Public debt and economic growth – economic systems matter

Most studies on the relationship between public debt and economic growth implicitly assume homogeneous debt effects across their samples. We –in accordance with recent literature– challenge this view and state that there likely is a great deal of cross-country heterogeneity in that relationship. However, other than scholars assuming that all countries are different, we expect that clusters of countries differ. We identify three country clusters with distinct economic systems: Liberal (Anglo Saxon), Continental (Core EU members) and Nordic (Scandinavian). We argue that different degrees of fiscal uncertainty at comparable levels of public debt between those economic systems constitute a major source of heterogeneity in the debt-growth relationship. Our empirical evidence supports this assumption. Continental countries face more growth reducing public debt effects than especially Liberal countries. There, public debt apparently exerts neutral or even positive growth effects, while for Nordic countries a non-linear relationship is discovered, with negative debt effects kicking in at public debt values of around 60% of GDP.     

Cities and Megalopolises: The Problem of Definitions and Sustainable Development Indicators

The persistent lack of a generally accepted scientific definition of city seriously hinders the implementation of sustainable development goals adopted by the United Nations as universal strategic guidelines for world progress until 2030, including the sustainable development of cities and settlements. In connection with this, actual problems of defining city and megacity (megalopolis) have been analyzed. A system of integrated indicators of sustainable urban development with regard to the global level has been considered. Particular attention has been paid to the new task for Russia of adapting these indicators to domestic specific natural and socioeconomic conditions, with consideration of the long-term prospects.     

Ludwig Von Mises’ Neoclassical Analysis of Dumping

The paper explores similarity in the analysis of dumping by Ludwig von Mises, which he labels as margin monopoly, in Human Action: A Treatise on Economics (1949), and by Joan Robinson in The Economics of Imperfect Competition (1933). Mises, though, does not admit to similarity with Robinson, and five reasons are suggested why he was unwilling to acknowledge Robinson. Robinson’s analysis is neoclassical, and so is that of Mises, which is an anomaly for Mises, an Austrian economist who generally focuses on activity in disequilibrium.     

The Valuation Effect of Accounting Standard 158 on Firms with High and Low Financial Risk

SFAS 158 mandated balance sheet disclosure of the funded status of firms’ Defined Benefit Pension Plan using the Projected Benefit Obligation (PBO) to estimate the pension liability. SFAS 158 caused a market phenomenon because the use of the PBO engendered dramatically higher estimates of pension liability and hence the perception of risk. Our work focuses on two aspects of this change in pension accounting: first, how will industry firms change their accounting strategy in light of the new rules, and second, how will firms’ stock prices be affected by the new allegedly better estimate of pension liability? Our research suggests that firms’ accounting strategies changed in that they use higher discount rates to estimate pension liability which offset the dramatic impact of using the PBO. In addition, we find that high financial risk firms’ tendencies to use higher discount rates increase with the firms’ leverage and decrease with liquidity. To test the market reaction we utilize standard event study methodology to investigate the effects of SFAS 158 on stock returns. Our findings suggest that firms with high (low) financial risk earn negative (positive) abnormal returns on and around relevant event dates preceding the implementation of SFAS 158.     

Three Perspectives on the Dutch Growth of Flexible Employment

The growth in flexible work arrangements has been more pronounced in the Netherlands than in most other western economies. Own account work, fixed-term contracts and contracts with variable hours all have become more prevalent since the early 2000’s. This paper describes the growth of flexible work arrangements from three perspectives. The institutional perspective reveals that the Dutch institutions provide incentives and possibilities for employers to circumvent institution-based risks and costs, and for workers to avoid taxes and social security contributions. The individual perspective shows that most workers nevertheless prefer an open-ended employment contract, which some groups manage to obtain more often than others. Over the life cycle the share of flexible employment contracts decreases among all cohorts and all social groups, but more so among the higher educated and men. Own account work, which is mostly a positive choice, increases over the life cycle. The job perspective shows that flexible work arrangements have grown in all sectors of the economy. In some sectors the increase is predominantly in own account work, in other sectors predominantly in flexible employment contracts, without a clear relation to sector characteristics.     

Does Central Bank Financial Strength Really Matter for Inflation? The Key Role of the Fiscal Support

This paper examines whether weak central bank finances affect inflation by scrutinizing the key rationale for such a relationship: that the absence of Treasury support makes central bank finances relevant for price stability. Specifically, I ask whether central banks which are not likely to enjoy fiscal support when needed experience higher inflation as their financial situation deteriorates. I find this to be true among a large sample of 82 countries between 1998 and 2008. De facto potential fiscal support appears relevant, while de jure fiscal support, which I survey analyzing 82 central bank laws, does not appear to matter. The results also bring forward an explanation for the conflicting results of the previous empirical studies, which neglected this key component.     

