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on macroeconomics |
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Issue of 2005‒01‒09
nineteen papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Andrew Eggers; Yannis Ioannides |
| Abstract: | US output growth became much more stable over the past half-century. This paper assesses the role of changes in the composition of output | the increasing importance of stable sectors and diminishing importance of volatile sectors | in this stabilization. Our decomposition of output growth volatility by one-digit industry indicates that a bit less than half of the drop in volatility between the pre- and post-1982 periods is accounted for by compositional shifts, most notably the decline of manufacturing. |
| Keywords: | Economic °uctuations, macroeconomic stabilization, deindustrialization, manufacturing |
| JEL: | E32 E23 |
| URL: | http://d.repec.org/n?u=RePEc:tuf:tuftec:0422&r=mac |
| By: | Norman V. Loayza (World Bank); Ana Maria Oviedo; Luis Serven |
| Abstract: | Regulation is purportedly enacted to serve specific social purposes. In reality, however, it follows a more complex political economy process, where legitimate social goals are mixed with the objectives of particular interest groups. Whatever its justification and objectives, regulation can have potentially significant macroeconomic consequences by helping or hampering the dynamics of economic restructuring and resource reallocation that underlie the growth process. Loayza, Oviedo, and Servén provide an empirical analysis of the macroeconomic impact of regulation. They first characterize the stylized facts on regulation across the world using a set of newly constructed, comprehensive indicators of regulation in a large number of countries in the 1990s. Using these indicators, the authors study the effects of regulation on economic growth and macroeconomic volatility using cross-country regression analysis. In particular, they consider whether the effects of regulation are affected by the country’s level of institutional development. Finally, their analysis controls for the likely endogeneity of regulation with respect to macroeconomic performance. The authors conclude that a heavier regulatory burden reduces growth and increases volatility, although these effects are smaller the higher the quality of the overall institutional framework. This paper—a product of the Growth and Investment Team, Development Research Group—is part of a larger effort in the group to understand the process of economic reform. |
| Keywords: | Governance; Labor & Employment; Macroecon & Growth; Private Sector Development |
| Date: | 2005–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3469&r=mac |
| By: | DR. GODWIN CHUKWUDUM NWAOBI (QUANTITATIVE ECONOMIC RESEARCH BUREAU, NIGERIA) |
| Abstract: | SINCE 1930, EXPECTATIONS HAVE PLAYED AN IMPORTANT ROLE IN ECONOMIC THEORY AND THIS IS BECAUSE ECONOMICS IS GENERALLY CONCERNED WITH THE IMPLICATIONS OF CURRENT ACTIONS FOR THE FUTURE. THIS PAPER THEREFORE ARGUES THAT THE DEVELOPMENT OF RATIONAL EXPECTATIONS THEORY WILL MAKE A MORE SIGNIFICANT CONTRIBUTION TO ECONOMICS(AND IN PARTICULAR, MONETARY ECONOMICS) IN THE IMPETUS IT GIVES TO RESEARCH ON THE VITAL AREAS OF LEARNING AND PRICE EXPECTATIONS FORMATION |
| Keywords: | RATIONAL EXPECTATIONS, MONETARY THEORY, AUGUMENTED PHILLIPS CURVE, INFLATION, OUTPUT, PRICES |
| JEL: | E10 E50 N10 |
| Date: | 2005–01–02 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpma:0501001&r=mac |
| By: | David Andolfatto (Simon Fraser University); Scott Hendry (Bank of Canada); Kevin Moran (Universite Laval) |
| Abstract: | Simple econometric tests reported in the literature consistently report what appears to be a bias in inflation expectations. These results are commonly interpreted as constituting evidence overturning the hypothesis of rational expectations. In this paper, we investigate the validity of such an interpretation. The main tool utilized in our investigation is a computational dynamic general equilibrium model capable of generating aggregate behavior similar to the data along a number of dimensions. By construction, the model embedded the assumption of rational expectations. Standard regressions run on equilibrium realizations of inflation and inflation expectations nevertheless reveal an apparent bias in inflation expectations. In these simulations, the null hypothesis of rational expectations is incorrectly rejected in a large percentage of cases; a result that casts some doubt on conventional interpretations of the evidence. |
| JEL: | E |
| Date: | 2005–01–04 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpma:0501002&r=mac |
| By: | Stuart Wattam (MDR Associates) |
