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on Macroeconomics |
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Issue of 2015‒04‒19
143 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Onour, Ibrahim |
| Abstract: | Research Problem: The primary purpose of the paper is to set up a macroeconomic model that depict domestic inflation dynamics in a conflict economy impeded by parallel market for foreign exchange and internal political conflict. Research methodology: To investigate domestic inflation sensitivity to macro variables time-varying coefficient estimation approach employed on monthly data from Sudan during the period from January 2008 to December2013. Results: While domestic money growth (government spending) is the main driver of domestic inflation,the increasing role of parallel market for foreign exchange and imported inflation on domestic inflation reveal increasing sensitivity of the economy to external shocks. Also indicated that our model based estimates of domestic inflation rate is about 22% above the officially announced inflation rate. Recommendations: To control domestic inflation it is essential to control growth in domestic money creation and adopt more flexible official foreign exchange rate that enables inflation trageting policy. |
| Keywords: | Inflation, parallel market, money growth |
| JEL: | E3 E30 E31 E4 E44 |
| Date: | 2015–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63527&r=mac |
| By: | Lorenza Rossi (Department of Economics and Management, University of Pavia) |
| Abstract: | I consider a NK-DSGE model with endogenous firms' exit and entry together with a monopolistic competitive banking sector, where defaulting firms do not repay loans to banks. I show that the exit margin is an important shock trans- mission channel. It implies: i) an endogenous countercyclical number of fi rms destruction; ii) an endogenous countercyclical bank markup and spread. The interaction between i) and ii) generates a stronger propagation mechanism with respect to a model with efficient banks. Compared to a model with exogenous exit the model generates a correlation between output and firms'entry closer to the data. |
| Keywords: | firms' endogenous exit, firms dynamics, monopolistic banking, inefficient financial markets, countercyclical bank markup, interest rate spread. |
| JEL: | E32 E44 E52 E58 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:pav:demwpp:demwp0099&r=mac |
| By: | José M. Gaspar (Rua Dr. Roberto Frias, 4200-464 Porto PORTUGAL) |
| Abstract: | We use the framework implicit in the model of inflation by Shone (1997) to address the analytical properties of a simple dynamic aggregate supply and aggregate demand (AS-AD) model and solve it numerically. The model undergoes a bifurcation as its steady state smoothly interchanges stability depending on the relation between the sensitivity of the demand for liquidity to variations in the interest rate and the way expectations on inflation are formed based on real output fluctuations. Using code embedded into a unique function in Matlab, we plot the numerical solutions of the model and simulate different dynamic adjustments using different parameter values. The same function also accommodates for the implementation of different policy shocks: monetary policy shocks through changes in the growth rate of money supply, fiscal policy shocks due to variations in public spending and in the exogenous tax rate, and supply side shocks as given by changes in the level of natural output. |
| Keywords: | business cycles; local dynamics; computational economics; policy shocks |
| JEL: | C62 C63 E32 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:559&r=mac |
| By: | Jakub Mateju (CERGE-EI, Prague, Czech Republic; Czech National Bank, Prague, Czech Republic) |
| Abstract: | This paper suggests that non-fundamental component in asset prices is one of the drivers of financial and credit cycle. Presented model builds on the financial accelerator literature by including a stock market where limitedly-liable investors trade stocks of productive firms with stochastic productivities. Investors borrow funds from the banking sector and can go bankrupt. Their limited liability induces a moral hazard problem which shifts demand for risk and drives prices of risky assets above fundamental value. Embedding the contracting problem in a New Keynesian general equilibrium framework, the model shows that loose monetary policy induces loose credit conditions and leads to a rise in both fundamental and non-fundamental components of stock prices. Positive shock to non-fundamental component triggers a financial cycle: collateral values rise, lending rate and default rate decreases. These effects reverse after several quarters, inducing a credit crunch. The credit boom lasts only while stock market growth maintains sufficient momentum. However, monetary policy does not reduce volatility of inflation and output gap by reacting to asset prices. |
| Keywords: | credit cycle, limited liability, non-fundamental asset pricing, collateral value, monetary policy |
| JEL: | E32 E44 E52 G10 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2015_05&r=mac |
| By: | Sanches, Daniel R. (Federal Reserve Bank of Philadelphia) |
| Abstract: | A primary concern in monetary economics is whether a purely private monetary regime is consistent with macroeconomic stability. I show that a competitive regime is inherently unstable due to the properties of endogenously determined limits on private money creation. Precisely, there is a continuum of equilibria characterized by a self-fulfilling collapse of the value of private money and a persistent decline in the demand for money. I associate these equilibrium allocations with self-fulfilling banking crises. It is possible to formulate a fiscal intervention that results in the global determinacy of equilibrium, with the property that the value of private money remains stable. Thus, the goal of monetary stability necessarily requires some form of government intervention. |
| Keywords: | Private money; Self-fulfilling crises; Macroeconomic stability |
| JEL: | E42 E44 G21 |
| Date: | 2015–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:15-18&r=mac |
| By: | César Carrera (Central Reserve Bank of Peru); Fernando Pérez Forero (Central Reserve Bank of Peru); Nelson Ramírez-Rondán (Central Reserve Bank of Peru) |
| Abstract: | Emerging economies have been largely affected for Fed's Quantitative Easing (QE) policies. This paper assesses the impact of these measures in terms of key macroeconomic variables for four small open economies (SOE) in Latin America such as Chile, Colombia, Mexico and Peru. We identify a QE policy shock in a Structural VAR with Block Exogeneity (à la Zha, 1999) and we impose a mixture of zero and sign restrictions (à la Arias et al., 2014). Overall, we find that this QE policy shock has significant effects on financial variables such as aggregate credit and the exchange rate. These effects are larger than the ones produced on output and prices. |
| Keywords: | Quantitative Easing, Structural Vector Autoregressions, Sign and Zero Restrictions |
| JEL: | E43 E51 E52 E58 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:apc:wpaper:2015-035&r=mac |
| By: | Ledenyov, Dimitri O.; Ledenyov, Viktor O. |
| Abstract: | Article introduces the notion of information money fields of the cyclic oscillations of the economic variables in the nonlinear dynamic economic system for the first time, and presents an original research on the Ledenyov theory on the information money fields of the cyclic oscillations of the economic variables in the nonlinear dynamic economic system. The Ledenyov theory on the information money fields of the cyclic oscillations of economic variables in the nonlinear dynamic economic system postulates that the economic continuous waves (the cyclic oscillations) have the information money fields in the nonlinear dynamic economic system, transmitting the economic/financial information in the nonlinear dynamic economic system. It is shown that the information money fields may interact with other cyclic oscillations and/or with the nonlinear dynamic economic system by means of the weak and strong interactions between the information money fields. We developed the MicroIMF software program to make the computer modeling of 1) the interactions between the information money fields of one cyclic oscillation and the information money fields of other cyclic oscillation(s) in the nonlinear dynamic economic system, 2) the interactions between the information money fields of cyclic oscillation and the nonlinear dynamic economic system itself, and 3) the density distributions of the information money fields by different cyclic oscillations (the economic continuous waves) in the nonlinear dynamic economic system. The MicroIMF software program can be used in the process of business cycles forecasting by the central banks with the purpose to make the strategic decisions on the monetary policies, financial stability policies, and by other financial institutions with the aim to perform the financial operations on the minimum capital allocation, countercyclical capital buffer creation, and capital investments. |
| Keywords: | information money field of cyclic oscillation, generation of cyclic oscillations, amplitude of cyclic oscillation, frequency of cyclic oscillation, wavelength of cyclic oscillation, period of cyclic oscillation, phase of cyclic oscillation, mixing of cyclic oscillations, harmonics of cyclic oscillation, nonlinearities of cyclic oscillation, Juglar fixed investment cycle, Kitchin inventory cycle, Kondratieff long wave cycle, Kuznets infrastructural investment cycle, econophysics, econometrics, nonlinear dynamic economic system, macroeconomics |
| JEL: | C50 C53 E00 E30 E32 E37 E50 E58 E60 O11 |
| Date: | 2015–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63564&r=mac |
| By: | Laurent Ferrara; Pierre Guérin |
| Abstract: | Following the Great Recession, econometric models that better account for un certainty have gained increased attention, and an increasing number of works evaluate the effects of uncertainty shocks. In this paper, we evaluate the impact of high-frequency uncertainty shocks on a set of low-frequency macroeconomic variables representative of the U.S. economy. Rather than estimating models at the same common low-frequency, we use recently developed econometric methodology that allows us to avoid aggregating high-frequency data before estimating models. The impulse response analysis uncovers various salient facts. First, in line with the existing literature, high-frequency uncertainty shocks are associated with a broad-based decline in economic activity. Second, we find that credit and labor market variables react the most to uncertainty shocks. Third, we show that the responses of macroeconomic variables to uncertainty shocks are relatively similar across single-frequency and mixed-frequency data models, suggesting that the temporal aggregation bias is not acute in this context. Finally, we find that some macroeconomic variables exhibit an asymmetric response to uncertainty shocks over the different phases of the business cycle. |
| Keywords: | MIDAS model, Mixed-frequency VAR, Uncertainty. |
| JEL: | E32 E44 C32 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2015-12&r=mac |
| By: | Barbara Annicchiarico (Department of Economics, University of Rome Tor Vergata.); Lorenza Rossi (Department of Economics and Management, University of Pavia) |
| Abstract: | We study the effects of real uncertainty on long-run growth under different Taylor-type rules. We fi nd a non-negligible relationship between real uncertainty and growth, which depends on the source of real uncertainty as well as the type of the Taylor rule considered. Importantly, when uncertainty is due to investment speci fic shocks, it is highly detrimental for growth, unless the Central Bank follows a strong inflation targeting rule. Furthermore, we fi nd that in the presence of real uncertainty, there is a positive correlation between average growth and average inflation under pure inflation targeting regimes and negative otherwise. |
| Keywords: | Taylor rules, Endogenous Growth, Real Uncertainty. |
| JEL: | E32 E52 O42 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pav:demwpp:demwp0100&r=mac |
| By: | De Koning, Kees |
| Abstract: | Economic growth data does not show how such growth was achieved. Was it based on income growth and consumption spending levels or was it based on borrowings to extend the income levels? The question is vital for deciding which economic tools work best for correcting imbalances. The main imbalances are based on the developments of two key variables: the level of income growth and the level of debt incurred to buy homes, consumer goods and education. The U.S. Balance Sheet of Households and Nonprofit Organizations sums up, very succinctly, the wealth position of households through various asset and liability classes. What a single balance sheet cannot show is how assets, liabilities, incomes and net worth interact. Making use of historical balance sheets provide a better insight. For instance in 1997, the combined liabilities of home mortgages and consumer credits as a percentage of disposable personal income stood at 82.9%. By the end of 2006 this percentage had increased to 123.7%. Per end of 2010 this percentage had dropped to 111.6%, only to drop even further to 96.4% per end of 2014. Student loans have not been included in these figures. If debts grow faster than income levels, one may define such a period as one of overfunding and, when debts grow slower than incomes, underfunding occurs. Overfunding took place in the U.S. from 1998-2007 and underfunding from 2008-2014. Relative positions are important, but the absolute level of incomes growth is essential. During the overfunding period average income levels had a tendency to grow slightly faster than the CPI level, while during the underfunding period average income growth lagged behind the CPI inflation levels. Finally, the spread of income levels around the average is important. Do the lower income groups benefit less from economic growth than the better off? This paper aims to set out why some new economic tools are needed to correct imbalances. They are: (i) the Economic Growth Incentive method (EGIM); (ii) the use of some pension fund savings and (iii) the use of home equity, which is the most illiquid of all savings. All three tools are for temporary use only. In the U.S. at 2014 year-end, pension entitlements stood at $20.8 trillion while owners’ equity in household real estate was valued at $11.25 trillion. In the U.S. such locked up equity positions have not been used as an economic policy tool to speed up or slow down the conversion process from equity to income when economic circumstances require such actions. Neither have future government cash flows been used as an economic policy tool. |
| Keywords: | business cycle, overfunding and underfunding, economic growth, debt-to-income levels and debt-to-asset values, pension savings, home equity, Economic Growth incentive method, Quantitative Easing, Keynesian cash injections, interest rates, money supply and money supplied. |
| JEL: | E2 E21 E32 E5 E58 E6 E62 |
| Date: | 2015–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63516&r=mac |
| By: | Ledenyov, Dimitri O.; Ledenyov, Viktor O. |
| Abstract: | Article introduces the notion of information money fields of the cyclic oscillations of the economic variables in the nonlinear dynamic economic system for the first time, and presents an original research on the Ledenyov theory on the information money fields of the cyclic oscillations of the economic variables in the nonlinear dynamic economic system. The Ledenyov theory on the information money fields of the cyclic oscillations of economic variables in the nonlinear dynamic economic system postulates that the economic continuous waves (the cyclic oscillations) have the information money fields in the nonlinear dynamic economic system, transmitting the economic/financial information in the nonlinear dynamic economic system. It is shown that the information money fields may interact with other cyclic oscillations and/or with the nonlinear dynamic economic system by means of the weak and strong interactions between the information money fields. We developed the MicroIMF software program to make the computer modeling of 1) the interactions between the information money fields of one cyclic oscillation and the information money fields of other cyclic oscillation(s) in the nonlinear dynamic economic system, 2) the interactions between the information money fields of cyclic oscillation and the nonlinear dynamic economic system itself, and 3) the density distributions of the information money fields by different cyclic oscillations (the economic continuous waves) in the nonlinear dynamic economic system. The MicroIMF software program can be used in the process of business cycles forecasting by the central banks with the purpose to make the strategic decisions on the monetary policies, financial stability policies, and by other financial institutions with the aim to perform the financial operations on the minimum capital allocation, countercyclical capital buffer creation, and capital investments. |
| Keywords: | information money field of cyclic oscillation, generation of cyclic oscillations, amplitude of cyclic oscillation, frequency of cyclic oscillation, wavelength of cyclic oscillation, period of cyclic oscillation, phase of cyclic oscillation, mixing of cyclic oscillations, harmonics of cyclic oscillation, nonlinearities of cyclic oscillation, Juglar fixed investment cycle, Kitchin inventory cycle, Kondratieff long wave cycle, Kuznets infrastructural investment cycle, econophysics, econometrics, nonlinear dynamic economic system, macroeconomics |
| JEL: | C53 C63 E0 E30 E32 E37 E50 E58 |
| Date: | 2015–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63565&r=mac |
| By: | International Monetary Fund |
| Abstract: | This 2014 Article IV Consultation highlights that the Serbian economy is facing serious challenges. GDP contracted by an estimated 2 percent in 2014 on account of continued falling domestic demand aggravated by floods, and weak economic activity in trading partners. This, together with the low imported inflation, pushed Serbia’s inflation rate below the National Bank of Serbia’s inflation tolerance band, allowing some easing of monetary policy. To support their economic policies over 2015–17, the authorities have requested the IMF’s assistance. The program aims to restore public debt sustainability, strengthen competitiveness and growth, and boost financial sector resilience. |
| Keywords: | Article IV consultation reports;Fiscal policy;Fiscal reforms;Monetary policy;Economic indicators;Letters of Intent;Debt sustainability analysis;Staff Reports;Press releases;Stand-by arrangement requests;Serbia; |
| Date: | 2015–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/50&r=mac |
| By: | Olivier Coibion; Yuriy Gorodnichenko; Saten Kumar |
| Abstract: | We implement a new survey of firms’ macroeconomic beliefs in New Zealand and document a number of novel stylized facts from this survey. Despite nearly twenty-five years under an inflation targeting regime, there is widespread dispersion in firms’ beliefs about both past and future macroeconomic conditions, especially inflation, with average beliefs about recent and past inflation being much higher than those of professional forecasters. Much of the dispersion in beliefs can be explained by firms’ incentives to collect and process information, i.e. rational inattention motives. Using experimental methods, we find that firms update their beliefs in a Bayesian manner when presented with new information about the economy. But few firms seem to think that inflation is important to their business decisions and therefore they tend to devote few resources to collecting and processing information about inflation. |
| JEL: | E3 E4 E5 E6 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21092&r=mac |
| By: | Daisuke Ikeda (Bank of Japan); Takushi Kurozumi (Bank of Japan) |
| Abstract: | The history of financial crises, including the recent global crisis, shows that post-financial-crisis recoveries tend to be slower than usual recoveries. Against this background lie various factors, one of which is a slowdown in productivity induced by a post-crisis deterioration in firms' financing. To avoid a post-crisis slow recovery in which this factor comes into play, how should monetary policy be conducted? Ikeda and Kurozumi (2014) develop a model in which a tightening in firms' financing induces a productivity slowdown and hence a slow recovery, and conduct a monetary policy analysis. The analysis shows that (1) it is crucial for the post-crisis conduct of monetary policy to adopt a policy stance of responding strongly to output growth, while maintaining a response to inflation; and (2) such a policy stance toward output stabilization outperforms that toward inflation stabilization, because it facilitates recoveries in investment and productivity by improving firms' growth expectations. |
| Keywords: | Post-financial-crisis slow recovery; Slowdown in total factor productivity; Welfare-maximizing monetary policy |
| JEL: | E52 O33 |
| Date: | 2015–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojlab:lab15e02&r=mac |
| By: | Andrea Vaona (Department of Economics (University of Verona)) |
| Abstract: | We investigate the link between inflation, growth and unemployment nesting a model of fair wages into one of endogenous growth of learning-by-doing. Firms protect real wages against inflation in exchange of worker's effort. In the long-run, unemployment decreases with higher inflation and real growth rates, though less so as inflation and growth increase. We then derive long-run restrictions for structural VARs for US data and we investigate the short-run behavior of inflation, real growth and unemployment. Structural shocks to inflation reduce unemployment and increase growth; to growth reduce unemployment and leave inflation unaffected; to unemployment produce a stagflation. |
| Keywords: | efficiency wages, money growth, long-run Phillips curve, SVARs |
| JEL: | E2 E3 E4 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:ver:wpaper:16/2015&r=mac |
| By: | Daniel Kaufmann (KOF Swiss Economic Institute, ETH Zurich, Switzerland) |
| Abstract: | This paper documents nominal stability in Switzerland from 1805 to 2013 using a data set on annual price, wage and nominal GDP changes. The trends of these indicators are estimated by an unobserved-components stochastic-volatility model in order to control for short-term fluctuations and measurement error. Based on a narrative analysis of these trends five main findings emerge. (i) Fiat currency regimes in Switzerland provided a relatively stable monetary background even compared to the metal-currency regimes before WW1. (ii) The flexible inflation targeting regime adopted in December 1999 has performed best over the last two centuries measured by today’s definition of nominal stability. (iii) Fiat currency regimes without clearly communicated nominal price anchor (Bretton Woods System and monetary targeting) were characterised by an inflation bias. (iv) The metal-currency regimes (competing currencies and bimetallism before World War 1, and to some extent flexible inflation targeting, were associated with a deflation bias. (v) Persistent deflations in terms of the CPI only occurred under metallic regimes before WW2. These episodes were accompanied by falling nominal GDP, falling employment but relatively stable hourly wages. |