Wage dispersion in Germany and the US: is there compression from below?

Wage compression from below is a common diagnosis for Germany compared to the U.S. We develop alternative hypotheses in order to identify the so-called accordion effect, i.e. reduced inter-quantile distances below the median especially for low skilled and other ill-paid groups. Our results are partly at odds with wide-spread beliefs. Using large micro data sources we find evidence of an accordion effect at the low end of the distribution for the U.S. The results for Germany, however, are contrary to what one would have expected in case of marked wage compression from below. For low-skilled workers of both genders and for female workers in general we find higher inter-quantile distances below rather than above the median. By contrast, there is strong evidence for the accordion effect if skilled male workers are considered.     

The Impact of US Uncertainty Shocks on Small Open Economies

In this paper, we investigate the impact of US uncertainty shocks on GDP growth in nine small open economies: Australia, Canada, Denmark, Finland, Iceland, New Zealand, Norway, Sweden and the United Kingdom. We compare the impact of two types of shocks: i) stock market volatility shocks and ii) policy uncertainty shocks. Using quarterly data from 1986Q1 to 2016Q1, this issue is analysed using Bayesian VAR models. Our results suggest that policy uncertainty seems to matter more than stock market volatility. Stock market volatility shocks appear to robustly have significant effects on Danish GDP growth. Policy uncertainty shocks, on the other hand, reliably lowers GDP growth in all five Nordic countries in a statistically significant manner. Statistically significant effects of policy uncertainty shocks on the Anglo-Saxon countries in our sample are harder to establish and are, in our preferred specification, only found for the United Kingdom.     

The analysis of the dynamics of the Russian economy using the output gap indicator

In this paper we estimate the indicator output gap for the Russian economy in 2000–2015 using univariate and multivariate versions of the Hodrick–Prescott filter and the Kalman filter for the model of unobserved components (taking into account the Phillips curve). The calculation results show a slowdown of potential output after 2014.     

From Estimation Results to Stylized Facts Twelve Recommendations for Empirical Research in International Activities of Heterogeneous Firms

Heterogeneous firms are at the heart of both the New New International Trade Theory and the Micro-econometrics of International Firm Activities. One important aim of micro-econometric studies is to uncover stylized facts that hold over space and time, and that can both inspire theoretical models that are based on “realistic” assumptions, and inform policy debates in an evidence-based way. Which results from the thousands of empirical estimates reported in the literature on the micro-econometrics of international firm activities do we consider as convincing? Based on my own experience from the last twenty years I use the opportunity of this paper to make twelve recommendations that, hopefully, will help to find the right way on the thorny road from estimation results to stylized facts. I will deal with the following topics: comparisons of means vs. comparisons of distributions; extremely different firms, or outliers; unobserved heterogeneity; simultaneous occurrence of differences across quantiles, outliers, and unobserved heterogeneity; heterogeneous effects of international firm activities on firm performance; replication; within-study replication by international research teams; meta-analysis; and talking to practitioners.     

The Innovative Development of the Transport Services Market: A Cluster Approach

The concept of an innovative transport and logistics cluster is formulated in the article. As a result of research into the current trends in the formation of domestic and foreign transport and logistics clusters (TLCs), the prospects of the formation of innovative transport-logistical clusters in the Russian Federation are determined based on the step-by-step approach proposed by the authors. The main ways of assessing the efficiency indicators of the cluster in relation to individual enterprises and their groups have been outlined.     

‘Outcome’ Assessment: What Exactly Are We Measuring? A Personal Reflection on Measuring the Outcomes from Competition Agencies’ Interventions

The UK and Dutch competition agencies were pioneers in Europe in publishing annual assessments of the ‘outcomes’ from their work. These countries had new competition laws to report on and a strong culture of public sector evaluation. Other countries have followed, with different approaches but enough common ground for OECD to develop a standard methodology. However, the measures are simplistic: they miss many important aspects of ‘outcomes’. I nonetheless argue that these assessments are worth carrying out but they should be recognised for what they are: a rather sophisticated measure of agency activity, rather than a simplistic assessment of outcomes.     

Does the dispersion of unit labor cost dynamics in the EMU imply long-run divergence?

