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on Macroeconomics |
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Issue of 2010‒05‒29
25 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Guenter W. Beck (Goethe University of Frankfurt, House of Finance, Grueneburgplatz 1, 60323 Frankfurt am Main, Germany.); Volker Wieland (Goethe University of Frankfurt, House of Finance, Grueneburgplatz 1, 60323 Frankfurt am Main, Germany.) |
| Abstract: | In the New-Keynesian model, optimal interest rate policy under uncertainty is formulated without reference to monetary aggregates as long as certain standard assumptions on the distributions of unobservables are satisfied. The model has been criticized for failing to explain common trends in money growth and inflation, and that therefore money should be used as a cross-check in policy formulation (see Lucas (2007)). We show that the New-Keynesian model can explain such trends if one allows for the possibility of persistent central bank misperceptions. Such misperceptions motivate the search for policies that include additional robustness checks. In earlier work, we proposed an interest rate rule that is near-optimal in normal times but includes a cross-check with monetary information. In case of unusual monetary trends, interest rates are adjusted. In this paper, we show in detail how to derive the appropriate magnitude of the interest rate adjustment following a significant cross-check with monetary information, when the New-Keynesian model is the central bank’s preferred model. The cross-check is shown to be effective in offsetting persistent deviations of inflation due to central bank misperceptions. JEL Classification: E32, E41, E43, E52, E58. |
| Keywords: | monetary policy, New-Keynesian model, money, quantity theory, European Central Bank, policy under uncertainty. |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20101191&r=mac |
| By: | Cúrdia, Vasco (Macroeconomic and Monetary Studies Function); Finocchiaro, Daria (Research Department, Central Bank of Sweden) |
| Abstract: | This paper analyzes to what extent changes in monetary policy regimes influence the business cycle in a small open economy and investigates the impact of policy breaks on the estimation procedure. We estimate a DSGE model on Swedish data, explicitly taking into account the monetary regime change in 1993, from exchange rate targeting to inflation targeting. The results suggest that monetary policy reacted strongly to exchange rate movements in the former, and mostly to inflation in the latter. The external sector plays an important role in the economy and the international transmission mechanism is significantly affected by the choice of exchange rate regime. A counterfactual experiment that applies the inflation targeting policy rule on the disturbances from the exchange rate targeting period suggests that such a policy would have led to higher output and employment, but also to a depreciated currency, higher inflation and a more volatile economy. We also show evidence that ignoring the break in the estimation leads to spurious results for both the parameters associated with monetary policy as well as those that are policy-independent. |
| Keywords: | Bayesian estimation; DSGE models; target zone; inflation targeting; regime change |
| JEL: | C10 C50 E50 F40 |
| Date: | 2010–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:rbnkwp:0241&r=mac |
| By: | Rachel Male (Queen Mary, University of London) |
| Abstract: | Identifying business cycle stylised facts is essential as these often form the basis for the construction and validation of theoretical business cycle models. Furthermore, understanding the cyclical patterns in economic activity, and their causes, is important to the decisions of both policymakers and market participants. Previous analyses of developing country stylised facts have tended to feature only small samples, for example the seminal paper by Agénor <i>et al.</i> (2000) considers just twelve middle-income economies. Consequently, unlike for the industrialised countries, there is not a consistent set of developing country business cycle stylised facts. Motivated by importance of these business cycle statistics, this paper makes an important contribution to the literature by extending and generalising the developing country stylised facts for a sample of thirty-two developing countries. In particular, it is found that real interest rates are, on average, weakly procyclical in developing countries, not countercyclical as previously reported; this holds only for the Latin American economies. There is evidence that money leads the cycle in numerous developing economies, and thus that monetary shocks are an important source of business cycle fluctuations. However domestic credit, which is thought to fulfil an important role in determining investment, and hence economic activity, in developing economies, is found to lag, rather than lead, the cycle, thus implying that fluctuations in output influence credit rather than credit influencing the business cycle. A final key empirical finding is that developing country business cycles are characterised by significantly persistent output fluctuations; however, the magnitude of this persistence is somewhat lower than for the developed countries. Furthermore, prices and nominal wages are found to be significantly persistent in almost all of the developing countries. This finding is particularly important, because it justifies the use of theoretical models with staggered prices and wages for the modelling of developing country business cycles. |
