An Eclectic Approach to Estimating U.S. Potential GDP

Rennison (Comparing alternative output gap estimations: a Monte Carlo approach, 2003) has provided simulation-based evidence showing that the joint use of extended multivariate filters and structural vector autoregression models is optimal for estimating potential output. We use this approach to estimate the two components of potential GDP: the full-employment labour input and trend labour productivity. This decomposition is useful for identifying sources of fluctuations in potential output. It reveals, for example, that the vigorous growth rate of U.S. potential GDP recorded during the second half of the 1990s is attributable to a fall in the structural rate of unemployment and a marked upswing in trend productivity growth.     

The Collapse of a European Bank in the Financial Crisis: An Analysis from Stakeholder and Ethical Perspectives

Fortis, the leading Benelux financial group, had been a success story of successive mergers of bank and insurance companies, with leadership in corporate social responsibility (CSR). One year after the acquisition of the major Dutch financial conglomerate ABN AMRO, the global financial crisis caused the collapse of the Fortis group. The purpose of this article is to use the case study of Fortis’s recent fall as a basis for reflective considerations on the financial crisis, from stakeholder and ethical perspectives. A selected number of key events of the history of the dramatic crisis at Fortis will be analysed from different ethical frameworks. Special consideration will be given to fairness of communication, shareholder activism and conflicts of interests of CEO’s mergers opportunities. A confrontation between the CSR policy and the reality raises the fundamental questions why the powerful CSR guidelines and ethical principles did not help in the assessment of the risks.     

Heterogeneity in social values and capital accumulation in a changing world

In a society characterized by a multitude of heterogeneous agents and a large number of possibly immaterial goods, each one having distinct social and personal values, we study the impact of these relative values on intergenerational capital accumulation, as a function of economic and social parameters such as capital mobility, productivity and personal and social values discrepancies. Each agent is modelled by a one-period production function and a two-period intertemporal utility. Agents live, produce and consume over one period, but optimize over two periods, so providing a remaining stock of goods for the next generation. This creates a dynamics in capital accumulation depending on social and individual values. A threshold appears in capital stock accumulation that depends on personal and social values’ volatilities, and below which the initial stock will be depleted. Whereas volatility in social values increases the threshold, impairing capital accumulation, adverse shocks in goods’ values may reverse the dynamics of the accumulation process. Finally, capital mobility specifically favors forerunners, but capital accumulation in one or several sectors may shift social values in their direction, at the expense of other sectors.

     

Evaluating Threshold Effects in Consumer Sentiment

This paper assesses the usefulness of consumer sentiment in forecasting aggregate consumer spending in the United States. The literature tends to dismiss the relevance of these sentiment indexes. Without formal modeling, however, some researchers suggest that consumer sentiment could be helpful during periods of major economic or political shocks. Such periods are usually associated with high volatility of consumer sentiment, suggesting that large swings in sentiment could be useful indicators of consumption. Our work distinguishes itself from previous research in that we provide a rigorous assessment of this possibility by estimating a consumption function in which only large variations of sentiment can affect spending. Our results show that economists and forecasters should pay attention to consumer sentiment, especially in times of elevated economic or political uncertainty.