Testing the asymmetric effects of exchange rate pass‐through in BRICS countries: Does the state of the economy matter?

This paper investigates not only the question of whether there is exchange rate pass‐through (ERPT) but also the extent to which the pass‐through is asymmetric or state‐dependent in the BRICS countries. Using monthly data from 1999:M1 to 2019:M12 and non‐linear smooth transition vector autoregressive (STVAR) model, our results provide evidence of period‐specific ERPT between the upper and lower regime periods, governed by the selected transition variables. The results further suggest that the pass‐through of exchange rate is higher when the economy is experiencing large appreciations and expansions as well as large depreciations and recessions. Theimplication for these findings is that ERPT is strongly affected by the state of the economy.     

Oil shocks and volatility jumps

Review of Quantitative Finance and Accounting - In this paper, we analyse the role of oil price shocks, derived from expectations of consumers, economists, financial market, and policymakers, in...     

Time varying stock return predictability: Evidence from US sectors

This paper argues that dividend yield stock return predictability is time-varying. We conjecture that such time-variation is linked to the business cycle. Employing monthly data for US sector portfolios we estimate 5-year rolling fixed window predictive regressions. The resulting series of time-varying predictive coefficients is regressed on industrial production growth and a recession dummy. Our results support the view of a negative relationship between predictability and output growth. That is the strength of the predictive relationship between returns and the dividend yield is stronger during contractionary periods, while during expansions the magnitude of the relationship declines.     

Alternative modes of deficit financing and endogneous monetary and fiscal policy in the U.S.A. 1923–1982

This paper first investigates the effects of alternative modes of deficit financing on the unemployment rate, the inflation rate and the real interest rate, within the framework of a small complete macroeconomic model. Secondly, it examines the nature of monetary and fiscal reaction functions. The two periods 1923–1960 and 1961–1982 are considered, with substantial differences in behaviour and policy being shown to exist between them. The most important conclusion is that long-run monetary neutrality properties shown to exist over the latter period are not intrinsic to the U.S. economy, but rather are the result of the stabilization policies being conducted over that period.     

“Black Swans” before the “Black Swan” evidence from international LIBOR–OIS spreads

The LIBOR–OIS spread is a closely monitored indicator of the financial health of economy. Previous research has used this spread to identify and anticipate abrupt changes in financial markets. Taylor and Williams (2009) refer to the drastic increase in the US LIBOR–OIS spread on August 7th, 2007 as a “Black Swan” in the money market. In this paper, rather than rely on visual observations of “Black Swans” we estimate them using Bai and Perron’s (1998) procedure. We estimate structural breaks, Granger causality tests, and innovation accounting in international LIBOR–OIS spreads and a CDS index to better understand their dynamics during the recent crisis. Our results reveal that “Black Swans” appeared in smaller economies prior to that in large ones during the financial crisis. In addition, we find that only shocks to the US LIBOR–OIS spread has any statistically significant effects after 30 days.     

How do ARM rates and teasers differ between solvent and insolvent thrifts?

Some economists have argued that poorly capitalized thrifts are the most aggressive issuers of “underwater” ARMs. The results using data from the previously named Federal Home Loan Bank Board’s (now Office of Thrift Supervision) Monthly Survey suggest that, on average, insolvent thrifts do not offer deeper discounts than other thrifts, nor do they charge fewer points or lower margins. In fact over the “full-sample” 1986–1989, insolvent thrifts offered smaller discounts than solvent thrifts while charging higher margins and more points. Large discounts on the sampled ARMs were most closely associated with increases in the 1-year Treasury bill rate, but were also associated with higher origination fees and greater margins. Higher fees and margins tend to offset the income loss associated with large discounts.     