| Keywords: | Business cycle, Developing economies, Stylised facts, Volatility, Persistence, Cross-correlations |
| JEL: | E31 E32 E52 F41 O50 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp664&r=mac |
| By: | Inci Ötker; Charles Freedman |
| Abstract: | This is the fifth chapter of a forthcoming monograph entitled "On Implementing Full-Fledged Inflation-Targeting Regimes: Saying What You Do and Doing What You Say." It examines whether certain conditions have to be met before emerging economies can adopt an inflation-targeting regime and provides some empirical evidence on the matter. The issues analyzed are the priority of inflation targeting over other goals, the absence of fiscal dominance, central bank independence, the degree of control over the policy interest rate, a sound methodology for forecasting, and the soundness of financial institutions and markets, and resilience to changes in exchange rates and interest rates. |
| Keywords: | Central bank autonomy , Emerging markets , Exchange rates , Fiscal policy , Inflation targeting , Interest rate policy , Monetary policy , |
| Date: | 2010–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/113&r=mac |
| By: | Eickmeier, Sandra; Hofmann, Boris |
| Abstract: | This paper uses a factor-augmented vector autoregressive model (FAVAR) estimated on U.S. data in order to analyze monetary transmission via private sector balance sheets, credit risk spreads and asset markets in an integrated setup and to explore the role of monetary policy in the three imbalances that were observed prior to the global financial crisis: high house price inflation, strong private debt growth and low credit risk spreads. The results suggest that (i) monetary policy shocks have a highly significant and persistent effect on house prices, real estate wealth and private sector debt as well as a strong short-lived effect on risk spreads in the money and mortgage markets; (ii) monetary policy shocks have contributed discernibly, but at a late stage to the unsustainable developments in house and credit markets that were observable between 2001 and 2006; (iii) financial shocks have influenced the path of policy rates prior to the crisis, and the feedback effects of financial shocks via lower policy rates on property and credit markets are found to have probably been considerable. -- |
| Keywords: | Monetary policy,asset prices,housing,private sector balance sheets,financial crisis,factor model |
| JEL: | E52 E44 C3 E3 E43 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp1:201007&r=mac |
| By: | Raj, Madhusudan |
| Abstract: | This paper discusses the real understanding of inflation, its true causes and its root solutions. |
| Keywords: | Inflation; Fractional reserve banking; Welfare warfare state; Money supply; Gold standard; Commodity money; Central bank; Austrian economics. |
| JEL: | E31 |
| Date: | 2010–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22599&r=mac |
| By: | Steven Gjerstad (Economic Science Institute, CHapman University); Vernon L. Smith (Economic Science Institute, Chapman University) |
| Abstract: | The recent economic crisis – already deservedly labeled the ‘great recession’ – continues to plague the health of the economy as a whole and has motivated us to probe its characteristic features and compare it to the typical economic downturn. Events during the boom and crash have been sharply delineated, progressing from (1) an unprecedented housing price bubble from 1997 to 2006, (2) rapid house price decline beginning early in 2007, (3) freezing of credit markets in August 2007, (4) rapid declines in equities prices and economic output by the middle of 2008, and (5) deterioration of the financial system in 2008 and an aggressive and unprecedented Federal Reserve intervention in the fall of 2008. This sequence of events has provided a fresh perspective with which to examine past economic cycles, and, we believe, is likely to change how economists, policy makers, investors, and others think about monetary policy, housing cycles, and business cycles. We find that eleven of the most recent fourteen economic downturns in the U.S. – from the great depression that began in 1929 to the great recession starting in late 2007 – were led by declines in housing investment. In these eleven downturns, housing investment declined before any other major component of GDP and its total decline before and during the recession was larger in percentage terms than the decline in any other major sector. In the 1945 recession – one of the three recessions in which housing was not implicated – national defense expenditures fell while all major components of private expenditure rose. The other two – in 1937-38 and 2001 – resulted primarily from declines in non-residential fixed investment that preceded and exceeded declines in any other