Macroeconomic factors and yield curve for the emerging Indian economy

This article investigates the dynamic linkages between the estimated parameters of a zero coupon yield curve and macroeconomic variables like inflation, gross domestic product growth in the presence of a monetary policy indicator in India for the period July 1997 to February 2004. The study finds that there exists strong causality from financial factors, defined by three parameters of the yield curves (‘Level’, ‘Slope’, ‘Curvature’) to macroeconomic factors; growth, inflation and monetary policy indicators (changes in the call money rate). However, the causality in the opposite direction is found to be weaker. It is found that theyield and macro factors do not cause each other before the launch of a liquidity adjustment facility, so the evidence of causality from financial to macroeconomic factors can be attributed to the introduction of a liquidity adjustment facility in June 2000. The causality from yield factors to macro factors is primarily driven by the fact that the ‘changes in level’ of yield curve brings an impact on inflation through the changes in monetary policy. This finding suggests that monetary policy plays a key role in driving the causality. This also implies that the indirect instrument of monetary policy mechanism is becoming increasingly important to influence the aggregate demand in the economy.     

The New Economy: Reality and Policy

This paper concerns the new economy (alias the knowledge‐based economy). I examine the different meanings attached to the new economy term and the evidence surrounding it, concentrating on the upsurge in US productivity growth between 1995 and 2000. I argue that the reports of the death of the new economy have been greatly exaggerated. There is evidence that information technology has transformed the US economy and is thus likely to have a strong impact on the UK economy in coming years. I discuss how elements of public policy should adapt to these economic changes, both in terms of an overall framework and in applications to specific areas (technology policy, human capital policy, competition policy and industrial policy). The new economy is a place of hope and fear. The hope is that policy activism can cement in potential productivity gains; the fear is that government actions will not mitigate the seemingly ineluctable pressures towards social exclusion.     

Can Insurance Activity Act as a Stimulus of Economic Growth? Evidence from Time-Varying Causality in China

This article investigates the nexus between insurance and economic growth in China with a dynamic interactive mechanism to study different time periods. Using quarterly data from 1999 to 2015, the rolling-window causality test provides evidence of bidirectional causality between insurance activity and economic growth. However, the “supply-leading” pattern tends to dominate the “demand-following” pattern, which implies that in China insurance acts as a stimulus of economic growth during most of the period. Property insurance is more effective than life insurance in stimulating economic growth. Some temporary negative impacts from the development of the insurance sector show that China is in the midst of a transition from a closed economy to a more open economy and policy interventions by the government to liberalize the insurance sector. These findings offer several useful insights for policy makers in transition economies and developing countries.     

Measuring the Dynamic Gains from Trade

This article investigates the links between trade policy andeconomic growth in a panel of 57 countries between 1970 and1989. It develops a new measure of trade policy openness basedon the policy component of trade shares, using it in a simultaneousequations system to identify the effect of trade policy on severaldeterminants of growth. The results suggest a positive impactof openness on economic growth, with the accelerated accumulationof physical capital accounting for more than half the totaleffect; enhanced technology transmission and improvements inmacroeconomic policy account for smaller effects. This decompositionis robust with respect to alternative specifications and timeperiods. The article also successfully tests whether the modelexhaustively captures the effects of trade policy on growth.     

How Important Is Money in the Conduct of Monetary Policy?

I consider some of the leading arguments for assigning an important role to tracking the growth of monetary aggregates when making decisions about monetary policy. First, I consider whether ignoring money means returning to the conceptual framework that allowed the high inflation of the 1970s. Second, I consider whether models of inflation determination with no role for money are incomplete, or inconsistent with elementary economic principles. Third, I consider the implications for monetary policy strategy of the empirical evidence for a long‐run relationship between money growth and inflation. And fourth, I consider reasons why a monetary policy strategy based solely on short‐run inflation forecasts derived from a Phillips curve may not be a reliable way of controlling inflation. I argue that none of these considerations provides a compelling reason to assign a prominent role to monetary aggregates in the conduct of monetary policy.     

Unemployment and monetary policy under rational expectations: Some Canadian evidence

The policy implications of combining rational expectations with the natural rate of unemployment hypothesis are reviewed. A monetary policy feedback rule is estimated on Canadian data for the period 1927–1972. The residuals from the regression serve as the unanticipated components of monetary policy while predicted values serve as expected monetary growth. An unemployment equation is then developed in which the unemployment rate is allowed to be influenced by expected and unexpected monetary policy and fiscal and foreign spending. The evidence confirms the hypothesis that it is unanticipated monetary policy that affects unemployment and that anticipated monetary growth plays no significant role.     

Central Government Control over Local Authority Expenditure: The Overseas Experience

This article compares the macroeconomic performance of centralized countries and decentralized countries in the OECD between 1984 and 1995. It considers three views of decentralization: the level of state and local taxes, the degree of decentralized power over tax rates, and the freedom of access for states or local authorities to capital markets. The evidence does not support the commonly held fear that decentralized countries may perform worse. In terms of growth, the two types of country seem evenly matched, and in terms of inflation and unemployment, decentralized countries actually seem to perform consistently better. It is possible, because central governments in decentralized countries concentrate on fewer activities, such as macroeconomic policy, that they tend to perform these activities better.     

