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on Macroeconomics |
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Issue of 2015‒05‒02
93 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Marco Casiraghi (Bank of Italy); Giuseppe Ferrero (Bank of Italy) |
| Abstract: | We explain why the macroeconomic effects of shocks to inflation of the same size, but opposite sign, are not necessarily symmetric. All in all, the costs of deflation and disinflation tend to exceed those of inflation due to the presence of constraints in the economy, namely the zero lower bound on nominal interest rates, downward nominal wage rigidity and borrowing limits. When these constraints are binding, they can prevent monetary policy from closing the inflation gap, labor market from clearing and agents from deleveraging. The impact of a disinflationary shock on the tightness of these constraints depends on the cyclical and structural conditions of the economy. We argue that it would be a mistake to assume that perverse effects can arise only with actual deflation and thus that the classification of deflationary episodes into good (supply-driven) and bad ones (demand-driven) is not only incorrect, but also misleading in terms of policy implications. Empirical evidence for the euro area suggests that the three constraints have become increasingly tight recently. |
| Keywords: | monetary policy, unconventional monetary measures |
| JEL: | E31 E52 E58 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_268_15&r=mac |
| By: | Stanova, Nadja |
| Abstract: | This paper analyses the link between discretionary fiscal policy and output growth in ten CEE countries. Three aspects are considered: cyclical pattern in the fiscal discretion, contributions to GDP growth, and the link between policy aggressiveness and output volatility. Fiscal discretion is estimated from quarterly data over 2000q1 to 2014q1 using a SVAR model in GDP, net taxes and spending. Decomposition of the GDP suggests that fiscal discretion induced rather small contributions to economic growth. Correlation between fiscal policy aggressiveness and output volatility is weak to moderate positive, notwithstanding whether spending or balance is used as the underlying indicator. The cyclical pattern has identified a mix of pro- and counter-cyclical episodes in the years before the crisis, implying that governments might not have consistently used the good times to create buffers. Overall, this evidence supports the view that policy makers in the CEE countries should mainly rely on rule-based fiscal policy rather than (aggressive) fiscal discretion. |
| Keywords: | discretionary fiscal policy, cyclicality of fiscal policy, fiscal policy aggressiveness, GDP growth, output volatility, SVAR model |
| JEL: | C32 E32 E61 E62 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63946&r=mac |
| By: | Jakub Mateju |
| Abstract: | This paper suggests that non-fundamental component in asset prices is one of the drivers of the financial and credit cycle. The 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 their 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 and default rates decrease. These effects reverse after several quarters, inducing a credit crunch. The credit boom lasts only while stock market growth maintains sucient momentum. However, monetary policy does not reduce the 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:cer:papers:wp535&r=mac |
| By: | Thomas COUDERT (LaRGE Research Center, Université de Strasbourg) |
| Abstract: | We study the effect of bank loan and bond announcements on borrower’s stock price. We apply an event study methodology on a sample of companies from 17 European countries. We find that debt announcement generates a positive stock market reaction. However our main conclusion is that the issuance of a loan exerts a significantly higher reaction than the issuance of a bond. This finding supports the hypothesis that loan issuance conveys a positive certification effect. The analysis of the determinants of abnormal returns following debt announcements shows a positive impact of financial development and a negative effect of the Eurozone crisis. |
| Keywords: | Labor Market Search, Severance Payments, Firing Costs, Wage Bargaining, Business Cycles, Inflation, Monetary Policy Shocks. |
| JEL: | E31 E32 E52 J64 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:lar:wpaper:2015-04&r=mac |
| By: | Christian Bredemeier; Falko Juessen; Andreas Schabert |
| Abstract: | This paper questions unconventional fiscal policy effects when the monetary policy rate is at the zero lower bound. We provide evidence for the US that the spread between the policy rate and the US-LIBOR, which is more relevant for private sector transactions, increases with government expenditures. We introduce a corresponding spread into an otherwise standard macroeconomic model which reproduces this observation. The model predicts that the fiscal multiplier takes conventional values, regardless of whether the policy rate follows a standard feedback rule or is at its zero lower bound. Likewise, labor tax increases exert contractionary effects in both cases. |
| Keywords: | Fiscal multiplier, tax policy, interest rate spreads, zero lower bound, liquidity premium |
| JEL: | E32 E42 E63 |
| Date: | 2015–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:kls:series:0080&r=mac |
| By: | 小黒, 一正; 服部, 孝洋 |
| Abstract: | 本論文は我が国戦中・戦後におけるシニョリッジの分析を行った最初の論文である。本論 文では複数のシニョリッジ（機会費用アプローチ、マネタリー・アプローチ、インフレ課 税）について理論的な整理を行ったうえで、その差異が、予期せぬインフレで削減される 債務の範囲を通常の一般政府債務にとどめるか、あるいは、日銀のマネタリーベースを含 めた統合政府の債務に拡張するかに帰着するとしている。また、戦中・戦後の対GDP比 でみた政務債務の削減度合に鑑みると、一般政府が得るシニョリッジの推計として、マネ タリー・アプローチないしインフレ課税（課税ベースを通常の一般政府債務にとどめるケ ース）が適切である可能性を指摘している。 |
| Keywords: | シニョリッジ, 政府債務, マネタリーベース, インフレ, 戦中・戦後 |
| JEL: | E31 E52 E58 H63 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:hit:cisdps:641&r=mac |
| By: | Bredemeier, Christian (University of Cologne); Juessen, Falko (University of Wuppertal); Schabert, Andreas (University of Cologne) |
| Abstract: | This paper questions unconventional fiscal policy effects when the monetary policy rate is at the zero lower bound. We provide evidence for the US that the spread between the policy rate and the US-LIBOR, which is more relevant for private sector transactions, increases with government expenditures. We introduce a corresponding spread into an otherwise standard macroeconomic model which reproduces this observation. The model predicts that the fiscal multiplier takes conventional values, regardless of whether the policy rate follows a standard feedback rule or is at its zero lower bound. Likewise, labor tax increases exert contractionary effects in both cases. |
| Keywords: | fiscal multiplier, tax policy, interest rate spreads, zero lower bound, liquidity premium |
| JEL: | E32 E42 E63 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8993&r=mac |
| By: | Linlin Niu; Xiu Xu; Ying Chen; |
| Abstract: | We propose the use of a local autoregressive (LAR) model for adaptive estimation and forecasting of three of China’s key macroeconomic variables: GDP growth, inflation and the 7-day interbank lending rate. The approach takes into account possible structural changes in the data-generating process to select a local homogeneous interval for model estimation, and is particularly well-suited to a transition economy experiencing ongoing shifts in policy and structural adjustment. Our results indicate that the proposed method outperforms alternative models and forecast methods, especially for forecast horizons of 3 to 12 months. Our 1-quarter ahead adaptive forecasts even match the performance of the well-known CMRC Langrun survey forecast. The selected homogeneous intervals indicate gradual changes in growth of industrial production driven by constant evolution of the real economy in China, as well as abrupt changes in interestrate and inflation dynamics that capture monetary policy shifts. |
| Keywords: | Chinese economy, local parametric models, forecasting |
| JEL: | E43 E47 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2015-023&r=mac |
| By: | Aurélien Leroy; Yannick Lucotte |
| Abstract: | This paper empirically investigates the evolution and the sources of interest rate pass-through heterogeneity in the Eurozone for a sample of 11 euro area countries over the period 2003M1-2011M12. Considering two harmonized bank retail rates, we first estimate single equation error correction models (ECM) and find an important pass-through heterogeneity, both for household and firm rates, even if results suggest that heterogeneity is not a new phenomenon. On the basis of this result, we then extend our analysis by studying the role played by a large number of structural and cyclical factors on monetary policy transmission. Findings based on a panel ECM approach and a panel interaction VAR framework indicate that financial tensions and fragile economic activity following the crisis are not the only factors that explain the heterogeneous monetary transmission in the euro. The differences of financial market structures across countries, in terms of banking competition and financial market development, also explain a part of this heterogeneity. In terms of policy implications, this means that future reforms promoting a more efficient and homogeneous monetary policy transmission should not only focus on risk factors, but also try to consolidate financial integration. |
| Keywords: | Interest rate pass-through; Monetary policy transmission; Eurozone; Error correction model; Interacted panel VAR |
| JEL: | C23 D40 E43 E44 E58 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:nbp:nbpmis:198&r=mac |
| By: | Christian Gillitzer (Reserve Bank of Australia) |
| Abstract: | The Sticky Information Phillips Curve (SIPC) provides a theoretically appealing alternative to the sticky-price New-Keynesian Phillips curve (NKPC). This paper assesses the empirical performance of the SIPC for Australia. There is only weak evidence in favour of the SIPC over the low-inflation period. Parameter estimates are sensitive to inflation measures and sample periods, and are theoretically inconsistent for several specifications. The apparent poor performance of the SIPC in part reflects the fact that inflation has become difficult to model since the introduction of inflation targeting. Over sample periods including the early 1990s disinflation, the SIPC appears to fit the data better. |
| Keywords: | sticky information; Phillips curve; inflation; Australia |
| JEL: | E3 E31 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:rba:rbardp:rdp2015-04&r=mac |
| By: | Michał Hulej; Grzegorz Grabek |
| Abstract: | Following Nyman (2010), the paper provides an indicator of resource utilisation (RU) for the Polish economy based on survey and labour market data. The indicator is subsequently used to identify output gap. Using real-time dataset, we find that output gap constructed in this way is revised to a similar or (in recent years) lesser extent than a measure based on the Hodrick and Prescott filter and structural approach. Also, the output gap based on the RU indicator performs comparably to other approaches as a proxy of inflation pressure: real-time data evaluation exercise reveals that RMSE of Phillips curve inflation forecasts with the RU indicator-based output gap is similar to the RMSE of equivalent specifications with alternative gap measures. |
| Keywords: | Principal component, Output gap, Trend-cycle decomposition, Inflation forecast, Real-time analysis. |
| JEL: | E32 E37 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:nbp:nbpmis:200&r=mac |
| By: | Lilia Cavallari (University of Roma Tre) |
| Abstract: | This paper studies the implications of entry costs for business formation in a dynamic stochastic general equilibrium model with endogenous entry and exit. The paper first documents some facts about business formation in the US. Exit is more volatile than entry, both are more volatile than output and co-move over the cycle. Firms are less volatile than output and procyclical. Then, it shows that a model with entry and exit can replicate these facts fairly well. In addition it captures important features of the US business cycle, outperforming models with a fixed exit rate and a fixed number of firms. The performance of the model is sensitive to changes in the composition of entry costs. |
| Keywords: | entry costs, firm entry, firm exit, business cycle, business creation, business destruction |
| JEL: | E31 E32 E52 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:rcr:wpaper:04_14&r=mac |
| By: | Milka Kazandziska (Berlin School of Economics and Law, Carl von Ossietzky University Oldenburg in Germany) |
| Abstract: | The goal of this paper is to analyse the economic development of Poland using the concept of macroeconomic policy regimes (MPRs). Six elements of a MPR will be identified: foreign economic policy, industrial policy, the financial system, wage policy, monetary policy and fiscal policy. Examining the functionality of the development of these elements applied to Poland is a further aim of this paper. The functionality of the development of the MPR elements will be analysed on the basis of the fulfilment of the objectives, as well as the use of the proposed instruments and strategy assigned to every element of MPR. Due to space limits, we are going to focus on the former in this paper. Taking into consideration that Poland is an emerging and a relatively open economy, foreign economic policy and industrial policy play very significant roles in restructuring of the economy towards production and exports of high value-added products, which would enable the country to follow a growth path consistent with an external balance. The financial needs of the manufacturing sector and particularly of the producers and/or exporters of high-end products need to be satisfied by the financial system, whose stability needs to be secured with the help of monetary policy. The latter is, moreover, in charge of providing low-cost finance and maintaining the stability of the exchange rate. Stabilising the inflation rate would be given to wage policy. Fiscal policy’s main tasks would be to correct aggregate demand shocks and reduce income inequality. |
| Keywords: | Macroeconomic regime; open economy policies; emerging countries; industrial policy; Poland |
| JEL: | E02 E58 E61 F41 F43 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no59&r=mac |
| By: | Michael J. Lamla (University of Essex, UK); Lena Dräger (University of Hamburg, Germany) |
| Abstract: | There is a growing interest in studying the disagreement of economic agents. Most studies, however, focus on the disagreement regarding one specific variable, hereby neglecting that disagreement may be comoving with disagreement on other variables. In this paper we explore to which extent disagreement regarding the interest rate is driven by disagreement on inflation and on unemployment. This relationship can be motivated by the existence of the Taylor rule. Using micro survey data for both professional forecasters and consumers, we provide evidence that disagreement on the future interest rate is mainly driven by disagreement on inflation. Exploring further determinants, we confirm that central bank transparency as well as news on money and credit conditions significantly influence disagreement. |
| Keywords: | Disagreement, Taylor rule, interest rate expectations, inflation expectations, unemployment expectations, microdata |
| JEL: | E31 E58 D84 C33 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:15-380&r=mac |
| By: | Vidakovic, Neven; Zbašnik, Dušan |
| Abstract: | This paper investigates the deleveraging process in three neighboring countries: Slovenia, Croatia and Hungary. Prior to the economic crisis of 2008 all three countries have experienced solid rates of economic growth, economic stability, but also fast rise of foreign debt. After 2008 all three countries are faced with a prolonged recession and without long term sustainable sources of growth. This paper looks at the effects of capital flow into three economies, determines the reasons for the increase in foreign debt and investigates the policy response. Paper finds that each of the three countries had different reason for the increase in foreign debt, but the economic effects are the same: prolonged macroeconomic instability and recession. In order to cover both economic theory and real economic effects authors use a modified version of the RBC model with soft budget constraint and free capital flows. The model does to some extent explain the effects leveraging process has had on the three economies. In the end paper investigates what was the role of the central bank in controlling the increase in foreign debt and concludes the role of central bank has to be augmented for control of capital flows in order to avoid crisis like the one started in 2008. |
