Changes in behaviour under EMU

Using a simple model of the euro area economy, we explore whether EMU has been associated with changes in behaviour both in the run up to Stage 3 and since it started operating. We find that some behaviour has indeed changed; expectations formation, inflation, country dispersion of behaviour, fiscal policy (although the run up to Stage 3 shows a greater change than within it) and monetary policy (with several caveats). However, EMU does not appear to be associated with changes in the labour markets; employment, output growth and productivity. Substantial caution is needed in attributing these changes to EMU as much of the rest of OECD enjoyed similar changes over the same period.     

Inflation and savings: testing Deaton's hypothesis

A ‘money illusion’ savings function in which unanticipated inflation affects the savings ratio positively is tested. This is strongly supported by Finnish data. Goodness-of-fit statistics are quite high and the coefficient estimates are of the expected sign and are highly significant. Standard stability tests of both the Brown-Durbin-Evans type and of the VPR type are generally rather favourable. Finally, cross-country evidence from ten OECD countries gives further support for the suggested specification.     

A theory of relativity in restructuring developed with the Coase Theorem

This article addresses a key topic in restructuring law, namely the alternative legislative rules for setting priorities for payments and rights among stakeholders in a statutory restructuring programme. The EU Member States have now implemented the Restructuring Directive (2019/1023), which gives two options for the priority rules and the outcomes of the new laws seem to vary significantly. As this legislation is important also for the efficiency of the capital markets, it is good to investigate the potential impacts the new legislative structures may bring for the process. In the article the author argues, by using the Coase Theorem, a leading theory in law and economics, that wider powers for a court to consider the interests of all parties in restructuring could be a preferable legislative solution to restructuring law. It would protect generally the creation of a restructuring surplus, as an individual class would be unable to use its rights as a tool for gaining further benefits. Relativity would stimulate the bargaining of property rights in the process and would follow the Coase Theorem, according to which bargaining between individuals or groups related to property rights will lead to an optimal and efficient outcome.     

The Lasting Well-Being Effects of Early Adulthood Macroeconomic Crises

This paper studies the effects of macroeconomic crises experienced in early adulthood on subjective well-being (SWB) later in life. Using repeated cross-sectional survey data of over 100,000 individuals from 38 countries around the world combined with historical data on macroeconomic circumstances, I find that having experienced a macroeconomic crisis at ages 18–25 is detrimental to SWB. This result is in line with earlier literature that focuses on other individual-level outcomes. However, the analysis presented in this paper reveals that outcomes related to individual’s earnings, employment status, family life, and religion cannot fully explain the lasting effect of macroeconomic crises on well-being. Results on heterogeneous responses show that the negative effect is largest for females and for individuals with low educational attainment.