major component of GDP. Figure 1 shows the percentage of GDP contributed by housing expenditures over the past 81 years. Although housing is not a large component of GDP – which may explain its limited role in accounts of recessions – it is volatile, it has declined before almost every recession, it has rarely declined substantially without a recession following soon afterward, and the extent of its decline emerges as a good predictor of the depth and duration of the recession that follows.2 In addition to its role as a leading indicator, and its volatility over the business cycle, housing investment has recovered faster than any other sector of the economy in every recession since 1921, with the single exception of the 1980 recession, which lasted only 12 months. |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:10-03&r=mac |
| By: | J. Stephen Ferris (Department of Economics, Carleton University); J. A. Galbraith (Department of Economics, Carleton University) |
| Date: | 2010–01–21 |
| URL: | http://d.repec.org/n?u=RePEc:car:carecp:10-03&r=mac |
| By: | Matthias Hartmann; Helmut Herwartz |
| Abstract: | We study the impact of the introduction of the European Monetary Union on inflation uncertainty. Two groups of economies, one consisting of three European Union members which are not part of the EMU and one of six OECD member economies, are used as control groups to contrast the effects of monetary unification against the counterfactual of keeping the status quo. We find that the monetary unification provides a significant payoff in terms of lower inflation uncertainty in comparison with the OECD. Regarding the difficulty of quantifying the latent inflation uncertainty, results are found to be robust over a set of four alternative estimates of inflation risk processes. |
| Keywords: | Monetary policy regimes,euro introduction,inflation uncertainty,uncertainty measures,Did the introduction of the euro impact on infla,Hartmann,Herwartz,European Economy. Economic Papers |
| JEL: | C53 E31 E42 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0396&r=mac |
| By: | Reijer, Adrianus Hendrikus Johannes den (Maastricht University) |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ner:maastr:urn:nbn:nl:ui:27-22624&r=mac |
| By: | Eric Mayer (University of Wuerzburg / Department of Economics); Johann Scharler |
| Abstract: | In this paper we quantitatively evaluate the hypothesis that the Great Moderation is partly the result of a less activist monetary policy. We simulate a New Keynesian model where the central bank can only observe a noisy estimate of the output gap and fnd that the less pronounced reaction of the Federal Reserve to output gap uctuations since 1979 can account for half of the reduction in the standard deviation of GDP associated with the Great Moderation. Our simulations are consistent with the empirically documented smaller magnitude and impact of interest rate shocks since the early 1980s. |
| Keywords: | Great Moderation, New Keynesian Model, Noisy Data |
| JEL: | E32 E52 E58 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2010_07&r=mac |
| By: | Davide Furceri; Annabelle Mourougane |
| Abstract: | This paper examines the effects of fiscal policy on output in the euro area. For this purpose we develop a DSGE Fiscal Model with endogenous government bond yields to assess the impact of different fiscal policy shocks on output, its components and on government debt. The simulations suggest that fiscal policy is effective in supporting activity, especially in the short term. In particular, the largest fiscal multipliers are found for an increase in public investment, public consumption and a cut in the wage tax. The results are robust to different parameter calibrations and are economically significant. Amongst the different structural parameters, the share of liquidity constrained households and price persistence are found to be the ones which affect the most fiscal multipliers.<P>Les effets de la politique budgétaire sur la production : une analyse à partir d’un modèle DSGE<BR>Ce papier examine les effets de la politique budgétaire sur l?activité dans la zone euro. À cette fin, nous avons développé un modèle budgétaire DSGE dans lequel les rendements des obligations d?État sont endogènes et nous examinons l?effet de différents chocs budgétaires sur le PIB et ses composantes et sur la dette publique. Les simulations indiquent que la politique budgétaire permet de soutenir l?activité, en particulier sur le court terme. Plus précisément, les multiplicateurs budgétaires les plus larges sont associés à une augmentation de l?investissement public, de la consommation publique ainsi qu?à une baisse du taux d?imposition sur les salaires. Les résultats sont robustes à différentes valeurs des paramètres structuraux du modèle et sont économiquement significatifs. Parmi les différents paramètres structurels, la part des ménages qui rencontrent des contraintes de liquidité et les inerties au niveau des prix sont les paramètres qui affectent le plus les multiplicateurs fiscaux. |
| Keywords: | fiscal policy, debt sustainability, output, DSGE, politique budgétaire, soutenabilité de dette, activité, DSGE |
| JEL: | E62 H10 |
