What ever happened to Germany? Is the decline of the former european key currency country caused by structural sclerosis or by macroeconomic mismanagement?

This paper challenges the institutional sclerosis view of the German crisis according to which rigid labour markets and generous welfare state institutions have driven Germany into its position as ‘Europe's sick man’. In general, the view is not convincing, because the underlying hypotheses about the effects of labour market regulation and welfare state institutions on employment and growth cannot unambiguously be derived from modern labour market theory and are at least partially at odds with accepted empirical findings. In particular, the explanation is unconvincing, because in international comparison Germany's labour market and welfare state institutions are simply not as sclerotic as often supposed. In most of the aggregate indicators for structural rigidities Germany is not worse than the average OECD or EU country. Moreover, there is a macroeconomic explanation focusing on the combined effects of restrictive and pro‐cyclical monetary, fiscal and wage policies in Germany that is broadly consistent with modern macroeconomic theory and is supported by empirical data.     

Restoring Macroeconomic Stability through Fiscal Adjustment: a Real–Financial CGE Analysis for India

Developing‐country attempts to regain macroeconomic stability through fiscal adjustment are often unsuccessful in reducing inflation and balance‐of‐payments (BoP) disequilibrium. This paper examines why this may be so in the light of India's experience with stabilization in response to the BoP crisis in 1991. It does so using a novel real–financial computable general‐equilibrium model. Focusing on credit rather than money, the model goes beyond earlier modeling approaches by (1) incorporating credit rationing, (2) recognizing the dual role of credit for working capital and investment, and (3) allowing for switches between credit‐constrained, capacity‐constrained, and demand‐constrained, regimes. The simulations indicate that the macroeconomic effects of monetized deficit reduction differ widely depending on the mode of financing and on initial conditions in real and financial markets. Whenever fiscal reform leads to a squeeze on available working capital credit, deficit reduction will lead to only a limited inflation decline and a modest BoP improvement.     

WHITHER GERMANY AND THE EMU IN A CHALLENGING ENVIRONMENT?*

While the German economy may currently be a bright spot in Europe, it has faced substantial challenges in recent years. Moreover, tensions are rising regarding Germany's responsibilities and opportunities as a member of the European Monetary Union. Other studies have documented the difficulties that Germany has encountered as a result of the unification and further integration of Europe. This paper adds to that literature by using an aggregate translog cost function approach to examine the relationships among inputs of domestic capital and labour and imports. Our findings indicate that the input pairs of capital‐labour and labour‐imports are substitutes. The substitutes relationship between labour and imports, which has become stronger over time, suggests that increasing globalisation will add to Germany's unemployment woes. Capital and imports appear to be weak complements, but that relationship is not statistically significant. The results also suggest that imports are playing an increasingly important role in Germany's aggregate production, accentuating the role of the international environment.     

中国宏观经济形势与政策:2008-2009年

2008年,中国经济景气进入到本次经济周期的收缩阶段,在将核心CPI指数通货膨胀率控制在2%以下的同时实现略低于10%的实际GDP增长速度。2009年,中国宏观经济管理应该在长期中性的需求管理原则指导下,建立以促进国内投资需求为核心的政策体系,采取扩张性财政政策和货币政策支持中国经济持续快速增长。     

Macroeconomic consequences of state fragility in sub‐Saharan Africa

Are poor macroeconomic outcomes primarily the result of economic policies, or of deeper underlying state fragility problems in sub‐Saharan Africa? We attempt to answer this question by using carefully specified dynamic panel regression techniques to show how state fragility conditions help to explain the differences in the macroeconomic performance of sub‐Saharan African economies, and to identify the most plausible mechanisms of transmission. We find that countries with greater fragility suffer higher macroeconomic volatility and crisis; they also experience weaker growth. When we disaggregate state fragility into its various components, we find that it is the security and social components that have the strongest causal impact on macroeconomic outcomes, while the political component is, at best, weak. Therefore, we conclude that it is state fragility conditions, and not necessarily macroeconomic policies, that are of first‐order importance in explaining the differences in macroeconomic performance for African countries. The knock‐on effects are mostly mediated through the fiscal channel, the aid channel, and the finance channel. Accordingly, we recommend that interventions in fragile states should best focus on exploiting the potential for using fiscal policy, aid, and finance as instruments to improve macroeconomic outcomes in sub‐Saharan Africa.     

