Estimating Europe’s natural rates

This article estimates potential output, the natural rate of unemployment, and the core inflation rate using aggregated euro area data. The empirical model consists of a Phillips curve linking inflation to unemployment. An Okun-type relationship is used to link the output gap to cyclical unemployment. The model further accounts for new developments in unobserved component models by allowing (i) for correlation between shocks to the natural rates and the corresponding gaps and (ii) structural breaks in the drift of potential output and the natural rate of unemployment.     

European Integration,Capitalist Diversity and Crises Trajectories on Europe’s Eastern Periphery

ABSTRACT

European policy responses to the Global Financial Crisis and its European manifestation have set off a scholarly debate whether different national varieties of capitalism are equally able to cope with deepened European integration. To date, this debate has mostly focused on the contrasting fates of the thriving northern export-oriented capitalisms and the ailing southern European ones. This paper seeks to broaden the debate by focusing on Europe’s Eastern periphery. It argues that a combination of domestic transformation strategies and the EU’s accession policies resulted in two different growth regimes on Europe’s Eastern periphery: a dependent export-driven in the Visegrád countries and a dependent debt-driven in the Baltic States. On the basis of the pre- and post-crisis trajectories of these two growth models, this paper finds that because East Central European capitalisms were profoundly shaped by EU integration, they are on balance also more compatible with deepened integration than Southern European capitalisms.     

Transforming Chinese Government＇s Functions Based on Knowledge Economy

Based on the nature of Knowledge Economy, this paper discusses the necessity and urgency for Chinese government to adjust its functions in the new economy; presents some concrete strategies of taking good chances and meeting the challenges of Knowledge Economy, including creating and protecting intellectual property rights, enhancing knowledge management, solving the problem of fairness and efficiency, breaking down local protectionism and building national innovation system.     

International spillovers of ECB’s unconventional monetary policy: the effect on Central Europe

We examine how unconventional monetary policy of the European Central Bank (ECB) influences macroeconomic stability in three Central European economies. We estimate various panel vector autoregressions (PVARs) using monthly data from 2008 to 2014. Using the shadow policy rate and central bank assets as measures of unconventional policies, we find that output growth and inflation in Central Europe temporarily increase following an expansionary unconventional monetary policy shock by the ECB. Using both impulse responses and variance decompositions, we find that the effect of unconventional policies on output growth is much stronger than the effect on inflation.     

Fashion’s Effect on Consumer’s Preference Formation

Abstract:

It is widely known that all principles of economics textbooks do not consider advertising much less fashion a demand determinant factor. Fashion’s effect on consumer choice is a critically important topic to the understanding of consumer behavior and decision-making in the “new economy.” The discussion of such issues includes verifying the effect of three important fashion market features on consumer preference formation and choice, namely the length of product life cycle, demand volatility, and impulse purchasing. It seems that time has come to concede that fashion firms, especially those producing fast or “junk” fashion, if you will, have successfully been affecting consumer preferences and have manipulated consumer choices for the sake of their own interests. Such a goal has been achieved by exploiting the fashion market features by employing specific marketing strategies, within the framework of supply chain agility, such as product remodeling, product customization, and revisions or innovation.     

Questions and an swers about Europe’s new currency

WillFrankfurtofParisdisplaceLondonasthefinancialcapitalofEurope?Thiswasoneofthebigpre-dictionsbefore1999 —admittedlyapredictionmademainlybyGermansandFrenchmen.WithBritainoutsidetheeurozone,thereasoningwent,London’sstatuswassuretofalter.Ithasnot.Sure,FrankfurtandParisbothhavestockexchangesthataremoreinnovativeanddynamicthanthestodgyLondonexchange.ButtheLSEhasplayedonlyaminorroleintherebirthofLondonasama-jorfinancialcapital.Thatrebirth,whichbeganinthe1960s,wasallaboutLondonbecomingacen…     

Are We Forgetting Something? Remarks on the Connections Between Douglass North’s Contributions and Original Institutional Economics

Douglass North’s latest works have become central to the current discussion regarding the differences and similarities between new institutional economics (NIE) and original institutional economics (OIE). We seek to contribute to this debate by offering a specific analytical perspective to evaluating North’s contributions. After defining a set of philosophical and methodological principles that specifies OIE, we endeavor to verify if and how North’s work relates to these foundations. We believe that this methodological perspective brings to light a fundamental issue not stressed by earlier analyses: the profound difference between the institutionalisms regarding the role of market order as a mechanism of human sociability.     