| Date: | 2010–05–18 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:770-en&r=mac |
| By: | Sandra Gomes (Bank of Portugal, Economic Research Department, Av. Almirante Reis 71, 1150-012 Lisbon, Portugal.); Pascal Jacquinot (European Central Bank, Directorate General of Research, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Massimiliano Pisani (Bank of Italy, Research Department, Via Nazionale 91, 00184 Rome, Italy.) |
| Abstract: | Building on the New Area Wide Model, we develop a 4-region macroeconomic model of the euro area and the world economy. The model (EAGLE, Euro Area and Global Economy model) is microfounded and designed for conducting quantitative policy analysis of macroeconomic interdependence across regions belonging to the euro area and between euro area regions and the world economy. Simulation analysis shows the transmission mechanism of region-specific or common shocks, originating in the euro area and abroad. JEL Classification: C53, E32, E52, F47. |
| Keywords: | Open-economy macroeconomics, DSGE models, econometric models, policy analysis. |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20101195&r=mac |
| By: | Aghion, P.; Hemous, D.; Kharroubi, E. |
| Abstract: | This paper evaluates whether the cyclical pattern of fiscal policy can affect growth. We first build a simple endogenous growth model where entrepreneurs can invest either in short-run projects or in long-term growth enhancing projects. Long-term projects involve a liquidity risk which credit constrained firms try to overcome by borrowing on the basis of their short-run profits. By increasing firms' market size in recessions, a countercyclical fiscal policy will boost investment in productivity-enhancing long-term projects, and the more so in sectors that rely more on external financing or which display lower asset tangibility. Second, the paper tests this prediction using Rajan and Zingales (1998)'s diff-and-diff methodology on a panel data sample of manufacturing industries across 17 OECD countries over the period 1980-2005. The evidence confirms that the positive effects of a more countercyclical fiscal policy on value added growth, productivity growth, and R&D expenditure, are indeed larger in industries with heavier reliance on external finance or lower asset tangibility. |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:ner:ucllon:http://eprints.ucl.ac.uk/17759/&r=mac |
| By: | Xavier Debrun; Radhicka Kapoor |
| Abstract: | The paper revisits the link between fiscal policy and macroeconomic stability. Two salient features of our analysis are (1) a systematic test for the government’s ambivalent role as a shock absorber and a shock inducer—removing a downward bias present in existing estimates of the impact of automatic stabilizers—and (2) a broad sample of advanced and emerging market economies. Results provide strong support for the view that fiscal stabilization operates mainly through automatic stabilizers. Also, the destabilizing impact of policy changes not systematically related to the business cycle may not be as robust as suggested in the literature. |
| Keywords: | Economic models , Economic stabilization , Fiscal policy , Fiscal stability , |
| Date: | 2010–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/111&r=mac |
| By: | Das, Rituparna |
| Abstract: | As per the researchers on monetary economics, a detailed account of the changing role of money from Walrasian and Non-Walrasian settings to the more recent theories on the dynamics of the relationships between money, inflation and growth with reference to their historical evolution are available in Friedman et al. ed. (1998) and such type of theoretical work did not happen in India. There is a tendency among the Indian researchers to apply the theories developed abroad to up to date empirical data in econometrics models and then, with the help of econometric techniques and compare the results. For example Dash and Goal (2001) applied the theory of Foster (1992) and Chona (1976) applied the theory of Ahrensdorf and Thasan (1960). This paper dealt with such applications, their lacunae and attempts to resolve the issues unaddressed till 2005. |
| Keywords: | monetary policy; money; interest rate; Keynes; monetarist; neo Keynesian; Quantity Theory; LM curve; Nachane; Brahmananda; Tobin; post Keynesian; endogenous; money supply; financial markets; bank; credit; loan |
| JEL: | E0 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22825&r=mac |
| By: | Lawrence Christiano (Northwestern University, 633 Clark Street Evanston, IL 60208 Evanston, USA.); Roberto Motto (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Massimo Rostagno (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | We augment a standard monetary DSGE model to include a banking sector and financial markets. We fit the model to Euro Area and US data. We find that agency problems in financial contracts, liquidity constraints facing banks and shocks that alter the perception of market risk and hit financial intermediation — ‘financial factors’ in short — are prime determinants of economic fluctuations. They have been critical triggers and propagators in the recent financial crisis. Financial intermediation turns an otherwise diversifiable source of idiosyncratic economic uncertainty, the ‘risk shock’, into a systemic force. JEL Classification: E3, E22, E44, E51, E52, E58, C11, G1, G21, G3. |