| Abstract: | This paper examines the historical record of UK house prices to establish if there is evidence to suggest that there have been significant changes in the prices of houses. It does this be examining a measure of affordability. This is defined as the average UK house price over the Average wage. This paper attempts to generate a simple model of the housing market and compares this with the actual data to make a forecast of likely movement |
| Keywords: | Houseprice, markets, booms |
| JEL: | E |
| Date: | 2005–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpma:0501004&r=mac |
| By: | George K Davis (Miami University); Bryce E. Kanago (University of Northern Iowa) |
| Keywords: | price output correlation |
| JEL: | E |
| Date: | 2005–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpma:0501005&r=mac |
| By: | Jochen Michaelis (Author-Workplace-Name: Department of Economics, University of Kassel); Angela Birk (Author-Workplace-Name: HWWA, University of Hamburg, Havard University, Department of Economics) |
| Abstract: | This paper explores how revenue-neutral tax reforms impact employment and economic growth in a model of endogenous growth and search frictions on the labor market. We analyze how savings and the incentive to create new jobs are affected by tax swaps between wage income taxes, payroll taxes, capital income taxes and taxes levied on capital costs. In our framework, the payroll tax is found to be neutral. If this tax is used to finance a cut in the capital income tax, we will observe an increase in both growth and, via the capitalization effect, employment. Most other tax reforms, however, imply a trade-off between employment and growth |
| Keywords: | search unemployment, growth, tax reform |
| JEL: | E6 H2 J6 O4 |
| Date: | 2004–06 |
| URL: | http://d.repec.org/n?u=RePEc:kas:wpaper:58/04&r=mac |
| By: | Belke, Ansgar (University of Hohenheim and IZA Bonn); Heine, Jens M. (zeb/rolfes.schierenbeck.associates) |
| Abstract: | This paper examines the degree of correlation of EU regional employment cycles and attempts to show whether these cycles reflect changing patterns of specialisation. By focusing on the regional level and by employing three different indicators of similarity of sectoral structure, it improves on existing studies. A dynamic panel data model is estimated pairs of regions by within groups, i.e., by a standard fixed effects estimator. Special attention is paid to capture the rich dynamics which are typical of employment data. The key finding is that employment growth is more synchronised when regions look alike in their sectoral structure. |
| Keywords: | regional employment, European Union, regional business cycles, specialisation, synchronicity |
| JEL: | E32 F15 R23 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1439&r=mac |
| By: | Denis Larocque; Michel Normandin |
| Abstract: | This paper presents and assesses a procedure to estimate conventional parameters characterizing fluctuations at the business cycle frequency, when the economic agents' information set is superior to the econometrician's one. Specifically, we first generalize the conditions under which the econometrician can estimate these 'cyclical fluctuation' parameters from augmented laws of motion for forcing variables that fully recover the agents' superior information. Second, we document the econometric properties of the estimates when the augmented laws of motion are possibly misspecified. Third, we assess the ability of certain information criteria to detect the presence of superior information. |
| Keywords: | Block bootstrap, Hidden variables, Laws of motion for forcing variables, Monte Carlo simulations |
| JEL: | C14 C15 C32 E32 |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:0434&r=mac |
| By: | Egil Matsen (Department of Economics, Norwegian University of Science and Technology); Ragnar Torvik (Department of Economics, Norwegian University of Science and Technology); Tommy Sveen (Central Bank of Norway) |
| Abstract: | This paper analyzes the effects of fiscal policy in an open economy. We extend the savers-spenders theory of Mankiw (2000) to a small open economy with endogenous labor supply. We first show how the Dornbusch (1983) consumption-based real interest rate for open economies is modified when labor supply is endogenous. We then turn to the effects of fiscal policy when there are both savers and spenders. With this heterogeneity taken into account, tax cuts have a short-run contractionary effect on domestic production, and increased public spending has a short-run expansionary effect. Although consistent with recent empirical work, this result contrasts with those of most other theoretical models. Transitory changes in demand have permanent real effects in our model, and we discuss the implications for real exchange-rate dynamics. We also show how "rational" savers may magnify or dampen the responses of "irrational" spenders, and show how this is related to features of the utility functions. |
| Keywords: | rule-of-thumb consumers;fiscal policy;open economy. |