| Keywords: | monetary history, monetary regimes, Nominal stability, unobserved-components stochastic-volatility model, price stability |
| JEL: | E31 C22 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:15-379&r=mac |
| By: | Lena Dräger (Universität Hamburg (University of Hamburg)); Christian R. Proaño (The New School for Social Research) |
| Abstract: | Against the background of the recent housing boom and bust in countries such as Spain and Ireland, we investigate in this paper the macroeconomic consequences of cross-border banking in monetary unions such as the euro area. For this purpose, we incorporate in an otherwise standard two-region monetary union DSGE model a banking sector module along the lines of Gerali et al. (2010), accounting for borrowing constraints of entrepreneurs and an internal con- straint on the bank’s leverage ratio. We illustrate in particular how different lending standards within the monetary union can translate into destabilizing spill-over effects between the regions, which can in turn result in a higher macroeconomic volatility. This mechanism is modelled by letting the loan-to-value (LTV) ratio that banks demand of entrepreneurs depend on either re- gional productivity shocks or on the productivity shock from one dominating region. Thereby, we demonstrate a channel through which the financial sector may have exacerbated the emergence of macroeconomic imbalances within the euro area. Additionally, we show the effects of a monetary policy rule augmented by the loan rate spread as in Cúrdia and Woodford (2010) in a two-country monetary union context. |
| Keywords: | Cross-border banking, euro area, monetary unions, DSGE |
| JEL: | F41 F34 E52 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:hep:macppr:201503&r=mac |
| By: | Funashima, Yoshito |
| Abstract: | Given that Nordhaus' political business cycle theory is relevant at election cycle frequency and that its validity can change over time, we consider wavelet analysis especially suited to test the theory. For the postwar U.S. economy, we exploit wavelet methods to demonstrate whether there actually exists an opportunistic political business cycle in monetary policy by allowing for time-varying behavior and by introducing the frequency-domain perspective. Our results indicate an inclination of the Federal Reserve to cut the Funds rate prior to presidential elections except for the 1990s. Moreover, such political manipulation is shown to significantly affect output in not only the famous Burns-Nixon era but also the Volcker-Reagan era. The outcomes are robust even when the effects of government spending are controlled for. |
| Keywords: | Monetary policy; Political business cycle; Wavelet |
| JEL: | E52 E58 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63654&r=mac |
| By: | International Monetary Fund |
| Abstract: | Elections: The candidate of the ruling coalition Frente Amplio, former president Tabaré Vazquez, won the presidency and will take office in March 2015. With Frente Amplio retaining majority in both houses of Parliament, broad continuity in macroeconomic policy making is expected. Focus: Amid moderating but still solid growth, the 2014 consultation focused on four broad themes: confronting inflation, reinforcing fiscal sustainability, safeguarding financial stability, and bolstering strong and inclusive growth for the medium run. Main Policy Advice: ? A comprehensive disinflation strategy is needed to bring inflation to the mid-point of the target range. This would include maintaining a tight monetary policy stance, moving towards tighter fiscal policy, reducing the extent of backward-looking indexation of wages, wellcrafted central bank communication on the direction of monetary policy, and enhanced central bank autonomy. The present conjuncture provides an unusually good opportunity to achieve a paradigm shift in expectations. ? Fiscal sustainability would be reinforced by raising the primary balance by 2 percent of GDP over the medium term to ensure a downward trend in net public debt. ? Banks’ exposures to exchange rate depreciation risks bear continued close monitoring. It would be useful to strengthen risk weights for foreign currency loans to unhedged borrowers and incorporate greater exchange rate stress into the supervisory stress tests. ? Uruguay’s medium-term growth would benefit additionally from heightened efforts to boost infrastructure, strengthen education outcomes, and foster an innovation-friendly business environment. Past advice: In recent Article IV consultations, there has been broad agreement between the authorities and Fund staff on the macroeconomic policy objectives. Views have differed on the appropriate stance of fiscal policy, with staff favoring a tighter stance. The tightening in the monetary policy stance since mid-2013 has been in line with staff advice. The authorities have taken several steps to reduce the fiscal risks stemming from the impact of recurrent droughts on the balances of the state-owned electricity company, including by boosting investment in wind power, creating an energy stabilization fund, and purchasing weather related insurance. The authorities continue to make steady progress in implementing the 2012 FSAP recommendations to further strengthen financial regulation and supervision, and improve access to finance. |
| Keywords: | Article IV consultation reports;Economic conditions;Economic growth;Inflation targeting;Monetary policy;Fiscal policy;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Uruguay; |
| Date: | 2015–03–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/81&r=mac |
| By: | Kei Imakubo (Bank of Japan); Jouchi Nakajima (Bank of Japan) |
| Abstract: | This paper proposes and estimates an extended shadow-rate term structure model, and uses it to extract inflation risk premia from nominal and real term structures. Our model incorporates the shadow rate and thereby explicitly takes account of the zero lower bound constraint of nominal interest rates. The estimation results for Japan and the United States confirm that our model successfully avoids the estimation bias inherent in the standard affine-type term structure model that ignores the zero lower bound. As we theoretically and empirically demonstrate, the inflation risk premium is time-varying and takes both positive and negative values reflecting market concerns with regard to asymmetric uncertainty in future inflation. |
| Keywords: | Arbitrage-free term structure; Inflation risk premium; Shadow rate; Term premium; Zero lower bound |
| JEL: | E31 E43 E52 G12 |
| Date: | 2015–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojwps:wp15e01&r=mac |
| By: | Giroud, Xavier; Mueller, Holger M |
| Abstract: | We argue that firms’ balance sheets were instrumental in the propagation of shocks during the Great Recession. Using establishment-level data, we show that firms that tightened their debt capacity in the run-up (“high-leverage firms”) exhibit a significantly larger decline in employment in response to household demand shocks than firms that freed up debt capacity (“low-leverage firms”). In fact, all of the job losses associated with falling house prices during the Great Recession are concentrated among establishments of high-leverage firms. At the county level, we find that counties with a larger fraction of establishments belonging to high-leverage firms exhibit a significantly larger decline in employment in response to household demand shocks. Thus, firms’ balance sheets also matter for aggregate employment. |
| Keywords: | financial accelerator; firm balance sheet channel; leverage; unemployment |
| JEL: | E24 E32 G32 R3 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10539&r=mac |
| By: | Jakub Janus (Cracow University of Economics) |
| Abstract: | The implementation of unconventional (nonstandard) monetary policy instruments by the leading central banks at the wake of the financial and economic crisis was the most significant shift in the practice of central banking in the recent years. Evaluation of their effects is not feasible without a thorough recognition of the transmission mechanism of various balance-sheet policies, such as quantitative easing. The transmission channels of a standard interest-rate policy are based on a group of theories that are relatively coherent and well-documented. On the contrary, identification of similar framework for unconventional measures proved to be a complicated task. The aim of this paper is to extract and evaluate the theoretical efficiency of particular channels of unconventional monetary policy. This goal requires references to at least several, to some extent mutually exclusive, theories. It is also inevitable to draw one’s attention to the relative significance of identified channels, depending on the nature of used unconventional tools, as well as on reactions of financial institutions and other economic agents to undertaken actions. This paper discusses three broad channel of the unconventional policies transmission mechanism: the signaling channel, the liquidity channel, and the portfolio-balance channel. |
| Keywords: | unconventional monetary policy; monetary transmission mechanism; central banking; quantitative easing |
| JEL: | E42 E52 E58 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no57&r=mac |
| By: | Xavier Giroud; Holger M. Mueller |
| Abstract: | We argue that firms’ balance sheets were instrumental in the propagation of shocks during the Great Recession. Using establishment-level data, we show that firms that tightened their debt capacity in the run-up (“high-leverage firms”) exhibit a significantly larger decline in employment in response to household demand shocks than firms that freed up debt capacity (“low-leverage firms”). In fact, all of the job losses associated with falling house prices during the Great Recession are concentrated among establishments of high-leverage firms. At the county level, we find that counties with a larger fraction of establishments belonging to high-leverage firms exhibit a significantly larger decline in employment in response to household demand shocks. Thus, firms’ balance sheets also matter for aggregate employment. |
| JEL: | E24 E32 R3 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21076&r=mac |
| By: | International Monetary Fund |
| Abstract: | The economy recovered quickly from the global crisis of 2008–09, with healthy growth and low inflation. Growth has, however, slowed recently and is expected to remain subdued in the short run, since gains from recovery in the U.S. will be offset by the closure of the Intel manufacturing plant. Inflation is elevated, owing primarily to exchange rate (XR) depreciation triggered by global repricing of emerging market assets in early 2014. Risks to the outlook are tilted to the downside. Absent consolidation, large fiscal deficits would make public debt dynamics unsustainable in the long-run. |
| Keywords: | Article IV consultation reports;Fiscal policy;Fiscal reforms;Monetary policy;Bank supervision;Economic indicators;Financial Sector Assessment Program;Debt sustainability analysis;Staff Reports;Press releases;Costa Rica; |
| Date: | 2015–02–04 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/29&r=mac |
| By: | International Monetary Fund |
| Abstract: | KEY ISSUES Background: Romania has in large part reduced internal and external imbalances through sound macroeconomic policies. However, income convergence with the EU has been slow and weak public infrastructure has emerged as a bottleneck for faster growth. At the same time, Romania remains vulnerable to external shocks and the repair of balance sheets is not yet complete. Policy recommendations: Going forward, sustainable macroeconomic policies need to be combined with measures that boost the efficiency of public spending, reinvigorate delayed state-owned enterprise (SOE) reforms, and resolve crisis legacies in the financial sector. • Fiscal policy. Maintain the fiscal adjustment achievements, put public debt on a firm downward path, ensure provision of higher quality public infrastructure, and improve revenue administration and public expenditure management including through higher absorption of EU funds. • Monetary policy. Keep the easing bias as inflation has fallen below the target band and support a private credit rebound. Improve the policy framework by gradually moving to full-fledged inflation targeting. • Financial sector. Maintain the intense watch on the banking system focused on asset quality and non-performing loans reduction, further strengthen non-bank supervision, develop capital markets, and create effective insolvency frameworks. • Structural reforms. Improve financial performance and generate resources for investment of SOEs by implementing good governance principles, restructuring and increased private ownership; further deregulate energy markets. Outlook and risks: Staff expects sustained growth supported by strong domestic demand. Better EU funds absorption could boost the growth potential by about ½ percent annually. However, increased volatility in the external environment and failure to implement a much needed infrastructure upgrade present downside risks. |
| Keywords: | Article IV consultation reports;Fiscal policy;Fiscal reforms;Monetary policy;Bank supervision;Financial intermediation;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Romania; |
| Date: | 2015–03–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/79&r=mac |
| By: | International Monetary Fund |
| Abstract: | This 2014 Article IV Consultation highlights that Malta’s economy continues to weather the global crisis well. Real GDP growth has been one of the highest in the euro area since the beginning of the crisis, supported by relatively diversified exports, a recent recovery in domestic demand, and a stable banking sector. Unemployment is close to historical lows and among the lowest in the euro area. The external position is strong, and progress has been achieved in reducing the budget deficit. The macroeconomic outlook is favorable. Growth is expected to remain robust in 2015–16, supported by domestic demand. Inflation is projected to remain subdued. The current account surplus will likely persist. |
| Keywords: | Article IV consultation reports;Economic growth;Global competitiveness;Fiscal reforms;Government expenditures;Public enterprises;Pension reforms;Bank supervision;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Malta; |
| Date: | 2015–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/46&r=mac |
| By: | Daniel Kaufmann (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Rolf Scheufele (Swiss National Bank, Switzerland) |
| Abstract: | We investigate the information content of business tendency surveys for key macroeconomic variables in Switzerland. To summarise the information of a large data set of sectoral business tendency surveys we extract a small number of common factors by a principal components estimator. The estimator is able to deal with mixed-frequency data and missing observations at the beginning and end of the sample period. We show that these survey-based factors explain a relevant share of the movements of key macroeconomic variables, i.e., CPI inflation, GDP, employment, and an output gap. In particular, questions about the current and future expected situation are informative. However, backward-looking questions, for example questions about the situation compared to the previous year, do not contain additional information. We then examine the economic dimension of the data set. Questions about prices, real activity and capacity constraints contain important information for the corresponding macroeconomic variables. Finally, we estimate a dynamic relationship to produce forecasts for our factors and these key macroeconomic variables. It turns out that the predictive ability of our survey-based factor approach is quite encouraging. In a pseudo out-of-sample exercise, our approach beats relevant benchmarks for forecasting CPI inflation and an output gap and adds information to the benchmark forecasts for GDP and employment. |
| Keywords: | Business tendency surveys, dynamic factor models, mixed frequencies, missing observations, nowcasting, forecasting |
| JEL: | E32 E37 C53 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:15-378&r=mac |
| By: | Jeffrey D. Sachs; Seth G. Benzell; Guillermo LaGarda |
| Abstract: | Do robots raise or lower economic well-being? On the one hand, they raise output and bring more goods and services into reach. On the other hand, they eliminate jobs, shift investments away from machines that complement labor, lower wages, and immiserize workers who cannot compete. The net effect of these offsetting forces is unclear. This paper seeks to clarify how economic outcomes, positive or negative, depend both on specific parameters of the economy and public policy. We find that a rise in robotic productivity is more likely to lower the welfare of young workers and future generations when the saving rate is low, automatable and non-automatable goods are more substitutable in consumption, and when traditional capital is a more important complement to labor. In some parameterizations the relationship of utility to robotic productivity follows a “noisy U” as large innovations are long-run welfare improving even though small innovations are immiserizing. Policies that redistribute income across generations can ensure that a rise in robotic productivity benefits all generations. |
| JEL: | E22 E23 E24 E25 H53 J23 O40 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21091&r=mac |
| By: | International Monetary Fund |
| Abstract: | KEY ISSUES Context. Mauritania’s economy has benefited from macroeconomic stability and high growth in the context of contained inflation, responsible macro-policies, high iron ore prices and scaled-up public investment. However, economic growth has not translated into broadly improved living standards and is being hit by a sharp decline in iron ore prices. Outlook and Risks. Although the outlook remains favorable, it hinges heavily on stabilizing iron ore prices and expanding mining capacity. Downside risks to the outlook dominate because iron ore prices may decline further in response to excess supply in the global market. Key Policy Recommendations. With high risk of debt distress and deteriorating terms of trade, Mauritania’s fiscal policy needs to remain focused on consolidation to support fiscal sustainability. Over the medium term, a fiscal framework with a full-fledged fiscal rule will help prevent the boom–bust cycles that ensue from volatility in natural resource revenue, and with strengthened governance in managing mining wealth. The central bank should take advantage of the low-inflation environment to strengthen monetary policy formulation, gradually liberalize the foreign exchange market, and introduce liquidity support and banking resolution frameworks. The implementation of the recent FSAP recommendations should be pursued to enhance the stability of the financial sector stability. Economic diversification and inclusive growth are the foremost medium-term challenges. The authorities should accelerate structural reforms needed to raise Mauritania’s potential growth, create jobs, and improve living standards for all Mauritanians. Article VIII. A comprehensive analysis of the foreign exchange market identified exchange restrictions and multiple currency practices (MCPs) subject to Fund approval under Article VIII. Effective November 20, 2013, the exchange rate regime is classified as “stabilized†arrangement. |
| Keywords: | Article IV consultation reports;Economic growth;Mining sector;Fiscal policy;Budgets;Fiscal reforms;Monetary policy;Exchange restrictions;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Mauritania; |
| Date: | 2015–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/35&r=mac |
| By: | International Monetary Fund |
| Abstract: | This 2014 Article IV Consultation highlights that the real GDP growth of Lao People’s Democratic Republic is expected to moderate from 8 percent in 2013 to 7.5 percent in 2014. Domestic activity has slowed, and credit growth has declined from excessive levels. Inflation has declined to 3 percent from 6.5 percent at end-2013, largely owing to weaker food and fuel price momentum. To address vulnerabilities, Executive Directors have emphasized the need for continued fiscal consolidation, greater exchange rate flexibility, tighter monetary conditions, strengthened financial supervision, and improved bank resolution and crisis prevention frameworks. |
| Keywords: | Article IV consultation reports;Fiscal policy;Fiscal consolidation;Monetary policy;Bank supervision;Financial stability;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Lao P. D..R.; |
| Date: | 2015–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/45&r=mac |
| By: | Ganev, Kaloyan |
| Abstract: | This paper presents the logic and structure of a small and parsimonious macroeconometric model designed for output gap and potential growth estimation in a data-poor environment. Such results can be useful in calculating the cyclically adjusted budget balances which are a key indicator for fiscal policies design in the framework of the EU Stability and Growth Pact. Empirical results using Bulgarian data are also included for illustrative purposes. |
| Keywords: | business cycle, output gap, potential growth |
| JEL: | E32 E37 |
| Date: | 2015–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63546&r=mac |
| By: | Lise Pichette; Pierre St-Amant; Ben Tomlin; Karine Anoma |
| Abstract: | Estimating potential output and the output gap - the difference between actual output and its potential - is important for the proper conduct of monetary policy. However, the measurement and interpretation of potential output, and hence the output gap, is fraught with uncertainty, since it is unobservable. It is therefore important that we continually expand and improve upon existing models, and innovate by testing new approaches and incorporating them into the analysis of potential output and the output gap. Within this context, this paper first provides an assessment of the extended multivariate filter (EMVF), which the Bank has used since the late 1990s to come up with a baseline measure of the output gap. It is determined that the EMVF has several limitations that need to be addressed. Consequently, a modified version of the EMVF incorporating revised conditioning information is presented. In addition, a newly developed methodology, the integrated framework (IF), provides a separate analysis of trend labour input and trend labour productivity, and in doing so accounts for more long-term structural changes in the economy. While neither of these approaches is perfect, and both have limitations, they represent improvements over the conventional method. The paper also outlines how the modified EMVF, the IF, and information from the Bank’s Business Outlook Survey and other sources are used to come up with an estimate of the current output gap and the future growth rate of potential output. |
| Keywords: | Economic models, Inflation and prices, Labour markets, Productivity |