Population Structure and Housing Prices: Evidence from Chinese Provincial Panel Data

This study analyzes the relationship between the proportion of the economically active population aged 15–64 to total population and housing prices. A panel of 31 provinces in China from 2002 to 2014 is used in our analysis. We find empirical evidence that the impact of the population structure on housing-price growth increases as the population growth rates rise. This observation suggests that, to understand provincial housing price movements in China, one should consider the ratio of working-age population to total population in a province. The main policy implication is that Chinese policymakers need to ensure a moderated population growth to effectively promote stability in housing prices and the economy.     

“稳增长”与“防风险”双目标的宏观调控政策抉择

“防风险”和“稳增长”是当前宏观调控的两大政策目标,为此,本文构建一个平衡兼顾双重政策目标的门限理论模型框架,基于反事实方法评估了动态平衡上述两大目标的最优财政货币政策组合。研究表明:(1)2008年以前,财政政策和货币政策都表现出较强的稳增长政策功效,但国际金融危机后,政策取向更倾向于动态平衡“稳增长”与“防风险”目标。(2)财政政策对三部门杠杆的影响呈现显著增强态势,数量型货币政策效果则在经历“增加—下降”周期后趋于稳定,利率政策效果显著而且近年来呈现增强态势,由此表明利率的传导效果正在不断得以强化。(3)从反事实结果看,宏观调控的最优政策搭配抉择取决于政策当局在动态平衡不同目标中的政策取向,特别是,依赖于精准调控“稳增长”与“防风险”目标的偏好强度。     

财政收入超经济增长的影响因素及对策建议

1994年分税制改革以来,我国财政收入进入高速增长阶段,出现了近十多年来财政收入增长速度大幅高于经济增长速度的现象。本文将从财政收入与经济增长的相互关系入手,分析财政收入超经济增长的原因及对我国经济产生的正、负面影响,进而提出相关政策建议。     

On the Consequences of Pro‐Cyclical Fiscal Policy

There is widespread evidence that pro‐cyclical fiscal policies have been prevalent in developing countries and often in some industrial nations. It is therefore surprising that, in contrast to the wealth of studies on the sources of pro‐cyclical policy, potential consequences of such seemingly suboptimal policies have been largely ignored in the existing literature. By utilising a comprehensive set of indicators from 114 countries for 1950–2010, we aim to address the following important question: does it matter whether a country adopts a pro‐cyclical fiscal policy stance rather than a counter‐cyclical one? Our results produce a resounding ‘yes’ to this question. We find that fiscally pro‐cyclical countries have lower rates of economic growth, higher rates of output volatility and higher rates of inflation.     

Economic policy uncertainty and the credit channel: Aggregate and bank level U.S. evidence over several decades

Economic policy uncertainty affects decisions of households, businesses, policy makers and financial intermediaries. We first examine the impact of economic policy uncertainty on aggregate bank credit growth. Then we analyze commercial bank entity level data to gauge the effects of policy uncertainty on financial intermediaries’ lending. We exploit the cross-sectional heterogeneity to back out indirect evidence of its effects on businesses and households. We ask (i) whether, conditional on standard macroeconomic controls, economic policy uncertainty affected bank level credit growth, and (ii) whether there is variation in the impact related to banks’ balance sheet conditions; that is, whether the effects are attributable to loan demand or, if impact varies with bank level financial constraints, loan supply. We find that policy uncertainty has a significant negative effect on bank credit growth. Since this impact varies meaningfully with some bank characteristics – particularly the overall capital-to-assets ratio and bank asset liquidity-loan supply factors at least partially (and significantly) help determine the influence of policy uncertainty. Because other studies have found important macroeconomic effects of bank lending growth on the macroeconomy, our findings are consistent with the possibility that high economic policy uncertainty may have slowed the U.S. economic recovery from the Great Recession by restraining overall credit growth through the bank lending channel.     

Cash holdings,risk, and expected returns

In this paper I develop and empirically test a model that highlights how the correlation between cash flows and a source of aggregate risk affects a firm's optimal cash holding policy. In the model, riskier firms (i.e., firms with a higher correlation between cash flows and the aggregate shock) are more likely to use costly external funding to finance their growth option exercises and have higher optimal savings. This precautionary savings motive implies a positive relation between expected equity returns and cash holdings. In addition, this positive relation is stronger for firms with less valuable growth options. Using a data set of US pubic companies, I find evidence consistent with the model's predictions.     