| JEL: | E21 E62 F41 |
| Date: | 2004–12–29 |
| URL: | http://d.repec.org/n?u=RePEc:nst:samfok:4704&r=mac |
| By: | Dufourt (BETA - University Louis Pasteur) |
| Abstract: | Linear and Hodrick-Prescott detrending methods do not provide a good approximation of the business cycle when output contains a unit root. I use the multivariate Beveridge-Nelson decomposition to document the main patterns of US postwar business cycles when output and some other variables are assumed to be integrated I(1) processes. I show that the business cycle identified in this way displays some important differences with those obtained from the preceding methods. I then evaluate the ability of various dynamic stochastic general equilibrium (DSGE) models to replicate the main aspects of this business cycle. Among competing models, I find that the best specification involves an economy hit simultaneously by both technological and monetary shocks, in a context of price stickiness and limited (but insufficient) accommodation by the monetary authorities. Hence, the data favor the model advocated by the New-Neoclassical Synthesis rather than its purely classical (RBC type and flexible price) counterparts. |
| Keywords: | Business cycles, Beveridge-Nelson decomposition, Prices rigidity |
| JEL: | E32 |
| Date: | 2005–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpma:0501003&r=mac |
| By: | Kirk Hamilton; Giovanni Ruta; Liaila Tajibaeva |
| Abstract: | How rich would resource-abundant countries be if they had actually followed the Hartwick Rule (invest resource rents in other assets) over the past 30 years? Hamilton, Ruta, and Tajibaeva use time series data on investments and rents on exhaustible resource extraction for 70 countries to answer this question. The results are striking: Gabon, Trinidad and Tobago, and Venezuela would all be as wealthy as the Republic of Korea, while Nigeria would be five times as well off as it is currently. The authors also derive a more general rule for sustainability—maintain positive constant genuine investment—and use this to draw further empirical results. This paper—a product of the Environment Department—is part of a larger effort in the department to foster sustainable development. |
| Keywords: | Environment; Macroecon & Growth |
| Date: | 2005–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3480&r=mac |
| By: | Petra Geraats |
| Abstract: | Transparency has become one of the key features of monetary policy. This paper analyzes the reputational incentives related to transparency, focusing on the publication of central bank forecasts. A simple dynamic monetary policy game shows how transparency reduces inflation, as has been found empirically. Although transparency exposes weak central banks, the negative market feedback in response to secrecy could provide a sufficiently strong inducement to become transparent. Thus, reputational concerns could lead to transparency, even without formal disclosure requirements. |
| Keywords: | transparency, monetary policy, central bank forecasts |
| JEL: | D82 E42 E52 E58 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0473&r=mac |
| By: | Hortlund, Per (The Ratio Institute) |
| Abstract: | In the classical monetary debates, the Banking School held that notes would be equally demand-elastic whether supplied by many or a single issuer. The Free Banking School held that notes would be less demand-elastic if supplied by a single issuer. These assertions have rarely, if ever, been subject to more stringent statistical testing. In this paper I compare the elastic properties of the note stock of the Swed-ish note banking system in 1878–1901 with those of the regime in 1904–1914, when the Bank of Sweden held a note monopoly. Evi-dence suggests that notes did not become less elastic after monopoli-sation, thus lending support to the views of the Banking School. |
| Keywords: | Banking School; Free Banking School; Elastic currency; Clearing mechanism; Note competition; Needs of trade; Law of Reflux; Speed of redemption; Real bills doctrine |
| JEL: | B12 E42 E51 E58 N13 N23 |
| Date: | 2005–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0061&r=mac |
| By: | Belke, Ansgar (University of Hohenheim and IZA Bonn); Schaal, Andreas (University of Hohenheim) |
| Abstract: | Anglo-Saxon countries have been successful in the 1990s concerning labor market performance compared to the former role models Germany and Japan. This reversal in relative economic performance might be related to idiosyncracies in financial markets with bank-based financial markets as in Germany and Japan being possibly inferior to stockmarket based financial markets in turbulent times and when approaching the economic frontier. A cleavage is related to venture capital markets which are flourishing on Anglo- Saxon but not on German type financial markets. Venture capital is crucial for financing structural change, new firms and innovations and therefore possibly also nowadays for employment growth. |
