher uncertainty expressed through the point estimate, a larger standard deviation among confidence estimates, positive skewness and a higher kurtosis are all negatively correlated with the business cycle. The impulse response functions reveal that in particular the first and the second moment of uncertainty cause a permanent effect on GDP with an initial decline and a subsequent overshoot. We find uncertainty in the corporate sector to be the main driver behind this observation, followed by financial markets’ uncertainty whose initial effect on GDP is comparable but receding much faster. While the first two moments of uncertainty improve GDP forecasts significantly, both the skewness and the kurtosis do not augment the forecast quality any further.
    Keywords: Uncertainty, Eurozone, Business cycle, GDP forecast, VAR,
    JEL: D8 E23 E27 E32 E37
    Date: 2019–05–10
  10. By: Martin Hellwig (Max Planck Institute for Research on Collective Goods)
    Abstract: Die deutsche Diskussion über die Europäische Währungsunion steckt in einer Empörungsfalle. Rechtsnormen und Zahlen werden ungenau und missverständlich wiedergegeben, Kausalzusammenhänge werden nicht belegt. Der Begriff des „Target-Kredits“ vermengt volkswirtschaftliche und einzelwirtschaftliche Vorstellungen auf unzulässige Weise und ist analytisch unbrauchbar. Dass die Deutsche Bundesbank in ihrem operativen Geschäft nicht selbständig agiert, wird verdrängt. Eine inhaltliche Auseinandersetzung mit den Aufgaben der Zentralbank fehlt weitgehend. Die Besonderheiten eines deckungslosen Papiergelds werden nicht angemessen berücksichtigt. Die in wiederholten Verlustwarnungen enthaltene Priorisierung fiskalischer Belange ist sachlich verfehlt und ordnungspolitisch gefährlich.
    Keywords: Papiergeld, Vermögenseffekte, Geldpolitik, Friedman-Schwartz-Paradox, Lender of the Last Resort, Europäische Währungsunion, Target-Salden, Finanzkrise, Eurokrise, Vollzuteilung, Notkredite, ANFA, Quantitative Easing.
    JEL: E44 E52 E58
    Date: 2019–03
  11. By: Arina Wischnewsky; David-Jan Jansen; Matthias Neuenkirch
    Abstract: This paper retraces how financial stability considerations interacted with U.S. monetary policy before and during the Great Recession. Using text-mining techniques, we construct indicators for financial stability sentiment expressed during testimonies of four Federal Reserve Chairs at Congressional hearings. Including these text-based measures adds explanatory power to Taylor-rule models. In particular, negative financial stability sentiment coincided with a more accommodative monetary policy stance than implied by standard Taylor-rule factors, even in the decades before the Great Recession. These findings are consistent with a preference for monetary policy reacting to financial instability rather than acting pre-emptively to a perceived build-up of risks.
    Keywords: monetary policy, financial stability, Taylor rule, text mining
    JEL: E52 E58 N12
    Date: 2019
  12. By: Debortoli, Davide (UPF, CREI and Barcelona GSE); Kim, Jinill (Korea University); Lindé, Jesper (Research Department, Central Bank of Sweden); Nunes, Ricardo (University of Surrey and CIMS)
    Abstract: Yes, it makes a lot of sense. This paper studies how to design simple loss functions for central banks, as parsimonious approximations to social welfare. We show, both analytically and quantitatively, that simple loss functions should feature a high weight on measures of economic activity, sometimes even larger than the weight on inflation. Two main factors drive our result. First, stabilizing economic activity also stabilizes other welfare-relevant variables. Second, the estimated model features mitigated inflation distortions due to a low elasticity of substitution between monopolistic goods and a low interest rate sensitivity of demand. The result holds up in the presence of measurement errors, with large shocks that generate a trade-off between stabilizing inflation and resource utilization, and also when imposing a moderate degree of interest rate volatility.
    Keywords: Central banksobjectives; simple loss function; monetary policy design; sticky prices and sticky wages; DSGE models
    JEL: C32 E58 E61
    Date: 2018–07–01
  13. By: Régis Barnichon; Geert Mesters
    Abstract: Despite decades of research, the consistent estimation of structural forward looking macroeconomic equations remains a formidable empirical challenge because of pervasive endogeneity issues. Prominent cases |the estimation of Phillips curves, of Euler equations for consumption or output, or of monetary policy rules| have typically relied on using pre-determined variables as instruments, with mixed success. In this work, we propose a new approach that consists in using sequences of independently identi ed structural shocks as instrumental variables. Our approach is robust to weak instruments and is valid regardless of the shocks' variance contribution. We estimate a Phillips curve using monetary shocks as instruments and nd that conventional methods (i) substantially under-estimate the slope of the Phillips curve and (ii) over-estimate the role of forward-looking in ation expectations.
    Keywords: Structural equations, instrumental variables, impulse responses, robust inference.
    JEL: C14 C32 E32 E52
    Date: 2019–05
  14. By: Michael Donadelli (Faculty of Economics and Business Administration and Research Center SAFE, Goethe University Frankfurt; Department of Economics, University Of Venice Cà Foscari); Luca Gerotto (University Of Venice Cà Foscari); Marcella Lucchetta (University Of Venice Cà Foscari); Daniela Arzu (University Of Venice Cà Foscari)
    Abstract: This paper examines the effects of changes in immigration-related uncertainty and fear on the real economic activity in four advanced economies (i.e., US, UK, Germany and France). Immigration uncertainty/fear is first captured by two news-based indicators developed by Baker et al. (2015), namely the Migration Policy Uncertainty Index (MPUI) and the Migration Fear Index (MFI), and then by a novel Google Trend Migration Uncertainty Index based on the frequency of internet searches for “immigration” (GTMU). VAR investigations suggest that the macroeconomic implications of rising immigration uncertainty/fear depend on the country under examination as well as on the way in which immigration uncertainty/fear is measured. In the US and UK, MPUI, MFI and GTMU shocks induce positive long-run effects on the real economic activity. Differently, in Germany, MPUI and MFI shocks lead to expansionary reactions whereas GTMU shocks generate significant adverse effects on the economy. This suggests that increasing media attention and rising population’s interest in immigration-related issues affect people’s mood in a different way. In France, MPUI, MFI and GTMU shocks induce negative macroeconomic effects in the long-run. A battery of robustness tests confirms our main findings.
    Keywords: Immigration, Uncertainty, Fear, Google Trends, Business Cycle
    JEL: C32 E32
    Date: 2018
  15. By: M. Koray Kalafatcilar
    Abstract: This study firstly introduces demographic concepts and reveals the different dynamics displayed by emerging and advanced economies. Then, the links between demographic developments and economic activity are discussed. We aim to support our arguments with quantitative findings obtained through a New-Keynesian general equilibrium model. The general equilibrium model, which is calibrated for Turkey, is simulated for the period until 2050 in accordance with changes in demographic exogenous variables. Through this simulation, the path that main macroeconomic variables follow is analyzed. The simulation exercise, conducted through the model which is de-trended with the increases in productivity and population, reveals that, compared to the initial steady state, production factor prices significantly change; real interest rate declines and real wage increases.