How effective is fiscal policy? The U.S. experience

Zusammenfassung Wie wirksam ist die Fiskalpolitik? Erfahrungen aus den Vereinigten Staaten. - Der Aufsatz untersucht empirisch die Wirksamkeit der US-Fiskalpolitik in den Perioden 1923–1960 und 1961–1982. Die Ergebnisse zeigen, da\ im Zeitraum 1923–1960 bei konstanter Staatsschuld eine Erh?hung der nominalen Staatsausgaben für Güter und Dienste die reale Nachfrage wesentlich stimulierte. Weitere autonome Ausgabeneffekte, die sich aus dem Wachstum der nominalen Exporte ergaben, übten keinen signifikanten Ansto auf das Wachstum der realen Nachfrage aus. Die Ergebnisse zeigen auch, da\ in dieser Periode eine vollst?ndige Verdr?ngung privater Kreditnehmer (crowding-out) stattfand. Im Gegensatz dazu stimulierte im Zeitraum 1961-1982 das nominale Exportwachstum die reale Nachfrage, w?hrend die Steigerung der nominalen Regierungsausgaben keinen signifikanten Ansto\ gab. Diese Periode stützt nicht die Hypothese des totalen Crowding-Out, sondern vielmehr das ?quivalenz-Theorem von Ricardo.

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Résumé Comment effective la politique fiscale est-elle? L’expérience des E.U. - Cet article empiriquement examine l’efficacité de la politique fiscale dans les E.U. pendant deux périodes: 1923–1960 et 1961–1982. Les résultats démontrent que dans la période 1923–1960 les augmentations des dépenses budgétaires (dette étant constante) ont significativement stimulé la croissance de la demande réelle. De plus, des effets des dépenses autonomes qui proviennent de la croissance des exportations nominales n’ont pas stimulé la croissance de la demande réelle d’une manière significative. Les résultats indiquent aussi qu’un effet de ?crowding out? total se passait pendant cette période. En contraste, dans la période 1961–1982 la croissance des exportations nominales a stimulé la croissance de la demande reelle pendant que la croissance des achats nominaux fédéraux ne l’a pas stimulée. Cette période récente n’a pas supporté l’hypothèse de ?crowding out? total. Plut?t, les résultats supportent le théorème d’équivalence de Ricardo.

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Resumen ?Cuán efectiva es la política fiscal? La experiencia estadounidense. - En este trabajo se examina empíricamente la efectividad de la política fiscal en los EE UU durante dos períodos: 1923– 1960 y 1961– 1982. Los resultados indican que para el período 1923– 1960 el gasto fiscal aumenta (manteniendo la deuda constante) en calidad de demanda federal de bienes y servicios, significando un fuerte estímulo para el crecimiento real de la demanda. También, los resultados se?alan que durante este período ocurrió un ?crowding-out? total. A diferencia del período anterior, el período 1961–1982 fué uno en el cual el crecimiento nominal de las exportaciones constituyó un estímulo para el crecimiento real de la demanda; el crecimiento nominal de la demanda federal no signifieó un estímulo importante en este período. En este último perído no se encuentra evidencia de un ?crowdihg- out? total. Empero, los resultados confirman el teorema ricardiano de equivalencia.

     

The Linkage between Prices,Wages, and Labor Productivity: A Panel Study of Manufacturing Industries

This article investigates the long-run relationship between prices and wage-adjusted productivity as well as between real wages and average labor productivity at the industry level for a panel of 459 U.S. manufacturing industries over the period 1956-1996. Panel reintegration test results strongly reject the null of no reintegration in the panel between both prices and wage-adjusted productivity and between labor productivity and real wages for many (but not all) industries. Granger-causality tests show that prices are weakly exogenous and cause movements in unit labor cost. Bidirectional Granger causality is found between real wages and productivity; however, a one-to-one relationship is strongly rejected between real wages and productivity. Increases in labor productivity are associated with a less than unity increase in real wages.     

Are Tax Effects Important in the Long-Run Fisher Relationship? Evidence from the Municipal Bond Market

Are nominal bonds appropriately discounted for taxes? Empirical estimates of the response of nominal interest rates to changes in inflation, the Fisher effect, have failed to produce a definitive answer. Four reasons have been put forward as possible explanations: (i) Tobin effects, (ii) fiscal illusion, (iii) peso problems, and (iv) different estimators. Utilizing data on taxable and tax-exempt bond interest rates and several different estimators, we find that the Fisher effect estimates are always larger for the taxable bond relative to the tax-exempt bond, suggesting that fiscal illusion and different estimators cannot account for the previous results.