| JEL: | E E0 E3 E31 E5 E52 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:15-1&r=mac |
| By: | mhamdi, ghrissi |
| Abstract: | The aim of this paper is to provide a credible measure of inflation. This credibility is of great importance for successful inflation targeting regime. This paper proposes a technique to solve a conceptual disparity between inflation phenomenon and its measurement. For this, we proposed an alternative measure called core inflation, defined as the inflation component that has no real impact on long-term production. Evaluation of core inflation was obtained using a VAR system under the assumption that variations in the extent of inflation are affected by two types of shock. The first type has no impact on real output in the long term, while the second can have this effect. This approach is a reconstruction of the approach of Quah and Vahey (1995) in the case of the Tunisian economy. The study concluded that the administered prices constitute a major obstacle to measure, interpret and forecast inflation. Central Bank of Tunisia has no control over a third of the CPI basket. This feature of the Tunisian economy is simply a sign of weakness of the economic system and the need for monetary authorities to continue its efforts to liberalize prices. |
| Keywords: | monetary policy in Tunisia, Inflation, core inflation, VAR |
| JEL: | E5 E6 |
| Date: | 2014–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63477&r=mac |
| By: | Calista Cheung; Dmitry Granovsky; Gabriella Velasco |
| Abstract: | This paper discusses broad trends in labour force participation and part-time employment across different age groups since the Great Recession and uses provincial data to identify changes related to population aging, cyclical effects and other factors. The main population age groups examined are youth (aged 15–24), prime age (25–54) and older (55 and above). Six main findings are reported. First, aging has been the most important driver of reduced participation. On their own, aging effects would have depressed participation rates by more than they fell between 2007 and 2014, and have been partly offset by rising participation rates of older workers. Second, shifting age composition has had the largest impact on the Atlantic provinces, owing primarily to their shrinking prime-age populations as some workers have migrated west. Third, a considerable part of the overall participation rate decline since 2007 reflects a greater share of prime-age and youth populations that are out of the labour force for various reasons including school, illness, and family responsibilities. These changes appear to be driven by both structural and cyclical forces, although the relative importance of each is unclear. Fourth, effects associated with “discouraged workers” have been negligible. Fifth, youth participation rates have fallen the most, by 2.8 percentage points since 2007, with 9 per cent of the decline reflecting purely higher school enrolment rates. Sixth, weak business conditions appear to be the main driver behind the shift toward part-time employment since the Great Recession, with involuntary part-time work explaining almost the entire increase since 2007. |
| Keywords: | Labour markets, Recent economic and financial developments, Regional economic developments |
| JEL: | E E2 E24 E3 E32 J J1 J2 J21 J6 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:15-2&r=mac |
| By: | Alan Finkelstein Shapiro; Andres Gonzalez |
| Abstract: | Emerging economies have high shares of self-employed individuals running owner-only firms who, in contrast to many salaried firms, have little access to formal financing and therefore rely on informal financing (input credit) from other firms. We build a small open economy real business cycle model with labor and financial market frictions where formal credit markets, informal credit, and the structure of the labor market interact. The model successfully replicates the cyclical behavior of sectoral employment, formal credit, and the main macroeconomic aggregates in emerging economies. We show that a countercyclical macroprudential policy that reduces formal credit fluctuations has positive though quantitatively limited effects on consumption and output volatility, but generates larger unemployment fluctuations in response to productivity shocks; the same policy increases labor market and aggregate volatility in response to net worth shocks. The link between input credit and the labor market structure---key for capturing the cyclical dynamics of labor and credit markets in the data---plays a crucial role for these results. |
| Keywords: | Macroprudential policies and financial stability;Latin America;Emerging markets;Labor markets;Business cycles;Small open economies;Labor market friction;Econometric models;Business cycles, self-employment, labor search frictions, financial frictions, macroprudential policy. |
| Date: | 2015–04–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/78&r=mac |
| By: | Francis W. Ahking (University of Connecticut) |
| Abstract: | We examine two issues in business cycle research. We first compare the performance of Hamilton’s Markov-Switching (MS) model and the Bry and Boschan algorithm in replicating the US business cycle features. A number of studies, especially Harding and Pagan, have demonstrated that Hamilton’s nonlinear MS model do not replicate business cycle features better than simpler linear models. Second, we compare the ability of the U.S. real GDP and a relatively new coincident index of four economic indicators, published by the Federal Reserve Bank of Philadelphia, in replicating features of the U.S. business cycle. We find that Hamilton’s MS model is not robust when compared to the Bry and Boschan algorithm with respect to different sample periods and to different measures of real income. Second, we also find that a constructed quarterly version of the coincident index is slightly preferred over the real GDP. |
| Keywords: | Markov-switching model, Bry and Boschan algorithm, business cycle dating |
| JEL: | E32 E37 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2015-06&r=mac |
| By: | International Monetary Fund |
| Abstract: | KEY ISSUES Context. The economy is recovering steadily helped by supportive macroeconomic policies and improved market sentiment. There has been a welcome decline in vulnerabilities but debt levels remain elevated, leaving the economy prone to shocks, and medium-term growth prospects appear subdued. The government took steps to address these challenges, but the overall strategy relies on measures that increase the role of the state in the economy and shift the burden of the adjustment to specific sectors. This may deter private domestic and foreign direct investment. Policy recommendations. Policies should aim at further reducing vulnerabilities and comprehensively tackling impediments to strong, private sector-led growth. ? Fiscal policy. Adopt a growth-friendly fiscal consolidation strategy to rebuild room for policy maneuver and sustainably reduce the public debt ratio. The strategy should rely on durable expenditure retrenchment, improved efficiency of spending, and a simplification of the tax system, including a gradual elimination of distortionary sectoral taxes. ? Monetary policy. Monetary policy needs to guard against building disinflationary pressures. Adequate reserves are necessary to support financial stability. ? Financial sector. Strengthen efforts (and follow up on recently-announced commitments) to repair financial intermediation by improving the operating environment for banks. Steps should include facilitating faster cleanup of bank portfolios and reducing the tax burden on banks. The Funding for Growth Scheme should remain targeted and time bound; while the role of the state in the banking sector should be contained. ? Structural reforms. Increase policy predictability and reduce state interference in the economy to help strengthen confidence and support private investment. Adopt policies to enhance labor participation, particularly among women and older workers; improve the business environment; and enhance competitiveness. |
| Keywords: | Article IV consultation reports;Economic growth;Fiscal policy;Fiscal reforms;Financial intermediation;Monetary policy;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Hungary; |
| Date: | 2015–04–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/92&r=mac |
| By: | Lukasz Lenart (Uniwersytet Ekonomiczny w Krakowie); Blazej Mazur (Uniwersytet Ekonomiczny w Krakowie); Mateusz Pipien (Uniwersytet Ekonomiczny w Krakowie) |
| Abstract: | The main objective of the paper is to investigate properties of business cycles in Polish economy before and after the recent crisis. The essential issue addressed here is whether there exist statistical evidence that the recent crisis has affected the properties of the business cycle fluctuations. In order to improve robustness of the results we do not confine ourselves to any single inference method, but instead use different groups of statistical tools, including non-parametric methods based on subsampling and parametric Bayesian methods. We examine monthly series of industrial production (from January 1995 till December 2014), considering properties of cycles in growth rates and in deviations from long-run trend. Empirical analysis is based on the sequence of expanding-window samples, with the shortest sample ending in December 2006. The main finding is that the two frequencies driving business cycle fluctuations in Poland correspond to cycles with periods of 2 and 3.5 years, and (perhaps surprisingly) the result holds both before and after the crisis. We therefore find no support for the claim that features (in particular frequencies) that characterize Polish business cycle fluctuations have changed after the recent crisis. The conclusion is unanimously supported by various statistical methods that are used in the paper, however, it is based on the relative short series of the data currently available. |
| Keywords: | APC processes, subsampling, Bayesian inference, global economic crisis, business cycle fluctuations |
| JEL: | C14 C46 E32 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no71&r=mac |
| By: | International Monetary Fund |
| Abstract: | This 2014 Article IV Consultation highlights that after a steady recovery during 2010–12 from the deep 2009 recession, Armenia’s growth softened in 2013 and has remained subdued in 2014. The softening of economic activity has been broad based, as growth of exports and remittances slowed, and government spending was lower than budgeted. Construction, which had declined since the 2009 crisis, was relatively flat. Growth is projected at 2.6 percent in 2014 and is expected to increase only gradually in 2015 and over the medium term in light of expectations of slow growth in key trading partners. The authorities’ policies remain geared toward maintaining macroeconomic stability and fostering sustainable and inclusive growth. |
| Keywords: | Article IV consultation reports;Economic growth;Fiscal policy;Pension reforms;Monetary policy;Exchange rate assessments;Economic indicators;Debt sustainability analysis;Letters of Intent;Staff Reports;Press releases;Extended arrangement reviews;Armenia; |
| Date: | 2015–03–11 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/65&r=mac |
| By: | International Monetary Fund |
| Abstract: | KEY ISSUES Context: Indonesia has strengthened policy and reserve buffers since mid 2013, in the face of global headwinds from the commodity down-cycle and episodes of volatility affecting emerging market economies. Policies have aimed at containing external and inflation pressures, helping to preserve macroeconomic and financial stability. With growth slowing, the new government is keen to jump start supply-side reforms aimed at raising potential growth while strengthening the external position. Upfront actions to curb fuel subsidies have opened fiscal space to support infrastructure spending. Near-term outlook: After slowing in 2014, growth is projected to tick up to 5.2 percent in 2015, factoring in an anticipated jump in public investment in infrastructure. Inflation has temporarily risen on earlier fuel price increases, but is expected to return to within the target band by year end. Notwithstanding soft commodity prices, the current account deficit is projected to narrow further in 2015. Risks to the outlook arise mainly from a deeper•than-expected slowdown in emerging market trading partners and surges in global financial market volatility, which could exacerbate strains on the domestic banking and corporate sectors. Policy mix: The current policy mix aims at improving growth potential while consolidating recent stability gains and containing vulnerabilities. Fiscal policy should be geared towards securing space for more social and capital spending, underpinned by a broad-based strategy for increasing nonoil tax revenues, while pursuing moderate deficit reduction over the medium term. Monetary policy needs to remain focused on anchoring inflation expectations and facilitating external adjustment, supported by continued exchange rate and bond yield flexibility. Bank funding pressures, while showing signs of easing, will need to be managed through stronger policy coordination and improved market functionality. Financial stability is expected to be preserved through enhanced risk assessment and effective prudential measures, anchored by a strong crisis management framework. Structural reforms should be aimed at easing supply bottlenecks and improving the investment climate in order to create new jobs, bolster medium-term growth prospects, and strengthen the external position. |
| Keywords: | Article IV consultation reports;Economic growth;Fiscal policy;Corporate sector;Fiscal reforms;Monetary policy;Bank supervision;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Indonesia; |
| Date: | 2015–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/74&r=mac |
| By: | GAMMADIGBE, Vigninou |
| Abstract: | From the policy mix theory to the related empirical works, the quantification of the coordination of monetary and fiscal policies seems to be missing. In this paper, we propose an index (PMCI) which measures the coherent nature of the policy mix rather than it restrictive or expansive character. It is defined as the average number of periods that monetary and fiscal policies have been in phase in a Keynesian perspective. After calculating the index for thirty (30) countries over the period 1990 to 2013, we explore the relationship between the policy mix coherence and the stabilization of the activity. The econometric analysis provides empirical evidence that good coordination of monetary and fiscal policies reduces the output volatility. |
| Keywords: | Coordination, Monetary policy, Fiscal policy. |
| JEL: | C21 C43 E61 |
| Date: | 2015–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63583&r=mac |
| By: | International Monetary Fund |
| Abstract: | This 2014 Article IV Consultation highlights that Morocco has made important strides in maintaining macroeconomic stability in a difficult environment, but challenges remain to reduce fiscal and external vulnerabilities, strengthen growth, create jobs, and tackle poverty. Growth slowed in 2014 as a result of a contraction in agricultural activity following an exceptional 2013 crop and weak demand from Europe. However, growth is expected to rebound in 2015 to about 4.4 percent and remain robust in the medium term as external demand and domestic confidence strengthen. Executive Directors have commended the authorities for their strong policy actions, which have reduced economic vulnerabilities. |
| Keywords: | Article IV consultation reports;Economic conditions;Economic growth;Unemployment;Fiscal policy;Fiscal reforms;Monetary policy;Economic indicators;Staff Reports;Press releases;Morocco; |
| Date: | 2015–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/43&r=mac |
| By: | Bursian, Dirk; Faia, Ester |
| Abstract: | Trust in policy makers fluctuates significantly over the cycle and affects the transmission mechanism. Despite this it is absent from the literature. We build a monetary model embedding trust cycles; the latter emerge as an equilibrium phenomenon of a game-theoretic interaction between atomistic agents and the monetary authority. Trust affects agents' ’stochastic discount factors, namely the price of future risk, and through this it interacts with the monetary transmission mechanism. Using data from the Eurobarometer surveys, we analyze the link between trust and the transmission mechanism of macro and monetary shocks. Empirical results are in line with theoretical ones. |
| Keywords: | betrayal aversion; monetary transmission system; trust games |
| JEL: | C7 C8 E0 E5 G12 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10541&r=mac |
| By: | María Cervini-Plá (EQUALITAS, Spain); Antonia López-Villavicencio (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); José I. Silva (Universitat de Girona and University of Kent, Campus de Montilivi, 17071, Girona) |
| Abstract: | We investigate the cyclicality of real wages and income using individual data for the UK over the 1991-2008 period. By paying special attention to the heterogeneity among different earnings and income groups, we document that individuals at the top of the distribution are more cyclical than lower ones. Moreover, the estimated cyclicality is considerably higher in recessions than in expansions for top-incomes. We also show that real wages and income are roughly acyclical for low wage and income workers. Instead, their adjustment to the cycle takes place through transitions to and from unemployment. |
| Keywords: | Real wage, cyclicality, heterogeneity, income distribution |
| JEL: | E24 E32 J31 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1506&r=mac |
| By: | Alan Finkelstein-Shapiro; Andrés González Gómez |
| Abstract: | This paper builds a small open economy business cycle model with labor and financial market frictions that incorporates frictional, endogenous self-employment entry and a link between formal credit markets, informal credit, and the labor market. The paper then shows that the model is consistent with the cyclical behavior of both labor and credit markets in Latin American economies and analyzes the aggregate consequences of cyclical macroprudential policy for labor market and aggregate dynamics. It is found that a policy that reduces credit fluctuations successfully reduces consumption, investment, and output volatility, but generates substantially higher unemployment fluctuations in response to productivity shocks. Moreover, the policy increases the volatility of all these variables in response to net worth shocks. The link between formal credit markets, input credit between firms, and self-employment plays a key role in explaining the adverse impact of macroprudential policy on unemployment dynamics. The findings point to potential gains from policy complementarities between macroprudential regulation and active labor market interventions over the business cycle. |
| Keywords: | Production & Business Cycles, Financial Policy, Labor markets, Labor search, Business cycles, Macroprudential policies, Financial frictions |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:88738&r=mac |
| By: | Gerdesmeier, Dieter; Reimers, Hans-Eggert; Roffia, Barbara |
| Abstract: | This paper models the relationship between consumer and asset prices (approximated by house prices, oil prices and the exchange rate) by means of a Markov Switching model (MS model). It can be shown that house prices appear to play a significant role in the determination of consumer prices in a high-inflation and a low-inflation regime, whereas oil prices and the exchange rate only unfold an impact in a high-inflation regime. Taken together, these results can be seen as being of help for the monetary policy decision-making process. |
| JEL: | D12 D13 E31 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hswwdp:012015&r=mac |
| By: | Tomasz Rosiak (Warsaw University) |
| Abstract: | The European Union has recently implemented one of the biggest reform packages in its history. Developed solutions are designed to (1) strengthen EU’s resilience to shocks and (2) improve its shock absorption capabilities. It seems that so far stress was mainly placed on the first objective. Among the reforms, which satisfied the second objective, the European Stability Mechanism (ESM) plays a key role. However, this is not the only solution. The European Union is also developing a fiscal capacity for the euro area. On the base of a subject literature study, I have developed a model with boundary conditions of fiscal federalism, which then was compared to macroeconomic data for the EU. Results of my findings show that the European Union, and especially the euro area, share a lot of characteristics typical for fiscal federalism. From this point of view, a budget for the euro area seems to be the best form of fiscal capacity. However, it could bring further fragmentation of economic integration process in the EU which probably would not positively contribute towards the stability in the political sphere. |
| Keywords: | Fiscal capacity, Fiscal federalism, European Union, Euro area, EU Budget |
| JEL: | E60 E61 E62 E63 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no93&r=mac |
| By: | Liu, Taoxiong; Huang, Mengdan |
| Abstract: | China has experienced several episodes of inflation in recent years. Popular arguments attribute these episodes to relatively high growth rates of money, which were then primarily explained by China’s accumulation of foreign exchange reserves and the undervaluation of RMB. We attempt to explain China’s high monetary growth rates through the supply of land. Under China’s land system, the supply of land is controlled by the government and can be viewed as exogenous to the monetary system. An increase in the money supply stimulates bank loans and thereby monetary growth. Both an error correction model and a simultaneous equations model are developed to explore the effect of the land supply on monetary growth. The empirical results show that the effect of the land supply on the money supply is significantly positive and even exceeds that of foreign exchange reserves. The significance for monetary policy is that, under China’s existing political economy, both the central bank and local governments should be responsible for monetary policy and price levels. |
| Keywords: | land supply, money supply, foreign exchange reserves |
| JEL: | E50 R10 R14 |
| Date: | 2015–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:62781&r=mac |
| By: | F. Pappadà; Y. Zylberberg |
| Abstract: | The unprecedented tax hikes implemented in Greece in 2010 generated a much lower than expected increase in tax revenues. In this paper, we document a new stylized fact explaining this gap: the strong increase of tax evasion. We then analyze the response of the economy to tax hikes in a stylized model where firms adjust the share of their declared activity. We calibrate the model to firm-level balance sheet data for Greece and quantify the response of tax evasion to the 2010 fiscal adjustment. One third of the tax increase is lost because small and medium size firms expand their share of non-declared activity. In turn, this lowers their borrowing capacity and contributes to non-negligible output losses. |
| Keywords: | tax evasion, austerity plans, credit frictions. |