    Keywords: Demography, Overlapping generations, Savings, General equilibrium
    JEL: J11 E21 C61
    Date: 2019
  16. By: Cukierman, Alex
    Abstract: Decisions about consumption, work, leisure, pricing, investment and other private and public policy decisions rely on forecasts of the future. The permanent-transitory confusion (PTC) refers to the fact that even when they know all past and current information individuals are uncertain about the persistence of the current state. This all pervasive informational limitation makes it optimal, in general, to use all past information when forecasting the future even under rational expectations. The objective of this paper is to remind the profession of this basic fact and point out some of its implications by showing at both the theoretical and the empirical levels that forecasts of the future are generally adaptive in the sense that they depend on available past information even when information is utilized efficiently. This is done along the following dimensions. First by briefly surveying the literature on rational-adaptive expectations from Muth (1960) to Coibion-Gorodnichenko (2015). Second, by showing that the PTC injects the past even into purely forward looking New-Keynesian such as that of Clarida, Gali & Gertler (1999). Third, by showing empirically that inflationary expectations in the US Survey of Professional Forecasters rely on past inflation. The paper concludes with reflections on the persistence of economic and policy changes induced by the global financial crisis.
    Keywords: inflationary expectations; Permanent-transitory confusion; rationally adaptive expectations â?? implications for New-Keynesian framework
    JEL: D84 E12 E31
    Date: 2019–05
  17. By: Mertens, Thomas M. (Federal Reserve Bank of San Francisco); Williams, John C. (Federal Reserve Bank of New York)
    Abstract: This paper uses a standard New Keynesian model to analyze the effects and implementation of various monetary policy frameworks in the presence of a low natural rate of interest and a lower bound on interest rates. Under a standard inflation-targeting approach, inflation expectations will be anchored at a level below the inflation target, which in turn exacerbates the deleterious effects of the lower bound on the economy. Two key themes emerge from our analysis. First, the central bank can eliminate this problem of a downward bias in inflation expectations by following an average-inflation targeting framework that aims for above-target inflation during periods when policy is unconstrained. Second, dynamic strategies that raise inflation expectations by keeping interest rates “lower for longer” after periods of low inflation can both anchor expectations at the target level and further reduce the effects of the lower bound on the economy.
    Keywords: monetary policy; inflation expectations; lower bound; inflation target
    JEL: E52
    Date: 2019–05–01
  18. By: Dimitra Kontana (Department of Economics, University of Macedonia); Fotios Siokis (University of Macedonia)
    Abstract: Based on the seminal paper of Case, Quigley and Shiller (2013), we investigate the effects of financial and housing wealth on consumption. Using quarterly data from 1975 to 2016, for all States of U.S. economy, and a different methodology in measuring wealth, we report relatively greater financial effects than housing effects on consumption. Specifically, in our basic utilized model, the calculated elasticity for financial wealth is 0.060, while for housing is 0.045. The results are not in agreement with the ones obtained by Case, Quigley and Shiller. In an attempt to investigate the disparity, we proceed by incorporating the introduction of the Tax Reform Act in 1986, which increased incentives for owner-occupied housing investments. Finally, due to distributional factors at work, and taking into account the pronounced uneven distribution of wealth we investigate the effects of wealth for 8 states that include the Metropolitan areas comprising of the well-known Case-Shiller 10-City Composite Index. Now the housing effect on consumption is much stronger and larger than the financial effect. Additionally, we forecast the consumption changes at the time of the high rise and large drops in house prices for these states. Forecasts showed a recession from the fall of Lehman Brothers until the fourth quarter of 2011. These forecasts were not verified. Probably, the new techniques used by politics played an important role. We also find that extreme behaviors cannot be predicted.
    Keywords: consumption; financial wealth; housing wealth; wealth effects.
    JEL: E21 G1 R31
    Date: 2019–05
  19. By: Deepankar Basu (Department of Economics, University of Massachusetts Amherst); Leila Gautham (Department of Economics, University of Massachusetts Amherst)
    Abstract: This paper uses a novel empirical strategy to present empirical estimates of the effect of an exogenous shock to distribution on demand and accumulation for the US economy from 1973 to 2018. We use recursive vector autoregressions to identify the impact of shocks to the wage share. We impose restrictions motivated by a simple neo-Kaleckian open-economy model, and build on the recursive identification scheme in Christiano, Eichenbaum and Evans (1999) to show that this small set of plausible and transparent assumptions are sufficient to identify the impact of shocks to distribution. We find that positive shocks to the wage share have long-lasting negative impacts on demand and growth. Our results are robust to the inclusion of additional variables and to differences in specification.
    Keywords: Demand-distribution dynamics, neo-Kaleckian models, functional income distribution, VAR estimation
    JEL: D3 C32 E25
    Date: 2019
  20. By: Artur Rutkowski (Group for Research in Applied Economics (GRAPE))
    Abstract: We provide ex ante welfare, fiscal and general macroeconomic evaluation of the voluntary old-age saving scheme recently introduced in Poland (Pracownicze Plany Kapitałowe, Employees’ Capital Plans). ECPs provide tax redemptions as well as lump-sum transfers with the objective to foster old-age savings. Reduction in capital income tax revenues and a rise in expenditure needs to be compensated through adjustment in other taxes. We employ an overlapping generations model (OLG) to gauge the plausible magnitude of the macroeconomic and welfare effects and provide insights in terms of microfoundations of these adjustments. Our OLG model features voluntary participation and innovates relative to the literature by introducing agents with hand-to-mouth preferences. We find relatively high crowding out of private savings. In our preferred specification roughly 0.08 to 0.09 PLN of each 1 PLN allocated to ECPs are actually new savings, the rest being displaced from unincentivized private voluntary savings. The plausible values of the effective capital growth range between 0.03 and 0.42 of 1 PLN in ECPs. ECPs reduce welfare of the fully rational agents, unless they offer a sufficiently large annuity. ECPs provide consumption smoothing and interest income to HTM agents.
    Keywords: overlapping generations, old-age savings, tax incentives, incomplete rationality
    JEL: C68 D63 E17 E21 H55
    Date: 2019
  21. By: Ewen Gallic (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Gauthier Vermandel (Paris-Dauphine and PSL Research Universities & France Stratégie, Services du Premier Ministre)
    Abstract: How much do weather shocks matter? The literature addresses this question in two isolated ways: either by looking at long-term effects through the prism of theoretical models, or by focusing on short-term effects using empirical analysis. We propose a framework to bring together both the short and long-term effects through the lens of an estimated DSGE model with a weather-dependent agricultural sector. The model is estimated using Bayesian methods and quarterly data for New Zealand using the weather as an observable variable. In the short-run, our analysis underlines the key role of weather as a driver of business cycles over the sample period. An adverse weather shock generates a recession, boosts the non-agricultural sector and entails a domestic currency depreciation. Taking a long-term perspective, a welfare analysis reveals that weather shocks are not a free lunch: the welfare cost of weather is currently estimated at 0.19% of permanent consumption. Climate change critically increases the variability of key macroeconomic variables (such as GDP, agricultural output or the real exchange rate) resulting in a higher welfare cost peaking to 0.29% in the worst case scenario.
    Keywords: agriculture, business cycles, climate change, weather shocks
    JEL: C13 E32 Q54
    Date: 2019–05
  22. By: Guay C. Lim (Melbourne Institute: Applied Economic & Social Research, The University of Melbourne); Robert Dixon (University of Melbourne); Jan C. van Ours (Erasmus University Rotterdam, Tinbergen Institute, University of Melbourne)
    Abstract: This paper studies the relationship between the change in the unemployment rate and output growth using an approach based on labour market flows. The framework shows why the Okun coefficient may be constant/time-varying and/or symmetric/asymmetric and that the outcome lies with the behaviour of the labour flows in response to growth. The encompassing framework nests the conditions to determine the properties of the Okun coefficient without the need to rely on retrospective arbitrary dating of recessions. The framework also highlights the potential mispecification in conventional models of Okun's Law unless stringent conditions are assumed about the behavior of labour flows. The empirical analysis is based on the stock-consistent labour market flows data developed by the BLS for the period 1990:2-2017:3.
