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on Open Economy Macroeconomic |
| By: | Sambit Bhattacharyya; Jeffrey G. Williamson |
| Abstract: | This paper studies the distributional impact of commodity price shocks over both the short and very long run. Using a GARCH model, we find that Australia experienced more volatility than many commodity exporting developing countries over the periods 1865-1940 and 1960-2007. A single equation error correction model suggests that commodity price shocks increase the income share of the top 1, 0.05 and 0.01 percents in the short run. THe very top end of the income distribution benefits from commodity booms disproportionately more than the rest of the society. The short run effect is mainly driven by wool and mining and not agricultural commodities. A sustained increase in the price of renewables (wool) reduces inequality whereas the same for non-renewable resources (minerals) increases inequality. We expect the initial distribution of land and mineral resources explains the asymmetric result. |
| Keywords: | commodity price shocks, commodity exporters, top incomes, inequality |
| JEL: | F14 F43 N17 O13 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:oxcrwp:117&r=opm |
| By: | Tiziano Arduini (Sapienza, University of Rome); Giuseppe De Arcangelis (Sapienza, University of Rome); Carlo L. Del Bello (Sapienza, University of Rome) |
| Abstract: | During the 2007-2009 financial crisis the foreign exchange market was characterized by large volatility and wide currency swings. In this paper we evaluate whether during the period of the Great Recession there has been a structural break in the relationship between fundamentals and exchange rates within an early-warning framework. This is done by extending the original data set by Kaminsky and Reinhart (1999) and including not only the most recent period, but also 17 new countries. Our analysis considers two variations of the original early-warning system. First, we propose two new methods to obtain the probability distribution of the early-warning indicator (conditional on the occurrence of a crisis) - one fully parametric and one based on a novel distribution-free semi-parametric approach. Second, we compare the original early-warning indicator with a core indicator that includes only "pseudo-nancial variables" (domestic credit/GDP, the real exchange rate, international reserves and the real interest-rate dierential) and we evaluate their performance not only for currency crises during the Great Recession, but also for the Asian Crisis. All tests make us conclude that "this time is different", i.e. early-warning systems based on traditional macroeconomic variables have not only failed to forecast currency crises during the Great Recession, but have also significantly worsened with respect to the period of the Asian crisis. |
| Keywords: | EarlyWarning Systems, Exchange Rates, Semi-parametric Methods. |
| JEL: | F31 F47 F30 |
| URL: | http://d.repec.org/n?u=RePEc:saq:wpaper:1/11&r=opm |
| By: | Joscha Beckmann; Ansgar Belke; Florian Verheyen |
| Abstract: | This study analyzes the exchange rate pass-through into German import prices based on disaggregated data taken on a monthly basis between 1995 and 2012. Our main contribution is twofold: firstly, we employ various time-series techniques to analyze data for different product categories, and also cointegration techniques to carefully distinguish between shortrun and long-run pass-through coefficients. Secondly, in a panel data approach we estimate time-varying pass-through coefficients and explain their development with regard to various macroeconomic factors. Our results show that long-run pass-through is only partly observable and incomplete, while short-run passthrough shows a more unique character, although heterogeneity across product groups does exist. We are also able to identify several macroeconomic factors which determine changes in the degree of pass-through, which is especially relevant for policymakers. |
| Keywords: | Exchange rate pass-through; Germany; cointegration; time-varying coefficient model |
| JEL: | E31 F10 F14 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0427&r=opm |
| By: | Dwyer, Gerald P; Devereux, John; Baier, Scott L.; Tamura, Robert |
| Abstract: | We examine the relationship of banking crises with economic growth and recessions. Our data cover 21 economies from around the world, most from 1870 to 2009 with the rest starting in 1901 or earlier. The data include capital investment and human capital formation. We have two major findings. First, there is very large heterogeneity in growth of Gross Domestic Product (GDP) and capital investment after banking crises. Most strikingly, twenty-five percent of counties experience no decrease in real GDP per capita in the year of the crisis or the following two years. Some countries see an increase in long run growth after a crisis while others see a fall, with no clear overall pattern. Second, we find clear evidence consistent with Zarnowitz’s Law. If there is a contraction in economic activity after a banking crisis, larger decreases in real GDP per capita are followed by faster subsequent growth. |