| JEL: | E02 E62 H26 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:546&r=mac |
| By: | International Monetary Fund |
| Abstract: | This 2014 Article IV Consultation highlights that Iceland has reached a relatively strong macroeconomic position with good growth prospects. Unemployment continues to trend down, now at 4 percent. Growth is expected to pick up to about 3 percent over 2015–17, supported by robust domestic demand and tourism. Consumption will be boosted by household debt relief and—together with net trade—will benefit from favorable commodity prices. Good progress has also been made in improving the financial stability framework, but gaps remain. |
| Keywords: | Article IV consultation reports;Monetary policy;Bank supervision;Fiscal policy;Fiscal reforms;Exchange restrictions;Post-program monitoring;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Iceland; |
| Date: | 2015–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/72&r=mac |
| By: | Sarolta Laczó (Bank of England; Centre for Macroeconomics (CFM)); Raffaele Rossi (Department of Economics Management School Lancaster University) |
| Abstract: | We characterise optimal fiscal policies in a Real Business Cycle model when the government has access to consumption taxation but cannot credibly commit to future policies. Contrary to the case where only labour and capital income are taxed, the optimal time-consistent policies are remarkably similar to their Ramsey counterparts, as long as the capital income tax causes some distortion within the period. The welfare gains from commitment are negligible, while they are substantial without consumption taxation. Further, the welfare gains from taxing consumption are much higher without commitment. These results suggest that the policy-maker's ability to commit is of secondary importance if consumption is taxed optimally. |
| Keywords: | fiscal policy, Markov-perfect policies, consumption taxation, variable capital utilisation, endogenous government spending |
| JEL: | E62 H21 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:1508&r=mac |
| By: | Riccetti, Luca; Russo, Alberto; Gallegati, Mauro |
| Abstract: | In this paper we build an agent-based model based on a threefold financial accelerator: (i) leverage accelerator - negative shocks on firms' output make banks less willing to loan funds, and firms less willing to make investments, hence a credit reduction follows further reducing the output; (ii) stock market accelerator - due to lower profit, firms' capitalization on the stock market decreases, thus the distance-to-default (DD) diminishes and it reinforces the leverage accelerator; (iii) network-based accelerator - the network structure may propagate the initial shock possibly resulting in an avalanche of bankruptcies. In this framework, we find that stock market volatility may damage the real economy if the stock market is too relevant. In particular, an increase of volatility worsens the economic performance through the stock market accelerator effect. Moreover, our findings have relevant implications for monetary policy. |
| Keywords: | Agent-based modeling; stock market; leverage; network; volatility; fnancial accelerator; monetary policy. |
| JEL: | C52 C63 E32 G01 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63622&r=mac |
| By: | International Monetary Fund |
| Abstract: | Following the approval of a new constitution in 2010, the authorities have embarked on important reforms including fiscal devolution, VAT reform, and the overhaul of the expenditure management framework. Supported by a three-year ECF, which expired in December 2013 with all six reviews completed, Kenya has consolidated macroeconomic stability. Growth has been robust, inflation contained, debt remained sustainable and reserve buffers increased (Tables 1a and 1b and Figures 1 and 2). This progress in a market-friendly environment has continued to attract the interest of foreign investors. As a result, Kenya is recognized as a frontier market increasingly integrated in global financial markets. A Eurobond debut issue of US$2 billion (the largest in SSA so far) took place successfully in June followed by a $750 million re-tap in December. |
| Keywords: | Standby Credit Facility;Fiscal policy;Financial management;Monetary policy;Economic indicators;Debt sustainability analysis;Staff Reports;Letters of Intent;Press releases;Stand-by arrangement requests;Kenya; |
| Date: | 2015–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/31&r=mac |
| By: | International Monetary Fund |
| Abstract: | This 2014 Article IV Consultation highlights that Gabon’s growth performance has recently been strong, but fiscal pressures have increased significantly. Real GDP growth has averaged about 6 percent in the last four years on the back of substantial scaling-up of capital spending as the authorities implement their strategy Plan Stratégique Gabon Emergent to promote economic diversification and growth inclusiveness. The medium-term growth outlook has weakened as a result of the sharp decline in oil prices, but is expected to remain relatively strong. Growth is expected to be driven by a number of projects under way in agro-industry, mining, and wood processing. |
| Keywords: | Article IV consultation reports;Economic growth;External shocks;Oil prices;Fiscal policy;Payments arrears;Fiscal reforms;Oil subsidies;Economic indicators;Debt sustainability analysis;Staff Reports;Press releases;Gabon; |
| Date: | 2015–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/47&r=mac |
| By: | Carlos A. Arango; Oscar M. Valencia |
| Abstract: | This paper presents a DSGE model with banks that face moral hazard in management. Banks receive demand deposits and fund investment projects. Banks are subject to potential withdrawals by depositors which may force them into early liquidation of their investments. The likelihood of this happening depends on the bank management efforts to keep the bank financially sound and the degree of bank leverage. We study the properties of this model under different monetary and macro-prudential policy arrangements. Our model is able to replicate the pro-cyclicality of leverage, and provides insights on the interplay between bank leverage and bank management incentives as a result of monetary, productivity and financial shocks. We find that a combination of pro-cyclical capital requirements and a standard monetary policy are well suited to contain the effects on output and prices of a downturn, keeping the financial system in check. Yet, in an expansionary phase (i.e. a productivity shock) this policy combination may produce desirable results for some macro-variables but at the expense of a deterioration in other macro-financial indicators. |
| Keywords: | DSGE modeling, Financial frictions, Moral hazard, Macro-prudential policies. |
| JEL: | G11 D86 |
| Date: | 2015–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:012695&r=mac |
| By: | Bovenberg, A Lans; Nijman, Theo E |
| Abstract: | Private pension provision faces the challenging task of providing stable income streams during retirement. The challenge has increased markedly in the last decades due to volatile financial markets, falling interest rates and the withdrawal of employers and external insurers as risk bearers of systematic financial and longevity risks. Partly because of these developments, policyholders desire pensions tailored to their individual needs. This paper proposes a new type of pension: the Personal Pension with Risk sharing (PPR). By unbundling and valuing the investment, (dis)saving, insurance and risk-sharing functions of pensions, PPRs allow risk management and (dis)saving to be customized to the specific features of heterogeneous individuals. Moreover, unlike variable annuities, PPRs allow investment risks to be combined with longevity insurance without giving rise to high year-on-year volatility in consumption streams or opaque and rigid valuation and smoothing rules. The unbundling of functions in the PPR also deepens the internal markets for financial and insurance products while at the same time accommodating the diverse traditions of countries in terms of occupational pension provision. Finally, the PPR reconciles financial, fiscal and macroeconomic stability with growth by increasing the supply of long-term risk-bearing and illiquid capital, complementing public retirement provision, reducing the interest-rate sensitivity of pensions and smoothing shocks. |
| Keywords: | decumulation phase; defined benefit; defined contribution; longevity insurance; private pensions; risk management; risk sharing; variable annuities |
| JEL: | D14 D91 E21 E62 G11 G22 G23 G28 H31 H55 J14 J18 J26 J62 P43 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10538&r=mac |
| By: | Merike Kukk (Tallinn University of Technology) |
| Abstract: | The paper investigates the extent to which household indebtedness suppressed consumption during the economic downturn in 2008-2009. The paper uses a unique quarterly panel dataset containing financial information on over 100,000 individuals. The dataset covers the period 2005-2011, when there were large changes in credit volumes, income and consumption in Estonia, a new EU member country. The estimations show that indebtedness measured by the debt-to-income ratio and the debt service ratio hampers consumption over the whole business cycle. The negative impact of the debt service ratio is, however, substantially stronger during the recession than in the pre-crisis and post-crisis periods, while the negative effect of the debt-to-income ratio is relatively stable over the sample period. The findings suggest that household indebtedness is amplifying the recession and the debt repayment burden indicates the mechanism which is at work. |
| Keywords: | household indebtedness, debt repayment burden, debt-to-income ratio, amplification effect, recession. |
| JEL: | E21 D14 E32 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:ais:wpaper:1505&r=mac |
| By: | Marcel Schroder |
| Abstract: | In theory, valuation effects (changes in net external assets of a country arising from movements in exchange rates or asset returns) are an important channel of international risk sharing as they facilitate external adjustment. However, the effects can also be economically destabilizing in the presence of frictions in the international financial system. Despite the growing significance of valuation effects in an era of financial globalization, the nature and extent of their macroeconomic effect has not yet been systematically examined, especially in relation to emerging market economies (EMEs). The study examines the macroeconomic impact of valuation effects for 53 countries from 1980–2010. Valuation effects seem to operate as a risk sharing channel in high income countries. For EMEs the results depend on how valuation effects correlate with domestic consumption growth. There is weak evidence that valuation effects act as a risk sharing channel only if the correlation is negative, and are destabilizing otherwise. |
| Keywords: | valuation effects, net foreign assets, risk sharing, financial globalization |
| JEL: | E21 E32 F32 F36 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:pas:papers:2015-03&r=mac |
| By: | Luis Ignacio Jácome |
| Abstract: | This paper provides a brief historical journey of central banking in Latin America to shed light on the debate about monetary policy in the post-global financial crisis period. The paper distinguishes three periods in Latin America’s central bank history: the early years, when central banks endorsed the gold standard and coped with the collapse of this monetary system; a second period, in which central banks turned into development banks under the aegis of governments at the expense of increasing inflation; and the “golden years,†when central banks succeeded in preserving price stability in an environment of political independence. The paper concludes by cautioning against overburdening central banks in Latin America with multiple mandates as this could end up undermining their hard-won monetary policy credibility. |
| Keywords: | Central banking;Latin America;Central bank role;Monetary policy;Inflation targeting;Economic recession;Financial crises;Cross country analysis;Latin America, central banks, inflation. |
| Date: | 2015–03–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/60&r=mac |
| By: | Laurence M. Ball; Sandeep Mazumder |
| Abstract: | This paper examines the recent behavior of core inflation in the United States. We specify a simple Phillips curve based on the assumptions that inflation expectations are fully anchored at the Federal Reserve’s target, and that labor-market slack is captured by the level of shortterm unemployment. This equation explains inflation behavior since 2000, including the failure of high total unemployment since 2008 to reduce inflation greatly. The fit of our equation is especially good when we measure core inflation with the Cleveland Fed’s series on weighted median inflation. We also propose a more general Phillips curve in which core inflation depends on short-term unemployment and on expected inflation as measured by the Survey of Professional Forecasters. This specification fits U.S. inflation since 1985, including both the anchored-expectations period of the 2000s and the preceding period when expectations were determined by past levels of inflation. |
| Keywords: | Inflation;United States;Unemployment;Deflation;Keynesian economics;Inflation, Phillips curve. |
| Date: | 2015–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/39&r=mac |
| By: | Weber, Warren E. (Bank of Canada, Federal Reserve Bank of Atlanta, University of South Carolina) |
| Abstract: | Beginning in 1864, in the United States notes of national banks were the predominant medium of exchange. Each national bank issued its own notes. E-money shares many of the characteristics of these bank notes. This paper describes some lessons relevant to e money from the U.S. experience with national bank notes. It examines historical evidence on how well the bank notes—a privately issued currency system with multiple issuers—functioned with respect to ease of transacting, counterfeiting, safety, overissuance, and par exchange (a uniform currency). It finds that bank notes made transacting easier and were not subject to overissuance. National bank notes were perfectly safe because they were insured by the federal government. Further, national bank notes were a uniform currency. Notes of different banks traded at par with each other and with greenbacks. This paper describes the mechanism that was put in place to achieve uniformity. The U.S. experience with national bank notes suggests that a privately issued e-money system can operate efficiently but will require government intervention, regulation, and supervision to minimize counterfeiting, promote safety, and provide the mechanism necessary for different media of exchange to exchange at par with each other. |
| Keywords: | bank notes; e-money; financial services |
| JEL: | E41 E42 E58 |
| Date: | 2015–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedacf:2015_002&r=mac |
| By: | Dudley, William (Federal Reserve Bank of New York) |
| Abstract: | Remarks at the New Jersey Performing Arts Center, Newark, New Jersey. |
| Keywords: | Economic growth; household spending; oil production; personal consumption expenditures (PCE) deflator; Survey of Consumer Expectations; patient; lift-off; interest on excess reserves (IOER) |
| JEL: | E52 E66 |
| Date: | 2015–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsp:161&r=mac |
| By: | International Monetary Fund |
| Keywords: | Fiscal policy;Labor markets;Labor taxes;Export performance;Global competitiveness;Public investment;Infrastructure;Fiscal reforms;Public enterprises;Inflation targeting;Monetary policy;Selected Issues Papers;Romania; |
| Date: | 2015–03–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/80&r=mac |
| By: | International Monetary Fund |
| Keywords: | Fiscal policy;Revenues;Government expenditures;Nonoil sector;Economic growth;Productivity;Inflation;Selected Issues Papers;Qatar; |
| Date: | 2015–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/87&r=mac |
| By: | Ahmat Jidoud |
| Abstract: | This paper investigates the channels through which remittances affect macroeconomic volatility in African countries using a dynamic stochastic general equilibrium (DSGE) model augmented with financial frictions. Empirical results indicate that remittances—as a share of GDP—have a significant smoothing impact on output volatility but their impact on consumption volatility is somewhat small. Furthermore, remittances are found to absorb a substantial amount of GDP shocks in these countries. An investigation of the theoretical channels shows that the stabilization impact of remittances essentially hinges on two channels: (i) the size of the negative wealth effect on labor supply induced by remittances and, (ii) the strength of financial frictions and the ability of remittances to alleviate these frictions. |
| Keywords: | Remittances;Africa;Business cycles;Private consumption;Labor supply;Economic stabilization;General equilibrium models;Macroeconomic Volatility, Remittances, African Economies, Financial Frictions. |
| Date: | 2015–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/49&r=mac |
| By: | Weber, Warren E. (Bank of Canada, Federal Reserve Bank of Atlanta & University of South Carolina) |
| Abstract: | In the United States prior to 1863, each bank issued its own distinct notes. E-money shares many of the characteristics of these bank notes. This paper describes some lessons relevant to e-money from the U.S. experience with state bank notes. It examines historical evidence on how well the bank notes—a privately issued currency system with multiple issuers—functioned with respect to ease of transacting, counterfeiting, safety, overissuance, and par exchange. It finds that bank notes made transacting easier and were not subject to overissuance. However, counterfeiting of bank notes was widespread, bank notes were not perfectly safe, and notes of different banks did not exchange at par and rates of exchange were volatile. The paper also examines how bank notes were regulated and supervised and how that regulation and supervision affected the functioning of the system. The U.S. experience with state bank notes suggests that a privately issued e-money system can operate efficiently but only with appropriate government intervention, regulation, and supervision to minimize counterfeiting and to promote safety and par exchange. |
| Keywords: | bank notes; e-money; financial services |
| JEL: | E41 E42 E58 |
| Date: | 2015–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedacf:2015_001&r=mac |
| By: | Carlos A. Arango (Banco de la República de Colombia); Oscar M. Valencia (Banco de la República de Colombia) |
| Abstract: | This paper presents a DSGE model with banks that face moral hazard in management. Banks receive demand deposits and fund investment projects. Banks are subject to potential withdrawals by depositors which may force them into early liquidation of their investments. The likelihood of this happening depends on the bank management efforts to keep the bank financially sound and the degree of bank leverage. We study the properties of this model under different monetary and macro-prudential policy arrangements. Our model is able to replicate the pro-cyclicality of leverage, and provides insights on the interplay between bank leverage and bank management incentives as a result of monetary, productivity and financial shocks. We find that a combination of pro-cyclical capital requirements and a standard monetary policy are well suited to contain the effects on output and prices of a downturn, keeping the financial system in check. Yet, in an expansionary phase (i.e. a productivity shock) this policy combination may produce desirable results for some macro-variables but at the expense of a deterioration in other macro-financial indicators. Classification JEL: G11, 033, D86. |
| Keywords: | DSGE modeling, Financial frictions, Moral hazard, Macro-prudential policies. |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:878&r=mac |
| By: | Gianluigi Nocella (University of Rome I) |
| Abstract: | Nell’ultimo ventennio le economie europee hanno visto cambiare il contesto in cui sono immerse: alla pressione proveniente dalle grandi economie emergenti si è aggiunta quella dovuta alla cancellazione di meccanismi di isolamento nominale dai competitor interni all’Unione. Il CLUP si è così trasformato in un indicatore della rapidità di adattamento al nuovo contesto, diventando una delle metriche essenziali per definire modelli virtuosi e non. Il modello affermatosi come virtuoso è stato quello tedesco, con una riduzione sbalorditiva del CLUP. Per l’Italia, la critica più comune unisce la costatazione di una crescita della produttività anemica ad una crescita dei salari indipendente dalla produttività stessa. Da qui la richiesta di meccanismi di contrattazione decentrata, che consentano di legare i salari alla produttività. In questo lavoro mostriamo come in Italia le due principali componenti del CLUP (produttività e costo del lavoro) non si siano separate significativamente nell’ultimo ventennio. La peculiarità del modello tedesco, quindi, si identifica nel riuscire coniugare una crescita della produttività “francese” con una dinamica salariale “italiana”, con risultati immaginabili dal punto di vista della distribuzione del reddito. L’introduzione dei cambi fissi ha permesso di massimizzare il rendimento di questa strategia competitiva, consentendo incrementi della domanda estera proporzionali alla capacità del sistema di contrattazione di non ridistribuire gli aumenti di produttività. L’evidenza raccolta ma stimola una riflessione su alcuni temi del dibattito attuale. In particolare, va chiarito se è questo il modello di competitività che l’Europa vuole imporre a sé stessa, e se il decentramento della contrattazione salariale deve essere un meccanismo redistributivo strutturalmente penalizzante per il lavoro o, piuttosto, un meccanismo incentivante di condivisione dei risultati economici. |
| Keywords: | Factor Income Distribution, Aggregate Labor Productivity, Incomes Policy, Macroeconomic Issues of Monetary Unions, Trade Unions. |
| JEL: | D33 E24 E64 J51 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:ais:wpaper:1504&r=mac |
| By: | Carlos Carvalho; Nilda Pasca; Laura Souza; Eduardo Zilberman |
| Abstract: | This paper augments a relatively standard dynamic general equilibrium model with financial frictions in order to quantify the macroeconomic effects of the credit deepening process observed in many Latin American (LA) countries in the last decade, most notably in Brazil. In the model, a stylized banking sector intermediates credit from patient households to impatient households and firms. The key novelty of the paper, motivated by the Brazilian experience, is to model the credit constraint faced by (impatient) households as a function of future labor income. In the calibrated model, credit deepening generates only modest abovetrend growth in consumption, investment, and GDP. Since Brazil has experienced one of the most intense credit deepening processes in Latin America, it is argued that the quantitative effects for other LA economies are unlikely to be sizeable. |