    Keywords: Labour flows, time-varying Okun, asymmetry
    JEL: E24 E32 J21
    Date: 2019–01
  23. By: Cipullo, Davide (Uppsala University); Reslow, André (Uppsala University)
    Abstract: This paper introduces macroeconomic forecasters as political agents and suggests that they use their forecasts to influence voting outcomes. We develop a probabilistic voting model in which voters do not have complete information about the future states of the economy and have to rely on macroeconomic forecasters. The model predicts that it is optimal for forecasters with economic interest (stakes) and influence to publish biased forecasts prior to a referendum. We test our theory using high-frequency data at the forecaster level surrounding the Brexit referendum. The results show that forecasters with stakes and in uence released much more pessimistic estimates for GDP growth in the following year than other forecasters. Actual GDP growth rate in 2017 shows that forecasters with stakes and in uence were also more incorrect than other institutions and the propaganda bias explains up to 50 percent of their forecast error.
    Keywords: Brexit; Interest Groups; Forecasters Behavior; Voting
    JEL: D72 D82 E27 H30
    Date: 2019–03–01
  24. By: Dergunov, Ilya; Meinerding, Christoph; Schlag, Christian
    Abstract: In a parsimonious regime switching model, expected consumption growth varies over time. Adding in ation as a conditioning variable, we uncover two states in which expected consumption growth is low, one with high and one with negative expected in ation. Embedded in a general equilibrium asset pricing model with learning, these dynamics replicate the observed time variation in stock return volatilities and stock-bond return correlations. Furthermore, they provide an alternative way to come up with a measure of time-varying disaster risk in the spirit of Wachter (2013). Our findings imply that both the disaster and the long-run risk paradigm can be extended towards explaining movements in the stock-bond return correlation.
    Keywords: long-run risk,inflation,recursive utility,filtering,disaster risk
    JEL: E31 E44 G12
    Date: 2019
  25. By: Ion Stancu (Institute of Financial Studies Bucharest); Andrei Tudor Stancu (Norwich Business School, UK); Iulian Panait (Financial Supervisory Authority)
    Abstract: In each issue of the Financial Studies Review, we update and publish the Financial Stability Index (FSI) of our Institute of Financial Studies, which tracks the correlation between economic growth and macroeconomic and financial factors in Romania.We constructeda composite index using a linear combination of financial variables that are considered to have a significant impact on economic activity. These financial variables are weighted with respect to their cumulated two quarters impulse response on GDP growth, as estimated by a VAR model.Developing such a composite index of financial stability or financial stress has two main utilities:•The analysis of the correlation between financial variables and the real economy placed in the context of different historical episodes of financial crisis. Also, this correlation analysis reveals, in each period, the significant positive or negative contribution of each financial variable to real economic growth. Following this analysis, the FSIcan measure the impact of economic and financial policy measures aimed at mitigating financial crises.•The short-term prediction of real economic growth estimated by forecasting the next period evolution of the real economic activity (GDPt+1) using current period GDPtand FSIt.
    Keywords: composite index, financial stress index, economic growth, VAR model, shortterm prediction
    JEL: E63 G01 G28
    Date: 2018–05
  26. By: Ion Stancu (Institute of Financial Studies Bucharest); Andrei Tudor Stancu (Norwich Business School, UK); Iulian Panait (Financial Supervisory Authority)
    Abstract: In each issue of the Financial Studies Review, we update and publish the Financial Stability Index (FSI) of our Institute of Financial Studies, which tracks the correlation between economic growth and macroeconomic and financial factors in Romania.We constructeda composite index using a linear combination of financial variables that are considered to have a significant impact on economic activity. These financial variables are weighted with respect to their cumulated two quarters impulse response on GDP growth, as estimated by a VAR model.Developing such a composite index of financial stability or financial stresshas two main utilities:•The analysis of the correlation between financial variables and the real economy placed in the context of different historical episodes of financial crisis. Also, this correlation analysis reveals, in each period, the significant positive or negative contribution of each financial variable to real economic growth. Following this analysis, the FSIcan measure the impact of economic and financial policy measures aimed at mitigating financial crises. The short-term prediction of real economic growth estimated by forecasting the next period evolution of the real economic activity (GDPt+1) using current period GDPtand FSItand economic and financial variables in the FSItcomposition.
    Keywords: composite index, financial stress index, economic growth, VAR model, short-term prediction
    JEL: E63 G01 G28
    Date: 2018–11
  27. By: João Tovar Jalles
    Abstract: In this paper, we empirically assess by means of the local projection method, the impact of different types of financial crises on a variety of pollutant emissions categories for a sample of 86 countries between 1980-2012. We find that financial crises in general lead to a fall in CO2 and methane emissions. When hit by a debt crisis, a country experiences a rise in emissions stemming from either energy related activities or industrial processes. During periods of slack, financial crises in general had a positive impact on both methane and nitrous oxide emissions. If a financial crisis hit an economy when it was engaging in contractionary fiscal policies, this led to a negative response of CO2 and production-based emissions.
    Keywords: pollution, greenhouse gases, local projection method, impulse response functions, recessions, fiscal expansions
    JEL: E32 E6 G01 O44 Q54
    Date: 2019–05
  28. By: Salih Fendoglu; Eda Gulsen; Josè-Luis Peydro
    Abstract: We show that global liquidity limits the transmission of local monetary policy on credit markets. For identification, we exploit global liquidity shocks in conjunction with monetary policy changes and exhaustive loan-level data (the credit and international interbank market registers) from a large emerging market, Turkey. We show that softer global liquidity conditions —proxied by lower VIX or expansionary US monetary policy— attenuate the pass-through of local monetary policy tightening on loan rates, especially for banks that borrow ex-ante more from international wholesale markets. Effects are also important for other credit margins and for bank risk-taking —especially for risky borrowers in FX loans. The mechanism at work is via a bank carry trade from international markets when local monetary conditions tighten.
    Keywords: Global liquidity, Global financial cycle, Monetary policy transmission, Emerging markets, Banks
    JEL: E52 F30 G01 G15 G21
    Date: 2019
  29. By: Jan Kregel
    Abstract: In the Western interpretation of democracy, governments exist in order to manage relations of property, with absence of property ownership leading to exclusion from participation in governance and, in many cases, absence of equal treatment before the law. Democratizing money will therefore ensure equal opportunity to the ownership of property, and thus full participation in the democratic governance of society, as well as equal access to the banking system, which finances the creation of capital via the creation of money. If the divergence between capital and labor--between rich and poor--is explained by the monopoly access of capitalists to finance, then reducing this divergence is crucially dependent on the democratization of money. Though the role of money and finance in determining inequality between capital and labor transcends any particular understanding of the process by which the creation of money leads to inequity, specific proposals for the democratization of money will depend on the explanation of how money comes into existence and how it supports capital accumulation.
    Keywords: Money; Finance; Financial History; Clearing Systems; Unit of Account
    JEL: E42 E51 E52
    Date: 2019–05
  30. By: Muge Adalet McGowan; Juan Antona San Millán
    Abstract: Spain is a highly decentralised country, making the effective implementation of national reforms dependent on regional policies. Some regional disparities are high and need to be reduced. High regional dispersion in education and job outcomes, compounded by low inter-regional mobility, emerge as key drivers of regional inequalities in income and wellbeing. Lifelong learning programmes that take into account regional specific needs would help foster regional skills and attract firms to lagging regions. Ensuring full portability of social and housing benefits across regions, by providing temporary assistance either by the region of origin or the central government, would improve inter-regional mobility. At the same time, barriers to achieving a truly single market limit productivity growth of regions, including the most advanced. Reducing regulatory barriers and better innovation policies would boost productivity. Effective intergovernmental coordination bodies and a well designed interregional fiscal equalisation system will be key to ensuring that regions have the incentives to implement policies for inclusive growth.
