Archive
What Caused the Great Recession?
by Stefan Homburg, Leibniz University of Hannover, 2015-06-15
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This paper examines five possible explanations for the Great Recession of 2008 and 2009, using data for the United States and the eurozone. Of these five hypotheses, four are not supported by the data, while the fifth appears reasonable.
year: 2015, volume: 66, Issue 1, pages: 1-12
show details »Time Varying Fiscal Multipliers in Germany
by Tim Oliver Berg, Ifo Institute, 2015-06-15
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This paper provides novel evidence on the time varying impact of government spending
shocks on output in Germany over the years 1970 to 2013. In a first step, I use an expectations-augmented vector autoregressive model with time varying parameters
(TVP-VAR) to show that fiscal multipliers are not stable over time but exhibit a ushaped
pattern. While multipliers fluctuate around 2 at the beginning and end of the sample, they are much smaller in between. In a second step, I discuss which factors determine the magnitude of German multipliers and hence explain the observed variation. It turns out that fiscal policy is more effective when business uncertainty is high but less in periods of financial market stress, while the state of the business cycle is of minor importance. Moreover, I find that fiscal sustainability is a crucial determinant of the multipliers. I conclude that policy recommendations based on average multipliers are misleading.
year: 2015, volume: 66, Issue 1, pages: 13-46
show details »Planned Fiscal Consolidations and Growth Forecast Errors - New Panel Evidence on Fiscal Multipliers
by Ansgar Belke, University of Duisburg Essen, Dominik Kronen, University of Duisburg Essen & Thomas Osowski, University of Duisburg Essen, 2015-06-15
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This paper analyzes the effect of planned fiscal consolidation on GDP growth forecast
errors from the years 2010–2013 using cross section analyses and fixed effects estimations. Our main findings are that fiscal multipliers have been underestimated in
most instances for the year 2011 while we find little to no evidence for the years 2010 and especially the latter years 2012/13. Since the underestimation of fiscal multipliers
seems to have decreased over time, it may indicate learning effects of forecasters. However, the implications for fiscal policy should be considered with caution as a false forecast of fiscal multipliers does not confirm that austerity is the wrong fiscal approach but only suggests a too optimistic assessment of fiscal multipliers for the year 2011.
year: 2015, volume: 66, Issue 1, pages: 47-70
show details »Nowcasting Regional GDP: The Case of the Free State of Saxony
by Steffen R. Henzel, Ifo Institute, Robert Lehmann, Ifo Institute & Klaus Wohlrabe, Ifo Institute, 2015-06-15
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We tackle the nowcasting problem at the regional level, using a large set of indicators
(regional, national and international) for the years 1998 to 2013. We explicitly take
into account the ragged-edge data structure and consider the different information sets
faced by a regional forecaster within each quarter. It appears that regional survey results in particular improve forecasting accuracy. Among the 10% best performing models for the short forecasting horizon, one fourth contain regional indicators. Hard indicators from the German manufacturing sector and the Composite Leading Indicator for Europe also deliver useful information for the prediction of regional GDP in Saxony. Unlike national GDP forecasts, the performance of regional GDP is similar across different information sets within a quarter.
year: 2015, volume: 66, Issue 1, pages: 71-98
show details »Determinants of house price dynamics. What can we learn from search engine data?
by Marco Oestmann, Helmut Schmidt University Hamburg & Lars Bennöhr, Helmut Schmidt University Hamburg, 2015-06-15
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There is a broad literature on determinants of house price dynamics, which received increasing attention in the aftermath of the subprime crisis. Additional to macroeconomic standard variables, there might be other hard to measure or even unobservable factors influencing real estate prices. Using quarterly data, we try to increase the informational input of conventional models and capture such effects by including Google search engine query information into a set of standard fundamental variables explaining house prices. We use the house price index (HPI) published by Eurostat to perform fixed-effects regressions for a panel of 14 EU-countries comprising the years 2005-2013. We find that Google data as a single aggregate measure plays a prominent role in explaining house price developments.
year: 2015, volume: 66, Issue 1, pages: 99-128
show details »Why Do Few Homeowners Insure Against Natural Catastrophe Losses?