| Keywords: | DSGE model, Financial frictions, Financial shocks, Bayesian estimation, Lending channel, Funding channel. |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20101192&r=mac |
| By: | Andrea Vaona (Department of Economics (University of Verona)) |
| Abstract: | This paper explores the influence of inflation on economic growth both theoretically and empirically. We propose to merge an endogenous growth model of learning by doing with a New Keynesian one with sticky wages. We show that the intertemporal elasticity of substitution of working time is a key parameter for the shape of the inflation-growth nexus. When it is set equal to zero, the inflation-growth nexus is weak and hump-shaped. When it is greater than zero, inflation has a sizeable and negative effect on growth. Endogenizing the length of wage contracts does not lead to inflation superneutrality in presence of a fixed cost to wage resetting. Once adopting various semiparametric and instrumental variable estimation approaches on a cross-country/time-series dataset, we show that increasing inflation reduces real economic growth, consistently with our theoretical model with a positive intertemporal elasticity of substitution of working time. |
| Keywords: | inflation, growth, wage-staggering, learning-by-doing, semi- parametric estimator |
| JEL: | E31 E51 E52 O42 C14 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:ver:wpaper:9/2010&r=mac |
| By: | Murtaza H. Syed; Hiromi Yamaoka |
| Abstract: | In responding to the global crisis, central banks in several advanced economies ventured beyond traditional monetary policy. A variety of unorthodox measures, including purchases of public and private assets, have significantly enlarged their balance sheets. As recoveries take hold, focus will increasingly shift from countering the Great Recession to orchestrating an exit and returning to a more normal monetary framework. Five years ago, as its economy recovered from a severe financial crisis, Japan attempted just such an exit. This note revisits the Bank of Japan’s experience and draws potential lessons for managing an orderly exit today, with a focus on technical aspects, practicalities, and communication strategies. While the nature of the assets acquired during the present crisis could pose additional complications, parts of Japan’s arsenal—communication, flexibility, a sufficient set of policy tools and a strategy for using them, safeguards against potential losses, the revival of risk appetite through decisive restructuring of balance sheets, and refinements to the monetary framework upon exit—also could be important this time around. |
| Keywords: | Asset management , Central bank policy , Economic recovery , Financial crisis , Interest rate increases , Japan , Liquidity management , Monetary measures , Monetary policy , |
| Date: | 2010–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/114&r=mac |
| By: | Hanan Morsy; Magda E. Kandil |
| Abstract: | Across a sample of thirty four emerging countries, the evidence shows the frequent existence of a pro-cyclical fiscal impulse. However, the scope for countercyclical policy increases with the availability of international reserves as it enhances credibility and mitigates concerns about the effect of expansionary fiscal policy on the cost of borrowing and debt service. The paper also examines the effectiveness of the fiscal policy in emerging countries in the short- and long-run and its underlying conditions, which does not appear to be uniform. In some cases, contractionary fiscal policy could stimulate growth in the short-run, if fiscal tightness lowers the cost of borrowing and debt service, and mitigates concerns about debt sustainability. However, an increase in international reserves is evident to mitigate these concerns. On the other hand, high inflation increases concerns about the impact of fiscal spending on inflationary expectations and the cost of borrowing, countering the effectiveness of the fiscal stimulus on output growth in the short-run. Where the debt burden is high, fiscal expansion has a longlasting negative effect on real growth. |
| Date: | 2010–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/123&r=mac |
| By: | Roman Horvath; Anca Maria Podpiera |
| Abstract: | In this paper, we estimate the interest rate pass-through from money market to bank interest rates using various heterogeneous panel cointegration techniques to address bank heterogeneity. Based on our micro-level data from the Czech Republic, the results indicate that the nature of interest rate pass-through differs across banks in the short term (rendering estimators that constrain coefficients across groups to be identical inconsistent) and becomes homogeneous across banks only in the long term, supporting the notion of the law of one price. Mortgage rates and firm rates typically adjust to money market changes, but often less than fully in the long run. Large corporate loans have a smaller mark-up than small loans. Consumer rates have a high mark-up and are not found to exhibit a cointegration relationship with money market rates. Next, we examine how bank characteristics determine the nature of interest rate pass-through in a cross-section of Czech banks. We find evidence for relationship lending, as banks with a stable pool of deposits smooth interest rates and require a higher spread as compensation. Large banks are not found to price their products less competitively. Greater credit risk increases vulnerability to money market shocks. |