| Keywords: | labor markets, venture capital, unemployment, new economy, panel data analysis |
| JEL: | E22 E24 E44 G24 G32 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1447&r=mac |
| By: | Gary M. Koop; Simon M. Potter |
| Abstract: | This paper develops a new approach to change-point modeling that allows the number of change-points in the observed sample to be unknown. The model we develop assumes regime durations have a Poisson distribution. It approximately nests the two most common approaches: the time varying parameter model with a change-point every period and the change-point model with a small number of regimes. We focus considerable attention on the construction of reasonable hierarchical priors both for regime durations and for the parameters which characterize each regime. A Markov Chain Monte Carlo posterior sampler is constructed to estimate a change-point model for conditional means and variances. Our techniques are found to work well in an empirical exercise involving US GDP growth and inflation. Empirical results suggest that the number of change-points is larger than previously estimated in these series and the implied model is similar to a time varying parameter (with stochastic volatility) model. |
| Keywords: | Bayesian; structural break; Markov Chain Monte Carlo; hierarchical prior |
| JEL: | C11 C22 E17 |
| Date: | 2004–11 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:04/31&r=mac |
| By: | Reinhold Kosfeld (Author-Workplace-Name: Department of Economics, University of Kassel); Christian Dreger (Author-Workplace-Name: Institute for Economic Research Halle (IWH)) |
| Abstract: | Changes in production, employment and unemployment are closely related over the course of the business cycle. However, as exemplified by the laws of Verdoorn (1949, 1993) and Okun (1962, 1970), thresholds seem to be present in the relationship. Due to capacity reserves of the firms, output growth must exceed certain levels for the creation of new jobs or a fall in the unemployment rate. In order to get efficient estimates of these bounds, we take a wide range of information into account. In particular, thresholds for employment and unemployment are determined on the grounds of 180 German regional labour markets. To capture cross section dependencies, a spatial SUR model is built up utilizing the eigenfunction decomposition approach suggested by Griffith (1996, 2000). The results indicate, that minimum output growth sufficient for a rise in employment is below the level which is needed for a simultaneous drop in the unemployment rate. Especially, the thresholds turn out to be about 1.2 and 2.2 percent, respectively. The ordering is related both to demographic changes and institutional settings on the labour market, such as the working of the unemployment benefit system. If spatial effects are not controlled for, the thresholds seem to be overrated. |
| Keywords: | Threshold employment and unemployment, regional labour markets, spatial filtering techniques, spatial SUR analysis |
| JEL: | C21 C23 E24 E32 |
| Date: | 2004–01 |
| URL: | http://d.repec.org/n?u=RePEc:kas:wpaper:52/04&r=mac |
| By: | DR. GODWIN CHUKWUDUM NWAOBI (QUANTITATIVE ECONOMIC RESEARCH BUREAU, NIGERIA) |
| Abstract: | OIL AS AN ENERGY PROPELLER, IS THE LARGEST INTERNATIONALLY TRADED COMMODITY THAT SHOWS HIGHLY VISIBLE INTERPLAY OF POLITICS AND ECONOMICS IN THE DETERMINATION OF ITS INVESTMENT, PRODUCTION, TRADE AND PRICING POLICIES. THIS UNIQUENESS, NO DOUBT DEMANDS A WELL ARTICULATED OIL POLICY FOR AN OIL PRODUCING NATION. THUS, THE THRUST OF THE PAPER WAS TO EVALUATE THE STATE OF THE NIGERIA'S OIL POLICY IN THE 1970S/80S. THIS PAPER THEREFORE ARGUES THAT IN THE OIL POLICY FORMULATION PROCESS, WE HAVE TO TAKE INTO ACCOUNT THE VARIOUS STAKEHOLDERS WHOSE DECISIONS AND PARTICIPATION HAVE A GREAT IMPACT ON OIL INDUSTRY, AND WHO WANT TO SEE CLEAR TARGETS AND MINIMISE RISKS. |
| Keywords: | NIGERIA, ECONOMY, OIL, POLICY, ENVIRONMENT, NNPC, POLLUTANTS, OPEC, WORLDBANK,ENERGY, PETROLEUM, GOVERNMENT |
| JEL: | E60 F10 L70 L72 N50 N70 Q30 Q40 |
| Date: | 2005–01–02 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwppe:0501001&r=mac |
| By: | Severin Borenstein (E.T. Grether Professor of Business & Public Policy, Haas School of Business, University of California, Berkeley) |
| Abstract: | Between 1995 and 2004, I find that airline prices fell more than 20% adjusted for inflation. I also show that premia at hub airports declined and that there is now substantially less disparity between the cheaper and more expensive airports than there was a decade ago. Still, I find that prices remain quite high at a few dominated airports. |
| Keywords: | Airline Competition, Airline Hubs, Price Indices |
| JEL: | L13 L93 E31 |
| Date: | 2005–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpma:0501006&r=mac |