by Benjamin Addai Antwi-Boasiako, TU Dresden, 2015-01-20
+ show abstract- hide abstractInsurance has been suggested as a policy instrument that can help in managing the rising economic cost of natural catastrophes. Evidence, however, shows that many homeowners do not insure their homes against natural catastrophes and tend to depend on (unreliable) disaster aid. This paper surveys the economics, insurance and psychology literature to explain why few homeowners insure against natural catastrophes. The paper covers the relevant theoretical approaches as well as the available empirical evidence and possible policy measures.
year: 2014, volume: 65, Issue 3, pages: 217-240
show details »Money and Credit in the New Keynesian Model
by Sven Offick, Christian-Albrechts-University Kiel & Hans-Werner Wohltmann, Christian-Albrechts-University Kiel, 2015-01-20
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This paper integrates a money and credit market into a static approximation of the baseline New Keynesian model based on a money-and-credit-in-the-utility approach, in which real balances and borrowing contribute to the household’s utility. In this framework, the central bank has no direct control over the interest rate on bonds. Instead, the central bank’s instrument variables are the monetary base and the refinancing rate, i. e. the rate at which the central bank provides loans to the banking sector. Our approach gives rise to a credit channel, in which current and expected future interest rates on the bond and loan market directly affect current goods demand. The credit channel amplifies the output effects of isolated monetary disturbances. Taking changes in private (inflation and interest rate) expectations into account, we find that – contrarily to BERNANKE and BLINDER (1988) –
the credit channel may also dampen the output effects of monetary disturbances. The expansionary effects of a monetary expansion may be substantially diminished if the monetary disturbance is accompanied by a contractionary credit shock. In a dynamic version of our model, in which expectations are formed endogenously, we find that the credit channel amplifies output responses.
year: 2014, volume: 65, Issue 3, pages: 253-280
show details »A Note on the Granular Nature of Imports in German Manufacturing Industries
by Joachim Wagner, Leuphana University Lueneburg, 2015-01-20
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This paper uses an approach recently suggested by Gabaix (Eonometrica 2011) to investigate for the first time the role of idiosyncratic shocks to the largest firms in the dynamics of imports by firms from manufacturing industries. For Germany we find evidence that imports are power-law distributed and that the distribution of imports in the industries can be characterised as fat-tailed. Results show that idiosyncratic shocks to very large firms are important for the import dynamics in 2010/2011 but not in 2009/2010.
year: 2014, volume: 65, Issue 3, pages: 241-252
show details »The Economics of Global Climate Change: A Historical Literature Review
by Leo Dobes, The Australian National University, Frank Jotzo, The Australian National University & David I. Stern, The Australian National University, 2015-01-20
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We review the literature on the economics of climate change with a focus on the evolution of the literature from some of the early classic papers to the latest contributions. We divide the paper into three main sections: trends in greenhouse gas emissions, mitigation, and adaptation.
year: 2014, volume: 65, Issue 3, pages: 281-320
download as pdf-fileshow details »Dynamics of Military Conflict: an Economics Perspective
by Klaus B. Beckmann, Helmut-Schmidt-University Hamburg & Lennart Reimer, Helmut-Schmidt-University Hamburg, 2014-11-10
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This paper is concerned with methods for analysing patterns of conflict. We survey
dynamic games, differential games, and simulation as alternative ways of extending
the standard static economic model of conflict to study patterns of conflict dynamics,
giving examples for each type of model.
It turns out that computational requirements and theoretical difficulties impose
tight limits on what can be achieved using the first two approaches. In particular, we
appear to be forced to model the outcome of conflict as being decided in a single
final confrontation if we employ non-linear contest success functions.
A simulation study based on a new model of adaptive, boundedly rational decision
making, however, is shown not to be subject to this limitation. Plausible patterns of
conflict dynamics emerge, which we can link to both historical conflict and standard
tenets of military theory.
year: 2014, volume: 65, Issue 2, pages: 193-216
show details »Confronting Climate-Related Disasters in Asia and the Pacific
by Vinod Thomas, Asian Development Bank, 2014-11-10
+ show abstract- hide abstractThe frequency of intense natural disasters has been on the rise worldwide over the
past 40 years. Meanwhile, temperatures have risen on average, while both temperatures and precipitation have become more variable and more extreme. Their impacts are clearly visible in Asia and the Pacific region, which has seen some of the most damaging natural disasters.
