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on Open MacroEconomics |
| By: | Sirin Saracoglu (Department of Economics, METU); Zeynep Akgul (Department of Economics, METU) |
| Abstract: | This paper examines the effects of international capital flows in a small open econ omy utilizing a dynamic general equilibrium framework based on a three-sector Ramsey growth model. In order to analyze the impact of international capital mobility on production, consumption and allocation of resources across three sectors ,two different economic environments are modelled. The first model represents an open economy with capital mobility (a more comprehensive environment),and the second model introduces a closed economy with no capital mobility. Numerical applications of the models use data from the Turkish economy for the year 2002. The numerical results demonstrate that the presence of capital mobility, despite being limited by a borrowing constraint, reverses the impact of economic growth on production and resource allocation. The results also show that while production in the closed economy model simply adjusts to domestic demand, that of the open economy model is not constrained by it. Results further point that although there is positive growth in income and output in both environments, income growth in the capital mobility environment falls short of that in the no capital mobility environment. This result can be attributed to the relatively slower accumulation of capi tal in the former, which may be compensated by a positive rate of technological progress to accompany international capital flows. |
| Keywords: | International Capital Flows,Human Capital, Multisector economy,Borrowing Constraint |
| JEL: | F43 O41 C61 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:met:wpaper:1001&r=opm |
| By: | Zeno Enders (University of Bonn); Philip Jung (University of Mannheim); Gernot J. Mueller (University of Bonn) |
| Abstract: | In this paper we analyze European business cycles before and under EMU. Across the two periods we find 1) a significant decline in real exchange rate volatility, 2) significant changes in cross-country correlations, and 3) the volatility of macroeconomic fundamentals largely unchanged. We develop a two-country business cycle model and show that the calibrated model is able to replicate key features of the data prior to and under EMU. We find that the euro has a strong bearing on the transmission mechanism as cross-country spillovers increase substantially under EMU. As a result, foreign shocks become more and domestic shocks less important in accounting for the (unchanged) volatility of macroeconomic fundamentals. |
| Keywords: | European business cycles, Euro, Optimum Currency Area, EMU, Monetary Policy, Exchange rate regime, Cross-country spillovers |
| JEL: | F41 F42 E32 |
| Date: | 2010–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:onb:oenbwp:162&r=opm |
| By: | Gunther Schnabl (Leipzig University, Grimmaische Straße 12, 04109 Leipzig, Germany.); Stephan Freitag (Leipzig University, Grimmaische Straße 12, 04109 Leipzig, Germany.) |
| Abstract: | The paper discusses global imbalances under the aspect of an asymmetric world monetary system. It identifies the US and Germany as center countries with rising / high current account deficits (US) and surpluses (Germany). These are matched by current account surpluses of countries stabilizing their exchange rates against the dollar (dollar periphery) and current account deficits of countries stabilizing their exchange rate against the euro (euro periphery). Meanwhile, the aggregate current account balance of the euro area has been by and large balanced. The paper finds that changes of world current account positions are affected by the macroeconomic policy decisions both in the centers and peripheries, albeit the centers – due to structural characteristics related to size – are argued to have a higher degree of freedom in macroeconomic policy making. In specific, expansionary monetary policy in the US as well as exchange rate stabilization and sterilization policies in the dollar periphery are found to have contributed to global current account imbalances. Given that the sample period for the analysis extends from 1981-2008, the results for Germany mostly capture the situation before the euro was created. JEL Classification: F31, F32. |
| Keywords: | Global Imbalances, Asymmetric World Monetary System, Twin Deficit, Twin Surplus, International Currency, Sterilization, Granger Causality Tests. |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20101208&r=opm |
| By: | Nabil Aflouk (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII); Jacques Mazier (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII); Jamel Saadaoui (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII) |
| Abstract: | Since the mid-1990s, the world imbalances have increased significantly with a large US current deficit facing Asian surpluses, mainly Chinese. Since 2007, a partial reduction of these imbalances has been obtained, largely thanks to production's decreases, without large exchange rate adjustments. The Asian surpluses have remained important. The objective of this paper is to examine the exchange rate misalignments (ERM) of the main emerging countries in Asia and Latin America since the 1980s, so as to shed light on the 2000s by a long term analysis and compare with the industrialized countries' case. Our results confirm that ERM have been reduced since the mid-2000s at the world level, but the dollar remained overvalued against the East Asian countries, except the yen. Chinese, Indian and Brazilian exchange rate policies have been much contrasted since the 1980s. The Indian rupee has been more often overvalued while a more balance situation prevailed in Brazil only since the 2000s. The Latin American countries have faced wider and more dispersed ERM and current imbalances than East Asian countries. But Argentina, Chile and Uruguay benefits now of undervalued currencies while Mexico is closer to equilibrium. |
| Keywords: | Equilibrium Exchange Rate, Current Account Balance, Macroeconomic Balance, Emerging Countries |
| Date: | 2010–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00484808_v2&r=opm |
| By: | Theresa Grafeneder-Weissteiner (Department of Economics, Vienna University of Economics & B.A.) |
| Abstract: | This article presents a framework within which the effects of demographic change on both agglomeration and growth of economic activities can be analyzed. I introduce an overlapping generation structure into a New Economic Geography model with endogenous growth due to learning spillovers and focus on the effects of demographic structures on long-run equilibrium outcomes and stability properties. First, life-time uncertainty is shown to decrease long-run economic growth perspectives. In doing so, it also mitigates the pro-growth effects of agglomeration resulting from the localized nature of learning externalities. Second, the turnover of generations acts as a dispersion force whose anti-agglomerative effects are, however, dampened by the growth-linked circular causality being present as long as interregional knowledge spillovers are not perfect. Finally, lifetime uncertainty also reduces the possibility that agglomeration is the result of a self-fulfilling prophecy. |
| JEL: | F43 O33 J10 R11 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp132&r=opm |
| By: | Maria Christidou (University Of Macedonia); Theodore Panagiotidis (University Of Macedonia) |
| Abstract: | The effect of the single currency on the Purchasing Power Parity (PPP) hypothesis is examined in this study for the 15 EU countries, vis a vis the US dollar, before and after the advent of the euro. Standard as well as nonlinear unit root tests are employed on the time series dimension. Unit root tests reject PPP and the highest half-lives are observed after the introduction of the single currency. Panel unit root (Pesaran, 2007) and stationarity tests (Hadri and Kurozumi, 2008) that take into account cross-sectional dependence are also estimated. The results remain inconclusive as panel stationarity tests fail to support PPP whereas panel unit root tests fail to reject PPP for the whole sample and for the period before the introduction of the single currency. |
| Keywords: | Purchasing Power Parity, half-life, nonlinear unit roots, panel unit roots, heterogeneity, cross-section dependence |
| JEL: | F31 F3 G15 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:1018&r=opm |
| By: | Kajal Lahiri; Gultekin Isiklar |
| Abstract: | Using a Factor Structural Vector Autoregressive (FSVAR) model and monthly GDP growth forecasts during 1995-2003, we find that Indian economy responds largely to domestic and Asian common shocks, and much less to shocks the from the West. However, when we exclude the Asian crisis period from our sample, the Western factor comes out as strong as the Asian factor contributing 16% each to the Indian real GDP growth, suggesting that the dynamics of transmission mechanism is time-varying. Our methodology on the use of forecast data can help policy makers of especially developing countries with frequent economic crises and data limitations to adjust their policy targets in real time. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:nya:albaec:10-06&r=opm |