Impact of Market‐based Policies and External Fiscal Discipline on Ghana's Inflation

This study investigates the impact of liberalization of the forex exchange and financial sectors and external prudent fiscal management in Côte d'Ivoire on Ghana's inflation. We find that, in the financial sector, there is a case for liberalization, in terms of lowering inflation. However, a quasi‐liberalized system in the sector proves to have a greater potential to reduce inflation in Ghana. In the exchange market, non‐liberalization has the edge over liberalization in reducing inflation in Ghana. However, a quasi‐liberalized system in the sector has a greater potential to lower inflation. There is evidence of a strong intra‐continental transfer of inflation from Côte d'Ivoire to Ghana, but this transmission has been significantly moderated downwards by the implementation of prudent fiscal management in Côte d'Ivoire. We also find that monetary targeting and inflation targeting have deflationary effects, but we cannot claim that this has significantly reduced inflation. The implication of the result is that; a system that achieves the correct balance between the market mechanism and command system in the exchange and financial sectors has a greater potential to lower inflation in Ghana. Also, domestic monetary policies should not only be anchored on internal factors.     

Twin deficits and fiscal spillovers in the EMU's periphery. A Keynesian perspective

The objective of this paper is to shed light on the twin deficit hypothesis in Southern Europe and the MENA region, taking into account fiscal spillovers from the core during the global crisis. Using Godley and Lavoie (2007)'s baseline model, we first show that fiscal shocks from a core region could aggravate macroeconomic imbalances in the periphery. We then gather data from the period 1977–2016 for ten MENA and peripheral EMU countries, and model the twin deficit hypothesis in the presence of fiscal spillover with a P-VARX methodology. Our results highlight that fiscal balance, current account, and GDP growth rates in the EMU's periphery are negatively affected by fiscal consolidations in the core. Fiscal discipline in surplus countries is tantamount to a ‘beggar thy neighbor’ effect on the periphery, in times of crisis. We discuss the implications of our results to propose further international coordination of macroeconomic policies.     

Life satisfaction and economic conditions in East and West Germany pre- and post-unification

Economic disruption in East Germany at the time of unification resulted in a noticeable drop in life satisfaction. By the late 1990s East Germany's life satisfaction had recovered to about its 1990 level, and its shortfall relative to West Germany was slightly less than that before unification. In West Germany life satisfaction was fairly constant before unification, but subsequently trended moderately downward, with Turkish life satisfaction declining noticeably relative to Germans. Changes in life satisfaction in East and West Germany both for Germans and foreigners are most closely associated with relative income variables, not absolute income.     

MONETARY–FISCAL INTERACTIONS WITH A CONSERVATIVE CENTRAL BANK

We study macroeconomic stabilization when monetary and fiscal policies interact via their effects on output and inflation and the monetary authority is more conservative than the fiscal. We find that monetary–fiscal interactions result in poor macroeconomic stabilization. With both policies discretionary, the Nash equilibrium is suboptimal with higher output and lower inflation than optimal; the Nash equilibrium may be extreme with output higher and inflation lower than either authority want. Leadership equilibria are not second best. Monetary commitment is completely negated by fiscal discretion and yields the same outcome as discretionary monetary leadership for all realizations of shocks. But fiscal commitment is not similarly negated by monetary discretion. Optimal macroeconomic stabilization requires either commitment of both monetary and fiscal policies, or identical targets for both authorities – output socially optimal and inflation appropriately conservative – or complete separation of tasks.     