| Keywords: | deleveraging, monetary policy, real business cycle, capital flows |
| JEL: | E58 F34 F44 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63958&r=mac |
| By: | Vidakovic, Neven; Zbašnik, Dušan |
| Abstract: | This paper investigates the deleveraging process in three neighboring countries: Slovenia, Croatia and Hungary. Prior to the economic crisis of 2008 all three countries have experienced solid rates of economic growth, economic stability, but also fast rise of foreign debt. After 2008 all three countries are faced with a prolonged recession and without long term sustainable sources of growth. This paper looks at the effects of capital flow into three economies, determines the reasons for the increase in foreign debt and investigates the policy response. Paper finds that each of the three countries had different reason for the increase in foreign debt, but the economic effects are the same: prolonged macroeconomic instability and recession. In order to cover both economic theory and real economic effects authors use a modified version of the RBC model with soft budget constraint and free capital flows. The model does to some extent explain the effects leveraging process has had on the three economies. In the end paper investigates what was the role of the central bank in controlling the increase in foreign debt and concludes the role of central bank has to be augmented for control of capital flows in order to avoid crisis like the one started in 2008. |
| Keywords: | deleveraging, monetary policy, real business cycle, capital flows |
| JEL: | E58 F34 F44 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63959&r=mac |
| By: | Till Strohsal; Christian R. Proaño; Jürgen Wolters; |
| Abstract: | Are financial cycles an international phenomenon, and, if so, how do financial cycles interact? This letter provides new evidence for the US and the UK. Considering the properties of the data in both the time and the frequency domains, we find a strong relation between the financial cycles of the US and the UK. US financial cycles have a significant impact on the UK, but not the other way around. The relation is clearly most pronounced for cycles between 8 and 30 years, which is also the frequency range that explains almost all variation of the data. |
| Keywords: | Financial Cycle, Vector Autoregressions, Indirect Spectrum Estimation, Coherency, Granger Causality |
| JEL: | C22 E32 E44 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2015-024&r=mac |
| By: | Deniz Baglan (Department of Economics, Howard University); M. Ege Yazgan (Department of Economics, Kadir Has University); Hakan Yilmazkuday (Department of Economics, Florida International University) |
| Abstract: | This paper investigates the relationship between relative price variability (RPV) and inflation using monthly micro price data for 128 goods in 13 Turkish regions/cities for the period 1994-2010. The unique feature of this data set is the inclusion of annual inflation rates ranging between 0 % and 90 %. Nonparametric estimations show that there is a hump-shaped relationship between RPV and inflation, where the maximum RPV is achieved when annual inflation is approximately 20 %. It is shown that this result is consistent with a region- or city-level homogenous menu cost model featuring Calvo pricing with an endogenous contract structure and non-zero steady-state inflation. |
| Keywords: | Relative price variability, Calvo pricing, Menu costs |
| JEL: | E31 E52 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:1502&r=mac |
| By: | Grech, Aaron George |
| Abstract: | This paper presents estimates of the possible macroeconomic impact of the reductions in income tax introduced in the Budgets for 2013 and 2014. The simulations are based on the structural macro-econometric model described in Grech and Micallef (2014). The impact of the reductions on Government revenue, estimated at 0.7% of GDP, is computed using data on chargeable income under the different tax bands from the Inland Revenue Department as at 2013, with future income projected using Central Bank forecasts. The policy should have a positive effect on economic activity, with the impact on GDP peaking at 0.35% in 2016 and stabilizing at just under 0.3% in the medium term. This effect is primarily driven by increased consumption following the boost in disposable income caused by the cuts. While this is complemented by higher investment, the impact is gradually dampened by worsening net exports due to rising domestic prices. Though the policy is in part self-financing as it results in a larger tax base, it should be accompanied by measures to reduce pressure on government finances. |
| Keywords: | Fiscal Policy, Macro-econometric modelling, Malta |
| JEL: | C5 E62 H20 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63902&r=mac |
| By: | Shu Lin (Fudan University and Hong Kong Institute for Monetary Research); Haichun Ye (Shanghai University of Finance and Economics) |
| Abstract: | We make the first attempt in the literature to empirically examine the spillover effects of U.S. monetary policy on trade in other countries. In a large sector-level bilateral trade dataset of 137 countries for the years 1970-2000, we find strong and robust evidence supporting an international credit channel of U.S. monetary policy transmission. We show that: 1) financially more constrained sectors have a more negative exposure of their trade to a tight U.S. monetary policy; 2) this international credit channel works mainly during significant U.S. monetary tightening periods (e.g., a large increase in interest rates); 3) the negative impact of a tight U.S. policy is significantly stronger in financially less developed countries or countries with no monetary autonomy. |
| Keywords: | International Transmission of U.S. Monetary Policy, Trade, Credit Constraints, Credit Channel |
| JEL: | E52 E44 F14 F33 F42 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:082015&r=mac |
| By: | Dudley, William (Federal Reserve Bank of New York) |
| Abstract: | Remarks at the Bloomberg Americas Monetary Summit, New York City. |
| Keywords: | emerging market economies (EMEs); economic growth; taper tantrum; personal consumption expenditures (PCE) deflator; interest on excess reserves (IOER); normalization |
| JEL: | E52 |
| Date: | 2015–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsp:166&r=mac |
| By: | Natacha Valla; Jesper Berg; Laurent Clerc; Olivier Garnier; Erik Nielsen |
| Abstract: | To stimulate and finance investment in Europe the three “policy stars” of Europe need to be aligned: the Capital Markets Union initiative, the €315bn Investment Plan, and the ECB’s €1,100bn asset purchase scheme. They jointly face a unique set of issues. First, the resilience and the cyclical performance of the European bank based system needs to be improved. Second, the “right” markets need to be developed for banks to outsource risks without jeopardising financial stability. Third, cross-border risk-sharing urgently needs to be rebalanced, because it has become, in the wake of the Great Recession, overly reliant on debt instruments as opposed to equity. We argue that to achieve alignment between initiatives, an overall strategic vision could: ? Set an explicit, holistic strategy, ensuring that the instruments in the Investment Plan receive appropriate regulatory treatment within the CMU, and are eligible to the ECB’s purchase programme and collateral. ? Set a strategic objective for the euro area financial structure. It could be a “spare wheel” model where (i) banks would remain predominant (with capital markets as a countercyclical “spare wheel”), and (ii) banks would outsource risk through covered bonds (with untranched securitisation acting as the “spare wheel”). ? Proactively promote equity instruments in all three policy initiatives for more sustainable cross border risk sharing. ? Promote a new business model for “credit assessment” with a value chain featuring the credit information collected by commercial and central banks. ? Re-orientate the ECB’s purchases away from sovereign debt instruments towards the instruments that will finance the Investment Plan, those of the so-called “agencies”, and private sector assets. ? Formally involve NPBs in the Investment Plan, preferably in the equity of the EFSI Fund. ? Improve the governance of public investment ex ante via independent, supra-national investment committees, and ex post via strict disciplinary measures. ? Be pragmatic but tangible in the objectives set for the Capital Markets Union (focus on cross-border insolvencies and improve national business environments). |
| Keywords: | ECB;Capital Markets Union;cross-border capital flows;policy strategy;securitization;covered bonds;financial structure;Quantitative Easing |
| JEL: | E42 E44 E52 E58 E61 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:cii:cepipb:2015-07&r=mac |
| By: | Aviral K. Tiwari (aviral.eco@gmail.com); Claudiu T. Albulescu (claudiu.albulescu@upt.ro); Rangan Gupta (Department of Economics, University of Pretoria) |
| Abstract: | Commodity and asset prices have a well-documented effect on economic growth, manifested through various channels. At the same time, the business cycle influences the commodity and asset prices. Whereas empirical evidence on the effect of commodity and asset prices on the long-run economic growth is ambiguous, most of the previous researches highlight a positive correlation in the short-run. The aim of this paper is to disentangle the short- and long-run co-movements between U.S. historical business cycles and commodity and asset prices, over the period 1859-2013. For this purpose we use a time-frequency approach and we test the historical influence of oil, gold, housing and stock prices, over the output growth. Different from other studies, we control for the effect of other prices and monetary conditions, using the wavelet partial coherency. In line with the previous works, we discover that co-movements between economic growth and commodity and assets prices manifest especially in the short-run. We also find that stock returns and housing prices have a more powerful effect on the U.S. economic growth rate than the oil and gold prices. The long-run co-movements are documented especially around the World War II. Finally, when controlling for the influence of the interest rate, inflation and other commodity and asset prices, co-movements become weaker in the short-run. In general the oil and housing prices lead the GDP growth, the U.S. output lead the gold prices, while there is no clear causality direction between business cycle and stock prices. |
| Keywords: | Commodity and asset prices, economic growth, U.S. business cycle, historical co-movements, wavelets |
| JEL: | E32 C22 N11 N12 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:201523&r=mac |
| By: | Pablo Aguilar (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Universidad del País Vasco (UPV/EHU)); Jesús Vázquez (Universidad del País Vasco (UPV/EHU)) |
| Abstract: | Agents can learn from financial markets to predict macroeconomic outcomes and learning dynamics can feed back into both the macroeconomy and financial markets. This paper builds on the adaptive learning (AL) model of Slobodyan andWouters (2012b) by introducing the term structure of interest rates. This feature results in more stable learning coefficients over the whole sample period. Our estimation results show that the inclusion of the term spread in the AL model results in an increase of the parameters characterizing endogenous persistence whereas the persistence of the exogenous shocks driving price and wage dynamics decreases. Moreover, the estimated model shows that the term spread innovations are an important source of persistent fluctuations under AL. This finding stands in sharp contrast to the lack of transmission of term premium shocks to the macroeconomy under rational expectations. Furthermore, our empirical results show that our extended model with term structure does an overall better job when reproducing U.S. business cycle features. |
| Keywords: | Term spread, adaptive learning, learning coefficients variability, medium-scale DSGE model |
| JEL: | C53 D84 E30 E43 |
| Date: | 2015–04–23 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2015007&r=mac |
| By: | Olivier Gervais; Marc-André Gosselin |
| Abstract: | The authors describe the key features of a new large-scale Canadian macroeconomic forecasting model developed over the past two years at the Bank of Canada. The new model, called LENS for Large Empirical and Semi-structural model, uses a methodology similar to the Federal Reserve Board’s FRB/US model and the Bank of Canada’s projection model of the U.S. economy (MUSE). LENS is based on a system of estimated reduced-form equations that describe the interactions among key macroeconomic variables. The model strikes a balance between theoretical structure and empirical properties, since most behavioural equations combine forward-looking expectations with adjustment costs. Compared to ToTEM, the Bank’s main model for projection and policy analysis, LENS is more driven by the empirical properties of the data than economic theory and generally provides better out-of-sample forecast performance. In addition, LENS is more disaggregated, thereby allowing the analysis of a broader set of issues related to the economic outlook. These properties will make LENS a useful complement to ToTEM for constructing economic projections at the Bank of Canada. |
| Keywords: | Economic models; Econometric and statistical methods |
| JEL: | E37 C53 E17 E27 F17 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocatr:102&r=mac |
| By: | Vidakovic, Neven; Radošević, Dubravko |
| Abstract: | Over the course of the recession during the last six years, central bank officials in Croatia have on numerous occasions stated there is a strong need for structural reforms in Croatia and that there is no need for monetary policy reforms. This short paper investigates why the CNB is only demanding fiscal reforms (i.e. internal devaluation) and is not offering any monetary reforms (conventional or unconventional monetary policy responses). Over the course of the last 15 years CNB has caused several structural changes that lead to financial instability. This paper reviews three main structural changes initiated by the central bank, i.e. structural changes of: credit policy of the banking system, development in the external indebtedness and central bank independence. The modern monetary theories and new central bank strategies imposed new views on central bank policy measures. We suggest several financial sector and central banking reforms in Croatia, including accession of Croatia to SSM, the first pillar of EU banking union. |
| Keywords: | deposit interest rate, probability of default, banks, |
| JEL: | E43 G21 G32 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63955&r=mac |
| By: | Volha Audzei |
| Abstract: | Excessive risk-taking of financial agents drew a lot of attention in the aftermath of the financial crisis. Low interest rates and subdued market volatility during the Great Moderation are sometimes blamed for stimulating risk-taking and leading to the recent financial crisis. In recent years, with many central banks around the world conducting the policy of low interest rates and mitigating market risks, it has been debatable whether this policy contributes to the building up of another credit boom. This paper addresses this issue by focusing on information acquisition by the financial agents. We build a theoretical model which captures excessive risk- taking in response to changes in policy rate and market volatility. This excessive risk takes the form of an increased risk appetite of the agents, but also of decreased incentives to acquire information about risky assets. As a result, with market risk being reduced, agents tend to acquire more risk in their portfolios then they would with the higher market risk. The same forces increase portfolio risk when the safe interest rate is falling. The robustness of the results is considered with different learning rules. |
| Keywords: | rational inattention; interest rates; financial crisis; risk-taking; |
