The missing shock: the macroeconomic impact of British Privatizations

In this paper the impact of privatization on macroeconomic performance in the United Kingdom is tested using quarterly data from 1979 to 1999. Privatization proceeds have been included in a simple analytical framework dealing with both demand and supply-side of the economy. Multivariate cointegration techniques have been used in order to consider the nonstationarity of the time series involved. The empirical results show that privatizations have no long-run effects on output in the UK. This result is consistent with microeconomic evidence that shows that in the UK ownership change per se had little impact on long term productivity trends. Moreover it is found that privatization proceeds have contributed to sustaining public expenditures.     

The impact of fiscal-monetary policy interactions on government size and macroeconomic performance

This paper analyzes the relationship between inflation, output and government size by reexamining the time inconsistency of optimal monetary and fiscal policies in a general equilibrium model with staggered timing structure for the acquisition of nominal money à la Neiss (Neiss, Katharine S. (1999), Discretionary Inflation in a General Equilibrium Model, Journal of Money, Credit and Banking, 31(3), pp. 357–374.), and public expenditure financed by means of a distortive tax. It is shown that, with predetermined wages, the equilibrium rate of inflation is above the Friedman rule and the equilibrium tax rate is below the efficient level. In particular, the discretionary rate of inflation is nonmonotonically related to the natural output, positively related to government size, and negatively related to the degree of central bank conservatism. Finally, a regime with commitment leads to welfare improvements over a regime with discretion.     

The macroeconomic impact of foreign labour influx into the industrialized nation state and the complementary policies

This paper makes a numerical assessment on the macroeconomic impact of foreign labor influx into the industrialized nation state allowing free trade in goods but imposing an immigration quota on labor, and then explores the complementary policies for the impact of foreign labor influx. One of the main findings is that immigration itself brings welfare gains only if prices are flexible, but a skill-biased intake policy can bring a much larger welfare gain. The complementary policy options to boost welfare gains by immigration increase are monetary expansion, adopting foreign components more, and influencing foreign demand for intermediate goods indirectly by inviting foreign direct investment. For these policies to cope, the destination country should try to correct the market structure so that prices can be flexible.     

The non-linear impact of monetary policy on international reserves: macroeconomic variables nexus

This paper employs panel smooth transition regression models to investigate the nonlinear effects of two monetary policy proxies (i.e., real exchange rate return and real interest rate differential) on the international reserves—macroeconomic variables nexus. The panel data set includes the fourteen G-20 countries during the period 1991–2012. Empirical results show that the marginal effects of the macroeconomic variables (savings, terms of trade, public debt, capital account liberalization, economic growth, and trade openness) on international reserves are non-linear and vary with time, the proxies and countries, not linear and constant derived from traditional linear model. Currency devaluation policy (against the US dollar) can non-linearly enlarge the positive contribution of trade openness and public debt on international reserves, and non-linearly reduce the negative impact of terms of trade on international reserves, as the Marshall–Lerner condition holds. Expansionary monetary policy (through the decrease in domestic interest rates) can strengthen the positive effects of public debt, trade openness, and economic growth on international reserves. The precautionary and mercantilist views of reserves holdings are partially supported.     

Measuring the impact of violence on macroeconomic instability: evidence from developing countries

Portuguese Economic Journal - Uncertainty induced by various economic and non-economic factors instigates macroeconomic instability. Macroeconomic instability, further, reduces predictability of a...     

The dynamic impact of macroeconomic factors on initial public offerings: evidence from time-series analysis

This article examines the explanatory power and the dynamic impact of macroeconomic conditions on Initial Public Offering (IPO) activities in US during the period from 1970 to 2005. Applying time-series econometric techniques, we find the existence of long-run equilibrium relationships between IPO activities and selected macroeconomic variables. Stock market performance and volatility are shown to play the most important role in the timing of IPOs. The Fed funds rate and the 10 year US Treasury Bond (TB) yield play a comparable role in determining the amount of proceeds raised in the IPOs. There also exist different short-run dynamic adjustment mechanisms between IPOs and macroeconomic factors towards the long run equilibrium path and they are mostly completed within the period of 6 months to 1 year. The results have some useful implications for forecasting IPO activities.     

The macroeconomic consequences of disasters

Natural disasters have a statistically observable adverse impact on the macro-economy in the short-run and costlier events lead to more pronounced slowdowns in production. Yet, interestingly, developing countries, and smaller economies, face much larger output declines following a disaster of similar relative magnitude than do developed countries or bigger economies. A close study of the determinants of these adverse macroeconomic output costs reveals several interesting patterns. Countries with a higher literacy rate, better institutions, higher per capita income, higher degree of openness to trade, and higher levels of government spending are better able to withstand the initial disaster shock and prevent further spillovers into the macro-economy. These all suggest an increased ability to mobilize resources for reconstruction. Financial conditions also seem to be of importance; countries with more foreign exchange reserves, and higher levels of domestic credit, but with less-open capital accounts appear more robust and better able to endure natural disasters, with less adverse spillover into domestic production.     

The Liverpool macroeconomic model of the United Kingdom

The paper describes the Liverpool Model, a rational expectations model of the UK economy used for forecasting since March 1980. The model is of the ‘new classical’ type, in that all markets clear; in the labour market, there is a union sector with one-year nominal wage contracts but the non-union sector clears excess demands. Equilibrium (or ‘natural rate’) values of output, employment, real wages, etc are endogenously determined. In- and out-of-sample errors, a full set of simulations, and a complete listing are included. The interim experience of the model as a test bed for rational expectations methods is ‘far from discouraging’.     

