For how long do IMF forecasts of world economic growth stay up-to-date?

This study analyses the performance of the International Monetary Fund (IMF) World Economic Outlook output forecasts for the world and for both the advanced economies and the emerging and developing economies. With a focus on the forecast for the current year and the next year, we examine the durability of IMF forecasts, looking at how much time has to pass so that IMF forecasts can be improved by using leading indicators with monthly updates. Using a real-time data set for GDP and for indicators, we find that some simple single-indicator forecasts on the basis of data that are available at higher frequency can significantly outperform the IMF forecasts as soon as the publication of the IMF’s Outlook is only a few months old. In particular, there is an obvious gain using leading indicators from January to March for the forecast of the current year.     

Has M2 demand in the USA become unstable? evidence from an error-correction model

The purpose of this paper is to estimate an appropriate broad-money demand function for the United States and to examine its stability after 1987, when the Federal Reserve System began using M2 as a policy guide. Special attention is paid to the model specification, its dynamic structure, and to its cointegration properties. The results from various dynamic error-correction models suggest that: (i) the money demand relationship is stable; (ii) most previously estimated models have undoubtedly misspecified the interest rate variable; (iii) interest-rate variability is another important determinant of real money demand; and (iv) in contrast of previous studies, the long-run scale variable is real GDP, whereas real consumer spending is the short-run scale variable. The sample period examined is 1953:1 to 1991:4.     

Are firms reluctant to engage in inter-organizational exchange relationships with competitors?

Using data on the establishment of Venture Capital syndicates in Germany during the period 1995-2005 I document that relationships are formed between VCs that occupy different strategic positions in the network to allow for the combination of complimentary investment expertise.     

The franc shock and Swiss GDP: how long does it take to start feeling the pain?

The article addresses the question on what is the typical time horizon over which a full transmission of movements in the real exchange rate takes place into real economy. We base our analysis on the mixed-frequency small-scale dynamic factor model (DFM) proposed by Siliverstovs in 2012 fitted to the Swiss data. In this article, we augment the benchmark model with the real exchange rate of the Swiss franc vis-a-vis currencies of its 24 trading partners, while keeping the rest of model specification intact. We are interested in investigating the relationship between the common latent factor, representing the Swiss business cycle, and the real exchange rate. We explore the temporal relationship between these two variables by varying the time lag with which the real exchange rate enters the factor model by recording the magnitude and statistical significance of the factor loading coefficient in the equation pertaining to the real exchange rate variable. Our main conclusion is that the fluctuations in the exchange rate start influencing real economy after 1 month and their effect is practically over after 13 months. The largest effect is recorded at the time horizon of about 6 to 9 months.     

Are Internet surveys an alternative to face-to-face interviews in contingent valuation?

Internet is an increasingly popular data collection mode for stated preference research in environmental economics. However, little is known about how this survey mode may influence data quality and welfare estimates. As part of a national contingent valuation (CV) survey estimating willingness to pay (WTP) for biodiversity protection plans, we assign two groups of respondents either to an Internet or face-to-face (in-home) interview mode. Our design aims to better isolate measurement effects from sample composition effects by drawing both samples from the same sample frame. We find little evidence of social desirability bias in the interview setting or satisficing (shortcutting the response process) in the Internet survey. The share of “don't knows”, zeros and protest responses to the WTP question with a payment card is very similar between modes and equality of mean WTP cannot be rejected. Results are fairly encouraging for the use of Internet in CV as stated preferences do not seem to be significantly different or biased compared to face-to-face interviews.     

Whose money is it anyway? Using prepaid incentives in experimental economics to create a natural environment

Simulating a real world environment is of utmost importance for achieving accurate and meaningful results in experimental economics. Offering monetary incentives is a common method of creating this environment. In general, experimenters provide the rewards at the time of experiment. In this paper, we argue that receiving the reward at the time of the experiment may lead participants to make decisions as if the money they are using were not their own. To solve this problem, we devised a “prepaid mechanism” that encourages participants to use the money as if it were their own.     

Testing EU fiscal surveillance: how sensitive is it to variations in output gap estimates?

Real‐time estimates of potential output are used for the calculation of the cyclically adjusted budget balance, one of the main indicators in the assessment of the fiscal performance of EU member states. The estimation of potential output involves a decomposition of actual output into a cyclical and a structural component based on arbitrary assumptions about the statistical properties of the two unobserved components. With a very high degree of smoothing, variations in GDP are mostly taken to be temporary, as are the ensuing changes in the budget deficit. Conversely, with a low degree of smoothing, variations in GDP are mostly taken to be permanent, leading to different policy conclusions. Our paper examines whether and how different potential output estimates would have supported different decisions in the EU budgetary surveillance in terms of both timing and substance. The results show that only a very high degree of smoothing of potential output would significantly reduce the reliability of the surveillance indicators. We conclude that a higher degree of smoothing compared with current practice would not be harmful for EU fiscal surveillance, while it could contribute to more cautious policies by signalling larger and longer periods of economic ‘good times’.     

The contradictory roles of ambiguity for innovation in an industry: how beneficial are standardisation and classification?

Studies on the influence of ambiguity on innovation show inconsistent understandings: it could be beneficial owing to flexibility, while it might be detrimental owing to distraction of information. Faced with the contradictory understandings, this study examines whether technological standardisation and industry classification could increase innovations of an industry. Using ISO9001 and the SIC codes in Korea from 1998 to 2010, the empirical tests illustrate inverted U-shaped relationships between industry-level innovation and standardisation/classification. Therefore, it is suggested that a moderate degree of standardisation and classification provides a positive infrastructure for innovation by providing the necessary guidelines for a firm's behaviour as well as maintaining its flexibility.     

