Monetary policy, taxes, and the business cycle

This paper analyzes the interaction of inflation with the tax code and its contribution to aggregate fluctuations. We find significant effects operating through the tax on realized nominal capital gains. A tax on nominal bond income magnifies these effects. Our innovation is to combine monetary policy shocks with non-indexed taxes in a model where the central bank implements policy using an interest rate rule. Monetary policy had important effects on the behavior of the business cycle before 1980 because policymakers did not exert effective control over inflation. Monetary policy reform around 1980 led to better control, and with more stable inflation, the effect of the interaction between monetary policy and the nominal capital gains tax has become negligible.     

Modelling The Second Stage of Transition From Communism: A Closer Look at the Balkans

MOCT-MOST: Economic Policy in Transitional Economies -     

Generalising Gibrat: using Chinese evidence founded on fieldwork

This paper reports on determinants of small firm growth and survival, using fieldwork evidence collected by face-to-face and telephone interviews. It extends the ??basic?? size-age model to a ??comprehensive?? growth model with two types of additional explanatory variables: firm specific and business environmental. Estimation is by log-linear regression on Chinese cross-section data, with corrections for sample selection bias and heteroskedasticity. Our results from the comprehensive model highlight the importance of location choice and customer orientation for the growth of Chinese private firms.     

Using Space Syntax to Assess the Built Environment for Physical Activity: Applications to Research on Parks and Public Open Spaces

The application of space syntax as a method for examining the role of spatial configuration on people's behavior has been widespread in several disciplines, such as urban design and architecture. However, the ideas and procedures of space syntax have rarely been applied in studies within the field of public health or leisure studies. This article briefly introduces the principles of space syntax and describes how space syntax can extend previous knowledge regarding associations between the built environment and physical activity with specific applications to research on parks and public open spaces.     

Shareholders’ rights in the European Union

In the European Union there has been increased mobility of capital and transnational ownership with the completion of the internal market. However, the harmonisation of standards, which would give shareholders equivalent rights throughout the Community, has not kept pace. This article examines the reasons for this and discusses new issues that the global integration of capital markets has brought to the forefront of the debate on shareholder protection.     

Macroeconomic Performance in the Bretton Woods Era and After

During the Bretton Woods era, OECD countries grew at historicallyunprecedented rates. This Golden Age has many possible explanations,ranging from the return to liberal policies in internationaltrade to a backlog of profitable growth opportunities afterthe neglect of the 1930s and wartime damage. Eichengreen (1996)has argued that the proximate cause of the rapid growth washigh investment, and that this high investment was made possibleby certain institutions that were particularly well suited toreconstruction and growth. On the domestic side, these institutionsled to high investment rates and moderate wage claims. Thispaper interprets the interaction between unions and firms asa coordination game. The risk-dominant equilibrium is selectedvia a global game argument. Only small changes to the payoffsare necessary to explain a change in the selected equilibriumand, therefore, the growth slowdown.     

Mature micro-firms and their experience of funding shortages

Funding shortages are analysed in the context of a simple neoclassical model of the micro-firm that uses financial capital for its operations. It predicts that a response to funding shortages is to substitute part-time workers for full-time workers, under the assumption that the latter are the more financial capital intensive employees. The experience of funding gaps in finance capital by long-lived micro-firms is investigated using data which were obtained by telephone interviews. The micro-firms examined had an average size of six full-time and two part-time workers, and an average age of fifteen years. Using probit estimators of the probability of experiencing funding shortages it is found that a strong and significant negative association exists between the number of part-time workers and the probability of experiencing funding shortages, refuting the simple neoclassical hypothesis, and suggesting an alternative hypothesis, emphasising the flexibility advantages of part-time embloyees in averting funding shortages. A ten per cent increase in part-time employees is shown to reduce the probability of experiencing funding shortages by two and a half per cent. A regional effect was also discovered, and bivariate probits gave results which were consistent with univariate probits.Professor in Economics and Director of the Centre for Research into Industry, Enterprise, Finance and the Firm (CRIEFF), University of St Andrews.     

A Note on the (Continued) Ability of the Yield Curve to Forecast Economic Downturns in South Africa

In 2002‐2003, the South African yield spread falsely signalled a downswing that never materialised. This paper provides two reasons for this false signal. First, while the Reserve Bank never actually officially declared the start of a downswing, by alternative measures a downswing did actually occur. It is this severe weakness in economic activity at that time that the yield curve pointed to. Second, short‐term interest rates in 2003 were higher than they should have been because of a mistake made in measuring consumer price inflation. Because South Africa had recently introduced an inflation‐targeting regime, policy interest rates were, as a result of this error, kept too high for too long. This policy mistake was rectified as soon as the error in the Consumer Price Index was discovered. Thus, the yield curve in 2003 pointed to the reality that short‐term interest rates were too high and risked pushing the economy into full blown recession. This is demonstrated by the fact that it was a fall in long bond interest rates that caused the yield spread to turn negative, indicating expectations that short‐term interest rates would need to be cut – as indeed they were.