| JEL: | E44 E52 G14 D84 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp536&r=mac |
| By: | Laura Carabotta (Facultat d'Economia i Empresa; Universitat de Barcelona (UB)); Peter Claeys (Université libre de Bruxelles) |
| Abstract: | Budget forecasts have become increasingly important as a tool of fiscal management to influence expectations of bond markets and the public at large. The inherent difficulty in projecting macroeconomic variables – together with political bias – thwart the accuracy of budget forecasts. We improve accuracy by combining the forecasts of both private and public agencies for Italy over the period 1993-2012. A weighted combined forecast of the deficit/ ratio is superior to any single forecast. Deficits are hard to predict due to shifting economic conditions and political events. We test and compare predictive accuracy over time and although a weighted combined forecast is robust to breaks, there is no significant improvement over a simple RW model. |
| Keywords: | deficit, forecast accuracy, fiscal forecasting, forecast comparison,forecast combination, fluctuation test. |
| JEL: | G12 C14 E43 E62 H62 H63 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ewp:wpaper:320web&r=mac |
| By: | Anzoategui Zapata, Juan Camilo |
| Abstract: | The restriction to liquidity in macroeconomic terms, is defined as the limited access and use certain proportion of the population to financial services. In the case of the inclusion of agents with liquidity constraints can be determined that pioneering work is the first developed by (Mankiw, 2000), who analyzes the inclusion of agents non-Ricardian considering that there are a significant part of the population subject to liquidity constraints, which may suffer severe changes in consumption to effects on public spending or tax changes, rescuing then, the importance of fiscal policy on the evidence of agents do not have access to the financial system. Also, determine that the non-Ricardian agents separate their consumption period of his term income and non-Ricardian agents do not have the ability - for their low income-consumption separating the level of income being forced to consume their income current. |
| Keywords: | Agentes ricardianos, agentes no ricardianos, Macroeconomía microfundamentada, Liquidez, Política fiscal. Ricardian agents, non-Ricardian agents, Macroeconomics Liquidity, Fiscal Policy. |
| JEL: | E6 E62 |
| Date: | 2014–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:62043&r=mac |
| By: | Miguel García-Posada (Banco de España); Marcos Marchetti (Banco de España) |
| Abstract: | We assess the impact on the credit supply to non-financial corporations of the two verylong-term refinancing operations (VLTROs) conducted by the Eurosystem in December 2011 and February 2012 for the case of Spain. To do so we use bank-firm level information from a sample of more than one million lending relationships over two years. Our methodology tackles the two main identification challenges: (i) how to disentangle credit supply from demand; and (ii) the endogeneity of VLTRO bids, as banks with more deteriorated funding conditions were more likely both to ask for a large amount of funds and to restrict credit supply. First, we exploit the fact that many firms simultaneously borrow from several banks to effectively control for firm-specific credit demand. Second, we exhaustively control for banks’ funding difficulties by constructing several measures of balance-sheet strength and by including bank fixed effects. Our findings suggest that the VLTROs had a positive moderately-sized effect on the supply of bank credit to firms, providing evidence of a bank lending channel in the context of unconventional monetary policy. We also find that the effect was greater for illiquid banks and that it was driven by credit to SMEs, as there was no impact on loans to large firms. |
| Keywords: | unconventional monetary policy, VLTRO, credit supply, bank lending channel. |
| JEL: | E52 E58 G21 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1512&r=mac |
| By: | Nelson H. Barbosa Filho |
| Abstract: | This paper presents the main issues involved in estimating potential output. The objective is to describe the alternative methods and analyze their application and implications for growth forecasts and macroeconomic policy in Brazil. The text emphasizes the determinants of potential output under fixed and flexible coefficients of production. Given the wide use of aggregate measures of Total Factor Productivity in growth accounting, and the sensitivity of such a variable to economic assumptions and errors of measurement, the text also presents the main applied critiques and alternatives to aggregate growth-accounting exercises. The main conclusions are: i) the annual potential growth rate of Brazil’s Gross Domestic Product (GDP) varies substantially depending on the method and hypotheses adopted and, what is most important, potential GDP is not separable from effective GDP in the long-run; ii) growth-accounting and time-series studies of Brazil result in low potential-output growth rates because they extrapolate the slow growth of 1981-2003 to the future; iii) capital seems to be the main constraint on growth in Brazil and, therefore, a demand-led increase in investment can raise both its effective and potential output levels; iv) however, because of the slow adjustment of the capital stock, an investment boom can also hit a supply constraint before the stock of capital has time to adjust to the growth rate of investment; and v) aggregate measures of potential output do not carry much information about the economy and, therefore, they should be complemented by sectoral estimates of capacity utilization to identify the bottlenecks in inter-industry flows and the corresponding demand pressures on inflation. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0147&r=mac |
| By: | Cuong Le Van (CNRS, Paris School of Economics, IPAG Business School, VCREME); Ngoc-Sang Pham (EPEE, University of Evry) |
| Abstract: | We build an infinite-horizon dynamic deterministic general equilibrium model with imperfect markets (because of borrowing constraints), in which heterogeneous agents invest in capital or/and financial asset, and consume. There is a representative firm who maximizes its profit. Firstly, the existence of intertemporal equilibrium is proved even if aggregate capital is not uniformly bounded. Secondly, we study the interaction between the financial market and the productive sector. We also explore the nature of physical capital bubble and financial asset bubble as well. |
| Keywords: | Infinite horizon, intertemporal equilibrium, financial friction, productivity, efficiency, fluctuation, bubbles |
| JEL: | C62 D31 D91 G10 E44 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:eve:wpaper:15-01&r=mac |
| By: | Nikolaos Antonakakis (Vienna University of Economics and Business, Department of Economics, Vienna, Austria); Christophe Andre (Economics Department, Organisation for Economic Co-operation and Development (OECD)); Rangan Gupta (Department of Economics, University of Pretoria) |
| Abstract: | In this study we examine dynamic macroeconomic spillovers in the United States, with a particular focus on the stock market, housing and economic policy uncertainty (EPU). Based on monthly data over the period 1987M1 to 2014M11, our findings reveal the following features. First, the transmission of various types of shocks contributes significantly to economic uctuations in the United States. Second, spillovers show large variations over time. Third, in the wake of the global financial crisis, spillovers have been exceptionally high in historical perspective. In particular, we find large spillovers from EPU, as well as stock market and housing returns to other variables, in particular in ation, industrial production and the federal funds rate. These results illustrate the contagion from the housing and financial crisis to the real economy and the strong policy reaction to stabilise the economy. |
| Keywords: | Housing market, Spillover, Stock market, Variance decomposition, Vector autoregression, Economic policy uncertainty, US recession |
| JEL: | C32 E40 E50 G10 G20 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:201521&r=mac |
| By: | Francesco Ravazzolo; Joaquin L. Vespignani |
| Abstract: | In modelling macroeconomic time series, often a monthly indicator of global real economic activity is used. We propose a new indicator, named World steel production, and compare it to other existing indicators, precisely the Kilian’s index of global real economic activity and the index of OECD World industrial production. We develop an econometric approach based on desirable econometric properties in relation to the quarterly measure of World or global gross domestic product to evaluate and to choose across different alternatives. The method is designed to evaluate short-term, long-term and predictability properties of the indicators. World steel production is proven to be the best monthly indicator of global economic activity in terms of our econometric properties. Kilian’s index of global real economic activity also accurately predicts World GDP growth rates. When extending the analysis to an out-of-sample exercise, both Kilian’s index of global real economic activity and the World steel production produce accurate forecasts for World GDP, confirming evidence provided by the econometric properties. Specifically, a forecast combination of the three indices produces statistically significant gains up to 40% at nowcast and more than 10% at longer horizons relative to an autoregressive benchmark. |
| Keywords: | Global real economic activity, World steel production, Forecasting |
| JEL: | E1 E3 C1 C5 C8 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2015-13&r=mac |
| By: | Evgeny Goryunov (Gaidar Institute for Economic Policy); Sergey Sinelnikov-Murylev (Russian Foreign Trade Academy); Laurence J. Kotlikoff (Boston University) |
| Abstract: | Fiscal gap is an indicator of long run sustainability of government finance. It is used for assessment of the extent to which current fiscal policy is able to keep government budget solvent in the longer period. Fiscal gap is derived from intertemporal budget constraint which connects flows of budget outlays and receipts aggregated along decades. Fiscal gap is defined as a sum of current government debt and present value of future primary deficit flow. In order to get an estimate of Russia’s general government fiscal gap we consider three scenarios which are based on different assumptions regarding demographic trends, productivity growth, extractable reserves of oil and natural gas, long term price of oil and natural gas etc. Estimated value of fiscal gap is positive in all three scenarios which implies that current fiscal policy cannot provide budget sustainability in the long run. There are two major factors of the budget imbalances: rising health and pension expenditures due to demographics trends and shrinking role of tax revenues from energy sector due to extraction stagnation. Fiscal gap value under intermediate scenario is equal to 1613 trln 2014 rubles or 13,6% of present value of GDP which is close to fiscal gap in several advanced economies. This study is an extension of (Goryunov et al., 2013) one made by a group of authors headed by Laurence J. Kotlikoff. |
| Keywords: | fiscal gap, fiscal sustainability, fiscal policy, budget constraints, budget sustainability |
| JEL: | E62 H51 H52 H55 H62 H63 H68 J11 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:gai:wpaper:0113&r=mac |
| By: | Rodrigo Barbone Gonzalez; Joaquim Lima; Leonardo Marinho |
| Abstract: | Business and financial cycles are important to Monetary and Macroprudential Policies. The Countercyclical Capital Buffer (CCB) proposed by the Basel Committee on Banking Supervision (BCBS) assumes that the financial cycle is four times longer than the business one with direct impacts over its main indicator, the credit-to-GDP gap. This paper addresses the issue of estimating credit and business cycles’ length using Bayesian Structural Time Series Models (STM) and Singular Spectrum Analysis (SSA) followed by Fourier-based Spectral Analysis. The results, considering 28 countries, suggest that financial cycles, measured by the credit-to-GDP, could indeed be longer than the business one, but definitely shorter than the one implied in the cut-off frequency used by the BCBS. We find that most countries in the sample have financial cycles between 13 and 20 years, but there is a smaller group of countries whose estimates are close to those of the business cycle, i.e., 3 to 7 years. Finally, we estimate q-ratios objectively using STM and find that a HP smoothing factor that closely relates to the gain functions of our estimated state space form is in the trend component of HP(150) and not in the gap of HP(400k) |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:bcb:wpaper:385&r=mac |
| By: | Farley Grubb (Department of Economics, University of Delaware) |
| Abstract: | The British North American colonies were the first western economies to rely on legislature-issued paper monies as an important internal media of exchange. This system arose piecemeal. In the absence of banks and treasuries that exchanged paper monies at face value for specie monies on demand, colonial governments experimented with other ways to anchor their paper monies to real values in the economy. These mechanisms included tax-redemption, land-backed loans, sinking funds, interest-bearing notes, and legal tender laws. The structure and performance of these mechanisms are explained and assessed. This was monetary experimentation on a grand scale. |
| Keywords: | Adam Smith, Benjamin Franklin, bills of credit, fiat currency, interest-bearing money, land banks, legal tender laws, paper money, sinking funds, tax redemption, zero-coupon bonds |
| JEL: | E42 E50 F31 G10 H60 K29 N11 N21 N41 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:dlw:wpaper:15-07&r=mac |
| By: | Lilia Cavallari (University of Roma Tre); Stefano D’Addona (University of Roma Tre) |
| Abstract: | This paper studies the dynamics of output and export margins in the aftermath of external shocks in fixed and floating exchange rate regimes. Using a panel VARX model, it traces the mean responses of output, terms of trade, extensive and intensive margins to real and nominal shocks in 22 developed economies over the period 1988-2011. It finds remarkable differences in the transmission of shocks depending on the exchange rate regime. In the sample of peggers, trade switches from previously traded goods towards trade of new products and previously non-traded goods in response to external shocks. This in turn exacerbates output fluctuations. Overall, our findings provide novel evidence in support of the stabilization advantages of flexible exchange rates based on their ability to smooth extensive margins. These findings are consistent with the predictions of theoretical models with firm entry. |
| Keywords: | extensive margin of trade, international business cycle, panel VARX, panel VAR, exchange rate regimes, firm entry, product creation |
| JEL: | E32 E52 F41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:rcr:wpaper:05_14&r=mac |
| By: | S. Avouyi-Dovi; G. Horny; P. Sevestre |
| Abstract: | We analyse the dynamics of the pass-through of banks’ marginal cost to bank lending rates over the 2008 crisis and the euro area sovereign debt crisis in France, Germany, Greece, Italy, Portugal and Spain. We measure banks’ marginal cost by their rate on new deposits, contrary to the literature that focuses on money market rates. This allows us to account for banks’ risks. We focus on the interest rate on new short-term loans granted to non-financial corporations in these countries. Our analysis is based on an error-correction approach that we extend to handle the time-varying long-run relationship between banks’ lending rates and banks’ marginal cost, as well as stochastic volatility. Our empirical results are based on a harmonised monthly database from January 2003 to October 2014. We estimate the model within a Bayesian framework, using Markov Chain Monte Carlo methods (MCMC).We reject the view that the transmission mechanism is time invariant. The long-run relationship moved with the sovereign debt crises to a new one, with a slower pass-through and higher bank lending rates. Its developments are heterogeneous from one country to the other. Impediments to the transmission of monetary rates depend on the heterogeneity in banks marginal costs and therefore, its risks. We also find that rates to small firms increase compared to large firms in a few countries. Using a VAR model, we show that overall, the effect of a shock on the rate of new deposits on the unexpected variances of new loans has been less important since 2010. These results confirm the slowdown in the transmission mechanism. |