| Keywords: | Public finance, Financial Policy, Microbusinesses & Microfinance, Credit deepening, Financial frictions, Consignado credit, Payroll lending, Financial frictions |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:87893&r=mac |
| By: | Koepke, Robin |
| Abstract: | The empirical literature has long established that U.S. interest rates are an important driver of international portfolio flows, with lower rates “pushing” capital to emerging markets. On the basis of this literature, it is often argued that the Federal Reserve’s imminent policy tightening cycle is likely to weigh on portfolio flows to emerging markets in coming years. The analysis presented in this paper offers a different interpretation of the literature, suggesting that it is the surprise element of monetary policy that affects EM portfolio inflows. A shift in market expectations towards easier future U.S. monetary policy leads to greater foreign portfolio inflows and vice versa. Given current market expectations of sustained increases in the federal funds rate in coming years, EM portfolio flows could be boosted by a slower pace of Fed tightening than currently expected or could be reduced by a faster pace of Fed tightening. |
| Keywords: | Capital Flows, Portfolio Flows, Emerging Markets, Monetary Policy, Market Expectations, Fed Funds Futures, Push and Pull |
| JEL: | E43 F32 F4 G11 |
| Date: | 2014–05–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63519&r=mac |
| By: | Christopher Henry; Kim Huynh; Rallye Shen |
| Abstract: | As the sole issuer of bank notes, the Bank of Canada conducts methods-of-payment (MOP) surveys to obtain a detailed and representative snapshot of Canadian payment choices, with a focus on cash usage. Overall, cash usage at the point of sale has decreased since 2009, constituting 44 per cent of payment volume and 23 per cent in terms of value, and the median value of a cash transaction is about $9. Respondents’ perceptions and demographic factors are used to interpret survey data: cash is seen as a convenient, lowcost, secure and widely accepted form of payment, and is used most widely among respondents who are age 55 and above, have an income less than $45,000 or have only a high school education. The paper also provides a comprehensive view of payment innovations, such as stored-value cards, contactless credit/debit cards or mobile payments, which are often perceived as substitutes for cash. |
| Keywords: | Bank notes, E-Money |
| JEL: | E4 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:15-4&r=mac |
| By: | International Monetary Fund |
| Abstract: | This Selected Issues paper examines how surges in global financial market volatility spill over to emerging market economies (EMs) including India. The results suggest that a surge in global financial market volatility is transmitted very strongly to key macroeconomic and financial variables of EMs, and the extent of its pass-through increases with the depth of external balance-sheet linkages between advanced countries and EMs. The paper also looks at food inflation, which has often been singled out as a key driver of India’s high and persistent inflation. |
| Keywords: | External shocks;Spillovers;Climatic changes;Fiscal policy;Corporate sector;Women;Labor markets;Exports;Monetary policy;Millennium Development Goals;Selected Issues Papers;India; |
| Date: | 2015–03–11 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/62&r=mac |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Albania’s Second and Third Reviews Under the Extended Arrangement and Request for Waiver for the Nonobservance of Performance Criterion, Waiver of Applicability of PCs, and Rephasing of Future Disbursements. The program is on track. All end-June, end-September, and available end-December quantitative PCs were met. However, the continuous PC on the accumulation of external arrears was not observed because of technical delay with one interest payment. The IMF staff supports the authorities’ request for the completion of the second and third reviews under the Extended Arrangement, waiver of applicability of PCs, and rephasing of future disbursements. |
| Keywords: | Extended arrangement reviews;Fiscal consolidation;Fiscal policy;Fiscal reforms;Energy sector;Monetary policy;Bank supervision;Economic indicators;Letters of Intent;Staff Reports;Press releases;Performance criteria waivers;Albania; |
| Date: | 2015–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/48&r=mac |
| By: | Rafael Portillo; Luis-Felipe Zanna |
| Abstract: | We develop a tractable small open-economy model to study the first-round effects of international food price shocks in developing countries. We define first-round effects as changes in headline inflation that, holding core inflation constant, help implement relative price adjustments. The model features three goods (food, a generic traded good and a non-traded good), varying degrees of tradability of the food basket, and alternative international asset market structures (complete and incomplete markets, and financial autarky). First-round effects depend crucially on the asset market structure and the different transmission mechanisms they trigger. Under complete markets, inter-temporal substitution prevails, making the inflationary impact of international food prices proportional to the food share in consumption, which in developing economies is typically large. Under financial autarky, the income channel is dominant, and first-round effects are instead proportional to the country's food balance—the difference between the country's food endowment and its consumption—which in developing countries is typically small. The latter result holds regardless of the degree of food tradability. Incomplete markets yield a combination of the two extremes. Our results cast some doubt on the view that international food price shocks are inherently inflationary in developing countries. |
| Keywords: | Food prices;Commodity price shocks;Inflation;Monetary policy;Developing countries;Econometric models;Food Price Shocks; First-Round Effects; Developing Countries; New-Keynesian Models; Asset Market Structure. |
| Date: | 2015–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/33&r=mac |
| By: | Vashelyuk, Natalya (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Trunin, Pavel (Russian Presidential Academy of National Economy and Public Administration (RANEPA)) |
| Abstract: | This paper examines the impact of nonstandard monetary policy measures on money market and their economy-wide effects. Four groups of nonconventional measures (quantitative easing, direct and indirect credit easing, forward guidance) and the way in which these operations were conducted in developed and emerging economies are explored. The study of nonstandard liquidity providing measures taken by the Bank of Russia revealed that the main challenges for monetary policy implementation are enhancing the transparency of monetary policy, minimizing distortional effects and appropriate risk management. We also found the evidence of the effectiveness of the credit auctions for 3-month loans secured by assets or guarantees. The regression analysis of the nonstandard liquidity easing measures showed that the increase in pace of providing the loans secured by non-marketable assets or guaranties puts a downward pressure on MosPrime rates. |
| Keywords: | monetary policy, money market, nonconventional measures, nonstandard liquidity, credit auctions |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:rnp:ppaper:mak14&r=mac |
| By: | Tommaso Proietti (DEF and CEIS, Università di Roma "Tor Vergata"); Martyna Marczak (Department of Economics, University of Hohenheim); Gianluigi Mazzi (Statistical Office of the European Communities, Eurostat) |
| Abstract: | EuroMInd-D is a density estimate of monthly gross domestic product (GDP) constructed according to a bottom–up approach, pooling the density estimates of eleven GDP components, by output and expenditure type. The components density estimates are obtained from a medium-size dynamic factor model of a set of coincident time series handling mixed frequencies of observation and ragged–edged data structures. They reflect both parameter and filtering uncertainty and are obtained by implementing a bootstrap algorithm for simulating from the distribution of the maximum likelihood estimators of the model parameters, and conditional simulation filters for simulating from the predictive distribution of GDP. Both algorithms process sequentially the data as they become available in real time. The GDP density estimates for the output and expenditure approach are combined using alternative weighting schemes and evaluated with different tests based on the probability integral transform and by applying scoring rules. |
| Keywords: | Density Forecast Combination and Evaluation; Mixed–Frequency Data; Dynamic Factor Models; State Space Models |
| JEL: | C32 C52 C53 E37 |
| Date: | 2015–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:340&r=mac |
| By: | Proietti, Tommaso; Marczak, Martyna; Mazzi, Gianluigi |
| Abstract: | EuroMInd-D is a density estimate of monthly gross domestic product (GDP) constructed according to a bottom-up approach, pooling the density estimates of eleven GDP components, by output and expenditure type. The components density estimates are obtained from a medium-size dynamic factor model of a set of coincident time series handling mixed frequencies of observation and ragged-edged data structures. They reflect both parameter and filtering uncertainty and are obtained by implementing a bootstrap algorithm for simulating from the distribution of the maximum likelihood estimators of the model parameters, and conditional simulation filters for simulating from the predictive distribution of GDP. Both algorithms process sequentially the data as they become available in real time. The GDP density estimates for the output and expenditure approach are combined using alternative weighting schemes and evaluated with different tests based on the probability integral transform and by applying scoring rules. |
| Keywords: | Density Forecast Combination and Evaluation,Mixed-Frequency Data,Dynamic Factor Models,State Space Models,Guilds |
| JEL: | C32 C52 C53 E37 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hohdps:032015&r=mac |
| By: | Kevin x.d. Huang (Vanderbilt University); Hui He (Shanghai University of Finance and Economics and International Monetary Fund) |
| Abstract: | Empirical evidence suggests that both leisure time and medical care are important for maintaining health. We develop a general equilibrium macroeconomic model in which taxation is a key determinant of the composition of these two inputs in the endogenous accumulation of health capital. In our model, higher taxes lead to using relatively more leisure time and less medical care in maintaining health. We find that difference in taxation between the US and Europe can account for a large fraction of their difference in health expenditure-GDP ratio and almost all of their difference in time input for health production. |
| Keywords: | Taxation; Relative health care price; Time allocation; Health care expenditure; Macroeconomics |
| JEL: | E2 H2 |
| Date: | 2015–04–08 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:vuecon-15-00003&r=mac |
| By: | Camille Cornand (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Rodolphe Dos Santos Ferreira (BETA-Strasbourg University, 61 avenue de la Forêt Noire - 67085 Strasbourg Cedex, France; Catolica Lisbon School of Business and Economics) |
| Abstract: | In Keynes’ beauty contest, agents have to choose actions in accordance with an expected fundamental value and with the conventional value expected to be set by the market. In doing so, agents respond to a fundamental and to a coordination motive respectively, the prevalence of either motive being set exogenously. Our contribution is to consider whether agents favor the fundamental or the coordination motive as the result of a strategic choice that generates a strong strategic complementarity of agents’ actions. We show that the coordination motive tends to prevail over the fundamental one, which yields a disconnection of activity away from the fundamental. A valuation game and a competition game are provided as illustrations of this general framework. |
| Keywords: | beauty contest, financial markets, indeterminacy, oligopolistic competition,strategic complementarities |
| JEL: | D43 D84 E12 E44 L13 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1501&r=mac |
| By: | Andrea Vaona (Department of Economics (University of Verona)) |
| Abstract: | Money long-run super-neutrality and the vertical long-run Phillips curve are two widely shared beliefs in the economics profession and among economic policy-makers. The present survey is devoted to anomalous empirical evidence which challenges this view. We consider a variety of studies, differing in terms of models, estimation strategies, and countries analyzed. We conclude with a brief discussion of some future possible developments of the literature. |
| Keywords: | long-run, money non-super-neutrality, non-vertical Phillips curve, empirical evidence |
| JEL: | E31 E40 E50 J64 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:ver:wpaper:17/2015&r=mac |
| By: | International Monetary Fund |
| Abstract: | KEY ISSUES The IMF has been supporting Malawi under an Extended Credit Facility (ECF) arrangement. A 36 month, SDR 104.1 million (150 percent of quota) Extended Arrangement under the ECF was approved by the Executive Board on July 23, 2012 and the Third and Fourth reviews were concluded on January 17, 2014. A total of SDR 52.06 million has been disbursed to date. The sixth and seventh tranches totaling SDR13.02 million will be available upon the completion of the Fifth and Sixth review. The “cashgate†scandal that came to light in October 2013 has had major political and economic consequences. While President Banda’s government initially responded with strong actions, allowing the third and fourth ECF program reviews to be completed in January 2014, these efforts were not sustained. In the run up to the presidential and parliamentary elections in May 2014, further governance concerns emerged and macroeconomic policies drifted off track. As a result, donor budget support remained suspended, resulting in increased recourse to domestic financing, monetization of the deficit, and the emergence of domestic payment arrears. As confidence waned, the exchange rate depreciated further and inflation became entrenched in the range 20–25 percent. Reflecting these developments, program implementation was uneven given external financing shortfalls with several performance criteria not being observed. Three out of seven performance criteria for the fifth review were not met, including the continuous performance criterion on the contracting of non-concessional external loans. For the sixth review, while the end-June 2014 target for international reserves was met, several other quantitative targets were not observed and implementation of a few structural benchmarks set at the time of the third and fourth reviews was delayed. |
| Keywords: | Extended Credit Facility;Fiscal reforms;Financial management;Monetary policy;Economic indicators;Letters of Intent;Debt sustainability analysis;Staff Reports;Press releases;Phasing of purchases;Performance criteria modifications;Performance criteria waivers;Malawi; |
| Date: | 2015–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/83&r=mac |
| By: | International Monetary Fund |
| Abstract: | KEY ISSUES The Ebola outbreak and sharp drop in iron ore prices have dealt a severe blow to Sierra Leone’s economy. The Ebola epidemic, which continues to spread albeit at a lower rate than in latter parts of 2014, has exacted a heavy human toll (at least 3000 lives to date) and disrupted much economic activity. The sharp drop in iron ore prices has compounded these difficulties by shuttering the main mining operator. These twin shocks have prompted a sharp slump in activity. Following several years of robust economic growth as new mining activity came on stream in 2011, economic output is set to contract by some 13 percent this year, comprising a decline in non-iron ore activity of some 2 percent and a 47 percent slump in iron-ore output as the dominant mining operator is not expected to resume activity until mid-year at the earliest. Against this backdrop, policy discussions focused on generating fiscal space to tackle the Ebola emergency and contend with the effects of the slump in iron ore production and prices. The domestic primary deficit is set to widen from 0.7 percent of non-iron ore GDP in 2013 to 5.2 percent in 2015 because of Ebola-related priority spending and weakened revenue performance. Increased support from Sierra Leone’s development partners will contribute towards the financing of the higher deficit, but recourse to domestic borrowing will also be unavoidable. Staff supports the authorities request for significant additional financing from the IMF. Program implementation has been good, notwithstanding the severe shocks that the economy has been subjected to and all continuous and end-June 2014 performance criteria, as well as most structural benchmarks have been observed. The authorities’ policy commitments are also commensurately strong with the challenges they face. Consequently, staff supports the authorities’ request for the completion of the second ECF review, 50 percent of quota augmentation of access, and 20 percent of quota debt relief under the catastrophe containment window of the Catastrophe Containment and Relief Trust. |
| Keywords: | Extended Credit Facility;External shocks;Fiscal policy;Borrowing;Debt relief;Emergency assistance;Fiscal reforms;Financial management;Monetary policy;Economic indicators;Letters of Intent;Debt sustainability analysis;Staff Reports;Press releases;Sierra Leone; |
| Date: | 2015–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/76&r=mac |
| By: | Romain Houssa; Jolan Mohimont; Christopher Otrok |
| Abstract: | We examine the role of global and domestic shocks in driving macroeconomic fluctuations for Ghana. We are able to study the impact of exogenous shocks including productivity, credit supply, and commodity price shocks. We identify the shocks with a combination of sign and recursive restrictions within Bayesian VAR models. As a benchmark we provide results for South Africa to document the difference between two economies with similar structures but different levels of development. We find that global shocks play a more dominant role in South Africa than in Ghana. These shocks operate through three channels: trade, credit and commodity prices. |
| Keywords: | Business cycles;Ghana;South Africa;External shocks;Commodity price shocks;Regional shocks;Low-income developing countries;Cross country analysis;Vector autoregression;Econometric models;Credit Shocks, Developing Countries, Macroeconomic Stabilization Policies, Sign Restrictions, Bayesian VAR. |
| Date: | 2015–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/40&r=mac |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Ukraine’s Request for Extended Arrangement Under the Extended Fund Facility (EFF) and Cancellation of Stand-by Arrangement (SBA). Despite tangible progress under the SBA, the crisis in Ukraine has increased its balance of payments and adjustment needs beyond what can be achieved under the current program. The authorities’ new four-year IMF-supported program aims to decisively address these challenges. The program lays out a strategy to restore financial and economic stability and resolve long-standing structural obstacles to growth. In view of Ukraine’s large external financing needs and the authorities’ strong policy commitments, the IMF staff supports approval of Ukraine’s four-year Extended Arrangement under the EFF with access equivalent to SDR 12.348 billion. |
| Keywords: | Extended Fund Facility;Monetary policy;Banking sector;Fiscal policy;Energy sector;Fiscal reforms;Economic indicators;Debt sustainability analysis;Letters of Intent;Staff Reports;Press releases;Stand-by arrangement cancellations;Extended arrangement requests;Ukraine; |
| Date: | 2015–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/69&r=mac |
| By: | David M. Byrne; Stephen D. Oliner; Daniel E. Sichel |
| Abstract: | The Producer Price Index (PPI) for the United States suggests that semiconductor prices have barely been falling in recent years, a dramatic contrast from the rapid declines reported from the mid-1980s to the early 2000s. This slowdown in the rate of decline is puzzling in light of evidence that the performance of microprocessor units (MPUs) has continued to improve at a rapid pace. Roughly coincident with the shift to slower price declines in the PPI, Intel — the leading producer of MPUs — substantially changed its pricing behavior for these chips. As a result of this change, we argue that the matched-model methodology used in the PPI for MPUs likely started to be biased in the mid-2000s and that hedonic indexes can provide a more accurate measure of price change since then. Our preferred hedonic index of MPU prices tracks the PPI closely through 2004. However, from 2004 to 2008, our preferred index fell faster than the PPI, and from 2008 to 2013 the gap widened further, with our preferred index falling at an average annual rate of 43 percent, while the PPI declined at only an 8 percent rate. Given that MPUs currently represent about half of U.S. shipments of semiconductors, this difference has important implications for gauging the rate of innovation in the semiconductor sector. |
| JEL: | E01 E31 E66 L16 L63 N12 N72 O33 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21074&r=mac |
| By: | Bentour, El Mostafa |
| Abstract: | Using input-output models, we analyze the effect of removing subsidized oil products in Morocco. We set three scenarios of increasing oil products by 25%, 50% and 75%, and symmetric decreases by the same amounts. We show that the effects are high in intensive oil products sectors such as transports and electricity and water sectors. Using the weights of the sectors, we deduce the overall inflation generated by direct and indirect requirements for the total economy. For example, an increase in oil prices by 75% generates a global inflation cost between 5.5% and 8%. Symmetric scenarios indicate no strong asymmetrical effects. The generated inflation may alter the stable path of inflation recorded over the past fifteen years putting pressure on the monetary authorities. Therefore, the change of strategy from managed exchange rate regime towards a flexible regime, extensively discussed, is now an urgent necessity. |
| Keywords: | Energy Reform, Fiscal Policy, Inflation, Input-Output Models, Asymmetric Effects, Morocco. |
| JEL: | D57 E31 Q41 |
| Date: | 2015–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63635&r=mac |
| By: | Sangyup Choi; Prakash Loungani |
| Abstract: | We study the role of uncertainty shocks in explaining unemployment dynamics, separating out the role of aggregate and sectoral channels. Using S&P500 data from the first quarter of 1957 to third quarter of 2014, we construct separate indices to measure aggregate and sectoral uncertainty and compare their effects on the unemployment rate in a standard macroeconomic vector autoregressive (VAR) model. We find that aggregate uncertainty leads to an immediate increase in unemployment, with the impact dissipating within a year. In contrast, sectoral uncertainty has a long-lived impact on unemployment, with the peak impact occurring after two years. The results are consistent with a view that the impact of aggregate uncertainty occurs through a “wait-and-see†mechanism while increased sectoral uncertainty raises unemployment by requiring greater reallocation across sectors. |
