How do institutions affect corruption and the shadow economy?

This paper analyzes a simple model that captures the relationship between institutional quality, the shadow economy, and corruption. It shows that an improvement in institutional quality reduces the shadow economy and affects the corruption market. The exact relationship between corruption and institutional quality is, however, ambiguous and depends on the relative effectiveness of institutional quality in the shadow and corruption markets. The analytics also show that the shadow economy and corruption are substitutes. The predictions of the model are empirically tested and confirmed.     

How useful is the concept of the natural real rate of interest for monetary policy?

The natural rate of interest plays a key role in Wicksell's‘cumulative process’ as well as in modern monetaryequilibrium models of the business cycle. It constitutes a usefulconcept for the theoretical analysis of the interdependenceof monetary policy and economic fluctuations. However, the usefulnessof this concept for the practice of monetary policy is limited—especiallyowing to the fact that the natural real rate of interest andits law of motion cannot be measured with satisfying precision.     

Otra Empanada en la Parilla: Examining the Role of Culture and Information Sharing in Chile and Australia

One of the biggest assets of a firm is its information base. Included in this information base is a knowledge of prior errors and failures. Extant research suggests that while the propensity to share “bad news” (i.e. a prior error) is dependent on the cost of sharing, the perceived value of that cost may be culturally dependent. One area of interest that has received substantial attention in the prior literature has been cross‐cultural differences in negative information sharing in general, as well as the particular context in which the individual's superior is either present or absent during the information‐sharing process. Our study examines the role of the two cultural values (individualism/collectivism and to a lesser extent power distance) in explaining national differences in information sharing. By focusing on a sample from Chile and Australia, we were able to remove the regional cultural dimension of face, which has been inherent in prior studies that used Greater China as the representative of a collectivist society. Results from our quasi experiment show that when a supervisor is present during information sharing, collectivist Chilean decision‐makers are more willing to share negative information with their colleagues than their counterpart and individualist Australian decision‐makers. Our results also show that when a supervisor is absent, both Australian and Chilean decision‐makers are willing to share more negative information but the increase in the Australian propensity is significantly greater than that of the Chileans.     

The WTO Compatibility of the Economic Partnership Agreements between the EU and the ACP Countries

The economic partnership agreements (EPAs) to be negotiated between the European Union and six different ACP regions under the Cotonou Agreement are intended to be in conformity with WTO rules, i.e. satisfy GATT Article XXIV and GATS Article V. To what extent is this realistic? What would be the effects on the ACP countries?

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This article summarises the following study: A. Borrmann, H. Gro?mann, and G. Koopmann: The WTO Compatibility of the Economic Partnership Agreement between the EU and the ACP States, Study on behalf of the Federal Ministry of Economic Cooperation and Development and the Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH, Eschborn 2005, http://www.gtz.de/de/dokumente/enwto-epa-acp-2005.pdf.     

EU/ACP Economic Partnership Agreements: Impact, Options and Prerequisites

The EU and the African, Caribbean and Pacific countries (ACP) are presently renegotiating their trade relations. Behind these negotiations are the fundamental conflict between the existing arrangement and multilateral trade rules, the frustration regarding poor ACP trade performance, the ineffectiveness of trade and trade-related ACP policies, and the inefficiency of corresponding EU assistance. This article highlights the fundamentals of the envisaged Economic Partnership Agreements (EPAs) between the EU and the ACP countries, sums up previous estimates of their probable economic impact, discusses policy options for ACP countries and sheds light on basic prerequisites, particularly on institutional conditions, that should be fulfilled to ensure the success of EPAs.     

Gemeinschaftsdiagnose im Frühjahr 2014

In 2014 and 2015 the German economy will, according to the joint economic forecast, be in an upswing that is mainly driven by strong internal demand. The institutes assess the risks coming from a possible slump of the Russian economy. Simulations with macroeconometric models show that Germany is more affected than other large economies in Europe such as France and Italy. The new minimum wage is a further risk for the German economy that it is difficult to assess. According to this forecast, the minimum wage will, when it comes into effect in 2015, mainly have an adverse effect on employment. Since in general only jobs with low productivity will be lost, the effect on production will be markedly smaller.