The macroeconomic determinants of academic salaries in Australia

Nominal and real salaries at Australian universities are significantly affected by the behaviour of inflation and unemployment. Australian academics are not fully compensated for inflation. High unemployment has a marked negative effect on real salaries. Predicted changes in real salaries for various combinations of inflation and unemployment, calculated from the econometric model, yield pessimistic conclusions about the future outlook for real academic salaries.     

The diversity of forecasts from macroeconomic models of the US economy

This paper investigates the accuracy and heterogeneity of output growth and inflation forecasts during the current and the four preceding NBER-dated US recessions. We generate forecasts from six different models of the US economy and compare them to professional forecasts from the Federal Reserve??s Greenbook and the Survey of Professional Forecasters (SPF). The model parameters and model forecasts are derived from historical data vintages so as to ensure comparability to historical forecasts by professionals. The mean model forecast comes surprisingly close to the mean SPF and Greenbook forecasts in terms of accuracy even though the models only make use of a small number of data series. Model forecasts compare particularly well to professional forecasts at a horizon of three to four quarters and during recoveries. The extent of forecast heterogeneity is similar for model and professional forecasts but varies substantially over time. Thus, forecast heterogeneity constitutes a potentially important source of economic fluctuations. While the particular reasons for diversity in professional forecasts are not observable, the diversity in model forecasts can be traced to different modeling assumptions, information sets and parameter estimates.     

The macroeconomic effects of infrequent information with adjustment costs

We extend the macroeconomic literature on Ss -type rules by introducing infrequent information in a kinked adjustment-cost model. We first show that optimal individual decision rules are both state and time dependent. We then develop an aggregation framework to study the macroeconomic implications of such optimal individual decision rules. In our model, a vast number of agents act together, and more so when uncertainty is large. The average effect of an aggregate shock is inversely related to its size and to aggregate uncertainty. These results contrast with those obtained with full information adjustment cost models. JEL Classification: E0,E1,E2,E3
Les effets macroéconomiques de l'information infréquente quand il y a des coûts d'ajustement. Les auteurs étendent la portée de la littérature spécialisée sur les règles de type Ss en proposant des postulats d'information infréquente et de fonction de coûts d'ajustement pliée. On montre que les règles de décision optimales des individus dépendent à la fois de l'état de l'environnement et du moment. On développe alors un cadre d'agrégation pour étudier les impacts macroéconomiques de ces règles optimales de décision. Dans ce modèle, un grand nombre d'agents agissent de concert, et optimales ce d'autant plus que l'incertitude s'accroît. L'effet moyen d'un choc au niveau global est inversement reliéà son importance et au niveau d'incertitude agrégée. Ces résultats contredisent ceux qu'on obtient dans des modèles de coûts d'ajustement avec pleine information.     

International comparisons of macroeconomic performance

In this article we present the results of a contingent rating study carried out on a sample of tourisits visiting Scicli, a Sicilian town known for its baroque heritage. In particular, we focus on different attributes of tourism products – namely, season, accommodation and cultural heritage – to study how much each of these attributes weights in tourists’ preferences. We also study how the socio-demographic characteristics of people affect their evaluation of the different attributes of tourism products. The heritage endowment appears to be far from being the most important factor; this result is consistent across different socio-demographic subgroups of interviewed persons.     

On the controllability of continuous-time macroeconomic models

Summary (Abstract) It is argued in this paper that an independent control of target variables over time in continuous dynamic macroeconomic systems may not be achievable even though Aoki's well-known rank test for target path controllability is satisfied. It is shown that in many dynamical systems impulse controls are needed to steer the targets along arbitrarily given time paths. Such controls are not admissible from the macroeconomic point of view. By means of the structure algorithm by Silverman and Payne (1971) conditions for target path controllability that depend on the choice of the admissible spaces for the target and the instrument variables, are derived.The author is grateful to Professor Dr. Helmut Kuhn, Göttingen, and two anonymous referees for valuable comments on an earlier draft of this paper.     

The phillips curve and US macroeconomic performance during the 1990s

This paper identifies two competing accounts of recent US macroeconomic performance, both of which are capable of explaining the concurrence of low unemployment and low inflation experienced by the US after 1995. Econometric evidence provides partial support for both views, establishing that while there has been no change in the position of the long run Phillips curve in the US during the 1990s, this long run Phillips curve is likely not vertical. These results suggest that recent US macroeconomic performance is not sustainable and that US policy makers ultimately face a choice between higher unemployment or higher inflation in the long run.     

An assessment of the macroeconomic determinants of inequality

The paper provides an assessment of the determinants of income inequality in a broader macroeconomic context. In particular the hypothesis that income inequality is related to fundamentals affecting economic growth is examined.     

A macroeconomic rationing model of the belgian economy

This paper presents a small macroeconometric model that allows explicitly for the existence of rationing on the goods and labour markets and clearly distinguishes the three well-known regimes: Keynesian unemployment, classical unemployment and repressed inflation. The basic structure of the model contains two equations that can be estimated by single equation techniques. Estimation on Belgian postwar data establishes both the feasibility and the usefulness of the quantity rationing approach. Empirical results also reveal after 1972 an increasing discrepancy between the amount of labour supplied and the potential employment level determined by existing production capacities.