| Keywords: | Bank pricing policies, financial structure, monetary transmission. |
| JEL: | E43 E58 G21 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2009/8&r=mac |
| By: | Holinski Nils; Kool Clemens; Muysken Joan (METEOR) |
| Abstract: | In this paper we document the growing dispersion of external and internal balances between countries in the North and South of the Euro area over the time period 1992 to 2007. We find a persistent divergence process that seems to have started with the introduction of the common currency and has its roots in the savings and investment behavior of private sectors. We dismiss the common argument in the literature that imbalances are the temporary outcome of an overall European economic convergence process and argue that future research should place greater emphasis on country heterogeneity in behavior to fully understand economic developments in the Euro area and to derive policy implications. |
| Keywords: | macroeconomics ; |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2010026&r=mac |
| By: | Rachel Male (Queen Mary, University of London) |
| Abstract: | Classical business cycles, following Burns and Mitchell (1946), can be defined as the sequential pattern of expansions and contractions in aggregate economic activity. Recently, Harding and Pagan (2002, 2006) have provided an econometric toolkit for the analysis of these cycles, and this has resulted in a recent surge in researchers using these methods to analyse developing country business cycles. However, the existing literature consists of diminutive samples and the majority fail to consider the statistical significance of the concordance statistics. To address this shortfall, this paper examines the business cycle characteristics and synchronicity for thirty-two developing countries. Furthermore, the US, the UK and Japan are included; this provides benchmarks upon which to compare the characteristics of the developing country cycles and also to examine the degree of synchronisation between developed and developing countries. Significantly, this research reveals that business cycles of developing countries are not, as previously believed, significantly shorter than those of the developed countries. However, the amplitude of both expansion and contraction phases tends to be greater in the developing countries. Furthermore a clear relationship between the timing of business cycle fluctuations and periods of significant regional crises, such as the Asian Financial Crisis, is exhibited. However, the more specific timing of the onset of these fluctuations appears to be determined by country-specific factors. Moreover, there are no clear patterns of concordance either within regions or between developed and developing country business cycles. |
| Keywords: | Classical business cycle, Turning points, Synchronisation, Concordance, Contagion, Developing economies |
| JEL: | C14 C41 E32 O50 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp663&r=mac |
| By: | Razzak, Weshah |
| Abstract: | Unanticipated shocks could lead to instability, which is reflected in statistically significant changes in distributions of independent Gaussian random variables. Changes in the conditional moments of stationary variables are predictable. We provide a framework based on a statistic for the Sample Generalized Variance, which is useful for interrogating real time data and to predicting statistically significant sudden and large shifts in the conditional variance of a vector of correlated macroeconomic variables. Central banks can incorporate the framework in the policy making process. |
| Keywords: | Sample Generalized Variance; Conditional Variance; Sudden and Large Shifts in the Moments |
| JEL: | E66 C3 C1 |
| Date: | 2010–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22804&r=mac |
| By: | Bowdler, Christopher; Nunziata, Luca |
| Abstract: | Using OECD panel data for 1961–2000 we provide evidence that the output cost associated with disinflation (the sacrifice ratio) decreases with coordination between wage-setters in the labor market. The relationship holds for alternative measures of labor market coordination and after controlling for standard sacrifice ratio determinants. The sign of the relationship is robust across alternative definitions of the sacrifice ratio, but its statistical significance varies. Our results also indicate that more stringent employment protection laws increase sacrifice ratios, but the effect is not significant at conventional levels. We provide explanations for our findings based on the speed of nominal wage adjustment in New Keynesian models. |
| JEL: | E30 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ner:oxford:http://economics.ouls.ox.ac.uk/14595/&r=mac |