|
on Open MacroEconomics |
| By: | Duval, Romain; Vogel, Lukas |
| Abstract: | This paper analyses the importance of real wage rigidities, in particular through their interaction with price stickiness, for optimal monetary policy in a calibrated small open economy DSGE model including oil in production and consumption. Blanchard and Galí (2007a) show real rigidities to introduce a trade-off between stabilising inflation and the welfare-relevant output gap. The present paper complements their findings by showing that the welfare cost of real rigidities can be substantial compared to nominal frictions. In a typical “tale of the second best”, we also show that in the presence of real wage rigidities, price stickiness can be welfare-enhancing. |
| Keywords: | DSGE model; price stickiness; real wage rigidity; oil price shocks |
| JEL: | E30 F41 Q43 |
| Date: | 2007–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:7282&r=opm |
| By: | Joseph P. Daniels (Center for Global and Economic Studies, Marquette University); David D. VanHoose (Hanmaker School of Business, Baylor University) |
| Abstract: | This paper develops and evaluates empirically the implications of a theoretical model of an open economy in which variations in both trade openness and capital mobility can influence the sacrifice ratio. Key predictions forthcoming from the model are that both forms of globalization can independently affect the capital ratio, once the influences of the level of central bank independence and the degree of wage stickiness in nations‘ economies are taken into account. Examination of cross-country data encompassing 58 disinflations for 16 countries yields evidence consistent with these essential predictions of the theoretical framework. |
| Keywords: | Openness, Capital Mobility, Sacrifice Ratio |
| JEL: | F40 F41 F43 |
| Date: | 2007–01 |
| URL: | http://d.repec.org/n?u=RePEc:mrq:wpaper:0701&r=opm |
| By: | Laszlo Goerke; Markus Pannenberg |
| Abstract: | In an open-shop model of trade union membership with heterogeneity in risk attitudes, a worker's relative risk aversion can affect the decision to join a trade union. Furthermore, a shift in risk attitudes can alter collective bargaining outcomes. Using German panel data (GSOEP) and three novel direct measures of individual risk aversion, we find evidence of a significantly positive relationship between risk aversion and the likelihood of union membership. Additionally, we observe a negative correlation between bargained wages in aggregate and average risk preferences of union members. Our results suggest that an overall increase in risk aversion contributes to wage moderation and promotes employment. |
| Keywords: | Employment, membership, risk aversion, trade union |
| JEL: | J |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp88&r=opm |
| By: | Kazuo Mino (Graduate School of Economics, Osaka University) |
| Abstract: | This paper investigates a two-country model of capital accumulation with country-specific production externalities. The main concern of our discussion is to explore the presence of equilibrium indeterminacy in an open-economy setting. In contrast to the existing studies on equilibrium indeterminacy in small-open economies, the present paper demonstrates that opening up international trade and financial interactions between two counties does not necessarily enhance the possibility of indeterminacy of equilibrium. It is shown that the results depend heavily upon not only on the degree of external increasing returns but also on the preference structures. |
| Keywords: | Financial integration, Two-country growth model, Equilibrium determinacy, Preference structure |
| JEL: | F43 O41 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:0805&r=opm |
| By: | Leon Bettendorf (Erasmus University Rotterdam); Hans Dewachter (Cath. University of Leuven) |
| Abstract: | In this paper we identify the effects of ageing on the relative price of nontradeables versus tradeables. We consider two cases. In a first specification, age effects only account for short-run dynamics. An alternative case allows for permanent age effects. Estimating the respective cases by means of an ECM on a panel of OECD countries we find significant effects of demographic composition on the relative prices, even after correcting for the standard explanatory variables. Simulations based on population projections of the UN show that ageing might substantially contribute to inflationary pressures in the near future. |
| Keywords: | relative price of nontradeables; age-specific effects; productivity differentials |
| JEL: | F41 E31 J11 |
| Date: | 2007–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20070064&r=opm |
| By: | Jelle Brouwer; Richard Paap; Jean-Marie Viaene (Erasmus University Rotterdam) |