| Keywords: | bank interest rates, error-correction model, structural breaks, stochastic volatility, Bayesian econometrics. |
| JEL: | E43 G21 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:547&r=mac |
| By: | Christian Bredemeier |
| Abstract: | This paper studies gender differences in the elasticity of labor supply in a model of household specialization. I show that household specialization implies larger Frisch elasticities for the partner that specializes in home production. Quantitatively, empirical time-use ratios alone imply differences in the Frisch elasticity between women and men of more than 50%. Similar results are obtained for long-run elasticities. My results imply that the elasticity of labor supply is not a deep parameter which can, e.g., explain parts of the state-dependent effects of fiscal policy. |
| Keywords: | Labor-supply elasticity, gender, home production |
| JEL: | E24 J22 J16 D13 |
| Date: | 2015–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:kls:series:0081&r=mac |
| By: | Byrne, Joseph; Cao, Shuo; Korobilis, Dimitris |
| Abstract: | This paper extends the Nelson-Siegel linear factor model by developing a flexible macro-finance framework for modeling and forecasting the term structure of US interest rates. Our approach is robust to parameter uncertainty and structural change, as we consider instabilities in parameters and volatilities, and our model averaging method allows for investors' model uncertainty over time. Our time-varying parameter Nelson-Siegel Dynamic Model Averaging (NS-DMA) predicts yields better than standard benchmarks and successfully captures plausible time-varying term premia in real time. The proposed model has significant in-sample and out-of-sample predictability for excess bond returns, and the predictability is of economic value. |
| Keywords: | Term Structure of Interest Rates; Nelson-Siegel; Dynamic Model Averaging; Bayesian Methods; Term Premia. |
| JEL: | C32 C52 E43 E47 G11 G17 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63844&r=mac |
| By: | Swamy, Vighneswara |
| Abstract: | The determinants of default risk of banks in emerging economies have so far received inadequate attention in the literature. This paper seeks to study the determinants of bank asset quality and profitability using panel data techniques and robust data sets for the period between 1997 and 2009. The study findings reveal some interesting results that run contrary to established perceptions. Priority sector credit has been found to be not significant in affecting NPAs; this is contrary to the general perception. Similarly, with regard to rural bank branches, the results reveal that aversion to rural credit is a falsely founded perception. Bad debts are dependent more on the performance of industry than on other sectors of the economy. Public sector banks have shown significant performance in containing bad debts. Private banks have continued to be stable in containing bad debts, as they have better risk management procedures and technology, which definitely allows them to finish with lower levels of NPAs. Further, this study investigates the effect of determinants on profitability, and establishes that while capital adequacy and investment activity significantly affect the profitability of commercial banks, apart from other accepted determinants of profitability, asset size has no significant impact on profitability. |
| Keywords: | banks,risk management,ownership structure,financial markets,non-performing assets,lending policy,macro-economy,central banks,banking regulation,financial system stability |
| JEL: | G21 G28 G32 E44 E58 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201527&r=mac |
| By: | Jakub Growiec |
| Abstract: | We generalize the normalized Constant Elasticity of Substitution (CES) production function by allowing the elasticity of substitution to vary isoelastically with (i) relative factor shares, (ii) marginal rates of substitution, (iii) capital–labor ratios, or (iv) capital–output ratios. Ensuing four variants of Isoelastic Elasticity of Substitution (IEES) production functions have a range of intuitively desirable properties and yield empirically testable predictions for the functional relationship between relative factor shares and capital–labor ratios. |
| Keywords: | production function, factor share, elasticity of substitution, marginal rate of substitution, normalization. |
| JEL: | E23 O47 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:nbp:nbpmis:201&r=mac |
| By: | Brisne J. V. Céspedes; Elcyon C. R. Lima; Alexis Maka |
| Abstract: | This article investigates the stochastic and dynamic relationship of a group of Brazilian macroeconomic variables (price and industrial production indexes, nominal exchange rate, short and medium-run nominal interest rates) for the period after the Real Plan (1996-2004). We adopt, as has become usual in the literature, several SVAR (structural VAR) models to uncover stylized facts for the short-run impacts of the identified exogenous sources of fluctuations of this selected set of variables. A distinctive feature of this article is the employment of Directed Acyclic Graphs (DAG) to obtain the contemporaneous causal order of the variables used to identify the SVAR models. Another distinguishing characteristic is the careful attention paid to monetary policy developments after the Real Plan when splitting our sample in two subsamples (1996/07-1998/08 and 1999/03-2004/12). The main results are: a) in response to a positive short run interest rate innovation, during the 1999-2004 subperiod, the output and the price level decrease—however, the output response is faster and the price level responds with a lag of near four months; b) for the 1996-1998 subperiod, the most likely effect of a positive short run interest rate innovation is the reduction of the price level (also with a four months lag), even though there is a large uncertainty in this response, and the reduction of output; c)short run interest rate innovations are one of the most important sources of temporary fluctuations in the level of economic activity for both subsamples; and d) exogenous shocks to the exchange rate and to the medium term interest rate are for the 1999-2004 period, the most important sources of inflation rate fluctuation. Este artigo investiga as relações estocásticas e dinâmicas de um grupo de variáveis macroeconômicas brasileiras (índices de preços, produção industrial, taxa de câmbio nominal, taxas de juros de curto e médio prazo, e M1) para o período após o Plano Real (1996-2004). Adota, como é usual na literatura, vários modelos SVARs (VAR estruturais) para determinar os fatos estilizados relativos aos impactos de curto prazo das fontes exógenas de flutuação identificadas para esse grupo de variáveis. O artigo inova ao empregar Grafos Acíclicos Direcionados (DAG) na obtenção das relações causais contemporâneas entre as variáveis e ao considerar que as alterações da política monetária, ocorridas após o Plano Real, tornam essencial a divisão da nossa amostra em dois subperíodos (1996/07-1998/08 e 1999/03-2004/12). Os resultados principais são: a) em resposta a uma inovação positiva na taxa de juros de curto prazo (Selic), durante o subperíodo 1999-2004, a produção e o nível de preços caem — porém, a resposta da produção é mais rápida que a do nível de preços, que só acontece com uma defasagem de aproximadamente quatro meses; b) para o período 1996-1998, o efeito mais provável de uma inovação positiva na taxa de juros de curto prazo é a redução do nível de preços também com uma defasagem de quatro meses, embora haja uma grande incerteza em relação a essa resposta e da produção; c) as inovações na taxa de juros de curto prazo (Selic) estão entre as fontes mais importantes da flutuação do nível de atividade econômica em ambos os subperíodos; e d) os choques exógenos na taxa de câmbio e na taxa de juros de médio prazo (Swap Pré x CDI) são, para o período 1999-2004, as fontes mais importantes da flutuação da taxa de inflação. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0149&r=mac |
| By: | Deuflhard, Florian; Georgarakos, Dimitris; Inderst, Roman |
| Abstract: | Savings accounts are owned by most households, but little is known about the performance of households' investments. We create a unique dataset by matching information on individual savings accounts from the DNB Household Survey with market data on account-specific interest rates and characteristics. We document considerable heterogeneity in returns across households, which can be partly explained by financial sophistication. A one-standard deviation increase in financial literacy is associated with a 13% increase compared to the median interest rate. We isolate the usage of modern technology (online accounts) as one channel through which financial literacy has a positive association with returns. |
| Keywords: | financial literacy,savings accounts,interest rates,household finance |
| JEL: | D12 E21 G11 G21 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:imfswp:88&r=mac |
| By: | Thomas Renstrom (University of Durham (UK)); Luca Spataro (Dipartimento di Economia e Management, University of Pisa (Italy)) |
| Abstract: | In this work we analyse the issue of optimal taxation and of policy changes in an endogenous growth model driven by public expenditure, in the presence of endogenous fertility and labour supply. While normative analysis confirms the Chamley-Judd result of zero capital income tax, positive analysis reveals that the presence of endogenous fertility produces different results as for the effects of taxes on total employment. |
| Keywords: | Taxation, endogenous fertility, critical level utilitarianism, population |
| JEL: | D63 E21 H21 J13 O4 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:gfe:pfrp00:00012&r=mac |
| By: | Ekizceleroglu, Caner |
| Abstract: | Cesse Colombo'nun yaklaşık bir yıl önce Forbes dergisinin web sitesinde yayınladığı bir makaleyi okuyunca, farklı bakış açılarının ne kadar önemli olduğunu gördüm. Bazen gerçekten olayın dışına çıkarak gözlemlemek gerekiyor. Türkiye ekonomisine de böyle bir bakış açısı gerekli. Son on günde Financial Times'ın Türkiye Eki ve Dani Rodrik'in Türkiye ekonomisi üzerine kaleme aldığı yazısı Türkiye ekonomisinin Türkiye dışından farklı algılandığını kanıtlar niteliktedir. |
| Keywords: | Türkiye Ekonomisi, Balon, Kredi Genişlemesi, |
| JEL: | E0 E5 E51 G18 |
| Date: | 2015–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63896&r=mac |
| By: | Kakarot-Handtke, Egmont |
| Abstract: | What do economists understand about the economy if they do not understand the profit phenomenon? Next to nothing. Therefore, the very first task in theoretical economics is to clarify the difference between profit and wage income and their respective determinants. It was Ricardo who tackled the problem first, but neither Orthodoxy nor Heterodoxy solved it until this day. The need for a paradigm shift is indisputable. The new structural axiomatic approach is more comprehensive as it embraces the consistent interaction of real and nominal variables of the monetary economy and the economic consequences of alternative variants of institutions. |
| Keywords: | new framework of concepts; structure-centric; axiom set; real analysis; nominal analysis; profit; distributed profit; ownership |
| JEL: | B59 E10 H00 |
| Date: | 2015–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63935&r=mac |
| By: | Carlos León; Jorge Cely; Carlos Cadena |
| Abstract: | We identify interbank (i.e. non-collateralized) loans from the Colombian large-value payment system by implementing Furfine’s method. After identifying interbank loans from transactional data we obtain the interbank rates and claims without relying on financial institutions’ reported data. Contrasting identified loans with those consolidated from financial institutions’ reported data suggests the algorithm performs well, and it is robust to changes in its setup. The weighted average rate implicit in transactional data matches local interbank rate benchmarks strictly. From identified loans we also build the interbank claims network. The three main outputs (i.e. the interbank loans, the rates, and the claims networks) are valuable for examining and monitoring the money market, for contrasting data reported by financial institutions, and as inputs in models of financial contagion and systemic risk. |
| Keywords: | Furfine’s method, interbank, IBR, TIB. |
| JEL: | E42 E44 |
| Date: | 2015–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:012716&r=mac |
| By: | Elcyon Caiado Rocha Lima |
| Abstract: | This paper estimates the Brazilian Nairu (Non-Accelerating Inflation Rate of Unemployment) and investigates several empirical questions: the behavior of Nairu along time, error bands for Nairu and the usefulness of Nairu to the conduct of monetary policy in Brazil. There are many recent studies about the Nairu ¾ Staiger, Stock and Watson (1997), Blanchard and Katz (1997) and Portugal, Madalozzo and Hillbrecht (1999). This article innovates with respect to previous ones because it adopts an econometric model that, in our judgment, is more adequate to deal with the still recent instability of Brazilian economy. We estimate two different state-space models: one with ARCH residuals and another with a Markov- switching regime. The article presents some new evidence on several questions. It shows that the Nairu has been increasing since 1995. It concludes that there is a statistically significant relationship, with correct sign, between deviations of unemployment from the Nairu and inflation. It also shows that the usefulness of the Nairu to the conduct of monetary policy is very limited because its error bands are too wide. Neste artigo estimamos a Non-Accelerating Inflation Rate of Unemployment (Nairu) do Brasil e investigamos diversas questões empíricas: o comportamento da Nairu ao longo do tempo, intervalos de confiança para a Nairu e sua utilidade na condução da política monetária no Brasil. Há diversos estudos recentes sobre a Nairu ¾ Staiger, Stock e Watson (1997), Blanchard e Katz (1997) e Portugal, Madalozzo e Hillbrecht (1999). Este artigo inova em relação aos demais ao adotar procedimentos econométricos que, na nossa opinião, são mais adequados para lidar com a instabilidade vivida pela economia brasileira em período recente. Estimamos dois modelos em espaço-deestados diferentes: um com resíduos ARCH e outro com mudança de regime markoviana. O artigo apresenta novas evidências empíricas que permitem responder a diversas indagações teóricas. Ele mostra que a Nairu tem crescido desde 1995 e conclui que existe uma correlação significativa e com sinal correto entre desvios da taxa de desemprego em relação à Nairu e à taxa de inflação. Conclui-se também que as estimativas da Nairu são muito pouco úteis na condução da política monetária já que os seus intervalos de confiança são demasiadamente amplos. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0094&r=mac |
| By: | Philippe De Donder (Toulouse School of Economics); John E. Roemer (Dept. of Political Science & Cowles Foundation, Yale University) |
| Abstract: | We calibrate a sequence of four nested models to study the dynamics of wealth accumulation. Individuals maximize a utility function whose arguments are consumption and investment. They desire to accumulate wealth for its own sake — this is not a life-cycle model. A competitive firm produces a single good from labor and capital; the rate of return to capital and the wage rate are market-clearing. The second model introduces political lobbying by the wealthy, whose purpose is to reduce the tax rate on capital income. The third model introduces differential rates of return to capitals of different sizes. The fourth model introduces inheritance and intergenerational mobility. |
| Keywords: | Piketty, Dynamics of wealth accumulation, Intergenerational mobility, Kantian equilibrium |
| JEL: | D31 D58 E37 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1998&r=mac |
| By: | Marcos S. Matsumura; Ajax R. B. Moreira |
