Alternative monetary policies and fiscal regime in new EU members

I investigate the relevance of a fiscal regime for disinflation in new EU member states (NMS). I generalize the framework of [Obstfeld, M., Rogoff, K., 1995. Exchange rate dynamics redux. Journal of Political Economy 103, 624–660] to incorporate the non-Ricardian fiscal regime and two monetary feedback rules: inflation targeting and depreciation targeting. Euro accession requires disinflation and stabilization of the exchange rate and thus restrictive monetary policy. The model illustrates that a sustainable and prudent fiscal policy is a necessary condition for successful stabilization of inflation. Thus, the lack of prudent fiscal policy, through its effects on inflation, may undermine the EMU accession of large NMS even when their fiscal outcomes fall within the Maastricht range.     

The effects of foreign exchange and monetary policies in Russia

This paper examines the effects of Russian foreign exchange and monetary policies under conditions of abundant natural resources during the period 1999–2011 using structural VAR models. The results suggest that monetary policy shocks, which are identified as money supply disturbances, have a persistent effect on real output, and more than half of the volatility in real output can be explained by changes in the money supply. Furthermore, the analysis reveals that stock prices are a more significant transmission channel of monetary policy than bank loans.     

The housing market and the monetary transmission mechanism in the UK, in and out of EMU

This paper, prepared for the No Campaign, uses the OEF Global Macroeconometric Model to assess the impact of the housing market on the UK's convergence with the Eurozone. The OEF Model provides the ideal framework for such analysis, as it incorporates a detailed system for forecasting UK house prices, transactions, mortgage borrowing and their interaction with consumer spending and the wider economy, within the context of a model of the Eurozone economy. Our analysis suggests that, if the government were to wish to take the UK into EMU, action to reduce the impact of changes in interest rates on the housing market would be beneficial in improving the UK's economic stability.     

Optimal fiscal and monetary policy with occasionally binding zero bound constraints

This paper studies optimal fiscal and monetary policy when the nominal interest rate is subject to the zero lower bound (ZLB) constraint in a stochastic New Keynesian economy. In the baseline model calibrated to match key features of the U.S. economy, it is optimal for the government to increase its spending when at the ZLB in the stochastic environment by about 60 percent more than it would in the deterministic environment. The presence of uncertainty creates a unique time-consistency problem if the steady state is inefficient. Although access to government spending policy increases welfare in the face of a large deflationary shock, it decreases welfare during normal times as the government reduces the nominal interest rate less aggressively before reaching the ZLB.     

Spatially blind trade and fiscal impact policies and their impact on regional economies

The evidence for the US suggests that spatially blind policies often generate greater impacts on regional economic growth and development than policies specifically targeted at regions on regional issues generally. In this presentation, attention will be directed to two sets of national policies that have been promulgated without due consideration of their specific spatial (regional) impacts – trade policy and fiscal policy.Drawing on research conducted for the US, Japan and Brazil, an examination of trade policies will be presented, using the experience of NAFTA in North America and MERCOSUR in Brazil. Some further analysis of experience in Colombia will also provide insights into the role of national trade policy and, in the case of Colombia, fiscal decentralization policies. The second part of the presentation will examine fiscal policy impacts mediated through regional business cycles; the experience of Japan and the US will be examined.The results affirm the important implications that national (spatially blind) policies can have on regional economies; in the case of Brazil, trade policies have exacerbated already wide differentials in per capita income across states.     

积极发挥财政政策作用 着力推动经济高质量发展

习近平总书记指出,现阶段我国经济发展的基本特征,就是由高速增长阶段转向高质量发展阶段。这是全面建成小康社会的应有之义,也是建设社会主义现代化强国的必然要求。当前及今后一个时期,制定经济政策、实施宏观调控的根本要求,就是要推动高质量发展。     

Alternative modes of deficit financing and endogneous monetary and fiscal policy in the U.S.A. 1923–1982

This paper first investigates the effects of alternative modes of deficit financing on the unemployment rate, the inflation rate and the real interest rate, within the framework of a small complete macroeconomic model. Secondly, it examines the nature of monetary and fiscal reaction functions. The two periods 1923–1960 and 1961–1982 are considered, with substantial differences in behaviour and policy being shown to exist between them. The most important conclusion is that long-run monetary neutrality properties shown to exist over the latter period are not intrinsic to the U.S. economy, but rather are the result of the stabilization policies being conducted over that period.     