| Keywords: | Labor markets;United States;External shocks;Unemployment;Stock markets;Structural vector autoregression;Econometric models;aggregate uncertainty; sectoral uncertainty; unemployment; stock market; Great Recession |
| Date: | 2015–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/36&r=mac |
| By: | David Vines |
| Abstract: | The global economic recovery is on course but remains weak. Many analysts and policymakers — including those from emerging markets — have recently called for international cooperation in the setting of macroeconomic policies. A global growth target has been adopted by the G20 to aid such cooperation. But advanced counties are unwilling to abandon fiscal policies which are driven by austerity, monetary policy is incapacitated, and demand in emerging markets economies is not growing rapidly enough. As a result, cooperation in the promotion of growth appears elusive. However microeconomic reforms have been added to the G20 policy mix: reforms which, for example, promote competition, liberalise trade, and support increased investment in infrastructure. A new form of cooperative process is thereby emerging. Countries have been asked to pursue such reforms, in ways which both promote the growth of productive potential and encourage the growth of aggregate demand. The aim is to create a global environment of ‘concerted unilateral reform’. Beneath the umbrella of a global growth target, counties are being encouraged to embrace reform, and to expand demand, in the light of the opportunities which are created by the pursuit of similar reforms elsewhere. This is a valuable experiment in international economic cooperation, and a successful outcome will be of particular value to emerging-market economies. |
| Keywords: | G20, Global financial crisis, Macroeconomic policy, European Union |
| JEL: | E60 F30 F41 F42 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pas:papers:2014-21&r=mac |
| By: | Carlos Huertas Campos; Eliana González Molano; Cristhian Ruiz Cardozo |
| Abstract: | En este documento se analiza el mecanismo de formación de las expectativas de inflación en Colombia usando diferentes medidas de esta variable a uno y dos años. Los resultados indican que las expectativas se forman de manera adaptativa y racional. Hay evidencia que soporta la hipótesis de aprendizaje adaptativo. Las pruebas estadísticas sugieren que la meta de inflación ha ganado credibilidad y se puede considerar como una expectativa racional. |
| Keywords: | Aprendizaje adaptativo, encuestas, expectativas, inflación. |
| JEL: | C42 C53 D84 E31 |
| Date: | 2015–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:012699&r=mac |
| By: | Yoshino, Naoyuki (Asian Development Bank Institute); Taghizadeh-Hesary, Farhad (Asian Development Bank Institute) |
| Abstract: | Japan has suffered from sluggish economic growth and recession since the 1990s, a phenomenon dubbed "Japan's Lost Decade." The People's Republic of China, many countries in the eurozone, and the United States may face similar problems in future and they have been concerned by Japan's long-term recession. This paper will address why Japan's economy has stagnated since the bursting of its economic bubble. Our empirical analysis challenges the beliefs of some western economists, such as Paul Krugman, that the Japanese economy is in a liquidity trap. We argue that Japan's economic stagnation stems from a vertical IS curve rather than a liquidity trap. The impact of fiscal policy has declined drastically, and the Japanese economy faces structural problems rather than a temporary downturn. These structural problems have many causes: an aging demographic (a problem that is frequently overlooked), an over-reliance by local governments on transfers from the central government, and Basel capital requirements that have made Japanese banks reluctant to lend money to startup businesses and small and medium-sized enterprises. This latter issue has discouraged Japanese innovation and technological progress. The paper will address all these issues empirically and theoretically and will provide some remedies for Japan's long-lasting recession. |
| Keywords: | japans lost decade; liquidity trap; japanese economy; economic stagnation; japanese innovation and technical progress |
| JEL: | E12 E62 |
| Date: | 2015–04–13 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0521&r=mac |
| By: | Ambrogio Cesa-Bianchi; Luis Felipe Céspedes; Alessandro Rebucci |
| Abstract: | This paper first compares house price cycles in advanced and emerging economies using a new quarterly house price dataset covering the period 1990- 2012. It is found that that house prices in emerging economies grow faster, are more volatile, less persistent and less synchronized across countries than in advanced economies. They also correlate more closely with capital flows than in advanced economies. The analysis is then conditioned on an exogenous change to global liquidity, broadly understood as a proxy for the international supply of credit. It is found that in emerging markets a global liquidity shock has a much stronger impact on house prices and consumption than in advanced economies. Finally, holding house prices constant in response to this shock tends to dampen its effects on consumption in both advanced and emerging economies, but possibly through different channels: in advanced economies by boosting the value of housing collateral and hence supporting domestic borrowing, and in emerging markets by appreciating the exchange rate and hence supporting the international borrowing capacity of the economy. |
| Keywords: | Capital flows, Housing finance, Exchange rates, Monetary Policy, Capital flows, Emerging markets, Global liquidity, House prices, External instrumental variables |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:88736&r=mac |
| By: | International Monetary Fund |
| Abstract: | This Selected Issues paper examines implications of capital account liberalization in Iceland. Capital controls were critical in 2008 to avoid a more severe collapse of the Icelandic economy. Six years later, capital inflows have been liberalized, but most outflows remain restricted. Iceland has used the breathing room to reduce flow and stock vulnerabilities, strengthen institutions, and prepare for the lifting of capital controls. Simulations using the central bank’s Quarterly Macroeconomic Model (QMM) suggest that, compared with the 2008 crisis episode, the economy can better withstand the impact of an abrupt removal of capital controls. However, the outcome would be dependent on a number of factors, including resident depositor behavior. |
| Keywords: | Capital account liberalization;Private savings;Investment;Financial sector;Exchange rates;Housing prices;Fiscal policy;Tourism;Fiscal reforms;Selected Issues Papers;Iceland; |
| Date: | 2015–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/73&r=mac |
| By: | Chie Aoyagi; Giovanni Ganelli; Kentaro Murayama |
| Abstract: | We assess the ongoing reform efforts in Japan in terms of inclusive growth. We use prefectural level panel data to regress a measure of inclusive growth, which incorporates both average income growth and income inequality, on macroeconomic and policy variables. Our analysis suggests that achieving the Bank of Japan’s 2 percent inflation target has a positive effect on average income growth, but an adverse effect on income equality. The package of structural reforms planned under Abenomics is found to be effective in increasing both average income growth and income equality. The main policy implication of our analysis is that full implementation of structural reforms– especially labor market reforms–is necessary to both foster growth and increase equality. |
| Keywords: | Inclusive growth;Japan;Income distribution;Income inequality;Fiscal reforms;Labor market reforms;Monetary policy;Inflation targeting;Japan; Inclusive growth; Economic growth |
| Date: | 2015–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/54&r=mac |
| By: | Ennis, Huberto M. (Federal Reserve Bank of Richmond) |
| Abstract: | This discussion was prepared for the 84th Meeting of the Carnegie-Rochester-NYU Conference Series on Public Policy "Monetary Policy: An Unprecedented Predicament" held on November 14-15, 2014, at Carnegie Mellon University. |
| Date: | 2015–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:15-03&r=mac |
| By: | Agne Reklaite (Vilnius University) |
| Abstract: | In this paper the issue of globalisation and deteriorating precision of domestically oriented frameworks is addressed. A hypothesis that the effect of international trends on the growth of economy is increasing over time is formed. In order to validate this a method of composing foreign series with local indicators in a hierarchical dynamic factor model is presented. The novelty of this approach is that globalisation effect is measured focusing on prediction rather than similarity. This way the measure presents country's sensitivity to global shocks and reveals how much focal country's economy is intertwined with global economy. The application was performed on Lithuanian data and the hypothesis was validated. The results indicate that globalisation effect has an increasing effect over time. |
| Keywords: | leading indicator; hierarchical dynamic factor model; globalisation; economic growth |
| JEL: | C43 E32 C10 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no91&r=mac |
| By: | Marcel Schroder |
| Abstract: | This paper is motivated by the popular view that the surge in China’s foreign exchange reserves is due to a distortionary exchange rate policy aimed at keeping the real exchange rate undervalued to support export-led growth. It undertakes an in-depth empirical investigation to quantify how much "mercantilist" and "precautionary" motives have contributed to the reserve build-up in China during 1998Q4-2011Q4. A substantial problem is that theory is consistent with employing two vastly differing approaches to defining and estimating the role of mercantilist reserve accumulation. A priori, either method could generate misleading results. The study shows, however, that the distinction between the two approaches is immaterial in China’s case. The results suggest that mercantilism accounts for less than 10 percent of reserve accumulation. Precautionary motives and other factors seem to be the dominant determinants of the surge in China’s international reserves. |
| Keywords: | international reserves, precautionary demand, mercantilism, China |
| JEL: | E58 F31 F36 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:pas:papers:2015-04&r=mac |
| By: | Grech, Aaron George |
| Abstract: | Since the global recession that took hold around the first decade of this century, Malta registered a more favourable economic performance than most of the other euro area states. It is difficult to reconcile Malta’s relatively high rate of economic growth with the openness of a small economy facing a hostile external environment. However, this could partly be explained by the pronounced structural changes that occurred in the Maltese economy in the years preceding the crisis, which, although a continuation of the trends observed in the decades since Independence in the mid-1960s, gave a new impetus to the economy. |
| Keywords: | small open economy, structural changes, unit labour costs |
| JEL: | E00 E30 O52 |
| Date: | 2015–04–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63632&r=mac |
| By: | Ravi Balakrishnan; Mai Dao; Juan Sole; Jeremy Zook |
| Abstract: | The U.S. labor force participation rate (LFPR) fell dramatically following the Great Recession and has yet to start recovering. A key question is how much of the post-2007 decline is reversible, something which is central to the policy debate. The key finding of this paper is that while around ¼–? of the post-2007 decline is reversible, the LFPR will continue to decline given population aging. This paper’s measure of the “employment gap†also suggests that labor market slack remains and will only decline gradually, pointing to a still important role for stimulative macro-economic policies to help reach full employment. In addition, given the continued downward pressure on the LFPR, labor supply measures will be an essential component of the strategy to boost potential growth. Finally, stimulative macroeconomic and labor supply policies should also help reduce the scope for further hysteresis effects to develop (e.g., loss of skills, discouragement). |
| Keywords: | Labor force participation;United States;Aging;Unemployment;Older people;labor force participation; unemployment; employment gap; macro-economic policy. |
| Date: | 2015–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/76&r=mac |
| By: | Luc Eyraud; Tao Wu |
| Abstract: | The paper contributes to the discussions on fiscal governance in Europe. It takes stock of recent reforms, identifies areas for further progress, and discusses a menu of policy options for the medium-term. The issues covered include: (i) the growing complexity of the European framework and ways to simplify it; (ii) the difficulties to measure and implement structural stance indicators; (iii) the challenge of reconciling fiscal sustainability and growth; (iv) the need to enhance coordination in the area of monitoring; and (v) the obstacles to compliance and proposals to strengthen enforcement. |
| Keywords: | Fiscal policy;European Economic and Monetary Union;Public debt;Fiscal rules;Fiscal reforms;Debt sustainability; |
| Date: | 2015–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/67&r=mac |
| By: | Malgorzata Olszaka (University of Warsaw, Poland); Mateusz Pipien (Cracow University of Economics, Poland); Sylwia Roszkowska (National Bank of Poland, Poland) |
| Abstract: | In this paper we aim to find out whether bank specialization and bank capitalization affect the relationship between bank loan growth and bank capital ratio, both in expansions and in contractions. We hypothesize that the impact of bank capital on lending is relatively strong in cooperative banks and savings banks. We also expect that this effect is nonlinear, and is stronger in “low” capital banks than in “high” capital banks. To test our hypotheses we apply two-step GMM robust estimator (Blundell & Bond, 1998) for data spanning the years 1996 – 2011 on individual banks available in the Bankscope database. Our analysis shows that lending of poorly capitalized banks is more affected by capital ratio than lending of well capitalized banks. Loan growth of cooperative and savings banks is more capital constrained that lending of commercial banks. Capital matters for the lending activity in contractions only in the case of savings and “low” capital banks. |
| Keywords: | loan supply, capital ratio, procyclicality |
| JEL: | E32 G21 G28 G32 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no83&r=mac |
| By: | Monnet, Cyril (Federal Reserve Bank of Philadelphia); Sanches, Daniel R. (Federal Reserve Bank of Philadelphia) |
| Abstract: | We show that a competitive banking system is inconsistent with an optimum quantity of private money. Because bankers cannot commit to their promises and the composition of their assets is not publicly observable, a positive franchise value is required to induce the full convertibility of bank liabilities. Under perfect competition, a positive franchise value can be obtained only if the return on bank liabilities is sufficiently low, which imposes a cost on those who hold these liabilities for transaction purposes. If the banking system is monopolistic, then an efficient allocation is incentive-feasible. In this case, the members of the banking system obtain a higher return on assets, making it feasible to pay a sufficiently high return on bank liabilities. Finally, we argue that the regulation of the banking system is required to obtain efficiency. |
| Keywords: | Private money; Banking structure; Regulation |
| JEL: | E42 G21 G28 |
| Date: | 2015–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:15-19&r=mac |
| By: | Kevin Fletcher; Damiano Sandri |
| Abstract: | We develop a simple model to examine the conditions under which delaying fiscal consolidation can affect the present value of GDP via the fiscal stance’s effects on the output gap and hysteresis. We find that the absolute size of the fiscal multiplier—the focus of much empirical investigation and policy debate—is likely inconsequential in this regard. Rather, what matters is the degree to which the multiplier during the initial period of fiscal stimulus differs from the multiplier when the stimulus is withdrawn. If the multiplier is constant over time, delaying consolidation is unlikely to significantly boost the present value of GDP via effects on the output gap and hysteresis. The potential success of such efforts relies instead on exploiting time-variation in multipliers. |
| Keywords: | Fiscal consolidation;Gross domestic product;Public debt;Fiscal stimulus and multipliers;Econometric models;Fiscal consolidation, hysteresis, fiscal multipliers |
| Date: | 2015–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/52&r=mac |
| By: | Bogna Gawronska-Nowak (Chair of Economics Lazarski University); Wojciech Grabowski (University of Lodz) |
| Abstract: | Evolution of speculative attack models show certain progress in developing idea of the role of expectations in the crisis mechanism. Obstfeld (1996) defined expectations as fully exogenous. Morris and Shin (1998) endogenised the expectations with respect to noise leaving information significance away. Dynamic approach proposed by Angeletos, Hellwig and Pavan (2006) operates under more sophisticated assumption about learning process that tries to reflect time-variant and complex nature of information in the currency market much better. But this model ignores many important details like a Central Bank cost function. Genetic algorithm allows to avoid problems connected with incorporating information and expectations into agent decision making process to an extent. There are some similarities between the evolution in Nature and currency market performance. In our paper an assumption about rational agent behaviour in the efficient market is criticised and we present our version of the dynamic model of a speculative attack, in which we use a genetic algorithm to define decision-making process of the currency market agents. The results of our simulation seem to be in line with the theory and intuition. An advantage of our model is that it reflects reality in quite complex way, i.e. level of noise changes in time (decreasing), there are different states of fundamentals (with “more sensitive” upper part of the scale), number of inflowing agents can be low or high (due to different globalization phases, different capital flow phases, different uncertainty levels). |
| Keywords: | currency crisis, dynamic model, genetic algorithms |
| JEL: | C6 F3 E5 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no51&r=mac |
| By: | Vladislav Flek (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic; Metropolitan University Prague); Martin Hala (University of New York in Prague; Metropolitan University Prague); Martina Myslikova (The Institute of Sociology of the Czech Academy of Sciences; Metropolitan University Prague) |
| Abstract: | Using Spain and the Czech Republic as examples of two EU countries with remarkably different youth labour market performance, we apply a gross flow analysis based on EU-SILC longitudinal data. While in Spain increases in youth unemployment rate are driven mostly by young people losing their jobs, in the Czech Republic, this is mainly due to new labour market entrants who failed to find a job. Furthermore, the analysis of flow transition rates suggests that the job-loss rates of young workers are persistently higher than those established for prime-age workers. But the analogous result applies, though less uniformly, also to the job-finding rates. Survival functions estimates point to prolonged unemployment duration and increasing long term unemployment, while both these tendencies apply relatively more to the young unemployed. Proportional hazard models generally indicate that shorter unemployment spells are more likely to be terminated by finding a job in comparison with those spells lasting for more than one year, while the hazard ratios for duration intervals under one year are typically higher for prime-age unemployed. Finally, we examine education, gender, household size, etc. as determinants of exits from unemployment, with uniform evidence found for tertiary education only. |
| Keywords: | flow transition rates, gross labour market flows, hazard function, survival function, unemployment |
| JEL: | E24 J6 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2015_06&r=mac |
| By: | Borislava Mircheva; Dirk Muir |
| Abstract: | Denmark, Finland, Norway, and Sweden form a tightly integrated region which has strong ties with the euro area as well as some exposure to Russia. Using the IMF’s Global Integrated Monetary and Fiscal model (GIMF), we examine spillovers the region could face, focusing on possible scenarios from the rest of the euro area and Russia, and the fall in global oil prices. We show that the spillovers from these scenarios differ in magnitude and impact, regardless of the high degree of integration among the four Nordic economies. These differences are driven by the fact that Denmark and Finland have no independent monetary policy, and Denmark and Norway are net energy exporters while Finland and Sweden are energy importers. We infer lessons for policy from the outcomes. |
| Keywords: | Spillovers;Denmark;Finland;Sweden;Norway;Russian Federation;Oil prices;Economic integration;Monetary policy;Fiscal policy;Cross country analysis;General equilibrium models;Spillovers; monetary policy; fiscal policy; dynamic stochastic general equilibrium models; Nordic countries |
| Date: | 2015–03–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/70&r=mac |
| By: | Piotr Podsiadlo (Cracow University of Economics) |
| Abstract: | The subject of the article is an analysis of the rules of state aid admissibility on the basis of the implementing regulations, adopted by the European Commission in 2004 and 2014 on rescue and restructuring aid. This should lead to verify the thesis that due to the taken up at EU level - in response to the effects of the financial and economic crisis – economic recovery plan, the support of the public authorities directed at rescuing and restructuring undertakings in difficulty has become the most broadly used form of State aid due to the value among all the forms of aid granted by Member States of the European Union. The adoption of such a thesis raises the question of the influence of State aid on the size of the general government sector debt in the EU Member States, which have provided State aid for undertakings in difficulty. This analysis was carried out based on the linear regression model. The response variable (dependent variable Y) is the size of the general government sector debt, and explanatory variable (independent variable X) is the expenditure on State aid. The research shows that between expenditures of the EU Member States on aid for rescuing and restructuring undertakings in difficulty and the condition of the public finances of these countries there is no substantial statistical relationship. Taking this into consideration the most important question arises. Does the State aid "to prevent the bankruptcy of undertakings” follow the condition of art. 107 par. 2 point c of Treaty on the functioning of the European Union? |