| Keywords: | financial crises, banking crises, recessions, Zarnowitz's Law, Zarnowitz's rule |
| JEL: | E32 E44 G01 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:48843&r=opm |
| By: | Mirdala, Rajmund |
| Abstract: | One of the key outcomes of open economy macroeconomics refers to a crucial importance of an investment-saving relation affecting a current account determination. However, despite a relative diversity in exchange rate regimes in European transition economies, there is still a substantial potential to analyze price effects of real exchange rate dynamics on current account adjustments. Rigorous investigation of relative changes in real exchange rates leading paths and associated adjustments in current accounts may reveal causal relationship between real exchange rate dynamics and international competitiveness in order to observe its redistributive effects. This purpose is even more significant provided that economic crisis has intensified cross-country expenditure shifting effects that still provide quite diverse and thus spurious effects on current account adjustments. In the paper we analyze main aspects of current account adjustments in European transition economies. Our main objective is to observe a relationship between real exchange rate dynamics and current account adjustments (in countries with different exchange rate arrangements). From estimated VAR model we calculate responses of the current account to the real exchange rate (REER calculated on CPI and ULC base) shock. To provide more rigorous insight into the problem of the current account adjustments according to real exchange rate dynamics we estimate the model for each particular country employing data for two subsequent periods 2000-2007 and 2000-2012. |
| Keywords: | current account adjustments, real exchange rate dynamics, economic growth, economic crisis, vector autoregression, impulse-response function |
| JEL: | C32 F32 F41 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:48901&r=opm |
| By: | Basu , Kaushik; Stiglitz, Joseph E. |
| Abstract: | As the Eurozone crisis drags on, it is evident that a part of the problem lies in the architecture of debt and its liabilities within the Eurozone and, more generally, the European Union. This paper argues that a large part of the problem can be mitigated by permitting appropriately-structured cross-country liability for sovereign debt incurred by individual nations within the European Union. In brief, the paper makes a case for amending the Treaty of Lisbon. The case is established by constructing a game-theoretic model and demonstrating that there exist self-fulfilling equilibria, which would come into existence if cross-country debt liability were permitted and which are Pareto superior to the existing outcome. |
| Keywords: | Debt Markets,Access to Finance,Banks&Banking Reform,Bankruptcy and Resolution of Financial Distress,Economic Theory&Research |
| Date: | 2013–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6555&r=opm |
| By: | Laurent Gobillon (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales [EHESS] - Ecole des Ponts ParisTech - Ecole normale supérieure de Paris - ENS Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, INED - Institut National d'Etudes Démographiques Paris - INED); François Charles Wolff (INED - Institut National d'Etudes Démographiques Paris - INED, LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272); Patrice Guillotreau (INED - Institut National d'Etudes Démographiques Paris - INED, LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272) |
| Abstract: | This paper investigates spatial variations in product prices using an exhaustive micro dataset on fish transactions. The data record all transactions between vessels and wholesalers that occur on local fish markets in France during the year 2007. Spatial disparities in fish prices are sizable, even after fish quality, time, seller and buyer unobserved heterogeneity have been taken into account. The price difference between local fish markets can be explained to some extent by distance, but mostly by a coast effect (analogous to a border effect in the literature on the law of one price) related to separate location on the Atlantic and Mediterranean coasts. In particular, fish and crustacean prices are 34% higher on the Mediterranean coast. The law of one price is verified for almost all species when considering only local fish markets on the Atlantic coast. |
| Keywords: | Fish ; Commodity price ; Local markets ; Panel data |
| Date: | 2013–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-00849075&r=opm |