The granularity of the Brazilian banking market

Bank size distributions concentrate in a few large banks – the big “grains.” This fact means idiosyncratic shocks at the bank level do not cancel out, thus affecting the business cycle. Here, we present evidence of granularity in the banking market using Brazilian data. We examine the explanatory power of the granular banking residual of the five largest banks on quarterly GDP changes from 2010 to 2019. We conservatively find that shocks to revenues of these top five banks explain nearly one-fifth of GDP fluctuations.     

Development threshold,capital flows,and financial turbulence

We study capital flows in a panel of 130 countries, and derive the implications for the observed patterns of capital flows and capital controls before and into the crisis of 2008–11. We find that the size of capital flows is positively correlated with country's income level. In addition, capital flight has a non-linear relationship with the income level. Using the Hansen threshold estimation, we identify a three-stage threshold effect: for low-income countries (GDP per capita below US$ 3,000), capital flight increases as the income level rises; and only after the economy passes a threshold level (GDP per capita above US$ 5,000), capital flight declines with income. We conclude with a case study of Brazil and Korea, observing that the decisions to implement capital control measures tend to be pushed around by the feedbacks among economic growth, currency appreciation, and the global financial conditions.     

All time cheaters versus cheaters in distress: An examination of cheating and oil prices in OPEC

This paper investigates the OPEC quota share system and whether there is any pattern to “cheating”. Using threshold cointegration methods, we examine each OPEC member's cheating behavior in periods of rising and falling real oil prices. Most OPEC members behave differently in response to rising oil prices than falling oil prices. For shocks of typical historical size, most members overproduce their quotas regardless of the direction of the real oil prices in the medium to long run. However, in response to large real oil price shocks, most members conform to a “public finance argument” whereby they underproduce their quotas in response to rising oil prices and overproduce in response to falling real oil prices. In an extended model with cheating by Saudi Arabia and other OPEC members, we find no statistically significant relationship between Saudi Arabian cheating and other cheating. The impulse response functions reveal that for typical shocks, neither Saudi Arabia nor other OPEC members absorb cheating by the other party. However, when there is a large incidence of cheating by other OPEC members, Saudi Arabia responds in kind: this forceful response is in line with a tit-for-tat strategy when there is “too much” cheating.     

DOES FDI ACTUALLY AFFECT INCOME INEQUALITY? INSIGHTS FROM 25 YEARS OF RESEARCH

While there are 25 years of empirical research on how FDI may affect income inequality, there is surprisingly no consensus on this issue. In this paper, we conduct a meta-analysis on the effect of FDI on inequality using 543 empirical studies from 1995 to 2019. Among various factors, we find that the development level of the study country has the strongest influence on the direction in which FDI affects income inequality. When the primary studies are sorted into three groups based on the GDP per capita of their sample areas, the within-group estimates on the effect of FDI on income inequality become strongly consistent with each other. Particularly, we find that FDI is associated with higher inequality for the low-income group, has no statistically significant effect for the middle-income group, and is associated with lower inequality for the high-income group. This observation suggests that FDI may increase income inequality as a country initially develops, but reduce inequality as development deepens.     

Re-examining the relationship between economic growth and inequality in the New Member States

The link between income inequality and economic growth has raised many debates in the literature and has generated a large spectrum of results over time. This paper aims at analyzing the relationship between economic growth and income inequality, as well as their macroeconomic and institutional determinants in the New Member States, between 2000 and 2009. In the presence of a set of explicative variables, the economic growth influences the social inequality through a U-shaped relationship. Health, education and gross capital formation generate different direct and indirect effects on income inequality as the per capita GDP growths, while the transition indicators are found to be either common or specific determinants of inequality and growth.     