| Abstract: | We use no arbitrage models with macro variables to study the interaction between the macroeconomy and the yield curve. This interaction is a key element for monetary policy and for forecasting. The model was used to analyze the Brazilian domestic financial market using a daily dataset and two versions of the model, one in continuous-time and estimated by maximum likelihood, and the other in discretetime and estimated by Monte Carlo Markov Chain (MCMC). Our objective is threefold: 1) To analyze the determinants of the Brazilian domestic term structure considering nominal shocks; 2) To compare the results of the discrete and the continuous time versions considering adherence, forecasting performance and monetary policy analysis; and 3) To evaluate the effect of restrictions on the transition and pricing equations over the model properties. Our main results are: 1) results from continuous and discrete versions are qualitatively and in most cases quantitatively equivalent; 2) Monetary Authorities are conservative in Brazil, smoothing short rate fluctuations; 3) inflation shock, or slope shock, depending on the model selected, are the main sources of long run fluctuations of nominal variables; and finally, 4) no arbitrage models showed lower forecasting performance than an unrestricted factor model. Este texto utiliza um modelo de não arbitragem para estudar a interação entre variáveis macro e a estrutura a termo das taxas de juros (ETTJ), interação que é um elemento crítico para política monetária e para a previsão. O modelo foi utilizado para analisar a ETTJ de títulos emitidos no mercado doméstico do Brasil e a sua relação com a taxa de câmbio e uma medida de inflação esperada, utilizando dados diários no período 2000-2005. Os modelos foram estimados em duas versões. Uma contínua estimada por máxima verossimilhança e outra discreta estimada por Monte Carlo Markov Chain (MCMC). Concluímos que: 1) os resultados das duas versões foram qualitativamente, e, em muitos casos, quantitativamente iguais, o que sugere a robustez dos resultados; 2) avaliamos a importância relativa das fontes de determinação das ETTJ, em particular dos choques cambiais, de inflação, e de movimentos autônomos da taxa de juros. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0171&r=mac |
| By: | François Langot ((GAINS-TEPP-IRA) Université du Mans, Paris School of Economics, Banque de France & IZA); Alessandra Pizzo (Centre d'Economie de la Sorbonne & Banque de France) |
| Abstract: | We develop a balanced growth model with labor supply and search and matching frictions in the labor market to study the impact of economic policy variables on the two margins which constitute the (total) labor input: the extensive one (the rate of employment) and the intensive one (the hours worked per worker). We show that the dynamics of the taxes have an impact mainly on the hours worked while labor market institutions have a large influence on the rate of employment. However, our findings underline that there is an interaction between the two margins. The model is tested on four countries (US, France, Germany and UK) which experiment different tax and labor market dynamics since the sixties. Using this structural approach, we can then perform counterfactual experiments about the evolution of the policy variables and to compare welfare levels implied by policy changes |
| Keywords: | Taxes; labor market institutions; hours; employment; labor market search |
| JEL: | E20 E60 J22 J60 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:15036&r=mac |
| By: | Rahim, Yasmin; Masih, Mansur |
| Abstract: | Econometricians had been blamed for the financial crises that occurred due to their giving a ‘false hope’ to investors and policy makers using untested theoretical assumptions. Therefore, econometricians had been challenged to reform their studies by grounding them more solidly on reality. The theory of Markowitz 1952 in the context of investment portfolio urged the investor ‘not to put all eggs in one basket’ implying to diversify their investment portfolio as a mechanism to minimize the risk. Controversies pertaining to the role of gold and its stability to diversify the investment portfolio had been raised and had been puzzling the investors till to date. Normally, the variable used to represent the stock index of a country is in terms of indices and very limited research is found to apply sectoral indices. Therefore, this research is an humble attempt to examine the correlation and causality between the Malaysian sectoral stock indices and gold applying multivariate standard time series techniques using monthly observations ranging from January 2007 until September 2014. We found that gold was the most independent (exogenous) variable compared to the sectoral stock indices even during the 2008 financial crisis period and the most dependent sectors were construction and financial. Therefore, we believe that gold could be a hedging instrument against these sectors. Hence, we humbly suggest to the investors and investment portfolio managers to include gold as part of their investment portfolios. |
| Keywords: | sectoral stock indices, gold, Granger-causality, time series techniques |
| JEL: | C22 C58 E44 G11 |
| Date: | 2015–01–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63928&r=mac |
| By: | Paul J. Burke; Md Shahiduzzaman; David I. Stern |
| Abstract: | This paper investigates the short-run effects of economic growth on carbon dioxide emissions from the combustion of fossil fuels and the manufacture of cement for 189 countries over the period 1961–2010. Contrary to what has previously been reported, we conclude that there is no strong evidence that the emissions-income elasticity is larger during individual years of economic expansion as compared to recession. Significant evidence of asymmetry emerges when effects over longer periods are considered. We find that economic growth tends to increase emissions not only in the same year, but also in subsequent years. Delayed effects – especially noticeable in the road transport sector – mean that emissions tend to grow more quickly after booms and more slowly after recessions. Emissions are more sensitive to fluctuations in industrial value-added than agricultural value-added, with services being an intermediate case. On the expenditure side, growth in consumption and in investment have similar implications for national emissions. External shocks have a relatively large emissions impact, and the short-run emissions-income elasticity does not appear to decline as incomes increase. Economic growth and emissions have been more tightly linked in fossil-fuel rich countries. |
| Keywords: | Economic growth, emissions, pollution, business cycle, asymmetry, sector |
| JEL: | Q56 O44 E32 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2015-12&r=mac |
| By: | Javier Andrés; José E.Boscá; Javier Ferri |
| Abstract: | In this paper we look at the interplay between the level of household leverage in the economy and fiscal policy. When the fiscal rule is defined on lump-sum transfers, government spending or consumption taxes, the impact multipliers of transitory fiscal shocks become substantially amplified in an environment of easy access to credit by impatient consumers. However, when the government reacts to debt deviations by raising distortionary taxes on income, labour or capital, the effects of household debt on the size of the impact output multipliers vanish or even reverse. We also find that differences in fiscal multipliers between high and low indebtedness regimes belong basically to the short run, whereas the long-run multipliers are barely affected by the level of household debt in the economy. Finally, we find that fiscal shocks exert an unequal welfare effect on impatient and patient households that can even be of opposite signs. |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdaddt:2015-05&r=mac |
| By: | Maurizio Iacopetta (OFCE and SKEMA Business School Auhor-Email :maurizio.iacopetta@sciencespo.fr); Raoul Minetti (Michigan State University); Pietro F. Peretto (Duke University) |
| Abstract: | We study the impact of corporate governance frictions in an economy where growth is driven both by the foundation of new firms and by the in-house investment of incumbent firms. Firms' managers engage in tunneling and empire building activities. Active shareholders monitor man- agers, but can shirk on their monitoring, to the detriment of minority (passive) shareholders. The analysis reveals that these confiicts among firms' stakeholders inhibit the entry of new firms, thereby increasing market concentration. Despite depressing investment returns in the short run, the frictions can however lead incumbents to invest more aggressively in the long run to exploit the concentrated market structure. By means of quantitative analysis, we characterize conditions under which corporate governance reforms boost or reduce welfare. |
| Keywords: | Endogenous Growth, Market Structure, Financial Frictions, Corporate Gover- nance.; Endogenous growth, Market Structure, Financial Frictions, Corporate Governance |
| JEL: | E44 O40 G30 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:1422&r=mac |
| By: | Nicholas Oulton; Gavin Wallis |
| Abstract: | This paper presents annual estimates of fixed capital stocks and capital services for the United Kingdom, 1950-2013, for the whole economy and for the market sector. Our estimates cover eight asset types (structures, machinery, vehicles, computers, purchased software, own-account software, mineral exploration and artistic originals) and also a ninth, R&D, from 1981 to 2013. We compare the effect on the estimates of capital services of using either an exogenous (ex post) rate of return or an endogenous one. The latter uses a model which allows for ex ante risk: firms’ expectations may not be satisfied so the realised rate of return may not be equalised across assets. We see how much the inclusion of R&D matters. We also look at what has happened to capital intensity (capital services per hour worked) in the Great Recession, a period when labour productivity fell in the UK. And we consider the evolution of the aggregate depreciation rate and of capital consumption as a proportion of GDP. |
| Keywords: | Capital services; capital stocks; rate of return; ex post; hybrid |
| JEL: | D24 E22 E23 O47 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:61697&r=mac |
| By: | Park, Kwang Suk; Masih, Mansur |
| Abstract: | Generally, Shariah (Islamic) indices are considered to have lower portfolio betas relative to conventional ones. The lower portfolio beta of Islamic indexes is a logical result of Shariah screening. As Shariah screening eliminates stocks with high financial leverage, the resulting portfolio beta ought to be lower because a stock’s beta is reflective of the underlying business risk and financial risk (leverage). With this motivation and background, we have tried to find out whether we can have diversification opportunities with combining Shariah index and conventional indexes. The results of analysis revealed the absence of cointegration between the DJIM index and three conventional indexes such as DAX, HangSeng, KL. This means that diversification opportunities exist for the mentioned indices. But for the S&P and DJIM, we found that they are cointegrated, which implies there exists long run theoretical relationship among the indices. Presence of cointegration indicates the absence of diversification opportunities in the concerned indices. So if we want to get diversification effect, we have to avoid setting up the portfolio with S&P and DJIM with the balanced weight. Because these two variables move together, the investors are not likely to get the positive portfolio effect particularly in the long term. |
| Keywords: | Shariah (Islamic) Index, diversification, cointegration |
| JEL: | C22 C58 E44 G15 |
| Date: | 2015–01–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63925&r=mac |
| By: | Marcos Antonio C. da Silveira |
| Abstract: | We build a two-country version of the model in Gali & Monacelli (2005), which extends for a small open economy the new Keynesain DSGE model used as tool for monetary policy analysis in closed economies. A distinctive feature of the model is that the terms of trade enters directly into the new Keynesian Phillips curve as a new pushing-cost variable feeding the inflation. Furthermore, home bias in households’ preferences allows for real exchange rate fluctuation, giving rise to alternative channels of monetary transmission. Unlike most part of the literature, the small domestic open economy is derived as a limit case of the two-coutry model, rather than assuming exogenous processes for the foreign variables. This procedure preserves the role played by foreign nominal frictions in the way as international monetary policy shocks are conveyed into the small domestic economy. O trabalho desenvolve uma versão para dois países do modelo em Gali & Monacelli (2005), o qual estende para uma pequena economia aberta o modelo de equilíbrio geral dinâmico e estocástico novo-keynesiano usado como ferramenta para análise de política monetária em economias fechadas. Uma importante característica do modelo é que os termos de troca entram diretamente na curva de Phillips novo-keynesiana, como uma nova variável pressionando os custos e alimentando a inflação. Além do mais, a hipótese de home bias nas preferências dos consumidores permite a flutuação da taxa de câmbio real, criando um canal alternativo de transmissão da política monetária. Diferente da maior parte da literatura, o modelo deriva a estrutura da pequena economia aberta como um caso limite do modelo para dois países, em vez de supor que as variáveis externas seguem processos exógenos. Esse procedimento preserva o papel das fricções nominais externas na forma como choques monetários internacionais são transmitidos para dentro da pequena economia doméstica. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0164&r=mac |
| By: | Elcyon Caiado Lima; Thiago Sevilhano Martinez; Vinícius dos Santos Cerqueira |
| Abstract: | Este trabalho investiga o efeito de choques monetários e cambiais sobre a dinâmica de preços desagregados do Índice Nacional de Preços ao Consumidor Amplo (IPCA), de 1999 a 2011. Para tanto, os resultados foram analisados com o emprego de um modelo de autorregressão vetorial estrutural aumentada por fatores dinâmicos – factor-augmented vector autoregressive (Favar) –, apresentados por diferentes níveis de agregação. O modelo é estimado por técnicas bayesianas, e as funções de resposta-impulso são construídas utilizando restrições de sinais sobre as respostas de variáveis macroeconômicas. Os principais resultados foram: i) 65,9% dos preços dos subitens investigados caem após um choque monetário e 50,7% sobem após um choque cambial; ii) apenas 2,6% dos subitens (peso de 1,6% no índice total) apresentaram price puzzle para choques monetários e 2,3% (peso de 0,5% no índice total) para choques cambiais; iii) choques macroeconômicos são mais persistentes do que os choques específicos; e iv) as respostas são diferenciadas conforme o setor considerado. This paper investigates the effect of monetary and exchange rate shocks on disaggregated prices of the Brazilian Consumer Price Index (IPCA), from 1999 to 2011. We analyze the results of a factor-augmented vector autoregressive model (Favar), which are presented by different levels of aggregation. We estimate the model using Bayesian techniques, and construct impulse-response functions using sign restrictions over the responses of macroeconomic variables. The main results were: i) 65.9% of the surveyed prices at the sub-items level fell after a monetary shock and 50.7% rose after exchange rate’s shock; ii) only 2.6% of the sub-items (weight of 1.6% of the index) showed the price puzzle for monetary shocks and 2.3% (weight of 0.5% of the index) for exchange rate shocks; iii) macroeconomic shocks are more persistent than series-specific shocks; iv) the answers are different according to the sector considered. |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:2072&r=mac |
| By: | Michael Ehrmann; Marcel Fratzscher |