An Evaluation of Unemployment Policy in Australia Using the Range of Equilibria

The major failures of macroeconomic policy in the last 40 years are the huge increases in unemployment and inflation in the 1970s and the persistence for 25 years of the former. This article uses econometric estimates of a model of the range of equilibria for Australia for the period 1965:4 to 2003:3 to evaluate the role of macroeconomic policies in these failures. Our analysis distinguishes the roles of aggregate supply policies and aggregate demand policies. We conclude from our analysis that macroeconomic outcomes would have been better over this period had monetary policy been guided by a hierarchical inflation target, which is to be set so as to achieve the highest level of activity subject to satisfying the inflation target.     

中国宏观经济形势与政策:2005-2006年

2005年中国经济向加强宏观经济调控的预期方向稳定发展,继续呈现高经济增长与低通货膨胀的良好配合态势。2006年乃至"十一五"期间,中国宏观经济管理应该保持其中性政策取向的连续性与稳定性,在最高可持续增长率(HSGR)的需求管理最终政策目标指导下,建立价格、工资与汇率动态调整一致的政策目标体系,通过稳健财政政策和货币政策的积极操作,以国内投资需求为轴心,实现国民经济持续快速增长。     

Taxation and Laffer Effects on Employment and Growth

Some dangerous short- and long-term ambiguities of fiscal policies arise from the belief that Laffer effects may be generated from deficit-financed tax cuts able to stimulate aggregate demand. However, even in a supply-side framework, fiscal illusion prevents a rational perception of the effectiveness of Laffer-oriented fiscal measures. The ambiguity of the Laffer effect led to an important series of studies of Francesco Forte, designed to disclose and empirically test its interactions with short- and long-term fiscal policies on gross domestic product (GDP) growth and on other relevant macroeconomic variables. We discuss, under the Laffer perspective, some of Francesco Forte’s studies related to fiscal policy effects on the labour market and GDP growth.     

从4万亿投资推动内需计划看中国内需提振

在世界经济金融危机日趋严峻的形势下,中国政府提出十大措施,在未来两年内投资4万亿元,以刺激经济的政策计划,以扩大内需为主要方式,抵御国际经济环境对中国的不利影响,采取灵活审慎的宏观经济政策,应对复杂多变的形势,通过分析当前扩大内需这项政策的必要性,提出相关政策要点,促进经济平稳较快增长。     

Fiscal expansion, monetary policy, interest rate risk premia, and wage reactions

We examine the macroeconomic implications of fiscal policy in a small open economy, with emphasis on the interactions between fiscal, monetary and labour market policies. The paper uses the NBNZ-DEMONZ macroeconometric model. Novel features of the model are that it includes an endogenous interest rate risk premium (IRRP), and forward-looking monetary and fiscal policy reaction functions which capture the essence of New Zealand's Reserve Bank and Fiscal Responsibility Acts. The most important empirical result is that the postulated IRRP, proxying financial market mechanisms, can contribute at least as much as the monetary policy reaction function to maintaining price stability. Also of significance are that an income tax cuts package shows more damped real GDP and underlying inflation paths than does an expenditure increases equivalent; and that the inflationary and real sector impacts of a personal income tax cut package depend heavily on how the cut is `shared' between firms and workers. The nature and interdependence of monetary and fiscal policies and labour market conditions are therefore crucial to the macroeconomic outcomes.     

FISCAL STRUCTURAL REFORM AND ECONOMIC ACTIVITY: PUBLIC SPENDING AND PRIVATE EFFORT*

This paper explores governments' and private agents' incentives to implement or postpone fiscal structural reform attempts. Both fiscal consolidation and fiscal reorganization often create spillover effects and thereby induce free‐riding problems. It is thus important to cope with the free‐riding behaviour of interest groups. It is often argued that in order to attain successful outcomes, a good macroeconomic situation is needed, since we expect positive income effects. In this paper, we first explain the dynamic aspects of insufficient fiscal consolidation due to free‐riding problems in the framework of private provision of public goods. Then, using a static model between central and local governments, we examine the sign of income effects for reform attempts to pursue fiscal reorganization. It is shown that good economic circumstances do not necessarily enhance reform of reorganizing fiscal expenditures, although it could enhance fiscal reconstruction.     