Britain,EMU and the European economy

In January 1999, 11 member countries of the European Union ‘irrevocably’ locked the foreign exchange values of their currencies to the euro, and they committed themselves to abandon their currencies in favour of the euro in 2002. As a result, these countries ceased to operate independent monetary policies. Monetary policy for the whole euro‐zone became the responsibility of the European Central Bank (ECB), whose primary objective is to maintain a low and stable rate of price inflation for the euro currency. The rules governing Economic and Monetary Union (EMU) were laid down in the treaty of Maastricht in 1992. As conditions for entry to EMU, the treaty specified ‘convergence criteria’ which consisted of upper limits for several macroeconomic aggregates including, notably, a 3 per cent maximum for the ratio of the public sector deficit to GDP and 60 per cent for the ratio of public debt to GDP.1 In February 1998 the 11 applicant countries submitted statistical analyses relating to their satisfaction of these conditions. Despite doubts as to whether some of them had strictly met the conditions, the European Commission deemed them all eligible, and the euro was launched.2 The British government, though more clearly eligible than most other EU countries on the basis of the convergence criteria, decided to defer its decision on entry. In this paper we consider the arguments for and against Economic and Monetary Union, and in particular whether it would be in Britain’s interest to join. We begin with a brief review of the state of the European economy and an analysis of the first year performance of the new Euro currency. 1 Upper limits were also set on the rate of inflation, at 1.5 percentage points above the average inflation rate of the three countries whose inflation was the lowest, and on long term interest rates, at 2 percentage points above the average of the rates prevailing in the three low inflation countries. An additional condition applied to exchange rate stability relative to the EU average for the two years prior to entry.
1 Notable cases were Belgium and Italy with debt to GDP ratios of 122.2 per cent and 121.6 per cent, respectively. Presumably, these countries were allowed membership under Article 104c(2) of the treaty which allows the debt to GDP ratio to be exceeded if ‘. . . the ratio is sufficiently diminishing and approaching 60 per cent at a satisfactory pace’. The reader is left to judge whether Belgium and Italy fell within the ‘spirit’ of this article.
     

Dynamics of fiscal financing in the United States

General equilibrium models that include policy rules for government spending, lump-sum transfers, and distortionary taxation on labor and capital income and on consumption expenditures are fit to US data under rich specifications of fiscal policy rules to obtain several results. First, the best-fitting model allows many fiscal instruments to respond to debt. Second, responses of aggregates to fiscal policy shocks under rich rules vary considerably from responses where only non-distortionary fiscal instruments finance debt. Third, in the short run, all fiscal instruments except labor taxes react strongly to debt, but long-run intertemporal financing comes from all components of the government’s budget constraint. Fourth, debt-financed fiscal shocks trigger long-lasting dynamics; short-run and long-run multipliers can differ markedly.     

Internal and external restructuring over the cycle: a firm-based analysis of gross flows and productivity growth in Portugal

This paper discusses the role played by internal restructuring vis-à-vis external restructuring in industry productivity growth, arguing that the contribution of these two components is expected to be sensitive to the economic cycle. The study describes gross flows (job and output) over a period of one decade, and analyses the productivity differential among continuing, entering and exiting firms in the Portuguese manufacturing sector. The results of the decomposition of industry productivity growth suggest that the share of external restructuring is stronger in recession, while internal restructuring seems to be predominant in expansion. The strong and positive contribution of the net entry effect, in 1991–1994, was not followed by any between and cross effects of equivalent magnitude in the 1994–1997 sub-period. The within effect is, as expected, stronger when output growth is at its peak, but in no case large enough to turn productivity growth procyclical.

Fragmented government and the us urban fiscal crisis

Book reviewed in this article: Alcaly, R. and Mermelstein, D. 1977: The fiscal crisis of American cities: essays on the political economy of urban America with special reference to New York. MacManus, S. 1978: Revenue patterns in US cities and suburbs: a comparative analysis. Passell, P. and Ross, L. 1978: State policies and federal programs: priorities and constraints.     

State capitalism and the urban fiscal crisis in the United States1

A quoi peut-on attribuer la crise fiscale qui engouffre une grande partie du c?ur urbain américain? Est-ce que cette crise et l'intensification de la lutte politique présagent des changements fondamentaux dans la structure de l'économie politique des Etats-Unis? Cet essai est une réponse tentative à ces questions. L'exposition de la crise fiscale urbaine aux Etats-Unis demande une analyse générale de la relation entre accumulation du capital, urbanisation, et expansion de l'état. Cette analyse doit ětre le fondement d'une exploration des origines particulières du financement urbain qui confronte beaucoup de villes centrales, ainsi que de la relation entre crise fiscale et lutte politique. Il est suggéré en dernière partie que la menace posée par la crise fiscale urbaine et la lutte politique envers la stabilité et la légitimité des institutions capitalistes américaines est la cause d'une réponse parmi les sections les plus éclairées de la classe capitaliste, qui tend vers un accroissement de leurs efforts à developper la Cité Capitaliste d'état en tant que noyau d'un complex socio-industriel grandissant.     

EMU and Labour: Facing up to the Euro

EMU is the historic issue facing the Labour Government. In this article, David Currie considers the prospects for EMU and the challenges that it poses for the Government, particularly in the light of the forthcoming UK Presidency. He also considers the implications and risks of the Chancellor's recent statement on EMU.     

The Impact of Shocks on the UK Economy in and Out of EMU

Entry to EMU at an inappropriate exchange rate could trigger a full-blown business cycle in the UK. Once inside EMU, the UK's response to a number of different economic shocks would change — partly because of the fixed exchange rate, and partly because of the common monetary policy. In particular, when an asymmetric shock occurs — one that hits the UK harder than other Eurozone economies — the UK response is generally likely to be more pronounced inside EMU than outside. We find that that result still applies even in a reformed EMU — one in which the ECB and the labour market are reformed to bring them closer to the Anglo–Saxon model.     

中国财政分权与地方基础设施供给的实证分析

在我国,自上而下的政绩考核机制激励着地方追求短期经济增长,导致其在基础设施投资上拥有很高的热情。文章实证分析了该结论,并用模型论证经济增长、城市化和财政分权等因素是导致地方基本建设支出增长的主要原因。