| Abstract: | The paper analyzes the integration of euro area sovereign bond markets during the European sovereign debt crisis. It tests for contagion (i.e., an intensification in the transmission of shocks across countries), fragmentation (a reduction in spillovers) and flight-to-quality patterns, exploiting the heteroskedasticity of intraday changes in bond yields for identification. The paper finds that euro area government bond markets were well integrated prior to the crisis, but saw a substantial fragmentation from 2010 onward. Flight to quality was present at the height of the crisis, but has largely dissipated after the European Central Bank’s (ECB’s) announcement of its Outright Monetary Transactions (OMT) program in 2012. At the same time, Italy and Spain became more interdependent after the OMT announcement, providing our only evidence of contagion. While this suggests that countries have been effectively ring-fenced, and Italy and Spain benefited from the joint reduction in yields following the OMT announcement, the high current degree of fragmentation poses difficult challenges for policy-makers, since it leads to an unequal transmission of the ECB’s monetary policy to the various countries. |
| Keywords: | Asset pricing; Financial markets; Interest rates; International financial markets |
| JEL: | F3 E5 G15 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:15-13&r=mac |
| By: | Octávio A. F. Tourinho |
| Abstract: | A specification for the demand for money in economies where inflation is high and stochastic is presented. It uses a generalized functional form and includes the variance of the inflation rate as an explanatory variable, and is estimated for Brazil in the period 1974/94 under the assumption that the monetary policy is passive and that expectations are adaptive. The supply of money is then specified as a generalization to a stochastic environment of the rule proposed by Sargent and Wallace (1973). The money demand and supply equations are then estimated simultaneously, under rational expectations, by using the Johansen (1991) (VEC) procedure and interpreting the two cointegrating vectors which arise as the supply and demand equations. The restrictions suggested by the hypothesized theoretical models for the money market equilibrium in high inflation processes are tested and accepted for this data. Apresenta-se neste artigo uma especificação para o equilíbrio monetário em uma economia onde a taxa de inflação é elevada e estocástica. A equação de demanda por moeda utiliza a forma funcional generalizada de Box-Cox e inclui a variância da inflação como uma variável explicativa. A oferta de moeda é especificada como uma generalização para o ambiente estocástico da regra proposta por Sargent e Wallace. O sistema de equações é estimado para os dados brasileiros do período 1974/94 de dois modos. Primeiro, a sua forma reduzida é estimada sob a hipótese de que a política monetária é passiva e de que as expectativas são adaptativas Em seguida, ele é estimado em sua forma estrutural, sob a hipótese de que as expectativas são racionais, usando o procedimento VEC de Johansen. Argumenta-se que os dois vetores de cointegração que são obtidos podem ser interpretados como representações das equações de oferta e demanda de moeda. Finalmente, as restrições extraídas dos modelos teóricos apresentados na primeira parte do artigo para caracterizar o equilíbrio de mercado sob condições de inflação elevada são aceitas no teste empírico do modelo para estes dados. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0068&r=mac |
| By: | Elcyon Caiado Rocha Lima; Ricardo Sandes Ehlers |
| Abstract: | When analyzing the demand for money in high inflation processes it has been suggested [Tourinho (1995)] that we should consider not only the effects of changes in the expected inflation rate but also changes in the expected variability of inflation. The model in Lima & Ehlers (1993) is extended here to deal more accurately with the uncertainty produced by the variability of inflation: a term proportional to the expected quadratic error in forecasting inflation is included in the demand for money equation. The problem of what estimate to use for the expected variance of inflation, is addressed by a Bayesian estimation procedure. Model parameters are allowed to vary slowly over time and Bayesian monitoring and intervention procedures are then used to cater for structural changes. We estimate the model with data ranging from first quarter of 1973 to fourth quarter of 1995, thus taking into account many stabilization plans for the Brazilian economy. We find that the presence of variance of inflation in our money demand equation is important in two ways: a) it prevents the monitor from signaling again in 1990 after an intervention period in 1986 and b) its effect turns out to be significant after 1986 when many stabilization plans contributed to increase uncertainty. Em trabalho recente Tourinho (1995) sugeriu que, em processos de inflação elevada, deve ser considerada não somente a esperança da taxa de inflação mas também a variância esperada da taxa de inflação O modelo apresentado em Lima & Ehlers (1993) é aqui estendido para lidar com a incerteza produzida pela variabilidade da taxa de inflação : um termo proporcional à esperança do erro quadrático médio, na previsão da taxa de inflação, é incluído na equação de demanda por moeda. O problema de que estimativa utilizar, para a variância esperada da taxa de inflação, é resolvido através de um procedimento de estimação Bayesiano. É permitida a alteração dos parâmetros do modelo ao longo do tempo e são adotados procedimentos de monitoramento e intervenção Bayesianos para detectar-se mudanças estruturais. O modelo foi estimado com dados trimestrais entre o primeiro trimestre de 1973 e o quarto trimestre de 1995, e portanto considerando-se os diversos planos recentes de estabilização da economia Brasileira. Nós concluímos que a presença da variância esperada da taxa de inflação, na equação de demanda por moeda, é importante por duas razões principais: a) ela impede que o monitor sinalize em 1990 após uma intervenção no modelo em 1986 e b) o seu efeito se torna significante depois de 1986 quando diversos planos de estabilização contribuíram para aumentar a incerteza a respeito da taxa de inflação. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0067&r=mac |
| By: | Rodrigo Pereira |
| Abstract: | In this paper I assess empirically the sign of the uncertainty-investment relation in Brazil within a quadratic adjustment cost model. It is shown that these variables are negatively related in the Brazilian economy. The implication is that investment can be enlarged with the adoption of a sustainable macroeconomic policy that rules out uncertainty-yielding shocks, like huge devaluation in domestic currency, or defaults in internal and external debts. I also propose a method for estimating the quadratic adjustment cost model when the endogenous variable is I(2) and the forcing variables are I(1). As long as capital stock is typically an I(2) variable, the econometric insight seems particularly suited for models of investment. Neste artigo é avaliado empiricamente o sinal da relação entre investimento e incerteza no Brasil, utilizando-se do arcabouço dos modelos com custo de ajustamento quadrático. Mostra-se que essas variáveis são negativamente relacionadas na economia brasileira. A implicação é que o nível de investimento pode ser aumentado com a adoção de uma política macroeconômica sustentável capaz de evitar choques que geram incerteza, como grandes desvalorizações no câmbio ou moratórias nas dívidas interna e externa. Propõe-se ainda um método para estimar o modelo com custo de ajustamento quadrático quando a variável endógena é I(2) e as variáveis exógenas são I(1). Dado que o estoque de capital é tipicamente uma variável I(2), o procedimento econométrico parece particularmente apropriado para modelos de investimento. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0085&r=mac |
| By: | Brisne J. V. Céspedes; Elcyon C. R. Lima; Alexis Maka; Mário J. C. Mendonça |
| Abstract: | In this article we use the theory of conditional forecasts to develop a new Monetary Conditions Index (MCI) for Brazil and compare it to the ones constructed using the methodologies suggested by Bernanke and Mihov (1998) and Batini and Turnbull (2002). We use Sims and Zha (1999) and Waggoner and Zha (1999) approaches to develop and compute Bayesian error bands for the MCIs. The new indicator we develop is called the Conditional Monetary Conditions Index (CMCI) and is constructed using, alternatively, Structural Vector Autoregressions (SVARs) and Forward-Looking (FL) models. The CMCI is the forecasted output gap, conditioned on observed values of the nominal interest rate (the Selic rate) and of the real exchange rate. We show that the CMCI, when compared to the MCI developed by Batini and Turnbull (2002), is a better measure of monetary policy stance because it takes into account the endogeneity of variables involved in the analysis. The CMCI and the Bernanke and Mihov MCI (BMCI), despite conceptual differences, show similarities in their chronology of the stance of monetary policy in Brazil. The CMCI is a smoother version of the BMCI, possibly because the impact of changes in the observed values of the Selic rate is partially compensated by changes in the value of the real exchange rate. The Brazilian monetary policy, in the 2000:9- 2005:4 period and according to the last two indicators, has been expansionary near election months. Neste artigo utiliza-se a teoria das previsões condicionais para o desenvolvimento de um novo Índice de Condições Monetárias [Monetary Conditions Index (MCI)] para o Brasil, comparando-o com os índices obtidos seguindo as metodologias sugeridas por Bernanke e Mihov (1998) e Batini e Turnbull (2002). Adicionalmente, desenvolvem-se e calculam-se intervalos de confiança bayesianos para os MCIs, empregando-se a abordagem proposta por Sims e Zha (1999) e Waggoner e Zha (1999). O novo indicador desenvolvido é chamado de Índice de Condições Monetárias Condicional [Conditional Monetary Conditionals Index (CMCI)], e é construído utilizando-se alternativamente os modelos de Auto-regressão Vetorial Estrutural [Structural Vector Autoregressions (SVARs) e Antecipativo [Forward-Looking (FL). O CMCI é a previsão do hiato do produto, condicionada aos valores observados da taxa de juros nominal (taxa Selic) e da taxa de câmbio real. Mostra-se que o CMCI, comparado ao MCI desenvolvido por Batini e Turnbull (2002), é um melhor indicador do estado da política monetária porque leva em consideração a endogeneidade das variáveis envolvidas na análise. O CMCI e o MCI Bernanke-Mihov (BMCI), apesar das diferenças conceituais, estabelecem uma cronologia semelhante para o estado da política monetária no Brasil. O CMCI é uma versão suavizada do BMCI, provavelmente porque o impacto de mudanças nos valores observados da taxa Selic é parcialmente compensado por mudanças no valor da taxa de câmbio real. De acordo com o CMCI e o BMCI, no período entre setembro de 2000 e abril de 2005, a política monetária brasileira tem sido expansionista nos meses próximos às eleições. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0160&r=mac |
| By: | Marcos Chamon |
| Abstract: | The 90s have been quite an eventful decade in Brazilian macroeconomics. There have been recessions, recoveries, hyperinflation, trade liberalization, many failed stabilization attempts, a successful one, exchange-rate overvaluation, just to name a few. Despite all these, since the beginning of this decade there has existed a strong trend for rising wages and declining employment in the manufacturing sector, which is somewhat surprising since historically employment and wages have moved together. The very same period is marked by an astonishing productivity growth in manufacturing that can do much to explain how employment and wages behaved the way they did. This paper explores this productivity issue, making some conjectures as to its origins and how it can shed light into this problem. This paper will also address the issue of substitution of labor by capital, and to which extent it can account for the decline in manufacturing employment. While data availability prevents us from obtaining a good estimate of the substitution between labor and capital, it is still possible to obtain rough measures of the cross-price elasticity of labor and capital. With those estimates and data on relative input price changes it is possible to assess the role of factor substitution in the observed decline in employment. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0075&r=mac |
| By: | Ricardo Paes de Barros; Carlos Corseuil; Rosane Mendonça; Maurício Cortez Reis |
| Abstract: | Over the past seventeen years the Brazilian macroeconomic performance has been considerably weaker than in previous decades. Inflation reached unprecedented levels and economic growth declined considerably. Despite the overall perception that macroeconomic performance is closely related to poverty and inequality, very few quantitative estimates are available in Brazil and elsewhere about the relationship between macroeconomic performance and income distribution. In this study we use monthly time series to access the relation between this weak and unstable macroeconomic performance on poverty and inequality. The estimates using aggregated and pooling time series reveal that inflation seems to have little association with inequality and particularly with poverty. However, since the variation in the monthly inflation rate over the past seventeen years has been very substantial, the associated variation of poverty became quite significant. As far as the impact of unemployment is concerned, the estimates indicate relatively weak relation between this variable and poverty or inequality. Finally, time-varying regressions indicate that the major results of this study, although applicable to most of the period analyzed, may not necessarily reflect the current situation. In fact, the time-varying estimates reveal a sharp recent decline in the association between unemployment and poverty or inequality, consistent with the drop in poverty and inequality in 1995, despite a considerably increase in the unemployment rate. There is also evidence that the relation between inflation and poverty or inequality declines as inflation accelerates. Nas últimas duas décadas o Brasil experimentou uma performance macroeconômica muito aquém da registrada para o período imediatamente anterior. A inflação alcançou níveis sem precedentes e o crescimento econômico desacelerou consideravelmente. Apesar da percepção generalizada de que a performance macroeconômica estaria relacionada aos níveis de pobreza e desigualdade, existem poucas estimativas quantitativas sobre esta relação para o Brasil, ou mesmo para qualquer outro país. Neste artigo usamos séries de tempo mensais para estimar a relação entre a performance macroeconômica e os níveis de pobreza e desigualdade no Brasil. As estimativas usando tanto dados agregados como um pooling de séries regionais revelam que a inflação parece estar pouco relacionada com pobreza e desigualdade. No entanto, quando se leva em consideração que a variação na taxa mensal de inflação foi bastante alta, mostra-se que as variações correspondentes nos níveis de pobreza e desigualdade são significativos. Com relação ao desemprego as estimativas indicam uma tênue relação desta variável com pobreza e desigualdade. Finalmente, quando se considera a possibilidade de estas relações estimadas variarem ao longo do período analisado, foi identificada uma mudança nas estimativas relacionadas ao período mais recente (pós-real). De fato, a relação entre desemprego e pobreza ou desigualdade se torna bem mais tênue no final do período, o que parece consistente com a queda da pobreza observada a partir de 1995 quando o desemprego assume uma trajetória ascendente. Também há evidências de que a relação entre inflação e pobreza ou desigualdade é mais fraca nos períodos de aceleração inflacionária. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0093&r=mac |
| By: | Siekmann, Helmut |
| Abstract: | The paper traces the developments from the formation of the European Economic and Monetary Union to this date. It discusses the fact that the primary mandate of the European System of Central Banks (ESCB) is confined to safeguarding price stability and does not include general economic policy. Finally, the paper contributes to the discussion on whether the primary law of the European Union would support a eurozone exit. The Treaty of Maastricht imposed the strict obligation on the European Union (EU) to establish an economic and monetary union, now Article 3(4) TEU. This economic and monetary union is, however, not designed as a separate entity but as an integral part of the EU. The single currency was to become the currency of the EU and to be the legal tender in all Member States unless an exemption was explicitly granted in the primary law of the EU, as in the case of the UK and Denmark. The newly admitted Member States are obliged to introduce the euro as their currency as soon as they fulfil the admission criteria. Technically, this has been achieved by transferring the exclusive competence for the monetary policy of the Member States whose currency is the euro on the EU, Article 3(1)(c) TFEU and by bestowing the euro with the quality of legal tender, the only legal tender in the EU, Article 128(1) sentence 3 TFEU. |