    JEL: D24 E24 I24 J24 J61 J65 O31
    Date: 2019–05–21
  31. By: Guilherme Bandeira (Bank of Spain); Jordi Caballe (Universitat Autonoma de Barcelona and Barcelona GSE); Eugenia Vella (University of Sheffield and MOVE, Universitat Autonoma de Barcelona)
    Abstract: In this paper we propose a new channel through which fiscal austerity affects the macroeconomy. To this end, we introduce endogenous migration both for the unem- ployed and the employed members of the household in a small open economy New Keynesian model with labour market frictions. Our model-based simulations for the austerity mix implemented in Greece over the period 2010-2015 show that the model is able to match the total size of half a million emigrants and output drop of 25%, while the model without migration generates an output drop of 20%. Having established that the model delivers empirically plausible results, we then use it to investigate (i) the two-way relation between migration and austerity, and (ii) the role of migration as shock absorber. We find that tax hikes induce prolonged migration outflows, while the effect of spending cuts is hump-shaped. In turn, emigration implies an increase in both the tax hike and time required to achieve a given size of debt reduction. As a result of the labour-reducing effect of these higher tax hikes, the unemployment gains from migration are only temporary in the presence of austerity and are substantially reversed over time.
    Keywords: Fiscal consolidation, migration, matching frictions, on-the-job search
    JEL: E32 F41
    Date: 2019–04
  32. By: Simone Tedeschi; Luigi Ventura; Pierfederico Asdrubal
    Abstract: This paper aims to fill the gap on the analysis of consumption smoothing/risksharing channels at the micro level, both within and across households. Using data from the Bank of Italy’s Survey on Household Income and Wealth covering the finan- cial crisis, we are able to quantify in a unified and consistent framework several risksharing mechanisms that so far have been documented separately. We find that Italian households were able to smooth about 83% of shocks household head’s earnings in 2008-2010, a fraction rising to almost 87% in 2010-2012. The most im- portant smoothing mechanisms turns out to be self-insurance through saving/dis- saving and within-household risksharing Interestingly, risksharing through port- folio diversification and private transfers are rather limited, but the overall degree of shock absorption occurring through private risksharing channels hovers around two thirds, as opposed to around one fifth of a shock cushioned by public transfers and taxes.
    Keywords: Household Risksharing; Precautionary Saving; Consumption Smoothing; Income Smoothing.
    JEL: C31 D12 E21
    Date: 2019–05
  33. By: Emilio Carnevali (University of Leeds, Economics Division; and Department for Work and Pensions, UK Government.); Matteo Deleidi (University College London, Institute for Innovation and Public Purpose; and Roma Tre University, Department of Economics.); Riccardo Pariboni (Roma Tre University, Department of Economics; and Freie Universitat, Berlin.); Marco Veronese Passarella (University of Leeds, Economics Division)
    Abstract: We develop an ecological open-economy SFC model that enables testing cross-area interactions among productive sectors, financial markets and the ecosystem. We show that the unequal technical progress across areas, coupled with rising ecological awareness, can force governments of less ecologically efficient areas to move further away from low-carbon assets. We argue that ‘green’ monetary and fiscal policies can be used to tackle climate change and financial instability. However, their effectiveness depends crucially on the impact of cross-border financial flows and growth rate differentials on exchange rates. Without a cross-area policy coordination plan, currency fluctuations can bring about unintended consequences, undermining green policies’ effects.
    Keywords: Stock-Flow Consistent Models, Climate Change, Financial Stability
    JEL: D53 E44 F37 G17 Q54
    Date: 2019
  34. By: meiyi, chen
    Abstract: With the rapid development of technology and the economy, more and more companies realized that the macroeconomic factors are quite important in terms of the big changes of them might carry the systematic risks to the whole system. For example, the subprime crisis happened in the United States in 2007 and eventually caused the financial crisis to the whole world. Therefore, this paper will choose the GSK corporation as the sample and analyze the inflation risk and the determinants of it. During this paper, the author used the inflation rate as dependent variables and ROA, ROE, corporate governance index, Tobin’s Q, Altman-Z score, GDP growth rate and the unemployment rate as the independent variables in order to find the relationship among these variables.
    Keywords: Inflation, GDP, Unemployment Rate
    JEL: E24 E3
    Date: 2019–05–09
  35. By: Rujin, Svetlana
    Abstract: How do international labor markets respond to a technology shock and what is the main transmission channel across countries with different labor market institutions? To answer these questions, I identify technology shocks using the approach of Galí (1999) and decompose the responses of total hours worked into movements along the extensive and the intensive margins. Overall, my analysis shows that technology shocks have a negative effect on total hours. This effect is stronger in countries with flexible labor markets, where the adjustment takes place along both margins. In contrast, the responses of total hours are smaller in countries with strict labor market legislation, where labor adjustment takes place along the intensive margin. These differences can be linked to the strictness of institutions that target quantity and price adjustments in the labor market.
    Keywords: technology shocks,labor markets,business cycle fluctuations,structural identification
    JEL: O40 O57 E32 C32
    Date: 2019
  36. By: Klug, Thorsten; Mayer, Eric; Schuler, Tobias
    Abstract: We investigate for the case of Germany the positive correlation between the corporate saving glut in the non-financial corporate sector and the current account surplus from a capital account perspective. By employing sign restrictions our findings suggest that mostly labor market, world demand and financial friction shocks account for the joint dynamics of excess corporate saving and the current account surplus. Household saving shocks, in contrast, cannot explain the correlation. We conclude that the corporate saving glut, explained through these factors, is the main driver of the current account surplus.
    Keywords: current account,corporate saving,macro shocks
    JEL: E32 F32
    Date: 2019
  37. By: Vellekoop, Nathanael; Wiederholt, Mirko
    Abstract: Do household in ation expectations affect consumption-savings decisions? We link survey data on quantitative in ation expectations to administrative data on income and wealth. We document that households with higher in ation expectations save less. Estimating panel data models with year and household fixed effects, we find that a one percentage point increase in a household's in ation expectation over time is associated with a 250-400 euro reduction in the household's change in net worth per year on average. We also document that households with higher in ation expectations are more likely to acquire a car and acquire higher-value cars. In addition, we provide a quantitative model of household-level in ation expectations.
    Date: 2019
  38. By: Michal Bencik (National Bank of Slovakia)
    Abstract: The output gap derived by conventional methods is dependent on data from national accounts statistics. Consequently, the output gap is usually the subject of significant updates if hard data are revised. Reliability of output gap estimates can also be affected by properties of the applied method, for instance the end-point problem (e.g. in the commonly used HP filter). The aim of this paper is to offer a solid methodology to measure output gap using exclusively the output series and surveys that allow for a less uncertain assessment, while eliminating the endpoint problem. We present and apply a method of constructing the output gap from surveys in Slovakia. The method consists of principal component analysis and Kalman smoother applied to the first principal component. The path of the resulting output gap is fairly similar to the path of other measures of output gap, but its revisions (especially during the outbreak of the Great Financial Crisis) are smaller than those of traditional measures.
    Keywords: Output Gap, Survey Indicators, Principal Components, Kalman Filter
    JEL: E32
    Date: 2019–05
  39. By: Dąbrowski, Marek A.; Wróblewska, Justyna
    Abstract: We examine the insulating property of flexible exchange rate in CEE economies using the fact that they have adopted different regimes. A set of Bayesian structural VAR models with common serial correlations is estimated on data spanning 1998q1-2015q4. The long-term identifying restrictions are derived from a macroeconomic model. We find that irrespective of the exchange rate regime output is driven mainly by real shocks. Its reactions to these shocks, however, are substantially stronger under less flexible regimes, whereas the responses to nominal shocks are similar. Hence, the insulating property of flexible regimes can reduce the costs from economic shocks.