| Keywords: | the European Union, legal regulation, rescue and restructuring aid, the general government sector debt, financial and economic crisis |
| JEL: | E62 K20 K33 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no89&r=mac |
| By: | Strunz, Sebastian; Bartkowski, Bartosz; Schindler, Harry |
| Abstract: | We do not know; but simplistic answers to the title's question should be mistrusted. In this paper, we first provide a literature overview, laying out the vast diversity of theories on the role of monetary aspects for economic growth both within mainstream growth theory and within heterodox perspectives. In fact, completely contradicting results have been derived from a variety of reasonable theories. Based on this literature survey, we explore the narrative background of the most prominent theories as each of them is related to and justified by a distinct narrative. For instance, mainstream growth textbooks are based on the assumption that "money is a neutral medium of exchange" while other approaches hold that "zero interest rates are a precondition for a stationary economy". We show how these narratives - though they may well contain some truth - lend themselves to serve as myths, which rather inhibit than facilitate our understanding of the complex relationship between monetary variables and economic growth. Finally, we discuss consequences for the degrowth debate in terms of practical proposals for overcoming assumed growth imperatives as well as theoretical consequences. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ufzdps:52015&r=mac |
| By: | Pritha Mitra; Tigran Poghosyan |
| Abstract: | Amid renewed crisis, falling tax revenues, and rising debt, Ukraine faces serious fiscal consolidation needs. Durable fiscal adjustment can support economic confidence and rebuild buffers but what is its overall impact on growth? How effective are revenue versus spending instruments? Does current or capital spending have a larger impact? Applying a structural vector autoregressive model, this paper finds that Ukraine’s near-term revenue and spending multipliers are well below one. In the medium-term, the revenue multiplier becomes insignificant (with a wide confidence interval) and the spending multiplier strengthens. Capital and current spending have a similar effect on growth but the capital multiplier remains significant for longer. These results suggest near-term consolidation based on a combination of revenue and spending measures would have a modest impact on growth. At the same time, medium-term policies could minimize the adverse consequences of consolidation on growth by offsetting some current spending cuts with increased capital spending. Given the severe challenges facing the Ukrainian economy, it is important that policymakers apply these results in conjunction with broader considerations such as public debt sustainability, investor confidence, credibility of government policies, and public spending efficiency. Consequently, it may be necessary to rely more on current spending cuts over other types of consolidation measures even though multiplier estimates suggest a more diverse combination of measures. |
| Keywords: | Fiscal stimulus and multipliers;Ukraine;Fiscal consolidation;Government expenditures;Tax revenues;Structural vector autoregression;Econometric models;Fiscal consolidation, fiscal multipliers, structural VAR |
| Date: | 2015–03–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/71&r=mac |
| By: | Paulina Szyja (Uniwersytet Pedagogiczny im. Komisji Edukacji Narodowej) |
| Abstract: | Starting from the crisis on the real economy in 2008 it has been developed an intense discussion, supported by a number of declarations on the global scale, about the need for changes in the economy. A huge impact on this state of affairs was the analysis of the causes and effects of the economic downturn and the challenges of the future. As a result, some states have taken action to remedy the situation. Many of them were aimed at structural changes in production, consumption and environmental friendly investment. At the same time gained in importance the concept of "low carbon economy" and "green economy". The aim of this paper is to present the role of the state in the economy in terms of creating conditions for a green economy. The thesis of publication is: implementation of structural changes connected with creating a green economy requires the involvement of the state. |
| Keywords: | sustainable development; environment; state; a green economy; energy |
| JEL: | E12 O20 O38 O44 P48 Q01 Q28 Q30 Q32 Q43 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no114&r=mac |
| By: | Soukiazis, Soukiazis; Antunes, Micaela; Stoian, Andreea |
| Abstract: | This article examines the tendencies of economic growth in Romania after its transition to the market economy by employing a balance of payments approach and an extended growth model that takes into account both internal and external imbalances. The first approach is linked to the well known balance of payments constrained growth hypothesis, while the second is an extension of that model that encompasses not only external imbalances emerging from trade but also internal imbalances related to public deficit and debt, among other factors. Both approaches show that the Romanian economy is balance of payments constrained and that measures must be taken to increase the country’s competitiveness. The scenario analysis provided by the second approach reveals that the Romanian economy must improve its external competitiveness in order to achieve higher growth rates. |
| Keywords: | balance-of-payments equilibrium growth rate, price and income elasticities of foreign trade, internal and external imbalances, 2SLS and 3SLS regressions. |
| JEL: | C13 E12 F43 O24 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63558&r=mac |
| By: | Bradley Jones |
| Abstract: | In distilling a vast literature spanning the rational— irrational divide, this paper offers reflections on why asset bubbles continue to threaten economic stability despite financial markets becoming more informationally-efficient, more complete, and more heavily influenced by sophisticated (i.e. presumably rational) institutional investors. Candidate explanations for bubble persistence—such as limits to learning, frictional limits to arbitrage, and behavioral errors—seem unsatisfactory as they are inconsistent with the aforementioned trends impacting global capital markets. In lieu of the short-term nature of the asset owner—manager relationship, and the momentum bias inherent in financial benchmarks, I argue that the business risk of asset managers acts as strong motivation for institutional herding and ‘rational bubble-riding.’ Two key policy implications follow. First, procyclicality could intensify as institutional assets under management continue to grow. Second, remedial policies should extend beyond the standard suite of macroprudential and monetary measures to include time-invariant policies targeted at the cause (not just symptom) of the problem. Prominent among these should be reforms addressing principal-agent contract design and the implementation of financial benchmarks. |
| Keywords: | Asset bubbles;Monetary policy;Macroprudential Policy;Asset prices;Asset management;Asset bubbles, Financial stability, Macroprudential policy, Monetary policy. |
| Date: | 2015–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/27&r=mac |
| By: | International Monetary Fund |
| Abstract: | This Selected Issues paper illustrates the recent evolution in Belgian housing prices. Belgian housing prices peaked at the end of 2013 after a persistent increase that was almost continuous for 30 years. The stabilization of prices, combined with policy changes on the fiscal and macro-prudential fronts, raises the question how housing prices are likely to evolve and how a price decline would affect the Belgian economy. The paper assesses the risk of a rapid price correction and the potential repercussions for the real economy. It also argues that an orderly and limited decline in housing prices—coupled with a marginal negative effect on the real economy—is the most plausible scenario. |
| Keywords: | Fiscal consolidation;Housing prices;Unemployment;Fiscal reforms;Pension reforms;Selected Issues Papers;Belgium; |
| Date: | 2015–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/71&r=mac |
| By: | International Monetary Fund |
| Abstract: | EXECUTIVE SUMMARY Recent data point to a gradual pick-up in economic activity as the effects of the drought fades. Growth should reach 2 percent in 2015/16, and inflation is projected to fall to an average of 5¼ percent, largely owing to lower fuel prices. The program is on track. All December 2014 quantitative performance criteria were met and structural reforms have progressed broadly on schedule. Based on the continued strong performance and the authorities’ policy commitments, staff recommends completion of the seventh review. Topics of the review. Discussions centered on the 2015/16 budget (which maintains the ambitious primary surplus target, at 7½ percent of GDP), reforms of the financial sector, and steps to boost long-term growth. Efforts are being made to improve public financial management and tax compliance. A new public-sector wage agreement is under negotiation. The securities dealers will transition to a trust-based framework by August. The resilience of the financial system is being reinforced. Progress in energy sector reform is expected to support investment and growth. Risks to the program are slowly waning but remain high. Notwithstanding the authorities’ demonstrated resolve in implementing the program, more tangible signs of improvements in growth will be important to sustain the social consensus needed to continue on the reform trajectory. Jamaica still faces risks from disruptions in external financing (including from PetroCaribe). Revenue shortfalls or an inability to contain the government wage bill could undermine the fiscal position. Vulnerabilities in the financial system, particularly during the transition to the trust for securities dealers, could become more prominent. |
| Keywords: | Extended Fund Facility;Fiscal policy;Budgets;Fiscal reforms;Monetary policy;Economic indicators;Letters of Intent;Staff Reports;Press releases;Performance criteria modifications;Jamaica; |
| Date: | 2015–04–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/95&r=mac |
| By: | Trunin, Pavel (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Bozhechkova, Alexandra (Russian Presidential Academy of National Economy and Public Administration (RANEPA)) |
| Abstract: | The aim of this work is to conduct a comprehensive analysis of the influence of factors on the dynamics of the real exchange rate. Firstly, the basic theoretical and empirical models of the real exchange rate are studied, key factors of its short- and long-term changes are identified, including differential productivity, terms of trade, net foreign assets, government investment, import tariffs, etc. Second, the analysis of the main trends of macroeconomic indicators that impact on the formation of the real exchange rate in the pre- and post-crisis periods is made. The reasons for differences in the appreciation of the real exchange rates of a number of commodity-exporting countries in the 2000s. Thirdly, on the basis of the a-vector autoregression model the long-term-elastic stey real effective exchange rate on such fundamental factors as labor productivity differential, the real price of oil, the net outflow of private capital, the share of government spending in GDP for the period 1 sq. 1999 - 1Q. 2014, are evaluated. The above analysis of variance showed that more than 60% of the variance of the real effective exchange rate is explained by innovations in the real price of oil and differential productivity. Fourth, as a result of the construction of the pulse response functions were significant impact shocks fundamental factors on the dynamics of the real exchange rate shown. |
| Keywords: | real exchange rate, macroeconomic indicators, changes, labor productivity differential, terms of trade |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:rnp:ppaper:mak13&r=mac |
| By: | Marco Bonomo; Ricardo Brito; Bruno Martins |
| Abstract: | Government-driven credit played an important role in countervailing the private credit crunch in Brazil during the recent financial crisis. However, government credit concessions continued to expand after the economy recovered. This paper investigates some important features of this expansion using a huge repository of loan contracts between banks and firms, composing an unbalanced panel of almost 1 million firms between 2004 and 2012. The results show that larger, older and less risky firms have benefited most from the government-sponsored credit expansion. Additionally, although higher access to earmarked credit tends to lead to higher leverage, the effect on investment appears to be insignificant for publicly traded firms. Since interest rates on earmarked loans are lower than market interest rates, firms with higher access to this type of loan tend to lower the cost of debt. |
| Keywords: | National development banks, Interest rates, Financial Crises & Economic Stabilization, Investment, Crisis management, State ownership of banks, Investment |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:88337&r=mac |
| By: | Berezinskaya, Olga (Russian Presidential Academy of National Economy and Public Administration (RANEPA)) |
| Abstract: | The paper presents an analysis of the dynamics of the Russian economy based on imports in 2006 - 2013 years. The paper presents a comparative analysis of industrial output and imports of intermediate goods, investment in fixed assets and capital goods imports, retail sales and imports of consumer goods. Particular attention is paid to the sensitivity of imports of consumer, investment, intermediate goods to a change in the national currency. The results obtained are useful for a better understanding of the nature and degree of dependence on imports of Russian economy at different stages of its development, as well as areas of import substitution in the medium term. The results can be used to develop measures of monetary and economic policy aimed at solving the problem of import substitution, the drafting of legislation and regulations in this area. |
| Keywords: | exchange rate, dynamics of russian economy, impirt, consumer goods, investment, monetary and economic policy, substitution of import |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:rnp:ppaper:mak10&r=mac |
| By: | Atsushi Inoue; Chun-Hung Kuo; Barbara Rossi |
| Abstract: | The Great Recession has challenged the adequacy of existing models to explain key macroeconomic data, and raised the concern that the models might be misspecified. This paper investigates the importance of misspecification in structural models using a novel approach to detect and identify the source of the misspecification, thus guiding researchers in their quest for improving economic models. Our approach formalizes the common practice of adding "shocks" in the model and identifies potential mis-specification via forecast error variance decomposition and marginal likelihood analyses. Simulation results based on a small-scale DSGE model demonstrate that the method can correctly identify the source of mis-specification. Our empirical results show that state-of-the-art medium-scale New Keynesian DSGE models remain mis-specified, pointing to asset and labor markets as the sources of the mis-specification. |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1479&r=mac |
| By: | Barbara Rossi; Tatevik Sekhposyan |
| Abstract: | The Great Recession of 2007:IV-2009:II sparked great interest in understanding uncertainty and its effects on the macroeconomy. This paper introduces a new approach to measure uncertainty. We start from the same premise as in Jurado et al. (2014), that is: "What matters for economic decision making is whether the economy has become more or less predictable; that is, less or more uncertain." However, as opposed to Jurado et al. (2014), the uncertainty index we propose relies on the unconditional likelihood of the observed outcome. More specifically, our proposed index is the percentile in the historical distribution of forecast errors associated with the realized forecast error. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1477&r=mac |
| By: | Iwona Koza (State School of Higher Education in Chelm) |
| Abstract: | Today, however, the concept of capital strongly focuses on intellectual capital, understood as the current or potential creative resource, or the increase in the wealth of a community. In this context, it is worth to examine the legitimacy of thesis about the expansive reality of Polish town distritcs. Over the past 10 years, in North macro-region, there has been a significant improvement of characteristics relating to intellectual capital. At the same time, gross domestic product per capita in the macro-region annually increased its value. It is, therefore, necessary to maintain and multiply the rate of change in the socio-economic sphere, based on a coherent, harmonious and innovative development strategies, evaluating intellectual potential of the communities. |
| Keywords: | macroregion, town districts, development, socio-economic potential |
| JEL: | E62 E65 G28 H70 H71 H72 H76 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no66&r=mac |
| By: | International Monetary Fund |
| Keywords: | Fiscal policy;Corporate sector;Nonbank financial sector;Financial intermediation;Banking sector;Selected Issues Papers;Ireland; |
| Date: | 2015–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/78&r=mac |
| By: | Carlos Huertas Campos (Banco de la República de Colombia); Eliana González Molano (Banco de la República de Colombia); Cristhian Ruiz Cardozo (Universidad Nacional de Colombia) |
| Abstract: | En este documento se analiza el mecanismo de formación de las expectativas de inflación en Colombia usando diferentes medidas de esta variable a uno y dos años. Los resultados indican que las expectativas se forman de manera adaptativa y racional. Hay evidencia que soporta la hipótesis de aprendizaje adaptativo. Las pruebas estadísticas sugieren que la meta de inflación ha ganado credibilidad y se puede considerar como una expectativa racional. Classification JEL: C42, C53, D84, E31. |
| Keywords: | Aprendizaje adaptativo, encuestas, expectativas, inflación. |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:880&r=mac |
| By: | Labrinidis, George |
| Abstract: | Distinguishing between the money that functions in the world market and the money that functions internally in an economy has troubled many theorists. This paper is informed by the Marxist approach to money in general and world money in particular and argues that the theoretical difficulty derives from a fundamental misconception with regard to the forms of money. Consequently, the paper offers an analysis of the forms of money and shows that a new form emerged as early as 1914 associated with the world market, which might be called quasi-world-money, such as the US dollar. The analysis provides a framework within which to comprehend the residual but essential role of gold in parallel to quasi-world-money. The framework also allows for money convertibility to be redefined appropriately. |
| Keywords: | forms of money, quasi-world money, gold, convertibility, USD |
| JEL: | B51 E42 F33 |
| Date: | 2014–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:59962&r=mac |
| By: | International Monetary Fund |
| Keywords: | Fiscal policy;Economic growth;Natural resources;Public investment;Labor markets;Economic models;Selected Issues Papers;Mauritania; |
| Date: | 2015–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/36&r=mac |
| By: | Eugenio Cerutti; Stijn Claessens; Luc Laeven |
| Abstract: | Using a recent IMF survey and expanding on previous studies, we document the use of macroprudential policies for 119 countries over the 2000-13 period, covering many instruments. Emerging economies use macroprudential policies most frequently, especially foreign exchange related ones, while advanced countries use borrower-based policies more. Usage is generally associated with lower growth in credit, notably in household credit. Effects are less in financially more developed and open economies, however, and usage comes with greater cross-border borrowing, suggesting some avoidance. And while macroprudential policies can help manage financial cycles, they work less well in busts. |
| Keywords: | Macroprudential Policy;Emerging markets;Developed countries;Procyclicality of financial system;Cross country analysis;Time series;Macroprudential policies, Effectiveness, Procyclicality, Financial cycles |
| Date: | 2015–03–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/61&r=mac |
| By: | Till Cordes; Tidiane Kinda; Priscilla S. Muthoora; Anke Weber |
| Abstract: | This paper provides new evidence on the effectiveness of expenditure rules. The analysis is based on a unique dataset covering all countries with national and supranational fiscal rules, including 33 expenditure rules, between 1985 and 2013. It contributes to the existing literature on fiscal rules in two main ways. First, it is the most comprehensive assessment of compliance with rules and of the potential role of expenditure rules, in particular regarding long-term sustainability. Second, it analyzes whether expenditure rules are associated with changes in public investment and its efficiency. |
| Keywords: | Expenditure effectiveness;Fiscal policy;Fiscal rules;Expenditure controls;Cross country analysis;Time series;Expenditure rules, Fiscal governance, Fiscal policy, Rules versus discretion, Stabilization |
| Date: | 2015–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/29&r=mac |
| By: | Tiberiu Brãilean (Alexandru Ioan Cuza University of Iasi); Aurelian-Petrus Plopeanu (Alexandru Ioan Cuza University of Iasi) |
| Abstract: | Modern finance has become a very complicated field, which raises many questions about its economic and social mission. Many bankers’ ignorance of complex knowledge and care for the future are hostile ingredients that transform the markets’ volatility, through spillover effects, into economic and financial crisis and social anomy. What fuels the wildfire does not necessarily mean black swan events, but often it is the result of (un)conscious and (un)intended decisions of certain economic policy makers. The current financial system is discredited. It is necessary to reform the financial institutions and practices, with the core principle that money should serve the economy and society and not vice versa. In a world of financial capitalism, a world driven by money and adjacent institutions appear to be defective and unjust to many of us. The conflicts’ arena must be manageable. The hopes rely on the institutions that represent financial capitalism, institutions erected by people, and where they do not work, they have to be changed. |
