Monetary and Fiscal Policy Rules in the EMU

Abstract. This paper studies the design and effects of monetary and fiscal policy in the euro area. To do so, a stylized two‐region model of monetary and fiscal policy rules in the EMU is built. We analyse how monetary and fiscal rules affect the adjustment dynamics in the model. Both the effects on the individual countries and on the EMU aggregate economy are studied. Three aspects play an important role in the analysis: (i) the consequences of alternative monetary and fiscal policy rules, (ii) the consequences of asymmetries between EMU countries (asymmetries in macroeconomic shocks and macroeconomic structures), and (iii) the role of alternative degrees of backward‐ and forward‐looking behaviour in consumer decisions and inflation expectations.     

Enough is Enough: Cognitive Antecedents of Workaholism and Its Aftermath

Workaholism is commonly conceptualized as a compulsive inner drive to work excessively hard. This study investigates to what extent rigid personal beliefs—i.e., performance‐based self‐esteem (self‐esteem that is contingent upon good performance) and an enough continuation rule (continuing with work until one feels one has done enough)—contribute to exhaustion through workaholism. To examine these potential antecedents and consequences of workaholism, data of a two‐wave longitudinal survey study with a six‐month time interval was used (n = 191). Results of structural equation modeling provided support for our hypotheses. Taken together, our findings show that rigid personal beliefs at T1 predicted primarily working compulsively at T2, and working compulsively at T1 influenced exhaustion at T2. Moreover, reciprocal relationships were found between applying the enough continuation rule and working compulsively, and between working compulsively and exhaustion. These results suggest partial mediation from cognitive antecedents (personal beliefs) through workaholism to exhaustion. In practical terms, the results indicate that cognitive antecedents may provide a good starting point for interventions for preventing exhaustion and workaholism. © 2014 Wiley Periodicals, Inc.     

Forecasting interest rates with shifting endpoints

We consider forecasting the term structure of interest rates with the assumption that factors driving the yield curve are stationary around a slowly time‐varying mean or ‘shifting endpoint’. The shifting endpoints are captured using either (i) time series methods (exponential smoothing) or (ii) long‐range survey forecasts of either interest rates or inflation and output growth, or (iii) exponentially smoothed realizations of these macro variables. Allowing for shifting endpoints in yield curve factors provides substantial and significant gains in out‐of‐sample predictive accuracy, relative to stationary and random walk benchmarks. Forecast improvements are largest for long‐maturity interest rates and for long‐horizon forecasts. Copyright © 2013 John Wiley & Sons, Ltd.     

THE CASE FOR PAY-AS-YOU-GO PENSIONS IN A SERVICE ECONOMY

The elderly consume more labour‐intensive services than young individuals. This makes them vulnerable to rising costs of services due to higher wages, which can be caused by increased capital accumulation. This paper shows that in a model with a service sector, the golden‐rule capital stock is lower and dynamic inefficiency is more likely to occur than in the conventional one‐sector model. This implies that in many cases, a positive Pay‐As‐You‐Go tax maximises long‐run welfare in a service economy. Calculations based on data from the United Kingdom and the Netherlands show that the long‐run optimal degree of funding coincides with the current situation in these countries.     

Dividend timing and behavior in laboratory asset markets

Summary. This paper investigates the effect of dividend timing on price bubbles and endogenous expectations in twenty-six laboratory asset markets. In ten "A1" markets, a single dividend is paid at the end of the trading horizon. In nine "A2" markets, dividends are paid at the end of each trading period. In seven "A3" markets, some of the dividends are paid at the end of the trading horizon, and the rest are paid on a per-period basis. The results indicate that price bubbles are most likely in A2 markets, less likely in A3 markets, and least likely in A1 markets. Six distinct hypotheses are considered. The data suggest that the concentration of dividend value at a single point in time helps to create common expectations, and thus significantly reduce the incidence of bubbles. Also, the results underscore the difficulty facing econometric tests on field data where fundamental value has to be approximated.     

Conditional Cooperation and Voluntary Contributions to Public Goods

We compare a partners condition , where the same small group of subjects plays a repeated public good game, to a strangers condition , where subjects play this game in changing group formations. From the first period onward, subjects in the partners condition contribute significantly more to the public good than subjects in the strangers condition. Strangers' contributions show continual decay, while partners' contributions fluctuate on a high level prior to decreasing in the final periods. We interpret subjects' behaviour in terms of conditional cooperation which is characterized by both future-oriented and reactive behaviour.
JEL classifications: C 91; C 92; H 41     

Cost-effectiveness of foreign aid programs in the baltics

After the upheavals in Central and Eastern Europe in the late 1980s and early 1990s, the Western world has given considerable aid to the fledgling democracies. In this paper we draw a summary from Baltic experience in the fields of educational programs, scientific and environmental programs, and commercial projects in banking, taxation, and energy. We analyze the motivation and identify different possible effects of foreign aid. We signal possible inefficiencies arising from the lack of coordination of foreign aid, deal with possible waste as being a form of loss in cost-effectiveness, and address the policies followed by aid-providing agencies. Finally, we suggest ways that can help to achieve cost-effectiveness by assisting the donor and recipient in maximizing benefits gained and possibly reducing costs.     

Sequential and multinomial logit: A nested model

A nested model is presented which has both the sequential and the multinomial logit model as special cases. This model provides a simple test to investigate the validity of these specifications. Some theoretical properties of the model are discussed. During the analysis a distribution function is derived, which, to the best of our knowledge, has not been used before. This distribution is shown to be a generalization of the typeI extreme-value distribution. Monte Carlo experiments and empirical applications of the model are presented.