The brain drain: A tax analysis of the Bhagwati proposal

To alleviate the problems caused by the brain drain, Professor Bhagwati proposes that professional, technical, and kindred persons who emigrate from less developed countries be subjected to a special tax on the income they earn in developed countries. This paper highlights the political and legal issues raised by his proposal and examines three approaches to implementation: a tax levied by the less developed country, a tax levied by the developed country, and a tax levied by the United Nations. Specific aspects of the proposal which require further study and refinement, such as administrative feasibility, are outlined.     

Optimal financial investments for non-concave utility functions

We prove a formula for the computation of optimal financial investments in an expected utility framework with arbitrary (not necessarily concave) utility functions. This extends classical results on optimal financial investments for strictly concave utility functions and is of importance particularly for applications of prospect theory where the utility function has a convex-concave shape.     

The Halle Economic Projection Model

In this paper we develop an open economy model explaining the joint determination of output, inflation, interest rates, unemployment and the exchange rate in a multi-country framework. Our model—the Halle Economic Projection Model (HEPM)—is closely related to studies published by Carabenciov et al. (2008a,b,c). Our main contribution is that we model the Euro area countries separately. In doing so, we consider Germany, France, and Italy which represent together about 70% of Euro area GDP. The model combines core equations of the New-Keynesian standard DSGE model with empirically useful ad-hoc equations. We estimate this model using Bayesian techniques and evaluate the forecasting properties. Additionally, we provide an impulse response analysis and historical shock decomposition.     

Funktionswandel der EZB?

Die Kernaufgabe der Europ?ischen Zentralbank ist es, die Preisstabilit?t zu gew?hrleisten. Die Finanz- und Staatsschuldenkrise hat der EZB die Rolle aufgezwungen, durch Notma?nahmen die Stabilit?t der W?hrungsunion zu sichern. Ihre Unabh?ngigkeit wird zunehmend dadurch gef?hrdet, dass es in diesem Prozess zu einer Verquickung von Fiskal- und Geldpolitik kommt. W ünschenswert w?re eine Rückkehr der EZB zu ihrer alten Rolle und eine Strategie, die für einen Abbau der weltweiten und europ?ischen Ungleichgewichte sorgen k?nnte.     

Loan supply shocks during the financial crisis: Evidence for the Euro area

This paper employs a panel vector autoregressive model for the member countries of the Euro Area to explore the role of banks during the slump of the real economy that followed the financial crisis. In particular, we seek to quantify the macroeconomic effects of adverse loan supply shocks, which are identified using sign restrictions. We find that loan supply shocks significantly contributed to the evolution of the loan volume and real GDP growth in all member countries during the financial crisis. However, concerning both, the timing and the magnitude of the shocks our results also indicate that the Euro Area was characterized by a considerable degree of cross-country heterogeneity.     

Forecasting the past: the case of US interest rate forecasts

This study evaluates 10-year US government bond yield forecasts and three-month US Treasury bill rate forecasts for the period between October 1989 and December 2004. In total, 136 forecast time series with approximately 13,800 forecast data were scrutinized, making this the most extensive analysis of interest rate forecasts to date. Not one of the forecast time series proved to be unbiased. In the majority of cases, information from the past was not efficiently integrated into the forecasts. The sign accuracy is significantly better than random walk forecasts in only a very few of the forecast time series. The modified Diebold–Mariano test for forecast encompassing reveals that the information content of most of the forecast time series is lower than that of the naïve forecasts, the simple ARIMA models, the implicit forward rates, or average interest rate expectations. The forecasting process is dominated by the present and past market situation.     

Knowledge of campaign finance regulation reduces perceptions of corruption

We use an experimental survey design to measure how campaign finance regulation influences perceptions of political corruption and trust in politicians when citizens are exposed to information about regulation. Unlike most observational studies, results of this experimental study suggest that knowledge of campaign finance regulation substantially reduces citizens’ perceptions of corruption but has only limited effect on trust in politicians. Findings have crucial implications for public policy. At a time when public cynicism about politics is high, a significant reduction in perceptions of political corruption through successful dissemination of campaign finance regulation would be a boost to the legitimacy of democracies.