Recent scientific evidence points to the link between rising greenhouse gas concentrations in the atmosphere and climate variables such as temperature and precipitation that underlie floods, storms, droughts and heatwaves. Rising population exposure, greater population vulnerability, and increasing climate-related hazards are three main disaster risk factors behind the increased frequency of intense natural disasters. A study underlying this paper finds an association between more frequent climatological disasters (relating to droughts and heat waves) and rising temperatures; and between hydrometeorological disasters (relating to floods and storms) and people locating in harm’s way and precipitation anomalies.
These findings underpin the necessity of greater prevention of natural disasters,
and of integrating climate adaptation and mitigation in reducing disaster risks. With
no let-up in the increasing costs of disasters to lives and livelihood, homes and infrastructure – such preventive measures must be part of policy and planning.
year: 2014, volume: 65, Issue 2, pages: 121-136
show details »Does the Level of Work Effort Influence Tax Evasion? Experimental Evidence
by Christoph Bühren, University of Kassel & Thorben C. Kundt, Helmut-Schmidt-University Hamburg, 2014-09-12
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Using a real effort experiment, we analyze the dependence of tax evasion on the
amount of effort invested to generate income. In three treatments, subjects were either
endowed with income or had to work moderately or arduously to earn it. In line with
prospect theory, subjects evaded more taxes when they worked hard for their income.
We find little evidence for the prediction that tax evasion in the endowed treatment is
higher than that in the moderate-effort treatment.
year: 2014, volume: 65, Issue 2, pages: 137-158
show details »The Taylor Rule and Financial Stability. A Literature Review with Application for the Eurozone
by Benjamin Käfer, University of Kassel, 2014-06-10
+ show abstract- hide abstractThe question whether central banks should bear responsibility for financial stability
remains unanswered. In connection with the use of interest rates, it is therefore not
clear whether and how the Taylor rule should be augmented by an additional financial
stability term. This paper reviews the normative and positive literature on Taylor rules
augmented with exchange rates, asset prices, credit, and spreads. These measures
have evolved as common indicators of financial (in)stability in the Taylor rule literature.
In addition, our own analysis describes the development of these indicators for
the core and the periphery of the Eurozone. Given the high degree of heterogeneity
between euro area countries, the conclusion here is that an interest rate reaction to
instability by the European Central Bank would be inappropriate in times of crisis.
However, this conclusion is somewhat weakened if there is no crisis.
year: 2014, volume: 65, Issue 2, pages: 159-192
download as pdf-fileshow details »Estimating Aggregate Capital Stocks Using the Perpetual Inventory Method. A Survey of Previous Implementations and New Evidence for 103 Countries
by Michael Berlemann, Helmut-Schmidt-University Hamburg & Jan-Erik Wesselhöft, Helmut-Schmidt-University Hamburg, 2014-05-12
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Almost all attempts to construct capital stock data base on some variant of the Perpetual Inventory Method. While various countries employ this method to construct
suitable proxies of national capital stocks, the implementation and the underlying assumptions differ considerably, thereby rendering the results internationally incomparable. Only a few attempts to construct internationally comparable capital stock data have yet been undertaken in the scientific literature. In this paper we outline the idea of the Perpetual Inventory Method and deliver a survey of previous implementations of the method. Based on a critical assessment of these implementations we propose a unified approach and construct estimations of aggregate capital stocks for the 1970 to 2010 period for 103 countries.
year: 2014, volume: 65, Issue 1, pages: 1-34
download as pdf-fileshow details »Ranking Economics and Econometrics ISI Journals by Quality Weighted Citations
by Chia-Lin Chang, National Chung Hsing University & Michael McAleer, National Tsing Hua University, 2014-03-28
+ show abstract- hide abstractThe paper analyses academic journal quality and impact using quality weighted citations that are based on the widely-used Thomson Reuters ISI Web of Science citations database (ISI). A recently developed Index of Citations Quality (ICQ), based on
quality weighted citations, is used to analyse the top 276 Economics and top 10
Econometrics journals in the ISI Economics category using alternative quantifiable
Research Assessment Measures (RAMs). It is shown that ICQ is a useful additional
measure to the 2-Year Impact Factor (2YIF) and other well known RAMs available
in ISI for the purpose of evaluating journal impact and quality, as well as ranking, of
Economics and Econometrics journals as it contains information that has very low
correlations with the information contained in alternative well-known RAMs. Among
other findings, the top Econometrics journals have some of the highest ICQ scores in
the ISI category of Economics.