    Keywords: open economy macroeconomics; exchange rate regimes; real and nominal shocks; Bayesian structural VAR; common serial correlation
    JEL: C11 E44 F33 F41
    Date: 2019–05–09
  40. By: Cukierman, Alex
    Abstract: The point of departure of this paper is that, in order to preserve the effectiveness of monetary policy in a world increasingly flooded by private digital currencies, central banks will eventually have to issue their own digital currencies. Although a non-negligible number of central banks (CBs) are actively considering the pros and cons of a central bank digital currency (CBDC) there is yet no CB that has issued such a currency on a full scale. Following a brief survey of current CBs positions on the issuance of a CBDC the paper presents two proposals for the implementation of such a currency: A moderate proposal in which only the banking sector continues to have access to deposits at the CB and a radical one in which the entire private sector is allowed to hold digital currency deposits at the CB. The paper compares and contrasts the implications of those two polar paths to a CBDC for the funding of banks, the allocation of credit to the economy and their implications for welfare as well as for political feasibility. One section of the paper shows that the radical implementation may pave the way toward a narrow banking system and dramatically reduce the need for deposit insurance in the long run. The paper evaluates the relative merits of issuing a currency on a blockchain using a permissionless distributed ledger technology in comparison to a centralized (permissioned) blockchain ledger operated by the CB and concludes that the latter dominates the former in more than one dimension. But it does acknowledge that distributed ledger technologies have many actual and potential cost savings benefits in other segments of the financial and real sectors.
    Keywords: blockchain technology; Central bank digital currency; centralized versus decentralized currencies; narrow banking; permissioned; permissionless
    JEL: E4 E5 H41
    Date: 2019–05
  41. By: Iftekhar Hasan (Fordham University and Bank of Finland); Roman Horvath; Jan Mares
    Abstract: Using a global sample, this paper investigates the determinants of wealth inequality capturing various economic, financial, political, institutional, and geographical indicators. Using instrumental variable Bayesian model averaging, it reveals that only a handful of indicators robustly matter and finance plays a key role. It reports that while financial depth increases wealth inequality, efficiency and access to finance reduce inequality. In addition, redistribution and education are associated with lower inequality whereas wars and openness to international trade contribute to greater wealth inequality.
    Keywords: Wealth inequality, finance, Bayesian model averaging
    JEL: D31 E21
    Date: 2018–12
  42. By: Syazwani, Anis
    Abstract: The study examines the impact of Tobin’s Q or market valuation determinants on firm corporate governance of MISC Berhad. Tobin’s Q of the firm represents the ratio of market capitalization plus long-term debt to total assets. This study employs time series regression analysis from 2012 to 2016. The findings show that only internal factors giving significant impact to the market valuation of the firm when it has been tested solely in Model 1 and combined for both internal and external factors in Model 3. Meanwhile, there is no significant result when the external factors were tested solely in Model 2. The multiple linear regression analysis shows that the Altman Z score is the most significant and positively influenced the market valuation of MISC Berhad.
    Keywords: Tobin’s Q, Market Valuation, Internal Factors, External Factors
    JEL: E3 E31 G32 G33
    Date: 2019–05–07
  43. By: Gabriel Mitache (Academy of Economic Studies, Bucharest and National Bank of Romania)
    Abstract: Before the 2007-2008 financial crisis, creditinstitutions were assured (though not officially or formally) that if they were large enough they would be rescued with tax-payers’ money, an action also known as bail-out, denoting what became known as the “too big to fail” paradigm. The introduction of the Bank Recovery and Resolution Directive (2014/59/EU) proposes a legal framework that aims at eliminating the possibility of bailing-out institutions. This paper has the objective of assessing througha game theory approachto what extent the BRRDirectivehas the potential to achieve its purpose and if there are identifiable possible improvements to this framework that could be considered for practical purposes or for a possible future review of the legal framework.The term institution, for the purpose of this paper, refers to credit institutions but can also be read as referring to other types of financial institutions such as investment firms or insurance companies
    Keywords: banking, banking union, bank resolution, central banking, bank recovery, bank supervision, BRRD, game theory
    JEL: D04 E61 G18 G21 G28 H12 K23
    Date: 2018–05
  44. By: Maliranta, Mika; Nurmi, Satu
    Abstract: Abstract We examine the growth of real value added, labour input and labour productivity of immigrant-owned firms in Finland in 2007–2016. In our analysis we use the so-called FLOWN (Finnish Longitudinal OWNer-Employer-Employee) data by Statistics Finland that allows linking register information on firms, their owners and employees. As immigrant-owned firms account for a few percent of all firms and about one percent of all labour in the business sector, their contribution to the growth of output and employment must be limited. However, the growth rate of their real value added is markedly stronger than in other firm groups. Their job creation rates are exceptionally high but their job destruction rates are, however, about the same magnitude as in the indigenous-owned firms. The immigrant-owned firms have created a relatively large amount of low productivity and low wage jobs. On an average, their wage growth has been somewhat higher than in other firms, but pro-cyclical variation of wages has been stronger.
    Keywords: Immigrants, Output growth, Employment growth, Productivity growth, Creative destruction
    JEL: J15 J21 J24 E24
    Date: 2019–05–14
  45. By: Konstantinos Chisiridis (Department of Economics, University of Macedonia); Kostas Mouratidis; Theodore Panagiotidis
    Abstract: The European north-south divide has been an issue of a long-standing debate. We employ a Global VAR model for 28 developed and developing countries to examine the interaction between the global trade imbalances and their impact within the euro-area framework. The aim is to assess the propagation mechanisms of real shocks, focusing on the interconnections among the north euro area and the south euro area. We incorporate theory-based long-run restrictions and examine the effects of (i) non-export real output shocks, (ii) expansionary shocks and (iii) real exchange rate shocks. The results provide support for symmetric adjustment in the euro area; an expansionary policy of the north euro area and increased competitiveness in the south euro area can alleviate trade imbalances of the debtor euro area economies. From the south euro area perspective, internal devaluation is the most beneficial policy. North euro area and U.S. origin shocks to domestic output exert a dominant influence in the rest of the Europe and Asia while the strong linkage between trade flows within the euro area is confirmed.
    Keywords: North-South Euro Area Trade Imbalances, Global Trade Imbalances, International Linkages, Global VAR, Spillover Effects
    JEL: C33 E27 F14
    Date: 2018–11
  46. By: Aurélien Goutsmedt (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, Chaire Energie & Prospérité - ENS Paris - École normale supérieure - Paris - X - École polytechnique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique - Institut Louis Bachelier); Erich Pinzón-Fuchs (Universidad de los Andes [Bogota]); Matthieu Renault (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne); Francesco Sergi (University of Bristol [Bristol])
    Abstract: We illustrate how the Lucas Critique was called into question by Keynesian macroeconomists during the 1970s and 1980s. Our claim is that Keynesians' reactions were carried out from a pragmatic approach, which addressed the empirical and practical relevance of the Critique. Keynesians rejected the Critique as a general principle with no relevance for concrete macroeconometric practice; their rejection relied on econometric investigations and contextual analysis of the U.S. 1970s stagflation and its aftermath. Keynesians argued that the parameters of their models remained stable across this period, and that simpler ways to account for stagflation (such as the introduction of supply shocks into their models) provided better alternatives to improve policy evaluation.