| Keywords: | economic and monetary union,euro,monetary policy,economic policy |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewh:26&r=mac |
| By: | Andersen, Torben M. (Aarhus University); Kristoffersen, Mark Strom (Aarhus University); Svarer, Michael (Aarhus University) |
| Abstract: | Unemployment insurance schemes include conditions on past employment history as part of the eligibility conditions. This aspect is often neglected in the literature which primarily focuses on benefit levels and benefit duration. In a search-matching framework we show that benefit duration and employment requirements are substitute instruments in affecting job search incentives and thus gross unemployment. We analyse the optimal design of the unemployment insurance system (benefit levels, duration and employment requirements) under a utilitarian social welfare function. Simulations show that a higher insurance motive captured by more risk aversion implies higher benefit generosity and more lax employment requirements but also shortened benefit duration. |
| Keywords: | reentitlement effects, unemployment insurance, business cycle |
| JEL: | E32 H3 J65 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8991&r=mac |
| By: | Ajax R. B. Moreira; Marco A. F. H. Cavalcanti |
| Abstract: | Based on three versions of a small macroeconomic model for Brazil, this paper presents empirical evidence on the effects of parameter uncertainty on monetary policy rules and on the robustness of optimal and simple rules over different model specifications. By comparing the optimal policy rule under parameter uncertainty with the rule calculated under purely additive uncertainty, we find that parameter uncertainty should make policymakers react less aggressively to the economy’s state variables, as suggested by Brainard’s “conservatism principle”, although this effect seems to be relatively small. We then informally investigate each rule’s robustness by analyzing the performance of policy rules derived from each model under each one of the alternative models. We find that optimal rules derived from each model perform very poorly under alternative models, whereas a simple Taylor rule is relatively robust. We also find that even within a specific model, the Taylor rule may perform better than the optimal rule under particularly unfavorable realizations from the policymaker’s loss distribution function. Este texto analisa a robustez e as propriedades de estabilização de regras de política monetária no contexto de um pequeno modelo macroeconométrico para o Brasil. Estimam-se três versões do modelo “padrão” da literatura recente sobre regras de política monetária. Em cada caso, a regra ótima de política é calculada sob incerteza puramente aditiva e sob incerteza multiplicativa. Observa-se que a incerteza sobre os parâmetros do modelo atenua os coeficientes da função de reação ótima das autoridades, conforme sugerido pelo “princípio do conservadorismo” de Brainard — ainda que esse efeito seja relativamente pequeno. A robustez das regras de política é investigada informalmente por intermédio da análise do desempenho da regra ótima de cada modelo no contexto de cada um dos modelos alternativos. Os resultados mostram que as regras ótimas derivadas de um modelo específico tendem a apresentar desempenho muito fraco sob os demais modelos, em contraste com uma regra de Taylor simples, que se revela relativamente robusta. Finalmente, mostra-se que, mesmo no contexto de um modelo específico, a regra de Taylor pode ter desempenho superior à regra ótima, sob realizações particularmente desfavoráveis da distribuição de probabilidade da função de perda das autoridades. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0100&r=mac |
| By: | Jose De Gregorio (Peterson Institute for International Economics) |
| Abstract: | Latin America’s recent economic performance has been disappointing. After a very strong recovery from the Great Recession, growth has slowed considerably, and prospects for 2015 are dim. Among the seven largest economies in the region, output is expected to contract in Argentina, Brazil, and Venezuela, and Chile, Colombia, Mexico, and Peru are projected to grow by only about 3 percent. The decline was not caused by external factors but was mostly cyclical in nature and a result of low productivity. Although monetary and fiscal policies may still have a role in supporting demand in some instances, the main problem in the region is not a lack of demand but low productivity growth. Efforts must be made to foster productivity. Institutional weakness must be addressed and inequality reduced if sustainable high growth is to resume. |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb15-6&r=mac |
| By: | Andrea Nobili (Bank of Italy); Andrea Orame (Bank of Italy) |
| Abstract: | In this paper we test for the potential bias in the estimated contribution of a supply restriction on lending to enterprises, as captured by the assessment of credit standards provided by the banks participating in the Eurosystem Bank Lending Survey (BLS banks). For Italy, we combine the information provided by the relatively small panel of large banking groups participating in the Eurosystem survey with the replies obtained from the non-overlapping and wider group of banks participating in the Regional Bank Lending Survey (non-BLS banks) carried out by the Bank of Italy. We find evidence of a limited upward bias in the estimated contribution of a tightening in credit standards from using the information for the BLS-only banks. This outcome mainly reflects a lower estimated sensitivity of lending growth to the considered indicators of a supply restriction for the non-BLS banks. The Eurosystem Bank Lending Survey, therefore, continues to be a timely and important source of information over the credit cycle for policymakers. |
| Keywords: | supply of credit, banks, Eurosystem BLS, Regional Bank Lending Survey |
| JEL: | G21 E51 E58 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_266_15&r=mac |
| By: | Henzel, Steffen; Lehmann, Robert; Wohlrabe, Klaus |
| Abstract: | We tackle the nowcasting problem at the regional level using a large set of indicators (regional, national and international) for the years 1998 to 2013. We explicitly use the ragged-edge data structure and consider the different information sets faced by a regional forecaster within each quarter. It appears that regional survey results in particular improve forecasting accuracy. Among the 10% best performing models for the short forecasting horizon, one fourth contain regional indicators. Hard indicators from the German manufacturing sector and the Composite Leading Indicator for Europe also deliver useful information for the prediction of regional GDP in Saxony. Unlike national GDP forecasts, the performance of regional GDP is similar across different information sets within a quarter. |
| Keywords: | nowcasting, regional gross domestic product, bridge equations, regional economic forecasting, mixed frequency |
| JEL: | C22 C52 C53 E37 R11 |
| Date: | 2015–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63714&r=mac |
| By: | Ben Ali, Mohamed Sami; Intissar, Timoumi; Zeitun, Rami |
| Abstract: | In this paper, the authors analyze the relationship between banking concentration and financial stability for a sample of 173 developed and developing countries over the period 1980-2011. First, they empirically examined the direct effect of banking concentration on financial stability by using a panel logit model. Second, the authors investigated the indirect effect through which concentration may affect stability. Their findings provide support for the existence of both concentration-stability and concentration-fragility channels. However, the authors report the absence of any direct effect of banking concentration on the occurrence of financial stability in our sample. When considering heterogeneity across countries, their results help confirm the stabilizing effect of concentration on financial stability for developing countries. However, the concentration-fragility hypothesis does not hold for these countries. They also confirm the existence of both effects regarding concentration: the stabilizing and destabilizing effect of concentration on financial stability. |
| Keywords: | Banking structure,Financial stability,Panel logit,GMM model |
| JEL: | E31 E3 C33 P44 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201522&r=mac |
| By: | Sanches, Daniel R. (Federal Reserve Bank of Philadelphia) |
| Abstract: | Supersedes Working Paper 13-32/R. Monetary economists have long recognized a tension between the benefits of fractional reserve banking, such as the ability to undertake more profitable (long-term) investment opportunities, and the difficulties associated with it, such as the risk of in-solvency for each bank and the associated losses to bank liability holders. I show that a specific banking arrangement (a joint-liability scheme) provides an effective mechanism for ensuring the ex-post transfer of reserves from liquid banks to illiquid banks, so it is possible to select a socially efficient reserve ratio in the banking system that preserves the safety of bank liabilities as a store of value and maximizes the rate of return paid to bank liability holders. |
| Keywords: | Fractional reserve banking; Reserve management; Risk sharing |
| JEL: | E42 G21 |
| Date: | 2015–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:15-20&r=mac |
| By: | Guillaume Bousquet; Christian Daude; Christine de la Maisonneuve |
| Abstract: | Colombia has engaged in a sustained process of fiscal decentralisation over the past decades. This paper analyses three aspects of fiscal performance for Colombia’s departments. First, it studies the sustainability aspects of subnational finances by estimating a fiscal reaction function. Evidence is presented that the current framework is conducive to fiscal sustainability, especially after the reforms in the late 1990s and early 2000s. Second, the paper analyses the impact of transfers and oil and mining royalties and the effort to raise own tax revenues at the departmental level. Overall, there is little evidence of a negative effect of transfers from the central government on departmental tax revenue, the so-called “fiscal fatigue”. Finally, the paper presents evidence of a limited degree of risk sharing of departmental idiosyncratic shocks, as transfers from the central government are mostly pro-cyclical. This Working Paper relates to the 2014 OECD Economic Survey of Colombia. (www.oecd.org/eco/surveys/economic-survey-colombia.htm)<P>Décentralisation budgétaire en Colombie : Nouveaux résultats concernant la viabilité, le partage des risques et la « fatigue budgétaire »<BR>La Colombie s’est engagée dans un processus soutenu de décentralisation budgétaire au cours des dernières décennies. Ce papier analyse trois aspects de la performance budgétaire des départements Colombiens. Premièrement, il évalue la viabilité des finances infranationales en estimant une fonction de réaction budgétaire. Les résultats montrent que le cadre actuel est favorable à la viabilité budgétaire, particulièrement à la suite des réformes de la fin des années 1990 et du début des années 2000. Deuxièmement, le papier analyse l’impact des transferts et des royalties du secteur pétrolier et minier ainsi que l’effort des départements pour collecter leurs propres recettes fiscales. Dans l’ensemble, l’analyse démontre peu d’effet négatif des transferts du Gouvernement central sur les recettes fiscales des départements, ce qu’on appelle une « fatigue budgétaire ». Pour finir, l’analyse démontre un degré limité de partage des risques face à des chocs idiosyncratiques car les transferts du gouvernement central sont, le plus souvent, pro-cycliques. Ce document de travail se rapporte à l’Étude économique 2014 de l’OCDE sur la Colombie (www.oecd.org/fr/eco/etudes/etude-econom ique-colombie.htm). |
| Keywords: | fiscal reaction function, risk sharing, royalties, subnational finances, fiscal fatigue, transfers, fonction de réaction budgétaire, transferts, Finances infranationales, fatigue budgétaire, partage des risques, royalties |
| JEL: | C1 E62 H7 |
| Date: | 2015–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1202-en&r=mac |
| By: | Rodrigo Barbone Gonzalez; Joaquim Lima; Leonardo Marinho |
| Abstract: | We re-evaluate the proposed framework of the Basel Committee on Banking Supervision (BCBS) to look into the credit-to-GDP gap as a leading indicator related to the Countercyclical Capital Buffer (CCB) and propose an alternative approach focusing at credit-to-GDP growth. We follow earlier work that the Hodrick-Prescott (HP) filter, especially with the proposed smoothing factor calibration, HP(400k), could possibly create spurious cycles. Moreover, it would not properly fit short credit series. With that in mind, we estimate Bayesian STMs for 34 countries and evaluate on-line (one-sided) estimates of their state components as well as other variables derived from their joint posterior distributions to anticipate crisis. The probabilities associated with the slope of the credit-to-GDP estimated using a one-sided STM have lower noise-to-signal ratios (NS) than the credit-to-GDP gap, especially considering a robustness exercise comprise of short series. The slope of the one-sided HP(150), which is simpler but closely related to our STM in its gain function, also performs better in anticipating crisis both in short and long series when compared to the credit-to-GDP gap. Finally, we put forward an exercise of CCB using the last available data point and our five leading indicators in all 34 countries |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:bcb:wpaper:384&r=mac |
| By: | Fernanda Mazzotta; Lavinia Parisi (-) |
| Abstract: | The paper examines simultaneously the leaving home and the employment decision of young Italians (aged 18-34). Stylized facts and previous studies have shown that when studying leaving home decision in Italy the probability of finding a job should also be analysed. The sample consists of young Italians (aged 18-34) drawn from European Union Statistics on Income and Living Conditions (EU-SILC) for the period 2004-2011, thus the time span gives us the possibility to look at individuals before and after the economic crisis. Moreover, the paper analyses the association between the economic status of the family of origin and the nest-leaving decision. We have estimated a bivariate probit model for the probability of leaving home and being employed allowing the error terms to be correlated. Results have shown that employment is a key factor to escape from parental home. According to the existing literature, individuals from richer family have higher probability of leaving home. As expected, after 2008 young Italians are less likely to leave parental home and to be employed. |
| Keywords: | Nest-leaving, Employment, Family Background, Italy |
| JEL: | E24 J12 I20 |
| Date: | 2015–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:crj:dpaper:8_2015&r=mac |
| By: | Siekmann, Helmut |
| Abstract: | The Treaty of Maastricht imposed the strict obligation on the European Union (EU) to establish an economic and monetary union, now Article 3(4) TEU. This economic and monetary union is, however, not designed as a separate entity but as an integral part of the EU. The single currency was to become the currency of the EU and to be the legal tender in all Member States unless an exemption was explicitly granted in the primary law of the EU, as in the case of the UK and Denmark. The newly admitted Member States are obliged to introduce the euro as their currency as soon as they fulfil the admission criteria. Technically, this has been achieved by transferring the exclusive competence for the monetary policy of the Member States whose currency is the euro on the EU, Article 3(1)(c) TFEU and by bestowing the euro with the quality of legal tender, the only legal tender in the EU, Article 128(1) sentence 3 TFEU. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:imfswp:89&r=mac |
