How has empirical monetary policy analysis in the U.S. changed after the financial crisis?

During the Great Recession, the Federal Reserve lowered the federal funds rate nearly to zero and began using unconventional monetary policy. A fed funds rate near zero is no longer a proper representation of policy. Thus, empirical models of monetary policy cannot be estimated as usual. We use a linear empirical model to investigate whether alternative instruments such as the balance sheet or shadow rates can replace the fed funds rate to capture unconventional policy. Our objective is to determine whether adding to or replacing the policy instrument can preserve linearity or whether one must allow structural breaks. We include data for both normal and unconventional periods and find that shadow rates preserve linearity better than using a bounded federal funds rate alone, adding the balance sheet, or adding long rates. When short rates are bounded, shadow rates produce similar responses to the unbounded period and alleviate the need for structural breaks. [JEL codes: E43, E44, E52] Keywords: zero lower bound, affine term structure.     

Rhetoric on the economy: have European parties changed their economic messages?

This study analyses the determinants of dispersion of economic issue mentions in European party manifestos. We examined three main economic domains (governmental control of the economy, free market capitalism and support for the welfare state) as consequences of globalization forces, economic conditions, partisanship and electoral turnout. Employing aggregate-level Comparative Manifesto Project (CMP) data from legislative elections in 15 European countries from 1970 to 2010, we confirm that parties hold a common view of the salience of economic control of the state as a consequence of globalization pressure and economic growth levels. Partisanship of the cabinets (regardless of the political orientation) counteracted issue salience concentration in the welfare domain. Government size favoured dispersion in the free market realm. Our results do not indicate clear homogenization of parties’ economic messages in elections over the last 40 years.     

Cost effectiveness of asthma treatment with a breath-actuated inhaler: how has the story changed?

Abstract

Objectives: A database analysis evaluating the comparative costs and outcomes of asthma treatment with breath-actuated inhalers (BAIs) and metered-dose inhalers (MDIs) has previously been undertaken in 2001. This analysis found that, despite the higher acquisition cost associated with BAIs, economies elsewhere meant that the overall cost associated with BAIs was lower than MDIs. Between 2001 and 2007, the comparative price of MDIs was significantly reduced thus widening the gap between the comparative acquisition cost of MDIs and BAIs. Furthermore, the introduction of specific targets for asthma review included a requirement for regular checks on inhaler technique. Such initiatives may be expected to enhance the overall effectiveness of MDIs. Given the potential impact of such changes, it appeared to be timely to update the original database analysis to assess the extent to which the original findings have been altered by changes in the clinical and economic environment over the past 5 years.

Methods: As in all chronic diseases, it is important that economic analyses evaluate cost effectiveness over as long a period as possible, and so the 2006 analysis was conducted over a 12- and a 24-month time period.

Results: The results emphasised that the clinical benefits associated with BAIs for certain patients can still be translated into greater cost effectiveness, but that altered cost structures required a longer time period for the greater cost effectiveness of BAIs to become evident.

Conclusion: Since completing this study, the reimbursement costs for beclometasone MDIs have increased significantly (since October 2007) due to the discontinuation of Becotide and Becloforte. As a consequence of this higher acquisition cost for MDI inhalers, the current cost-effectiveness advantages of BAI compared to MDI can be expected to be even greater than that identified in the study.     

Social security and economic performance in Portugal: after all that has been said and done how much has actually changed?

This paper provides an empirical estimate of the macroeconomic effects of the Portuguese pay-as-you-go social security system based on data for the period 1970?C2007 and on VAR estimates using GDP, the unit cost of labor, the unemployment rate, the savings rate and social security spending. The major findings are twofold. First, growing social security spending has had detrimental effects on all of the private sector variables under consideration suggesting the existence of sizable inefficiencies. Second, these inefficiencies persist despite the successive reforms that took place over the last two decades. These results highlight the need for structural reforms of the pay-as-you-go system thereby addressing the sources of these inefficiencies, regardless of whether or not the system is financially sustainable. Furthermore, any reforms designed to address sustainability concerns cannot ignore these inefficiencies or risk making them even worse and thereby hindering the quest for sustainability itself.     

Immigrants’ net direct fiscal contribution: How does it change over their lifetime?

Life-cycle direct public fiscal contributions and transfers are studied using longitudinal income tax data from 1982 to 2016 and administrative files for immigrants landed in Canada from 1980 to 2016. Relative to a comparison group comprising the Canadian-born and immigrants landed before 1980, immigrants since 1980 have a lower average net direct fiscal contribution (NDFC) during their working years due to their lower taxes and social security contributions but a higher average NDFC after 65 years of age because of reduced public pension eligibility and entitlement. Immigrants who landed at younger than 19 years old have much higher direct fiscal contributions than other age-at-arrival groups and reach their peak of contributions around 10 years earlier in life than other age-at-arrival groups. Immigrants whose age at arrival is above 65 have a less negative average NDFC than other age-at-arrival groups over the above-65 life cycle. These life-cycle age𠄁at-arrival trajectories are stable for immigrants in different landing cohorts. We apply the life-cycle estimates to project the present discounted value of lifetime NDFCs for immigrants who landed in 2016. For each landing age group, refugees and family class immigrants have negative or zero average present values of life-cycle NDFCs, much below that of economic immigrants.     

How to motivate people to put their money where their mouth is: What makes employees participate in electronic prediction markets?

Although prediction markets are widely acknowledged to be as effective as other institutions predicting future events, little is known regarding their application in organizational settings. For organizations, prediction markets offer a new technical possibility to make use of the beliefs, information and knowledge of their employees for organizational decisions and forecasts. Based on survey data of 147 users in German-speaking Europe, we show that expected rewards increase user satisfaction. While contribution effort and general reciprocity in isolation have no impact on satisfaction, perceived general reciprocity in conjunction with high rewards is likely to increase user satisfaction. Our findings extend our knowledge on user behavior and emphasize the importance of incentives in prediction markets.     

Real capital market integration in the EU: How far has it gone? What will the effect of the euro be?

Much effort has been devoted to the study of financial market integration in Europe. Little is known, however, about real capital market integration – the degree to which plants and equipment move to take advantage of locally high returns. This paper looks at the evidence. An analysis of flows of foreign direct investment in Europe shows that integration was quite limited in the early 1980s, but has increased considerably since then. Another analysis looks at rates of return of a large number of firms. It reveals that country-specific factors play a significant role in explaining corporate returns, even after taking risk into account. This finding is incompatible with the CAPM definition of market integration. The view that integration is limited in Europe is further strengthened when the same approach is carried out for the USA and Canada. Part of the national specificity appears to be related to labour and goods market regulations, which harm firms profitability. If, by introducing more transparency and eliminating currency risk, EMU strengthens competition on the real capital market, one obvious economic benefit will be a more rational and efficient use of capital, but the most important potential consequences are political. Special-interest regulations of an exclusively national nature will not survive. They will either fall in a wave of internationalist liberalization, or become embedded in 'harmonized' regulations at the federal level. A reduction in excessive regulatory burdens, notably in the labour market, could lead to substantial and shared productivity gains.