Environmental taxes,reforms and economic growth: an empirical analysis of panel data

This paper explores the relationship between environmentally related taxes and the economic growth rate. The analysis also investigates whether this relationship differs between countries that have implemented environmental tax reforms (ETRs) and those that have not. Using panel data from 31 OECD countries over the period 1994–2013, the paper finds that when we allow environmentally related tax revenues to interact with an initial level of real GDP per capita, the overall revenues of these taxes are negatively associated with the economic growth rate in the short and long term. Furthermore, we show that the higher the initial level of GDP per capita, the more environmentally related tax revenues can promote the economic growth rate. The analysis also reveals that the relationship between environmentally related tax revenues and economic growth varies between countries that have a mechanism to redistribute environmentally related tax revenues and those that do not.     

交通、教育基础设施的共同富裕效应研究——基于异质性视角的考察

依据理论机制与模型论证基础设施和共同富裕的关系,并基于2010—2020年全国208个主要地级市数据,实证检验交通、教育基础设施改善对共同富裕的作用、路径及异质性效果。研究表明：交通和教育基础设施改善能显著促进共同富裕,但存在区域城市异质性效果和时滞效应。交通基础设施改善能通过推进人口城镇化、促进就业、强化经济集聚能力建立促进共同富裕的长效机制,而教育基础设施在通过改善人口城镇化助力共同富裕方面存在一定的阻碍。在农村收入占比的双重门槛约束下,两种基础设施的共同富裕效应存在差异：当农村收入占比处于低门槛区间时,教育基础设施的共同富裕效应显著,但交通基础设施效果失灵;随着农村收入占比的增长,交通基础设施的挤占效应消失;当农村收入占比处于高门槛区间,教育基础设施作用不显著,交通基础设施的边际贡献显著为正。     

Marginal effects of public employment on unconditional distribution of wage income in China

This paper examines the marginal effects of an employment expansion in China’s public sector on the unconditional distribution of “wage income” using the unconditional quantile estimation suggested by Firpo et al. (2009). Empirical data from the China Health and Nutrition Survey is split into three sub-samples to eliminate the effects of the Asian financial crisis in 1997 and the subprime financial crisis in 2008 on our empirical results. To explore the marginal effects, the empirical unconditional distributions of wage income “before” and “after” an expansion of the public employment have been graphed and compared. It has been found that an expansion of China’s public employment reduces the dispersion of wage income and hence alleviates income inequality in China. Besides, an expansion of public employment makes the symmetrical unconditional distribution of wage income become leftward skewed. Given these findings, an expansion of the public employment caused by the strategy of “guojin mintui” could mitigate China’s income inequality.     

The regime-switching risk premium in the gold futures market

A bivariate Markov-switching model identifies two regimes in the futures-price and risk-premium models. The persistent underlying states have very different implications for spot and risk-premium forecasts. In the “low” state, a positive bias predicts spot price appreciation. The “high” state is associated with lower spot appreciation and higher risk premiums. The regime-switching framework provides a new perspective on the intertemporal role of gold as a hedge or safe-haven asset. The gold spot-price appreciation regime is shown to be correlated with higher inflation rates and the complement regime is associated with high market returns and stock market risk premia. Since the state-space methodology procedure can be employed using only past data, forecasts of the persistent unobserved underlying state of the gold price appreciation regime will be augmented as more data becomes available.     

The impact of oil price changes on selected macroeconomic indicators in Azerbaijan

We examine the relationship between oil price fluctuations and economic activity in Azerbaijan using vector autoregressive models for the period 2002Q1–2018Q4. Our key results are as follows. First, growth in the gross domestic product (GDP) decreases after oil price innovations in the oil and gas sector and in the remainder of the economy. Downturns (upswings) in the oil and gas sector also prompt downturns (upswings) in the non-oil sector as fluctuations in oil revenues affect the government's capacity to subsidize the rest of the economy. Second, oil price innovations also lead to higher inflation in Azerbaijan. In response to the required tightening of monetary policy, the manat appreciates against the US dollar. Finally, GDP effects are primarily seen after oil price increases, whereas the interest rate and the exchange rate mainly react to decreases. Inflation increases after both types of shocks, due to either the accommodative monetary policy stance in the case of oil price decreases or the shock itself in the case of increases.     