| By: | Edgar Cruz (Facultat d'Economia i Empresa; Universitat de Barcelona (UB)) |
| Abstract: | Empirical evidence suggests that the differences in rates of technical progress across sectors are time-variant, implying that the bias in technological change is not constant. In this paper, we analyze the implications of this non-constant sectoral biased technical change for structural change and we assess whether this is an important factor behind structural transformations. To this end, we develop a multi-sectoral growth model where TFP growth rates across sectors are non-constant. We calibrate our model to match the development of the U.S. economy during the twentieth century. Our findings show that, by assuming non-constant biased technical change, a purely technological approach is able to replicate the sectoral transformations in the U.S. economy not only after but also prior to the World War II. |
| Keywords: | Multi-sector growth model, Structural change, Sector biased technical change, Baumol effect. |
| JEL: | O41 O47 O14 E29 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ewp:wpaper:324web&r=mac |
| By: | Xi Li (Department of Accounting, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology); Xuewen Liu (Department of Finance, Hong Kong University of Science and Technology); Yong Wang (Department of Economics, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology) |
| Abstract: | Despite consistently lower productivity, China’s state-owned enterprises (SOEs) exhibited higher profitability than non-SOEs after 2001 while the opposite was true in the 1990s, even with markets becoming increasingly liberalized and GDP growth remaining high throughout the whole period. To address this growth puzzle, we develop a general-equilibrium model based on the following under-appreciated vertical structure featured in China’s state capitalism: SOEs monopolize key upstream industries, whereas downstream industries are largely open to private competition. We show how the upstream SOEs extract rents from the liberalized downstream industries in the process of structural change and globalization. The unprecedented prosperity of SOEs is thus symptomatic of the incompleteness of market oriented reforms, distorting factor prices, impeding structural change, depressing GDP, and reducing public welfare. We also explain how this vertical structure emerged endogenously, and why this development model of state capitalism is not sustainable. General implications for other countries are also discussed. |
| Keywords: | structural change, growth and development, state capitalism, Chinese economy, state-owned enterprises |
| JEL: | E02 E60 O10 O43 P31 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:hku:wpaper:201512&r=mac |
| By: | Yamamura, Eiji |
| Abstract: | Based on survey data from Japan, empirical results show that stock prices in the graduation year of university students are negatively associated with the probability that those individuals will consider suicide many years after graduation. |
| Keywords: | Graduation year; Recession; Stock price; Suicide; Subjective perception. |
| JEL: | E60 I12 I39 Z10 |
| Date: | 2015–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63848&r=mac |
| By: | Eustáquio J. Reis; Marco Antônio F. H. Cavalcanti; Alexandre Samy de Castro; José Luiz Rossi Jr; Emerson Rildo de Araújo; Beatriz Muriel Hernandez |
| Abstract: | This paper presents the latest version of the annual econometric model for the Brazilian economy developed by the Group of Macroeconomic Analysis and Modelling (Gamma) at IPEA/DIPES. The model is designed to make medium run projections and policy simulations. The specification of the model is basically Keynesian. Estimation features include the use of various time series methods, such as FIML (full information maximum likelihood) cointegration analysis and time varying parameters, besides OLS and instrumental variables estimation. In general, the development of the model’s equations has explicitly tried to ensure desirable long-run properties as well as reasonable short-run dynamics. Este texto apresenta a última versão do modelo econométrico anual da economia brasileira desenvolvido pelo Gamma (Grupo de Análise e Modelagem Macroeconômica) do IPEA/DIPES. O modelo destina-se à realização de projeções e simulações de política econômica de médio e longo prazos. A especificação do modelo é basicamente keynesiana. Os procedimentos econométricos incluem diversos métodos de séries temporais, tais como análise de co-integração e modelos com parâmetros variáveis no tempo, bem como estimação por MQO e variáveis instrumentais. O desenvolvimento das equações visou, em geral, à obtenção de propriedades de longo prazo desejáveis do ponto de vista teórico, além de dinâmica de curto prazo consistente com os dados. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0081&r=mac |
| By: | Marco S. Matsumura |
| Abstract: | We use macro finance models to study the interaction between macro variables and the Brazilian sovereign yield curve using daily data. We calculate the model implied default probabilities and a measure of the impact of macro shocks on the probabilities. An extension of the Dai-Singleton identification strategy for Gaussian models with latent and observable factors is described in order to estimate our models. Among the tested variables, VIX is the most important macro factor affecting short term bonds and default probabilities and the Fed short rate is the most important factor affecting the long term default probabilities. Utilizamos modelos de macrofinanças para estudar a interação entre variáveis macro e a curva de juros soberana brasileira usando dados diários. Calculamos as probabilidades de default implícitas do modelo e uma medida do impacto de choques macro nas probabilidades. Uma extensão da estratégia de identificação de Dai e Singleton para modelos gaussianos com fatores latentes e observáveis foi descrita de modo a estimar nossos modelos. Entre as variáveis testadas, VIX é o fator macro mais importante afetando títulos e probabilidades de default de curto prazo, e a taxa curta do Federal Reserve (Fed) é o fator mais importante que afeta probabilidades de longo prazo. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0173&r=mac |
| By: | Marianne, Ojo |
| Abstract: | Do jurisdictions with concentrated ownership structures require less reliance on audits as corporate governance mechanisms and devices? Why do concentrated ownership structures still prevail in certain jurisdictions which are considered to be “market based corporate governance systems”? More importantly, if failures and causes of recent financial crises are principally attributable to the fact that market based corporate governance mechanisms, such as financial regulators, are not optimally performing their functions, why is the role of audits still paramount in such jurisdictions? These are amongst some of the questions which this paper attempts to address. The ever increasing growth of institutional investors in jurisdictions – particularly those jurisdictions with predominantly concentrated ownership structures, with their increased stakes in corporate equity, also raises the issue of accountability and the question as regards whether increased accountability is fostered where institutional investors assume a greater role – as opposed to position which exists where increased stake of family holdings (family controlled structures) arises. |
| Keywords: | audit quality; corporate governance; concentrated ownership structures; capital market economies; institutional investors |
| JEL: | D8 E5 G3 K2 M4 |
| Date: | 2013–12–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63884&r=mac |
| By: | Nicole Jonker; Mirjam Plooij; Johan Verburg |
| Abstract: | Do consumers change their payment behaviour after being exposed to a public campaign that encourages them to use their debit cards more often? We analyse the impact of such a campaign that started in 2007, using weekly debit card transaction data between 2005 and 2013. The overall results show positive effects of a national campaign to promote debit card usage, both in the short and in the long run. Debit card usage increased by 2%. The effects are the most significant at the early stages of the campaign, while appearing to wear off after a few years of interventions. The results suggest that high campaign intensity had a positive impact, as did a focus on certain large retail chains. |
| Keywords: | debit cards; payment behaviour; social marketing; cost efficiency; safety |
| JEL: | D24 E42 G21 M31 M37 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:470&r=mac |
| By: | Michal Bernard Pietrzak (Nicolaus Copernicus University) |
| Abstract: | According to Tobler’s first law of geography, one of the key issues in doing the regional research is considering spatial location. Therefore, the article presents a proposal for modifying the TOPSIS method, which allows the spatial dependence to be considered in the research. The composite index calculated by means of the modified TOPSIS method allows to determine the trend in the level of the development of the phenomenon under study, assuming the impact of the spatial mechanisms. The TOPSIS method defined in that way has been applied in the spatial analysis of the situation on the labour market in Poland. |
| Keywords: | regional research, spatial econometrics, spatial dependence, TOPSIS method |
| JEL: | C21 E24 J01 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no111&r=mac |
| By: | Zou, Lele; Xue, Jinjun; Fox, Alan; Meng, Bo; Shibata, Tsubasa |
| Abstract: | Chinese government commits to reach its peak carbon emissions before 2030, which requires China to implement new policies. Using a CGE model, this study conducts simulation studies on the functions of an energy tax and a carbon tax and analyzes their effects on macro-economic indices. The Chinese economy is affected at an acceptable level by the two taxes. GDP will lose less than 0.8% with a carbon tax of 100, 50, or 10 RMB/ton CO2 or 5% of the delivery price of an energy tax. Thus, the loss of real disposable personal income is smaller. Compared with implementing a single tax, a combined carbon and energy tax induces more emission reductions with relatively smaller economic costs. With these taxes, the domestic competitiveness of energy intensive industries is improved. Additionally, we found that the sooner such taxes are launched, the smaller the economic costs and the more significant the achieved emission reductions. |
| Keywords: | China, Energy policy, Environmental policy, Taxation, Climatic change, Econometric model, Economic conditions, Energy tax, Carbon tax, Climate change, CGE model, Energy intensive industry |
| JEL: | C13 C15 E37 J21 K32 Q54 C54 O44 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper487&r=mac |
| By: | Ajax R. B. Moreira; Hélio S. Migon |
| Abstract: | The monetary authorities need a future measure of in°ation trend to keep on tracking the in°ation on target. Many alternatives of the core in°ation measure have appeared in the recent literature pretending to avoid the de¯ciencies of the usual headline in°ation index as a predictor. This price index is de¯ned as some weighted average of the individual price change of a list of goods and services. To use it as the future in°ation indicator is criticized in the literature, as far as the products are heterogeneous in respect to the variability and some of the involved prices have relevant seasonal movements. A multivariate model including simultaneously the seasonal e®ects of each component of the price index and a common trend - the core in°ation - will be developed in this paper. The model will be phrased as a dynamic model and a robust sequential ¯lter will be introduced. The posterior and predictive distributions of the quantities of interest will be evaluated via stochastic simulation techniques, MCMC - Monte Carlo Markov Chain. Di®erent models will be compared using the minimum posterior predictive loss approach and many graphical illustrations will be presented. |
| Keywords: | Core in°ation, Robust Kalman Filter, Common Trend, In°uence function. As autoridades monetárias necessitam de uma previsão da tendência futura da inflação para agir preventivamente sobre a economia. Na literatura encontram-se muitas propostas para o núcleo da inflação que evitam algumas das deficiências do índice de preços usual como um previsor da inflação futura. O índice de preços é definido como uma soma ponderada das taxas de variação de preços de uma lista de bens e serviços. A utilização desse índice como um indicador da inflação futura é criticada na literatura porque a variabilidade de preços dos produtos é heterogênea, e alguns dos preços apresentam componente sazonal relevante. Este artigo propõe um modelo multivariado que descreve os movimentos dos preços dos produtos com uma componente comum, e componentes sazonais e irregulares definidas para cada elemento da lista de bens e serviços do índice de preços. É um modelo dinâmico que utiliza um filtro seqüencial robusto. As distribuições preditivas a posteriori das quantidades de interesse serão avaliadas utilizando a técnica estocástica do Monte Carlo Markov Chain (MCMC). Os diferentes modelos serão comparados utilizando como critério minimizar a variância preditiva. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipe:ipetds:0104&r=mac |
| By: | Guiso, Luigi; Sapienza, Paola; Zingales, Luigi |
| Abstract: | Entering a currency union without any political union European countries have taken a gamble: will the needs of the currency union force a political integration (as anticipated by Monnet) or will the tensions create a backlash, as suggested by Kaldor, Friedman and many others? We try to answer this question by analyzing the cross sectional and time series variation in pro-European sentiments in the EU 15 countries. The 1992 Maastricht Treaty seems to have reduced the pro-Europe sentiment as does the 2010 Eurozone crisis. Yet, in spite of the worst recession in recent history, the Europeans still support the common currency. Europe seems trapped: there is no desire to go backward, no interest in going forward, but it is economically unsustainable to stay still. |
| Keywords: | euro; euro crisis; European Union |
| JEL: | E42 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10559&r=mac |
| By: | Luigi Guiso; Paola Sapienza; Luigi Zingales |
| Abstract: | Entering a currency union without any political union European countries have taken a gamble: will the needs of the currency union force a political integration (as anticipated by Monnet) or will the tensions create a backlash, as suggested by Kaldor, Friedman and many others? We try to answer this question by analyzing the cross sectional and time series variation in pro-European sentiments in the EU 15 countries. The 1992 Maastricht Treaty seems to have reduced the pro-Europe sentiment as does the 2010 Eurozone crisis. Yet, in spite of the worst recession in recent history, the Europeans still support the common currency. Europe seems trapped: there is no desire to go backward, no interest in going forward, but it is economically unsustainable to stay still. |
| JEL: | E42 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21121&r=mac |
| By: | Adam P. Balcerzak (Nicolaus Copernicus University, Poland) |
| Abstract: | In the year 2015 the European Union has reached the halfway of implementation of Europe 2020 strategy, which is aimed at forming the conditions for sustainable and inclusive economy delivering high levels of employment, productivity and social cohesion. In this context the aim of the paper is to analyze the level of fulfillment its aims with special concentration on diversity between New Member States that joined European Union in 2004 and 2007 (EU-10) and Old European Union Members (EU-15). The empirical part of the paper is based on the taxonomic research with application of zero-unitarization method. In order to make the dynamic analysis for the years 2004-2013 the constant reference point for the whole period was used. The evaluation was based on the Eurostat Europe 2020 indicators. The analysis showed significant diversity between New and Old Member States. However, in the years 2004-2013 EU-10 had made an important progress in the implementation of Europe 2020 strategy. |
| Keywords: | Europe 2020 strategy, multivariate analysis, zero-unitarization method |
| JEL: | C00 E61 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pes:wpaper:2015:no122&r=mac |