    Keywords: History of macroeconomics,Lucas Critique,Keynesian macroeconometrics,Stagflation
    Date: 2017–10
  47. By: Aurélien Goutsmedt (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, Chaire Energie & Prospérité - ENS Paris - École normale supérieure - Paris - X - École polytechnique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique - Institut Louis Bachelier)
    Abstract: The article studies the 1978 macroeconomics conference titled "After the Phillips Curve", where Lucas and Sargent presented their fierce attack against structural macroeconometric models, "After Keynesian Macroeconomics". The article aims at enlarging the comprehension of changes in macroeconomics in the 1970s. It shows: 1) that Lucas and Sargent dit not tackle directly the issue of the explanation of stagflation; 2) but that the struggle between different methodological stances in the conference cannot be separated from the way macroeconomists interpreted stagflation; 3) that it was not an opposition between being in favor or against microfounded models, but rather on the way we build microfoundations; 4) finally that the study of the 1978 conference opens the doors for scrutinizing the evolution of institution macroeconometric models of the 1970s which were not totally overthrown by Lucas and Sargent's arguments.
    Keywords: History of macroeconomics,Keynesian economics,Microfoundations,Structural Macroeconometric Models
    Date: 2017–10
  48. By: Yongchen Zhao (Department of Economics, Towson University)
    Abstract: Using data from the New York Fed's Survey of Consumer Expectations, we examine the information content of the updates to household inflation expectations. We find that, although consumers frequently revise their expectations, the adjustments are largely uninformative.
    Keywords: Inflation expectations, revisions to expectations, household surveys, rational inattention.
    JEL: E31 D82 D84
    Date: 2019–05
  49. By: Lim, Guan Ta
    Abstract: The aim of this study is to examine the relationship between Corporate Governance Index and with its dependents. This Samsung Company had been chosen as the focus of our studies. Five years of data were collected from Samsung’s annual reports and websites from the year 2014 until the year 2018. The data collected is used to calculate the descriptive analysis which will be shown in the reports. Based on our studies, the dependent variables were the Corporate Governance Index. And for the independent variables, We had chosen Return on Asset (ROA), Return On Equity (ROE), Tobin’s Q, and Altman Z as the Internal factors and for the data like GDP per capita, Unemployment rate, and Exchange rate had been chosen as the external factors. The Stepwise method is used to claiming the results for the Correlations, regression results and etc to observe the most significant with the corporate governance index. Only the unemployment rate shows the most influence on the Corporate Governance Index.
    Keywords: Corporate Governance, Corporate Governance Index, ROA, ROE Unemployment Rate, GDP per capita
    JEL: B21 B22 E24 G3 G33 G34 O16
    Date: 2019–05–05
  50. By: Wen, Lei; Zhou, Haiwen
    Abstract: Impact of economic integration on unemployment is studied in a general equilibrium model in which unemployment is a result of the existence of efficiency wages. Banks provide capital to manufacturing firms and engage in oligopolistic competition. Manufacturing firms choose technologies and also engage in oligopolistic competition. A country with a more efficient financial sector has a lower unemployment rate and a comparative advantage in producing manufactured goods. Trade integration decreases the unemployment rate and increases the wage rate and the equilibrium level of technology. An additional financial integration will decrease the unemployment rate and increase the wage rate and the level of technology further.
    Keywords: Unemployment, economic integration, efficiency wages, choice of technology, two-tier oligopoly
    JEL: E24 F12 J64
    Date: 2019–05–10
  51. By: Simplice A. Asongu (Yaoundé/Cameroon); Oludele E. Folarin (University of Ibadan, Ibadan, Nigeria); Nicholas Biekpe (University of Cape Town, Cape Town, South Africa)
    Abstract: This study investigates the stability of demand for money in the proposed Southern African Monetary Union (SAMU). The study uses annual data for the period 1981 to 2015 from ten countries making-up the Southern African Development Community (SADC). A standard function of demand for money is designed and estimated using a bounds testing approach to co-integration and error-correction modeling. The findings show divergence across countries in the stability of money. This divergence is articulated in terms of differences in cointegration, CUSUM (cumulative sum) and CUSUMSQ (CUSUM squared) tests, short run and long-term determinants and error correction in event of a shock. Policy implications are discussed in the light of the convergence needed for the feasibility of the proposed SAMU. This study extends the debate in scholarly and policy circles on the feasibility of proposed African monetary unions.
    Keywords: Stable; demand for money; bounds test
    JEL: E41 C22
    Date: 2019–01
  52. By: Robert J. Barro
    Abstract: The national income and product accounts double-count investment, which enters once when it occurs and again in present value when the cumulated capital leads to more rental income. From the perspective of resources available intertemporally for consumption, the double-counting issue implies over-statement of levels of GDP and national income. There is also exaggeration of capital-income shares. A proposed alternative measure of product and income involves a form of full expensing for gross investment. In the steady state, revised product and income correspond to consumption. Outside of the steady state, the measure deviates from consumption because full expensing relates to the long-run flow of gross investment, not the current flow. At a practical level, the new concept requires only an extension from the standard depreciation rate to an effective rate that adds in the economy’s expected long-run rate of economic growth.
    JEL: E01 E22
    Date: 2019–05
  53. By: Ion Stancu (Institute of Financial Studies Bucharest); Andrei Tudor Stancu (Norwich Business School, UK); Iulian Panait (Financial Supervisory Authority)
    Abstract: There is a vast literature on developing a composite index of relevant macroeconomic indicators that predicts the real economic growth. This is of great importance not only for international financial institutions (e.g. IMF, ECB), central banks, and financial supervisory authorities, but also for the private sector (credit rating agencies). Our goal is to build a Financial Stability Index (FSI) or financial stress index that tracks economic growth in Romania. We constructed a composite index using a linear combination of financial variables that are considered to have a significant impact on economic activity. These financial variables are weighted with respect to their cumulated two quarters impulse response on GDP growth, as estimated by a VAR model. Developing such a composite index of financial stability or financial stress has two main utilities: • The analysis of the correlation between financial variables and the real economy placed in the context of different historical episodes of financial crisis. Also, this correlation analysis reveals, in each period, the significant positive or negative contribution of each financial variable to real economic growth. Following this analysis, the FSI can measure the impact of economic and financial policy measures aimed at mitigating financial crises. • The short-term prediction of real economic growth estimated by forecasting the next period evolution of the real economic activity (GDPt+1) using current period GDPt and FSIt. Keywords: composite index, financial stress index, economic growth, VAR model, shortterm prediction JEL Classification: E63; G01; G28
    Keywords: composite index, financial stress index, economic growth, VAR model, shortterm prediction
    JEL: E63 G01 G28
    Date: 2017–11
  54. By: María Clara Arroyo
    Abstract: In the political economy literature there is a widely accepted view that checks on the executive can block policy implementation. Dueto lack of sufficient data, there have not been any attempts to find empirical evidence to support this theory. This thesis studies the effect of executive constraints on reform implementation using a new dataset on economic reforms introduced by Giulianoet al. (2013) and Polity IV's measure of constraints on the executive. The database used by Giuliano et al. (2013) describes the degree of regulation in six different sectors of the economy: agriculture, product markets (electricity and telecommunication), trade, capital account, current account and the domestic financial sector in 156 countries for the period 1960-2005. I use two approaches to study the relationship between executive constraints and reform implementation. The first replicates the methodology used by Giuliano et al. (2013) using executive constraints instead of democracy as the variable of interest. The second studies the persistence of the deregulation index to see whether it is affected by executive constraints. If the theory presented before is supported by the evidence, I should observe that high executive constraints are associated with a higher persistence of the deregulation index. Both approaches result in the inability to find statistically significant evidence that constraints on the executive have any effect on reform implementation, as measured by the deregulation index from Giuliano et al. (2013)
    Keywords: Political Economy, Checks and Balances, Economic Reforms
    JEL: H11 P16 P48 E02
    Date: 2018–08
  55. By: Ademmer, Martin; Boysen-Hogrefe, Jens
    Abstract: We investigate the impact of errors in medium run tax revenue forecasts on the final budget balance. Our analysis is based on fiscal data for the entirety of German states and takes advantage of revenue forecasts and respective errors that can be considered as exogenously given in the budgeting process. We find that forecast errors at various forecast horizons translate considerably into the final budget balance, indicating that expenditure plans get only marginally adjusted when revenue forecasts get revised. Consequently, the accuracy of medium run forecasts considerably affects the sustainability of public finances. Our calculations suggest that a significant share of total debt of German states results from revenue forecasts that were too optimistic.