| Keywords: | crisis, financial system, elite, reform, morality |
| JEL: | E5 F3 N20 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no87&r=mac |
| By: | Julian A. Parra-Polania; Carmiña O. Vargas |
| Abstract: | We argue that international lenders take into account that taxes (or subsidies) affect borrowers’ available income for debt repayments. Using an endowment-economy model, we show that by incorporating this fact into the analysis of ?financial crises from the pecuniary externality perspective, ex-post interventions are completely ineffective to manage crises and, instead, ex-ante capital controls are useful for correcting the externality that stems from the underestimation of the social costs of decentralized debt decisions. |
| Keywords: | financial crisis, credit constraint, capital controls, macroprudential tax, exchange rate policy. |
| JEL: | H23 D62 F34 F41 |
| Date: | 2015–04–13 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:012698&r=mac |
| By: | International Monetary Fund |
| Keywords: | Commodity markets;Corporate sector;Banking sector;Liquidity;Fiscal risk;Fiscal policy;Debt sustainability;Risk management;Selected Issues Papers;Indonesia; |
| Date: | 2015–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:15/75&r=mac |
| By: | Labrinidis, George |
| Abstract: | The purpose of this paper is to contribute to the discussion on the modern monetary arrangements from a Marxist perspectives, following the recent developments of the Marxist theory of world money. The paper treats the US Dollar as a primus inter pares quasi-world money and challenges the argument of the US hegemony by exploring the behavior of major capitalist states and selected developing countries as far as their official international reserves are concerned. The findings reveal a clear pattern in the behavior of major capitalist states in terms of size and forms, although the degree varies implying a hierarchical structure of the corresponding quasi-world moneys. Although part of a vast literature on international reserves, the analysis focuses on developed countries and treats them individually. The merit of this approach is that it reveals the above mentioned pattern which is blurred when Japan is included. The results imply that current international monetary arrangements promote multipolarity and competition in the geopolitical scene, the evolution of which is historical. |
| Keywords: | International reserves, quasi-world money, US Dollar, Gold |
| JEL: | B51 E58 F3 F31 |
| Date: | 2014–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:59963&r=mac |
| By: | Baji, Petra; Péntek, Márta; Boncz, Imre; Brodszky, Valentin; Loblova, Olga; Brodszky, Nóra; Gulácsi, László |
| Abstract: | In the past few years, several papers have been published in the international literature on the impact of the economic crisis on health and health care. However, there is limited knowledge on this topic regarding the Central and Eastern European (CEE) countries. The main aims of this study are to examine the effect of the financial crisis on health care spending in four CEE countries (the Czech Republic, Hungary, Poland and Slovakia) in comparison with the OECD countries. In this paper we also revised the literature for economic crisis related impact on health and health care system in these countries. OECD data released in 2012 were used to examine the differences in growth rates before and after the financial crisis. We examined the ratio of the average yearly growth rates of health expenditure expressed in USD (PPP) between 2008–2010 and 2000–2008. The classification of the OECD countries regarding “development” and “relative growth” resulted in four clusters. A large diversity of “relative growth” was observed across the countries in austerity conditions, however the changes significantly correlate with the average drop of GDP from 2008 to 2010. To conclude, it is difficult to capture visible evidence regarding the impact of the recession on the health and health care systems in the CEE countries due to the absence of the necessary data. For the same reason, governments in this region might have a limited capability to minimize the possible negative effects of the recession on health and health care systems. |
| JEL: | I15 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:cvh:coecwp:2015/10&r=mac |
| By: | Tomas Meluzin (Brno University of Technology); Marek Zinecker (Brno University of Technology) |
| Abstract: | The purpose of this paper is to investigate IPO developments across five CEE countries between 2003 and 2012. Using a wider range of methods and different data sets we intend to complement the previous research. Applying descriptive statistics, relevant local developments are analysed first before being compared with leading European markets (London Stock Exchange and Deutsche Börse). We also investigated the assumption that a growing market has an explanatory power for the accelerating IPO activity. For this purpose we performed a Spearman correlation analysis. The data were evaluated at the significance level of ? = 5 %. All CEE capital markets recorded strong dynamism over the observed period. All fundamental capital market parameters increase the attractiveness of individual capital markets, although their values lag behind developed European capital countries. The unambiguous leader in the region is Poland with a flourishing IPO market. Our assumption that a growing market has a positive impact on IPO activities could not be supported by empirical evidence. |
| Keywords: | IPO, Going Public, Trends, Financial Markets, CEE |
| JEL: | E44 G23 G32 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no120&r=mac |
| By: | Ferrir, Richard |
| Abstract: | The most significant value added by Euro 2012 is undoubtedly the infrastructural changes. The event became a catalyst for the execution of more than two hundred projects for an amount of ca. PLN 100 billion. This paper focuses on the key projects, including above all the road construction projects, as well as those connected to road and rail infrastructure. Considering such significant outlays, the funding the preparation, particularly in a division into private and public sources, becomes an especially important issue. It is the predominant commitment of public funds that creates the need to justify their allocation, chiefly in the case of the sports venues, usually utilised by private sports clubs after the end of the event. Euro 2012 has been compared in this respect with other events of this rank, staged in Europe since the beginning of the 21st century. |
| Keywords: | Euro 2012, Mega sport's event |
| JEL: | E22 H41 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63280&r=mac |
| By: | Ezra Davar (r) |
| Abstract: | This paper shows that the post-Walras general equilibrium theory is irrelevant to real contemporary economic life. The main achievement of modern General Equilibrium Theory is the proof of equilibrium’s existence. It might be that the proof of the equilibrium existence is a mathematical achievement, but the question is whether these proofs are harmonious with the economic situation in reality. This paper traces concisely how Walras’s theory has been became causing economic science to deviate in an erroneous direction and reaching a deep crisis; because post-Walras’s economists, since Pareto, have misunderstood and misinterpreted Walras’s economic theory. This group of Post-Walras authors (Pareto, Cassel, Schlesinger, Wald, and von-Neumann, Hicks, Keynes, Lange, and Patinkin) then recast Walras’s theory into incorrect and wrong form; their error further compounded when a later group of economist-mathematicians (Arrow, Debreu, Friedman, Samuelson, Solow and others) accepted their interpretation without reservation. Post-Walras’s economists ignore Walras’s less known assumptions and blame him for disregarding the problem of equilibrium existence, uniqueness and stability and comparative-static. Therefore, their main objective since the beginning of the 20th century was the rigorous proof of equilibrium existence. However, this proof was based on unrealistic assumptions and along the road the goal of economics was lost. The nine crucial, unrealistic assumptions will be considered and will illustrate that modern general equilibrium theory is irrelevant to real economics and is also far removed from Walras’s general equilibrium theory. |
| Keywords: | Walras; post-Walras; General Equilibrium Theory; Modern Theory; Unrealistic Assumptions |
| JEL: | A1 B2 D5 E4 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no46&r=mac |
| By: | Sylwia Morawska (Szko³a G³ówna Handlowa w Warszawie); Przemyslaw Banasik (Politechnika Gdañska) |
| Abstract: | Na poprawê sprawnoœci funkcjonowania wymiaru sprawiedliwoœci mo¿na spojrzeæ z trzech perspektyw: makro, mezo i mikro. Chodzi bowiem o poprawê sprawnoœci funkcjonowania organizacji wymiaru sprawiedliwoœci jako ca³oœci (perspektywa makro), s¹dów (skala mezo) i procesów s¹dowych (skala mikro). Strategia modernizacji przestrzeni sprawiedliwoœci w Polsce na lata 2014 - 2020 przygotowana przez Ministerstwo Sprawiedliwoœci uwzglêdnia powy¿sze trzy perspektywy. Z punktu widzenia artyku³u istotna jest perspektywa s¹du. W Strategii za³o¿ono, ¿e poprawa sprawnoœci s¹dów mo¿e nast¹piæ poprzez wprowadzenie mened¿erskiego modelu zarz¹dzania nimi. Sprawne s¹dy oraz sprawnie odbywaj¹ce siê w nich procesy s¹dowe s¹ szczególnie istotne wobec globalizacji, arbitra¿u regulacyjnego i forum shopping. Artyku³ przedstawia, wykorzystuj¹c metodê case study, wyniki innowacyjnego projektu – pilota¿u wdra¿ania nowoczesnych metod zarz¹dzania s¹dami powszechnymi i odpowiada na pytanie czy s¹dy - organizacje biurokratyczne s¹ gotowe do wdro¿enia dobrych praktyk zarz¹dczych sprawdzonych w biznesie. W trakcie pilota¿u w szeœædziesiêciu wybranych s¹dach rejonowych, okrêgowych i apelacyjnych, przy wsparciu ekspertów zewnêtrznych, wdra¿ane by³y „dobre praktyki” – usprawnienia zarz¹dcze . Wyniki pilota¿u wskazuj¹, ¿e poziom rozwoju instytucjonalnego s¹dów determinuje mo¿liwoœæ wdro¿enia dobrych praktyk zarz¹dzania. Ró¿nicowany poziom rozwoju s¹dów powoduje, ¿e praktyki nie mog¹ byæ wdro¿one we wszystkich s¹dach pilota¿owych na tym samym poziomie. Kategoria s¹du (wielkoœæ, s¹d rejonowy, okrêgowy, apelacyjny) decyduje o determinacji wejœcia na wy¿szy poziom dojrza³oœci funkcjonowania praktyki. Ponadto nie wszystkie praktyki z biznesu s¹ mo¿liwe do implementacji z uwagi na ró¿ny poziom kompetencji kadry zarz¹dzaj¹cej. Wdro¿enie dobrych praktyk utrudnia struktura organizacyjna narzucona przez ustawodawcê, mniej elastyczna ni¿ w biznesie i wolniej reaguj¹ca na zmiany. |
| Keywords: | sprawnoœæ, wymiar sprawiedliwoœci, globalizacja, arbitra¿ regulacyjny, forum shopping |
| JEL: | E6 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no81&r=mac |
| By: | Ogundari, Kolawole; Ito, Shoichi; Okoruwa, Victor |
| Abstract: | The study estimates calories, proteins and fats-income elasticities in sub Saharan Africa (SSA). Annual time series data for 43 countries covering 1975-2009 that yields a balanced panel was employed for the analysis. The nutrient-income elasticities are estimated based on the aggregate Engel Curve framework using Feasible Generalized Least Square (FGLS) technique that is robust to autocorrelation and non-parametric plot. The empirical results show that a 10% increase in income will lead to about a 0.90%, 0.87%, and 0.73% rise in fats, proteins and calories supply, respectively in the region. This shows that the estimated nutrient-income elasticities are of small size. Other results show that the relationship between calorie and protein-income was found to be non-linear at higher income and diminished, as revealed by the estimated aggregate Engel Curve and non-parametric plot. |
| Keywords: | Nutrition, health, income elasticity, cross-country, and SSA |
| JEL: | E0 E00 I1 I10 |
| Date: | 2014–07–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63523&r=mac |
| By: | Marco A Espinosa-Vega; Steven Russell |
| Abstract: | This relatively simple model attempts to capture and integrate four widely held views about financial crises. [1] Interconnectedness among financial institutions (banks) can play a major role in precipitating systemic financial crises. [2] Lack of information about the quality of bank portfolios also plays a role in precipitating systemic crises. [3] Financial crises, particularly systemic ones, are often followed by severe, lengthy recessions. [4] Loss of confidence in the financial system is partly responsible for the length and severity of these recessions. In the model, banks make decisions about initiating and liquidating risky loans. Interconnectedness among their asset portfolios can obscure information about these portfolios, causing them to make inefficient decisions about liquidation, and about retention of the managers who assess credit risk. These decisions can increase the depth of recessions, and they can produce systemic financial crises. They can also reduce the effectiveness of future bank risk assessment, increasing the probability of lengthy, severe recessions. The government, acting in the interest of current and future depositors, may wish to increase the transparency of bank portfolios by limiting interconnectedness. The optimal degree of regulation, which may depend on depositors’ degree of risk aversion, may not eliminate financial crises. |
| Keywords: | Interconnectedness;Banks;Financial crises;Economic recession;Systemic risk assessment;Equilibrium. Econometric models;financial crisis, systemic risk, interconnectedness, recession |
| Date: | 2015–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/46&r=mac |
| By: | Bournakis, Ioannis; Christopoulos, Dimitris; Mallick, Sushanta |
| Abstract: | Given the decline in growth momentum in the manufacturing sector in many OECD countries, the role of knowledge-based capital has emerged as a key driver for sustained growth. While empirical studies on estimating knowledge spillovers have usually been undertaken at the country level, the spillover effects can be more definitive only if the analysis is conducted at the industry-level. The effectiveness of international spillovers is conditional on recipient country’s absorptive capacity and this is an important component of the spillover mechanism that has not attracted significant attention so far. This paper therefore assesses the effect of spillovers in driving per capita output growth taking into account the role of absorptive capacity. Our main findings are first, the confirmation of the robust positive relationship between human capital and output growth for 14 OECD countries at industry level. Second, the gains from international spillover are conditional to the level of human capital and the degree of protection of intellectual property rights. Third, countries that improve absorptive capacity can potentially increase gains from spillovers via either trade or FDI (including vertical FDI). Finally, significant heterogeneity is found between high and low-tech industries. The former group is more effective in absorbing spillovers while the latter has failed to reach the critical level of technological advancement in order to absorb foreign and domestic knowledge. |
| Keywords: | Growth; R&D; Knowledge Spillovers; Absorptive Capacity; Human Capital; Intellectual Property Rights |
| JEL: | E24 F1 O3 O4 |
| Date: | 2015–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63542&r=mac |
| By: | Giampaolo Arachi; Valeria Bucci; Alessandra Casarico |
| Abstract: | This paper reassesses the relationship between tax structure and long run income, using as indicators of tax structure both a new series of implicit tax rates based on Mendoza et al. (1997) and tax ratios, adopting a dynamic panel estimation strategy, and explicitly accounting for cross-section dependence in the panel. When implicit tax rates are used, the paper shows, the link between tax structure and long run income per capita is not robust to the adoption of different assumptions on observable and unobservable heterogeneity across countries. When tax ratios are used, there is some evidence of a negative impact of labour taxation on long run income, but this result is shown to capture non-fiscal effects coming from the evolution of the labour share. Turning to the short run, the research presented here finds strong evidence of a positive effect on per capita income of a tax shift from labour and capital taxation towards consumption taxation, which provides support for fiscal devaluations. |
| Keywords: | long run income, tax structure, fiscal devaluation, cross-section dependence |
| URL: | http://d.repec.org/n?u=RePEc:don:donwpa:074&r=mac |
| By: | Rodrigo Octávio Orair; Raphael Rocha Gouvêa; Ésio Moreira Leal |
| Abstract: | This paper provides new evidence for the empirical literature that investigates the presence of political cycles in fiscal policy and, more precisely, public investments in Brazil. The approach differs from most of the studies for applying the state-space modeling. The greatest benefit is to estimate the cyclical component endogenously and with greater precision. Another difference is that it considers the presence of cycles in central, state and local investments and central government capital transfers. This allows a wider picture of the general government and intergovernmental relationships. The main contributions come from the identification of qualitative differences among the political cycles of each government level – pointing to a smaller degree of direct influence of local elections as it goes from local to state and central levels – and a close relation between cycles of central government transfers and cycles of state and local governments. Este trabalho provê novas evidências para a literatura empírica que explora a presença de ciclos políticos eleitorais nos investimentos públicos no Brasil. A abordagem se diferencia da maior parte dos trabalhos da área por aplicar a modelagem de espaço de estados. Sua maior vantagem é estimar o componente cíclico com maior precisão e de maneira endógena. Outra distinção é considerar a presença de ciclos nos três entes federados, além das transferências do governo federal, permitindo-se uma visão mais abrangente da administração pública e das inter-relações federativas. As contribuições mais relevantes foram: i) a identificação de diferenças qualitativas nos ciclos eleitorais de cada ente federado, constatando-se menor grau de influência direta das eleições municipais conforme se caminha da esfera local para as esferas estadual e federal; e ii) a observação de estreita relação entre os ciclos bienais das transferências do governo federal e dos investimentos dos demais entes federados. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0202&r=mac |
| By: | Julian A. Parra-Polania (Banco de la República de Colombia); Carmiña O. Vargas (Banco de la República de Colombia) |
| Abstract: | We argue that international lenders take into account that taxes (or subsidies) affect borrowers’ available income for debt repayments. Using an endowment-economy model, we show that by incorporating this fact into the analysis of ?financial crises from the pecuniary externality perspective, ex-post interventions are completely ineffective to manage crises and, instead, ex-ante capital controls are useful for correcting the externality that stems from the underestimation of the social costs of decentralized debt decisions. Classification JEL: H23, D62, F34, F41 |
| Keywords: | financial crisis, credit constraint, capital controls, macroprudential tax, exchange rate policy. |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:879&r=mac |
| By: | Khan, Wajid; Sun, Shaorong; Khan, Ikramullah |
| Abstract: | Microcredit, being the most unique form of antipoverty intervention in terms of its methodology and outreach, has generated considerable amount of disagreements in recent times. While there may be more serious disagreements surrounding microcredit, this article addresses whether or not microcredit has the potential to alleviate poverty, and whether or not the conclusion derived to the first issue is sensitive to interest rate variations. Connecting the already established principles of economics, we show that there is every reason to believe that microcredit has the potential to change the fortunes of the poor communities. However, we also show that this change in fortune can be in any direction, depending on how costly the financial services of the microfinance institutions are felt by the poor. |
| Keywords: | Poverty, Microfinance Institutions, Optimization, Income/Price Policy |
| JEL: | C61 E64 G21 I30 |
| Date: | 2015–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63587&r=mac |
| By: | Bertrand Candelon; Amadou N. R. Sy |
| Abstract: | We use event study methods to compare the market reaction to U.S. and EU-wide stress tests performed from 2009 to 2013. Typically, stress tests have a positive impact on stressed banks’ returns. While the 2009 U.S. stress test had a large positive outcome, the impact of subsequent U.S. exercises decreased over time. The 2011 EU exercise is the only EU-wide stress test that resulted in a significant negative market reaction. Comparing past exercises suggests that the qualitative aspects of the governance of stress tests can matter more for stock market participants than technical elements, such as the level of the minimum capital adequacy threshold or the extent of data disclosure. |
| Keywords: | Stress testing;European Union;Banks;Stock markets;Macroprudential policies and financial stability;financial stability, macroprudential, stress tests, financial stability |
| Date: | 2015–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:15/75&r=mac |
| By: | Magdalena Zajaczkowska (Cracow University of Economics) |
| Abstract: | Renewable energy will play a key role in the transition towards a competitive, secure and sustainable energy system. In 2014 the Commission proposed an objective to increase the share of renewable energy to at least 27% of the EU's energy consumption by 2030. The European Council endorsed this target which is binding at EU level. The Renewable Energy Directive (Directive 2009/28/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC) was implemented in Poland on 20 February 2015 by the new renewable energy sources act. The objective of this article is to analyse the current state of the Polish energy sector related to the prosumer energy industry. It also describes the future potential for the development of prosumer energy in Poland. The analysis was conducted in the light of the new EU climate and energy initiatives. At the beginning, the article presents the current general state in EU’s energy sector. European Union Climate and Energy Package targets up to 2050 and the state of renewable energy use gives the background to conduct an analysis of prospects for the development of prosumer energy in Poland. That is why the last part is devoted to the prosumer energy sector in Poland in the context of European Union regulations. The critical analysis of the current situation in that sector has made it possible to evaluate prospects for the development of prosumer energy in Poland in the context of the recently introduced legal regulations. |
| Keywords: | prosumer; energy sources; renewable sources of energy; climate and energy policies |
| JEL: | A11 E61 F50 H89 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no117&r=mac |