De facto and official exchange rate regimes in transition economies

This paper provides an empirical investigation on the discrepancies between official and de facto exchange rate regimes in transition economies. We use a probit model to describe the determination of regime discrepancies. We find that “errors” in the selection of official regimes as well as the macroeconomic developments calling for conflicting adjustments in exchange rate regimes are important determinants of regime discrepancies.     

DOES GOVERNMENT SPENDING AFFECT INCOME INEQUALITY? A META-REGRESSION ANALYSIS

In this paper findings of a meta-regression analysis are presented exploring the effects of government spending on income inequality, with a particular focus on low- and middle-income countries. We identify a total of 84 separate studies containing over 900 estimates of the effect of one or more measures of spending on one or more measures of income inequality. The results show some evidence of a moderate negative relationship between government spending and income inequality, which is strongest for social welfare and other social spending, and when using the Gini coefficient or the top income share as the measure of inequality. However, both the size and direction of the estimated relationship between government spending and income inequality is affected by a range of other factors, including the control variables and estimation method used. We also find evidence of publication bias, in that negative estimates of the relationship appear to be under-reported in the literature.     

Equilibria under monetary and fiscal policy interactions in a portfolio choice model

This paper studies how the presence of income-taxes changes the properties of general equilibrium models with monetary and fiscal policy interactions. It is found that from a global perspective, the only policy regime that leads to a unique equilibrium is one where fiscal policy is active, i.e. the fiscal theory of the price level regime in Sims (1994). From a local perspective, there are three regimes. In particular, and relative to the previous literature following Leeper (1991), a new third regime exists where a passive fiscal rule combined with a passive monetary rule can still deliver determinacy where the same area of the parameter space would lead to multiple solutions if taxes were lump sum. To obtain the size of the new regime, the paper characterizes analytically the extent to which tax cuts are self-financing and how the distortionary tax Laffer curve looks near the steady state. In the new regime, monetary and fiscal backstops are brought into play so as to rule out off equilibrium dynamics, and inflation can temporarily increase in order to increase seigniorage revenues. With this flexibility, the monetary policy is consistent with the real debt remaining bounded, and the arithmetic that follows is monetarist and unpleasant in the sense of Sargent and Wallace (1981).     

Skill shortages and labor market outcomes in Central Europe

The new Central European members of the EU have been characterized by low employment rates, especially among unskilled workers, despite the GDP recoveries and large private sector shares in output and employment. Evidence points at skill shortages in Central Europe as a key impediment to faster labor reallocation and convergence to the EU-15 employment structures. In this paper, we develop a simple model of labor reallocation with transaction costs and show how skill shortages can inhibit firm creation and increase income inequality. We use the model to examine the impact of training subsidies and their financing on skill acquisition and start-ups of new private firms, and show that the positive effect of subsidies would be mostly offset by high wage taxes. Shifting financing from wage to consumption taxes would improve incentives for workers’ training and firm start-ups, while relying more on income taxes could reduce the income gap between workers and entrepreneurs.     

Do Unions Affect Labor's Share of Income: Evidence Using Panel Data

There have been a number of studies analyzing the impact of unions on labor's share of income. Most have relied on either time series or cross‐section data. The purpose of this paper is to determine the impact of unions on labor's share of income in the U.S. This study adds to the understanding of this topic by developing an analytical model of imperfect competition and estimating the model using panel data for the manufacturing sector. This study finds that unions have a positive impact on labor's share of income. Specifically, this paper finds that labor's share declined 17.9 percent between 1997 and 2006 whereas, if unionization density had remained at its 1997 level, labor's share would have declined only 13.9 percent. Thus, the decline in unionization explains about 29 percent of the decline in labor's share of income. This paper is important for three reasons. First, this paper sheds light on whether social and institutional forces play an important role in determining the distribution of income between labor and capital. Second, it helps to explain recent increases in wage inequality. Third, it has implications for understanding the potential impact of legislation, such as the Employee Free Choice Act, that would make it easier for workers in the U.S. to unionize.     