    Keywords: fiscal policy,fiscal planning,medium run forecasting,budget balance,public debt
    JEL: E62 H61 H68
    Date: 2019
  56. By: Sebastian Weinand; Ludwig von Auer
    Abstract: Over the last three decades the supply of economic statistics has vastly improved. Unfortunately, statistics on regional price levels (sub- national purchasing power parities) have been exempt from this positive trend, even though they are indispensable for meaningful spatial comparisons of regional output, income, wages, productivity, standards of living, and poverty. To improve the situation, our paper demonstrates that a highly disaggregated and reliable regional price index can be compiled from data that already exist. We use the micro price data that have been collected for Germany’s Consumer Price Index in May 2016. For the computation we introduce a multi-stage version of the Country-Product-Dummy method. The unique quality of our price data set allows us to depart from previous spatial price comparisons and to compare only exactly identical products. We find that the price levels of the 402 counties and cities of Germany are largely driven by the cost of housing and to a much lesser degree by the prices of goods and services. The overall price level in the most expensive region, Munich, is about 27 percent higher than in the cheapest region. Our results also reveal strong spatial autocorrelation.
    Keywords: spatial price comparison, regional price index, PPP, CPD-method, hedonic regression, consumer price data
    JEL: C21 C43 E31 O18 R10
    Date: 2019
  57. By: Harker, Patrick T. (Federal Reserve Bank of Philadelphia)
    Abstract: Fed’s Harker on Unwinding: “Walk, Don’t Run”. A slow and steady approach to unwinding the Fed’s balance sheet is Philadelphia Fed President Patrick T. Harker’s preference. “So in metaphorical terms, it is a dark and stormy night, to quote Peanuts, and we are walking in the direction of a wall,” he told a conference audience. "In that situation, most of us would give the advice of ‘walk, don’t run.’”
    Keywords: monetary policy; GDP; outlook
    Date: 2019–05–06
  58. By: Aggarwal, Aradhna (Copenhagen Business School)
    Abstract: This paper examines economic growth, structural change and poverty reduction linkages across 147 countries of the world during 1991-2015. It emphasises that under the liberal market growth model structural change-growth linkages are complex, which in turn can complicate the poverty reduction effects of growth. It proposes a conceptual framework to explain how growth and structural dynamics have been influenced by globalisation. It argues that at the core of the conventional growth-structural change relationship lies the assumption that economic activities within and across sectors are strongly connected with each other through forward and backward linkages. Globalisation may distort this connectedness affecting different sectors asymmetrically. As a result, structural change in value added and employment may not commensurate with each other exerting ambiguous effects on cross-sector productivity dispersions. The study hypothesises that the convergence between them is critical for productivity enhancing structural change, and in turn, for poverty reducing effects of growth. The generalised method of moments (GMM) estimator within the framework of a dynamic panel data approach upholds the hypothesis. These findings question the sustainability of the growth and structural change processes taking place in the developing world and call for deeper strategic government interventions for broad based economic development with an emphasis on manufacturing.
    Keywords: Economic Growth, Globalisation, Structural Change, Poverty reduction, Cross country analysis
    JEL: E24 O14 O40
    Date: 2019–04–30
  59. By: Beetsma, Roel; de Jong, Frank; Giuliodori, Massimo; Hanson, Jesper
    Abstract: We use information on new sovereign debt issues in the euro area to explore the drivers behind the debt maturity decisions of governments. We set up a theoretical model for the maturity structure that trades off preference for liquidity services of short-term debt, roll-over risk and price risk. The average debt maturity is negatively related to both the level and the slope of the yield curve. A panel VAR analysis shows that positive shocks to risk aversion, the probability of non-repayment and the demand for the liquidity services of short-term debt all have a positive effect on the yield curve level and slope, and a negative effect on the average maturity of new debt issues. These results are partially in line with our theory. A forecast error variance decomposition suggests that changes in non-repayment risk as captured by credit default spreads are the most important source of shocks.
    Keywords: euro-area public debt auctions; expected repayment probability; liquidity services of short debt; Maturity; risk aversion; yield curve
    JEL: E62 G11 G12 G18
    Date: 2019–05
  60. By: Lago Peñas, Santiago; Vaquero-Garcia, Alberto; Sanchez-Fernandez, Patricio; Lopez-Bermudez, Beatriz
    Abstract: This article provides empirical evidence on the effect of fiscal consolidation in decentralized countries. The focus on Spain is justified for three reasons. First, it is one of the OECD countries that has been the most affected by the Great Recession in terms of both GDP and public deficit. Second, it is one of the most decentralized countries in the world. Third, the compliance with fiscal consolidation targets has been very diverse across regions. Using both time series econometrics and the synthetic control method approach (SCM), the authors show that compliance with fiscal targets at the regional level has not involved lower GDP growth rates in the short run.
    Keywords: fiscal consolidation,regional economic growth,great recession
    JEL: H74 R11 H62
    Date: 2019
  61. By: Lassila, Jukka; Valkonen, Tarmo
    Abstract: Abstract We study the use of pension funds in the Finnish earnings-related pension system with the aim of smoothing contributions over time under demographic and economic risks. Smoothing is affected by the revisions in long-term forecasts and is thus imperfect. As a partially funded defined-benefit system, demographic risks and asset yield risks directly affect the contributions. In a general equilibrium setup, these risks also affect wages and thus pension benefits and replacement rates. We also consider alternative benefit rules where risks are transferred more to the pensioners.
    Keywords: Pensions, Funding, Contribution smoothing, Risks, Generational fairness
    JEL: E17 H55
    Date: 2019–05–07
  62. By: Mester, Loretta J. (Federal Reserve Bank of Cleveland)
    Abstract: The FOMC currently uses what has been called a flexible inflation-targeting framework to set monetary policy. It is briefly described in the FOMC’s statement on longer-run goals and monetary policy strategy.1 In my view, this framework has served the FOMC well in effectively promoting our policy goals. A milestone was reached in January 2012 when the U.S. adopted an explicit numerical inflation goal. I am certain that Charles remembers very well the careful analysis and discussions that helped the FOMC reach a consensus on the explicit 2 percent goal and the statement that describes the FOMC’s approach to setting policy to promote its congressionally mandated goals of price stability and maximum employment. The FOMC is currently reviewing its policy framework. I am very supportive of this initiative.