Using unit labor cost (ULC) data from Euro area countries as well as US States and German Länder we investigate inflation convergence using different approaches, namely panel unit root tests, cointegration tests and error-correction models. All in all we cannot reject convergence of ULC growth in EMU. However, country-specific deviations from the rest of the currency union are much more pronounced and much more persistent in Europe than in the US or Germany. This holds before and after the introduction of the common currency. Hence, asymmetric shocks in the future might take a long time to dissipate.     

On the Relative Optimality of Environmental Policy Instruments: An Application of the Work of Alberto Alesina

We study the issue of optimality of policies devoted to environmental goals, building upon the recent and interesting work by Alesina and Passarelli (2010) and extending their analysis to the more general framework set up by Weitzman (The Review of Economic Studies 41: 477-491, 1974). We illustrate instruments that governments have at their disposal to reduce polluting emissions, and we point out the economic implications that may arise from the overlapping regulation through both instruments in the European context. We review the literature on political determination of environmental regulation. On the basis of existing literature, we show that political factors are more important than economic ones in explaining why particular instruments are implemented for certain problems (Hepburn et al. Climate Policy 6: 137–160, 2006). We recognize Alesina’s contribution which states that environmental policy, and the decision to adopt one tool instead of another, is subject to a complex political process. Governments are subject to pressure from politicians, households, and firms because their decisions imply winners and losers. Then, we focus in detail on the work by Alesina and Passarelli (2010) who consider which policy tool and at what level would be chosen by majority voting to reduce polluting emissions; they find out that even if a tax is in general superior to quantity based mechanisms (quotas and tradable permits), the majority may strategically choose a quantity mode in order to charge the minority a larger share of the cost for polluting emissions reduction. We extend Alesina’s analysis, focusing on the optimality of price-based mechanisms, since it is not always the case that price instruments are more efficient than quantity instruments. To this aim, we explicitly make use of Weitzman results (The Review of Economic Studies 41: 477–491, 1974), which suggest that if costs are highly nonlinear compared to benefits, then price-type regulation is more efficient, while if costs are close to linear, then quantity-type regulation is more efficient. We cast Alesina’s analysis in the European context, analyzing potential voting outcomes, assuming that EU countries can be arranged according to different criteria. We find that depending on the empirical distribution of voting countries, Alesina’s voting procedure leads to interesting different outcomes.     

A Re-Examination of the Effect of GATT/WTO on Trade

The empirical literature on the effect of the GATT/WTO on trade provides ambiguous results. This paper sheds new light on this issue by re-examining the ex post (partial) effect of GATT/WTO membership on trade using multiple econometric specifications of the gravity equation and analysing several potential asymmetries of the GATT/WTO system. Our results show an uneven but pervasive evidence that membership in GATT/WTO have had an economically significant effect on members’ bilateral trade. Moreover, we find that the GATT/WTO effect operates through both trade margins but mainly through the intensive margin.     

Economic models of speculative attacks and the drachma crisis of May 1994

Speculative attacks on fixed or ‘fixed but adjustable’ exchange rate regimes seem to have become a standard feature of the landscape of foreign exchange markets. The supposed excesses of seemingly untethered financial markets have been documented for some time, but only recently have the concerted attacks by speculators on exchange-rate regimes begun to occupy the popular imagination.Economic models of this phenomenon, however, have been around for some time, and are useful in characterizing the real-world speculative attacks that have occurred in the last 10–15 years in a number of countries. In this paper, we provide a brief overview of one such model. We also sketch some implications of that model for the speculative attack on the Greek drachma in May 1994.     

Israel’s open-secret trade

This paper uncovers and quantifies Israel’s exports to countries that ban trade with Israel. Israel exported a total of $6.4 billion worth of merchandise to boycott countries between 1962 and 2012, and most of this trade is illicit, i.e. not recorded by the importers. We find that electronic exports to Malaysia account for the lion’s share of this trade but it also includes a wide array of products from footwear to fruit and vegetables. Our estimates suggest Israel’s exports to these countries would be 10 times larger without the boycott. On top of providing further evidence on the unintended consequences of unilateral trade bans, this paper provides a case study on the role of politics in international trade.     

Is it really more dispersed?

The ECB’s one size monetary policy is unlikely to fit all euro area members at all times, which raises the question of how much monetary policy stress this causes at the national level. I measure monetary policy stress as the difference between actual ECB interest rates and Taylor-rule implied rates at the member state level. These rates explicitly take into account the natural rate of interest to capture changes in trend growth. I find that monetary policy stress within the euro area has been steadily decreasing prior to the recent financial crisis. Current stress levels are not only lower today than in the late 1990s, they are also in line with what is commonly observed among U.S. states or pre-euro German Länder.