Oil dependence and entrepreneurship: Non-linear evidence

This study examines the empirical nature of the oil dependence-entrepreneurship nexus, building on recent research that extends the “resource curse” beyond its effects on economic growth. For the period from 2006 to 2018, the sample includes 115 countries at various stages of economic development. Using panel threshold methods, we discover an inverted U-shaped relationship, indicating that even small increases in oil rents increase entrepreneurship below the threshold. Globally, oil rents above a threshold of 77 % stifle entrepreneurship. Regional differences and institutional vulnerability act as moderators.     

Forecasting GDP growth with NIPA aggregates: In search of core GDP

In addition to GDP, which is measured using expenditure data, the U.S. national income and product accounts (NIPAs) provide a variety of measures of economic activity, including gross domestic income and other aggregates that exclude one or more of the components that make up GDP. Similarly to the way in which economists have attempted to use core inflation—which excludes volatile energy and food prices—to predict headline inflation, the omission of GDP components may be useful in extracting a signal as to where GDP is going. We investigate the extent to which these NIPA aggregates constitute “core GDP.” In an out-of-sample forecasting exercise using a novel real-time dataset of NIPA aggregates, we find that consumption growth and the growth of GDP excluding inventories and trade have historically outperformed a canonical univariate benchmark for forecasting GDP growth, suggesting that these are promising measures of core GDP growth.     

IFRS,financial development and income inequality: An empirical study using mediation analysis

Income inequality continues to be an issue of concern. Early work on economic development suggested that, as a country’s economy grows, incomes would rise and reduce any income disparities. However, there is growing evidence that as countries develop, income inequality actually worsens. Some studies argue that this is the result of financial development and the growth of the financial sector. Although there is a good deal of empirical research on the relationship between financial development and income inequality, there is no prior work that examines how accounting standards, in particular International Financial Reporting Standards (IFRS), might influence this relationship. This study examines the relationship of IFRS and financial development with income inequality using mediation analysis over the period from 1998 to 2018. The results indicate that the impact of IFRS on income inequality is mediated by financial development. Moreover, there is a direct relationship between IFRS and inequality.     

Income Distribution in the Third World: Its Estimation Via Proxy Data

A bstract . A two-Stage least squares estimate of the distribution of income in the Third World is derived in this paper using the per capita ownership of cars, infant mortality rates, and the average daily caloric requirement along with the per capita Gross Domestic Product. Previous work by Kitznets 1955 had established a relationship between the distribution of income and GDP/CAP, but with the inclusion of the three additional "proxy" variables, the distribution of income is estimated with a great deal more precision. For example, the R-squared for the estimate of the share of income earned by the poorest 20% of households increases from 0.30 to 0.68 by incorporating the proxy variables.
Using the parameters estimated via two-stage least squares on a set of 23 countries for which the distribution of income Is known, the paper then estimates the distribution of income for a set of 43 countries for which this data is unknown. The results indicate that countries like Singapore and Sri Lanka have relatively even distributions of income for their stage of development, and countries like Brazil, Kenya, Bolivia , and Gautemala have highly skewed distributions of income for their level of GDP/CAP.     

Boom, bust, and the poor: Poverty dynamics in the Middle East and North Africa, 1970–1999

This paper analyzes changes in poverty and inequality in the Middle East and North Africa. It finds that the structural relationship between poverty reduction, income growth and distribution is the same for MENA and other developing economies. Prior to 1985 rapid growth sharply reduced poverty. After 1985, despite very low income growth, a rising share of income accruing to the lowest quintile meant that the average income of the poor rose more rapidly than that of the non-poor. These unusual poverty dynamics were primarily due to international migration. Remittances both increased per capita incomes in labor exporting countries and increased the share of income accruing to the poor.