    Date: 2019–05–03
  63. By: Delphine Bassilière; Ludovic Dobbelaere; Filip Vanhorebeek
    JEL: C5 E17
    Date: 2018–09–25
  64. By: Silvia Faggian (Department of Economics, University Of Venice Cà Foscari); Fausto Gozzo (Università LUISS Guido Carli); Peter M. Kort (CentER, Department of Econometrics & Operations Research, Tilburg University; Department of Economics, University of Antwerp)
    Abstract: The paper concerns the study of equilibrium points, or steady states, of economic systems arising in modelling optimal investment with vintage capital, namely, systems where all key variables (capitals, investments, prices) are indexed not only by time τ but also by age s. Capital accumulation is hence described as a partial differential equation (briefly, PDE), and equilibrium points are in fact equilibrium distributions in the variable s of ages. Investments in frontier as well as non-frontier vintages are possible. Firstly a general method is developed to compute and study equilibrium points of a wide range of infinite dimensional, infinite horizon boundary control problems for linear PDEs with convex criterion, possibly applying to a wide variety of economic problems. Sufficient and necessary conditions for existence of equilibrium points are derived in this general context. In particular, for optimal investment with vintage capital, existence and uniqueness of a long run equilibrium distribution is proved for general concave revenues and convex investment costs, and analytic formulas are obtained for optimal controls and trajectories in the long run, definitely showing how effective the theoretical machinery of optimal control in infinite dimension is in computing explicitly equilibrium distributions, and suggesting that the same method can be applied in examples yielding the same abstract structure. To this extent, the results of this work constitutes a first crucial step towards a thorough understanding of the behaviour of optimal controls and trajectories in the long run.
    Keywords: Equilibrium Points, Equilibrium Distributions, Vintage Capital Stock, Age-structured systems, Maximum Principle in Hilbert Spaces, Boundary control, Optimal Investment
    JEL: C61 C62 E22
    Date: 2019
  65. By: Christa N. Brunnschweiler (University of East Anglia); Steven Poelhekke (University of Auckland, Vrije Universiteit Amsterdam and Tinbergen Institute)
    Abstract: Does institutional change in the petroleum sector lead to more oil and gas exploration and discoveries? Foreign ownership and investment in the sector has traditionally been unrestricted. We document that this is no longer the case; foreign-domestic partnerships are the norm today. Tracking changes in legislation between 1867 and 2008 for a panel of countries, we show that switching to foreign ownership results in more drilling and more discoveries of petroleum than domestic ownership. Switching to partnership yields even more drilling, but yields fewer discoveries. Discoveries, and the intensity and quality of exploration drilling, are endogenous to industry-specific institutional change.
    Keywords: discoveries, oil and gas, natural resources, institutions
    JEL: E02 O43 Q30
    Date: 2019–05–10
  66. By: Chantal Kegels; Dirk Verwerft
    Abstract: This working paper analyses the economic impact of a regulated professional services reform in Belgium through simulations based on the European Commission's DSGE model QUEST III R&D
    JEL: D24 E17 K23 L11
    Date: 2018–06–30
  67. By: Bhambhwani, Siddharth; Delikouras, Stefanos; Korniotis, George
    Abstract: We test the theoretical prediction that blockchain trustworthiness and transaction benefits determine cryptocurrency prices. Measuring these fundamentals with computing power and adoption levels, we find a significant long-run relationship between them and the prices of five prominent cryptocurrencies. Conducting factor analysis, we find that the returns of the five cryptocurrencies are exposed to aggregate fundamental-based factors related to computing power and adoption levels, even after accounting for Bitcoin returns and cryptocurrency momentum. These factors have positive risk premia and Sharpe ratios comparable to those of the U.S. equity market. They further explain return variation in an out-of-sample set of cryptocurrencies.
    Keywords: Asset Pricing Factors; Bitcoin; cointegration; Computing Power; Dash; ethereum; Hashrate; Litecoin; Monero; network
    JEL: E4 G12 G14
    Date: 2019–05
  68. By: Ioana-Maria Dobjanschi (Acamedy of Economics Studies, Bucharest)
    Abstract: The correlation between financial market development and economic growth was and is still an intensively studied theme from the theoretical and empirical point of view. Because of this fact, the main goal of this article is to theoretically and empirically discover the relationship between thefinancial markets and economic growth using panel regression, OLS method. The database used is composed from some variables for 30 countries during the period 2006-2016 and the frequency of the data is annual.
    Keywords: economic growth, financial markets development, capital market, banking market, panel regression
    JEL: C33 E51
    Date: 2018–11
  69. By: Jézabel Couppey-Soubeyran (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, PSE - Paris School of Economics); Salim Dehmej (Bank Al-Maghrib, Département de la Recherche)
    Abstract: La zone euro souffre de divergences économiques et financières entre ses membres. La politique monétaire ne peut pas y remédier, puisqu'elle est unique, donc calibrée et menée pour la moyenne de la zone. Elle peut même les accroître en agissant seule, sans autre levier de politique économique pour la compléter. Cela rend urgent un nouveau policy mix en zone euro, qui prenne en compte le fait que la zone est hétérogène et soumise à des cycles financiers peu synchrones. Rechercher la stabilité économique par la stabilité financière est possible dans le cadre de la politique macroprudentielle, dont l'action contracyclique peut-être calibrée par pays, tout en étant coordonnée au niveau de la zone par une institution déjà en place, le Conseil européen du risque systémique. La zone euro se trouverait ainsi dotée de l'instrument d'ajustement macro-conjoncturel qui lui fait tant défaut depuis ses débuts.
    Keywords: Politique monétaire européenne,Risque systémique,Macroeconomie,Coopération économique
    Date: 2017–11
  70. By: Francesco De Palma; Yann Thommen
    Abstract: Policy advisers repeatedly call on Western European countries to reform their employment protection legislation (EPL) by adopting layoff taxes to finance unemployment insurance (UI). This new design, partly based on the existing "experience-rating" (ER) system in the U.S., would induce firms to internalize layoff fiscal costs and hence reduce unemployment. Its success remains uncertain in economies with a collective wage-setting system, as in many Western European countries. Using a matching model with endogenous job destruction, we provide an ex-ante evaluation of this policy reform’s effects on labor market outcomes in a firm-level bargaining economy and a sector-level bargaining one. Using numerical exercises, we show that compared to a scenario of a simple increase in EPL stringency, the implementation of an ER system results in a decrease in unemployment under both bargaining regimes. Because of the possibility for firms to adjust most terms and conditions of employment (including wage) in decentralized negotiations, juxtaposing the ER system with the existing EPL yields the best labor market performance under a firm-level bargaining regime. The lack of internal flexibility in sector-level bargaining calls for accompanying the implementation of the ER with a relaxation of the existing EPL’s stringency. Lastly, we show that in industries with a turbulent economic environment, accompanying the introduction of ER while reducing the existing EPL’s strictness is recommended.
    Keywords: Search and matching models, Collective bargaining, Experience rating, Employment protection.
    JEL: E10 J48 J50 J60
    Date: 2019
  71. By: Stefan Steinerberger; Aleh Tsyvinski
    Abstract: We demonstrate how a static optimal income taxation problem can be analyzed using dynamical methods. We show that the taxation problem is intimately connected to the heat equation and derive a new property of the optimal tax which we call the fairness principle. The optimal tax at a given income is equal to the weighted by the heat kernels average of optimal taxes at other incomes and income densities. The fairness principle arises not due to equality considerations but represents an efficient way to smooth the burden of taxes and generated revenues across incomes. Just as nature distributes heat evenly, the optimal way for a government to raise revenues is to distribute the tax burden and raised revenues evenly among individuals. We then construct a gradient flow of taxes – a dynamic process changing the existing tax system in the direction of the increase in tax revenues – and show that it takes the form of a heat equation. The fairness principle holds also for the short-term asymptotics of the gradient flow. The gradient flow is a continuous process of a reform of the nonlinear tax and thus unifies the variational approach to taxation and optimal taxation
    JEL: E62 H21
    Date: 2019–05

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