| Abstract: | This paper considers the nature and the distribution of trade and FDI effects of a potential enlargement of the European Monetary Union (EMU) to the ten countries that obtained EU membership in 2004. Intuitively, the implementation of a single currency for these countries means replacing several fluctuating currencies by a common currency. This gives rise to both “level” and “risk” effects of reduced currency movements on trade and investment. Another factor is the nature of the link between trade and FDI. This is also important not only because cross-border factor flows are becoming increasingly important, but also the international trade literature has long recognized that cross-border factor flows and trade in goods and services can be substitutes or complements. Given this background, one-way and two-way error component gravity models are estimated to examine for these theoretical expectations within a dataset of unbalanced panel data that combines bilateral trade flows among 29 countries and the distribution of outward FDI stocks among these countries (including the 10 new EU members). The data generally cover the period from 1990 to 2004. Our empirical results convincingly support: (i) a complementarity between trade and investment, (ii) a relationship between trade and exchange rate volatility that depends on the sign of bilateral trade balances, (iii) a positive effect of EU on trade and investment, and (iv) a positive effect of EMU on foreign investment. Using a simulation-based technique, we find that estimates of FDI effects of EMU range between 18.5 percent for Poland and 30 percent for Hungary. |
| Keywords: | EMU; exchange rate volatility; foreign investment; trade diversion; vertical integration |
| JEL: | C33 F21 F31 F33 F36 |
| Date: | 2007–10–04 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20070077&r=opm |
| By: | Richard G. Harris (Department of Economics, Simon Fraser University); Peter E. Robertson (School of Economics, The University of New South Wales) |
| Abstract: | How has the USA’s “new economy” productivity boom affected Australia? We consider this question using a dynamic multi-sector growth model of the Australian and USA economies. We find that productivity growth in the USA durables sector generates small but important gains to Australia. We find that the transmission of growth is generated through increased export demand for Agriculture. Consequently we find that the USA’s productivity growth tends to favour Australia’s traditional export sectors. Likewise it increases the relative demand for less skilled labour in Australia and reduces the demand for skilled labour and higher education. |
| Keywords: | Terms of Trade; Productivity; Economic Growth; Human Capital; Computable General Equilibrium Models |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:swe:wpaper:2007-16&r=opm |
| By: | Guido Cozzi |
| Abstract: | If economic agents coordinate on social norms more oriented towards the protection of national industries, an asymmetric in- ternational specialization in the research and development (R&D) arises even in a tariff free world with no a priori differences across countries in endowments, demography or technology. This paper exploits the indifference in the composition of R&D expenditure across sectors of the typical multi-sector Schumpeterian framework (forward-looking decisions, CRS R&D technology and free entry) to construct a theory of the international allocation of innovation and education based on sunspot equilibrium. A role for industrial policies as mere coordination devices emerges in an international Schumpeterian framework. The implications for the relationships between inequality and growth are examined. |
| Keywords: | Schumpeterian Growth Theory, Inequality, International Trade, Social Norms, Indeterminacy, Sunspots. |
| JEL: | O41 O32 D33 F43 |
| URL: | http://d.repec.org/n?u=RePEc:gla:glaewp:2008_02&r=opm |
| By: | Monzur Hossain (American International University Bangladesh) |
| Abstract: | This paper investigates the currency regime choices of six East Asian emerging countries, namely, Indonesia, Korea, Malaysia, Philippines, Singapore and Thailand, for the period 1973-99 from the optimum currency area (OCA), macroeconomic stabilization and currency crisis perspectives. It finds that regime transition dynamics in these countries are statistically insignificant for the period under consideration, but static regime choice is largely consistent with the predictions of international macroeconomics. The empirical results suggest that a more fixed or flexible regime is suitable for these East Asian countries. |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:aiu:abewps:31&r=opm |
| By: | Frank A.G. den Butter (VU University Amsterdam); Christiaan Pattipeilohy (VU University Amsterdam, and Frisch Center, Oslo) |
| Abstract: | A major question in the globalization debate is whether outsourcing and offshoring activities are beneficial to the home country. This paper investigates the effects on productivity and trade from the perspective of transaction costs, using a recent theory on trade in tasks. A production function is estimated for the Netherlands for the period 1972-2001. It suggests that the effect of offshoring manufacturing and services on total factor productivity (TFP) is positive and larger than the effect of R&D on productivity. |
| Keywords: | globalization; offshoring; foreign direct investments; transaction costs; total factor productivity |
| JEL: | F10 F43 O47 |
| Date: | 2007–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20070089&r=opm |