Slow Growth,Trade Liberalisation and the Mexican Disease: A medium-term macroeconomic model with an application to Mexico

The purpose of this paper is to analyse Mexico's medium-term macroeconomic outlook, from the vantage point of the country's recent development. The analysis is carried out within a formal model for the determination of the rates of employment and inflation under conditions of external and internal balance. In equilibrium, the real wage and the rates of employment and inflation depend inter alia on the level of labour productivity, the ratio of foreign debt to domestic output, and the foreign trade regime. Econometric tests based on Mexican data support the model's basic postulates and, in addition, reveal the presence of structural change, linked to trade reform, in the trade balance and the manufactures' productivity growth equations. The macroeconomic implications of such parameter changes are discussed with the help of the analytical model developed.     

Macroeconomic dynamics in Macedonia and Slovakia: Structural estimation and comparison

This paper estimates a structural macroeconomic model using data for Macedonia and Slovakia to characterize possible challenges Macedonia can face concerning macroeconomic stabilization during its transition process. A comparison of the estimated model parameters suggests that, in Slovakia, the output gap is less sensitive to real interest rate movements and prices experience greater inertia. The estimated monetary policy reaction functions show Macedonia and Slovakia as inflation targeters, with Macedonia as the more conservative one, despite its officially applied exchange rate targeting regime. The differences in the estimated parameters imply differing transmission mechanisms for Macedonia and Slovakia. Consequently, the variance of domestic variables in Slovakia is most influenced by monetary policy shocks, while there is no single dominating shock explaining the volatility of Macedonia's macroeconomic variables. The exchange rate shock, the monetary policy shock and the demand shock are jointly important in determining the volatility of Macedonia's variables. The model simulations indicate that Macedonia experiences lower output gap and inflation volatility than Slovakia. This comes, nevertheless, at the cost of higher interest rate and real exchange rate volatility in Macedonia, which could be an indication of more volatile financial markets with possible negative implications for financial stability.     

Global Financial Crisis and ASEAN: Fiscal Policy Response in the Case of Thailand and Indonesia

Sound macroeconomic and financial fundamentals, plus quick and forceful fiscal policy responses contributed to Thailand's and Indonesia's economic recovery in the aftermath of the global financial crisis. This paper reviews the impacts of the recent global financial crisis on the Thai and Indonesian economies, and identifies the characteristics of the fiscal stimulus package in each economy and their implications to counter the negative impact of the global financial crisis.     

Macroeconomic policy in an output-expenditure model

This paper proposes an alternative framework for examining the international macroeconomic impact of domestic monetary and fiscal policies and focuses on the distinction between national spending and national production and the reactive behavior of foreign investors to changing external account balances. It demonstrates that under a floating exchange rate regime, monetary and fiscal policies can affect aggregate expenditure and output quite differently, with important implications for the behavior of the exchange rate, the current account balance, and national income in the short run, as well as the economy's price level in the long run. In particular, this paper predicts that expansionary monetary and fiscal policies tend to depreciate the currency and only temporarily raise gross domestic product and the current account surplus, although permanently raise the domestic price level.This is a revised version of a paper presented at the Forty-Ninth International Atlantic Economic Conference, March 14–21, 2000, Munich, Germany.     

Global Crisis,National Responses: The Political Economy of Turkish Exceptionalism

With its dilatory and piecemeal fiscal activism and uncharacteristic aversion to IMF assistance, the Turkish government's response to the global economic crisis of 2008–9 diverged considerably from prevalent trends in other major emerging market countries. Underlying this intriguing pattern were Turkey's pre-existing policy and macroeconomic constraints, cognitive lapses on the part of policymakers, and the conjunctural dynamics of domestic politics. The interplay of these factors progressively narrowed the policy space for vigorous action, leading to a motley combination of reactive initiatives that neither offered sufficient protection to vulnerable social groups nor promised sustainable growth in the long run despite rapid short-term recovery.