The information transfer effects of political connections on mitigating policy uncertainty: Evidence from China

A key aspect of Chinese-style institutions is that the growth of the economy can be severely restricted by the adjustment and implementation of policy, leading to serious uncertainty in business practices. This paper investigates whether political connections help private firms obtain policy information ahead of public disclosure that would allow them to hedge against policy uncertainty. Using the quarterly data on non-financial private listed companies over 2007:Q1–2017:Q4, we find that the negative effect of policy uncertainty on fixed-asset investment is lower in politically connected firms than in non-connected firms, especially in industries with low asset reversibility and regions with a high degree of marketization. Further, a positive mitigation of policy uncertainty exists in firms whose top executives served as officials rather than deputies, and higher administrative as well as finance-related political connections show more information advantage. In addition, robust evidence is provided that controls the impacts of political connections on financing constraints, business performance and policy burdens, overcoming potential endogeneity, and the cash-holdings perspective. Our findings suggest that political connections are conducive to mitigate information asymmetry between private firms and policymakers in China.     

中国税收增长的理论分析和实证研究--中国1992-2002年税收增长个案分析

本文尝试从税收来源和使用角度分析税收增长的动因，指出税收增长是供给约束和需求刺激两类因素共同作用相互平衡的结果，并在此基础上提出了税收增长的供求模型。运用该模型，论文对于中国1992—2002年税收增长的主要因素，以及这些因素变动与税收增长之间的动态关系进行了初步的理论探讨和实证分析。研究结论表明，1994年税制改革在税收高增长中发挥主要作用。1998年以来实施的积极财政政策成为拉动我国税收收入高速增长的直接动因，并形成增长的拐点。同时，本文针对近年来税收增长数倍于GDP增长的现象以及不断攀升的税收弹性系数进行了较为深入的剖析，指出税收增长应同时具备适度弹性和长期稳定性两个特征，既要保证税收增长与经济增长的联系和互动，又要能满足长期的财政需求。     

Loan growth and bank risk: new evidence

This study provides new evidence on the relationship between abnormal loan growth and banks’ risk-taking behavior using data from a rich panel of Colombian financial institutions. We show that abnormal credit growth during a prolonged period leads to an increase in banks’ riskiness, accompanied by a reduction in solvency and an increase in the ratio of nonperforming loans to total loans. We also show that abnormal credit growth played a fundamental role in the bank-failure process during the late 1990s financial crisis in Colombia. Our results have important implications for financial regulation and macro-prudential policy.     

中国财政政策宏观经济效应的实证检验:1978-2004

本文从财政政策是否有效、财政政策是否存在时滞、财政政策的挤出效应如何等三个层面，基于VAR模型的Granger因果关系检验方法，分析了我国财政政策相关变量之间的关系。实证结果显示，财政政策各层变量之间存在层层推进的因果关系，怛部分变量的关联与理论的吻合性较差。总体来看，中国的财政政策从其宏观效应来分析是有救的，但存在挤出效应，而且时滞较为明显。     

A monetary policy feedback rule in Korea's fast-growing economy

In Korea's high-growth economy, the Bank of Korea had been willing to tolerate double-digit inflation, provided that it remained at `non-explosive' levels. In this article, we estimate a monetary policy feedback rule for Korea and find that the upper threshold of tolerable inflation for the Bank of Korea was about 20%. It appears that the Bank of Korea's disciplined, rule-like approach to monetary policy was able to control inflation and keep it away from explosive levels, despite the well-known empirical regularity that inflation becomes more variable at higher levels. After 1983, however, our regime-switching model suggests that the inflation target has been 6%. We also find little evidence that the Bank of Korea has targeted real growth, except for a period in the mid-1980s when industrial production growth suggested that the economy was overheating, relative to an implicit growth target of 7.4%. We conclude with a discussion of possible reasons for Korea to choose to stabilize inflation at lower levels since the mid-1980s.     

Gibrat's law test on Brazilian commercial banks

In recent years, Brazil has been one of the countries with the biggest changes in the banking sector. The process of deregulation that began in 2002 has entailed the increase of the presence of foreign banking and the increase of competition, among other aspects. In this context, the objective of this study consists in contrasting Gibrat's Law in the Brazilian commercial banking during the period of 2002–2013 with the objective of contributing with evidence for the construction of a growth model for banking that will guide the financial policy of the country. For this, the quartile regression methodology is utilized, since we consider that it analyzes the relation between growth and the size of the entities more thoroughly than the empirical contrasts given by previous empirical evidence. The results obtained indicate that there is a non-linear relation in an inverted U form between growth and size in the Brazilian commercial banking. These results allow us to affirm that the relative dispersion of the sizes of the financial entities will tend to decrease in time and with this, the concentration of the sector.     

The expectations theory works for monetary policy shocks

In practice, the expectations theory of the term structure is employed extensively in monetary policy analysis despite its empirical failure. This paper performs a conditional test of the theory that is directly relevant to monetary theory and policy. It finds that the theory holds quite well conditional on identified monetary policy shocks, but fails conditional on aggregate supply shocks that prompt an immediate jump in prices. It also finds that policy responses to movements in the term structure play an important role in uncovering evidence for the theory as predicted by McCallum [1994. Monetary policy and the term structure of interest rates. NBER Working Paper Series, no. 4938].