Do stock prices react to immigration restrictions? Evidence from an event study in Switzerland

This article tests the effects of sudden immigration restrictions on stock prices of firms in industries with high shares of immigrants. It estimates the abnormal returns as a function of the share of migrants by industry. To do so, one specific event – a referendum on migration policy with an unexpected outcome – that will potentially cut off Swiss listed companies from the supply of foreign labour is studied. Although operating in an industry with a high share of immigrants is associated with lower returns, the effect is not very strong, which indicates that investors seem to trust the government to leave some leeway in the implementation of the constitutional amendment that was voted on.     

How private is private information? The ability to spot deception in an economic game

We provide experimental evidence on the ability to detect deceit in a buyer–seller game with asymmetric information. Sellers have private information about the value of a good and sometimes have incentives to mislead buyers. We examine if buyers can spot deception in face-to-face encounters. We vary whether buyers can interrogate the seller and the contextual richness. The buyers’ prediction accuracy is above chance, and is substantial for confident buyers. There is no evidence that the option to interrogate is important and only weak support that contextual richness matters. These results show that the information asymmetry is partly eliminated by people’s ability to spot deception.     

Is energy consumption effective to spur economic growth in Pakistan? New evidence from bounds test to level relationships and Granger causality tests

The present study investigates the relationship between energy (renewable and nonrenewable) consumption and economic growth using Cobb–Douglas production function in case of Pakistan over the period of 1972–2011. We have used the ARDL bounds testing and Gregory and Hansen (1990) structural break cointegration approaches for long run while stationarity properties of the variables have been tested applying Clemente-Montanes-Reyes (1998) structural break unit root test.Our results confirm cointegration between renewable energy consumption, nonrenewable energy consumption, economic growth, capital and labor in case of Pakistan. The findings show that both renewable and nonrenewable energy consumption add in economic growth. Capital and labor are also important determinants of economic growth. The VECM Granger causality analysis validates the existence of feedback hypotheses between renewable energy consumption and economic growth, nonrenewable energy consumption and economic growth, economic growth and capital.     

Constitutional interests in the face of innovations: how much do we need to know about risk preferences?

In constitutional political economy, the citizens’ constitutional interests determine the social contract that is binding for the post-constitutional market game. However, following traditional preference subjectivism, it is left open what the constitutional interests are. Using the example of risk attitudes, we argue that this approach is too parsimonious with regard to the behavioral foundations to support a calculus of consent. In face of innovative activities with pecuniary and technological externalities in the post-constitutional phase, the citizens’ constitutional interests vary with their risk preferences. To determine what kind of social contract is generally agreeable, specific assumptions about risk preferences are needed.

Why was china trapped in an agrarian society? An economic geographical approach to the needham puzzle

This paper argues that before the world started to globalize, the differences in the geographical endowments that different population faced were the most important constraints to their long-term production and consumption. The paper uses this central hypothesis to explain the sharp contrast between the flourishing Song and the stagnant Ming and Qing. During the Song dynasty, despite the fact that China lost a significant amount of arable land to invading nomads as its population peaked, China witnessed a higher urbanization level, more prosperous commerce and international trade, and an explosion of technical inventions and institutional innovations. However, after having significantly improved its man-to-land ratio in the period after the Song China only found itself induced deeper into the agrarian trap, resulting in reduced urbanization, withering foreign trade, a declining division of labor, and stagnant in technology.     

To lockdown? When to peak? Will there be an end? A macroeconomic analysis on COVID-19 epidemic in the United States

In this paper, we construct an extended SIR model with agents optimally choosing outdoor activities. We calibrate the model and match it to the data from the United States. The model predicts the epidemic in the United States very well. Without government intervention, our simulation shows that the epidemic peaks on 22 March, 2020 and ends on 29 August, 2022. By the end of the epidemic, more than 21 million people will be infected, and the death toll is close to 3.8 million. We further conduct counterfactual experiments to evaluate the effectiveness of different polices against this pandemic. We find that no single policy can effectively suppress the epidemic, and the most effective policy is a hybrid policy with lockdown and broadening testing. Lockdown policy alone is ineffective in controlling the epidemic as agents would have optimally stayed at home anyway if the infection risk is high even without a lockdown. Broadening testing solely will accelerate the return to normal life as there are fewer infected people hanging around. However, as people do not internalize the social costs of returning to normal life, the epidemic could get even worse. Increasing medical capacity without any other measures only has temporary effects on reducing the death toll. We also find that random testing is too inefficient unless a majority of population is infected.     

Has Austria’s Accession to the EU Triggered an Increase in Competition? A Sectoral Markup Study

We estimate the pro-competitive effects of Austrias participation in the Single Market after its European Union (EU) accession in 1995 in terms of firms market power as measured by the Lerner index, using a sample of 46 industries and 7 industry groups, covering the period 1978–2001. In the framework of the markup estimation method suggested by Roeger (1995), we test for both an instantaneous structural break between 1993 and 1998 and also estimate logistic smooth transition models to take up the proposition that the regime shift is likely to have occurred gradually rather than as a big bang. In sum, the results provide no reason for being euphoric: Pronounced markup reductions were only found in three industry groups (mining and quarrying, wholesale and retail trade; financial services and real estate). At the more disaggregate level, the picture is mixed: Both increases and reductions in market power have been found.