The effects of education on spouses’ satisfaction in Europe

This article identifies the effects of both own and spouses' education levels on individual economic satisfaction for European households. To that end, it estimates several specifications based on the family collective approach, for each of the 14 EU countries, by using the eight waves of the European Community Household Panel, 1994–2001. After demonstrating that the IV Hausman–Taylor procedure is the selected estimation method in the majority of cases, the empirical results show that male and female income satisfaction significantly increases when the husband achieves higher education qualifications in the majority of European countries. However, the positive effect of the wife's higher education on female income satisfaction only appears in a very limited number of countries. Additionally, increases in individual wage and nonwage incomes generally lead to higher satisfaction levels.     

How Germany’s anti-Keynesianism has brought Europe to its knees

This paper investigates the (lack of any lasting) impact of John Maynard Keynes’s General Theory on economic policy-making in Germany. The analysis highlights the interplay between economic history and the history of ideas in shaping policy-making in postwar (West) Germany. The paper argues that Germany learned the wrong lessons from its own history and misread the true sources of its postwar success. Monetary mythology and the Bundesbank, with its distinctive anti-inflationary bias, feature prominently in this collective odyssey. The analysis shows that the crisis of the euro today is largely the consequence of Germany’s peculiar anti-Keynesianism.     

Choosing one’s own informal institutions: on Hayek’s critique of Keynes’s immoralism

In the main, Hayek favored rules that apply equally to all and located such rules in tradition, beyond conscious construction. This led Hayek to attack Keynes’s immoralism, i.e., the position that one should be free to choose how to lead one’s life irrespective of the informal institutions in place. However, it is argued here that immoralism may be compatible with Hayek’s enterprise since Hayek misinterpreted Keynes, who did not advocate the dissolving of all informal rules for everybody. By avoiding this misinterpretation, immoralism can be seen as institutional experimentation at the margin, which Hayek himself favored.

Zero Lower Bound Monetary Policy’s Effect on Financial Asset’s Correlations

We investigate the hypothesis that zero lower bound monetary policy has an effect on the correlations of financial assets. Using an event-study approach, we evaluate the impact of the zero lower bound monetary policies of the Bank of Japan, the Bank of England, and the Federal Reserve on the bond and equity markets in Japan, the UK, the US, and the Eurozone. We evaluate the bond markets using the Japanese 10-year Sovereign bond (JGB), UK 10-year bond (Gilt), US 10-year Treasury note (T-note), and German 10-year bond (Bund). For the equity markets we use the Nikkei 225, FTSE 100, S&P 500, and Euro STOXX 600 as proxies for each regional market. We also include gold and silver as control commodities. Our analyses demonstrate significant changes not only in the evaluated assets’ correlations with each other, but also in their general behavior. This has major implications for investment portfolio construction and provides useful insight for financial service regulators and the central banks themselves in monitoring the fragility and stability of the financial system.     

A Note on Laurence Seidman’s Article

Mihail Manoilescu was among the foremost intellectual figures of the interwar period in Romania. He was known as a politician and central banker, as well as an economist. From the very beginning of his theoretical and practical career, or at least from the late 1920s onward, Manoilescu’s ideas and theories (especially his corporatist theory) were marked by clear continuity and consistency based on the theory of protectionism grounded on productivity differences. By developing his model — an alternative to the theory of comparative advantage — Manoilescu endeavored to show the need for protectionist measures to promote the development of peripheral countries. His defense of protectionism is usually presented as clumsy and founded on an incorrect method, even if he is often recognized as the forerunner of the theory of unequal exchange and the dependency theory. Few scholars note the similarity of Manoilescu’s theory with Karl Marx’s labor theory. This paper contributes to validating Manoilescu’s conclusions, the soundness of which we test here by reconstructing the theory from a Marxian perspective. A reconstruction of this type offers new possibilities of evaluating his theory and a better understanding of its contributions and limitations.     

Differential effects of mother’s and child’s postnatal WIC participation on breastfeeding

We evaluate the effect of postnatal participation in the Women, Infants, and Children (WIC) programme on breastfeeding decisions using the data from the IFPS II. We find that the infant’s WIC participation positively affects the hazard of discontinuing breastfeeding, both partial and exclusive (and is thus associated with abbreviated breastfeeding duration). No significant association is found between the mother’s participation and the hazards of stopping exclusive or partial breastfeeding. Such differential effects might be a result of the programme’s policy, according to which the infant, but not the mother needs to be enrolled to receive free formula.