year: 2014, volume: 65, Issue 1, pages: 35-52
show details »The Objections against Workfare Revised
by Tim Lohse, Berlin School of Economics and Law, Max-Planck-Institute for Tax Law and Public Finance, 2014-01-24
+ show abstract- hide abstractOpponents of work obligations in return for transfer payments argue that workfare
can crowd out private sector work, that workfare harms the welfare of the poor and
thereby reduces a society’s welfare in general. This paper analyzes these objections
against workfare in a discrete optimal income tax model. Workfare productivity
emerges to be the crucial determinant. We identify a productivity threshold. If workfare
productivity exceeds this threshold, then crowding out indeed happens, but it is
second-best. Crowding out occurs entirely in the sense that workfare and private sector
employment are mutually exclusive. Welfare increases due to the fact that out of
the three effects workfare entails, beyond the detected threshold, the output effect and
the incentive effect dominate the negative utility effect. Numerical simulations calibrated
on the distribution of gross hourly wages in Germany reveal that on an individual
level, the poor may even be better off under a tax-transfer scheme with workfare
rather than without workfare. This is due to the fact that a higher degree of redistribution
can be achieved.
year: 2014, volume: 65, Issue 1, pages: 95-118
show details »How Informative Are Central Bank Minutes?
by Mikael Apel, Sveriges Riksbank & Marianna Blix Grimaldi, The Swedish National Debt Office , 2014-01-24
+ show abstract- hide abstractOne characteristic feature of central banks today is that policy decisions are almost
exclusively made by a committee rather than by a single policy maker. Another is that
central banks endeavour to be transparent. Together, this has brought to the fore an
important but so far unresolved issue: how much information about the committee’s
deliberations should the central bank reveal? Does this kind of information make
monetary policy easier to understand and predict, or does it make it harder? We address this issue by employing a novel method. We measure the sentiment and tone of the minutes of the Swedish central bank using an automated content analysis that
converts the qualitative information in the minutes to a quantitative measure. We find
that this measure is helpful in predicting future policy rate decisions.
year: 2014, volume: 65, Issue 1, pages: 53-76
show details »Media Bias and Advertising: Evidence from a German Car Magazine
by Ralf Dewenter, Helmut-Schmidt-University Hamburg & Ulrich Heimeshoff, DICE, Heinrich-Heine-University of Duesseldorf, 2014-01-24
+ show abstract- hide abstractThis paper investigates the existence of a possible media bias by analyzing the impact
of automobile manufacturers’ advertisements on automobile reviews in a leading German
car magazine. By accounting for both endogeneity and sample selection using a
two-step procedure, we find a positive impact of advertising volumes on test scores.
The main advantage of our study is the measurement of technical characteristics of
cars to explain test scores. Due to this kind of measurement, we avoid serious biases
in estimating media bias caused by omitted variables.
year: 2014, volume: 65, Issue 1, pages: 77-94
show details »Monetary Policy and Redistribution: Information from Central Bank Balance Sheets in the Euro Area and the US
by Philippine Cour-Thimann, European Central Bank, 2013-12-18
+ show abstract- hide abstractThe exceptional measures by central banks during the financial crisis have led to
renewed interest in the redistributive effects of monetary policy. This paper adopts
the perspective of central bank balance sheets to assess such effects. It uses information from the euro area National Central Banks and the US Federal Reserve Banks to analyse the regional and sectoral effects of monetary policy. Central bank balance sheets capture sustained imbalances in payment flows across the euro area countries that peaked at 10% of GDP in the so-called Target balances, and across the US districts that reached 5% of GDP in the equivalent Interdistrict Settlement Accounts. These imbalances, combined with accommodative central bank liquidity, shifted risks from the private financial sector to the public sector and among taxpayers – yet, mechanisms are in place to mitigate such risks and the associated redistributive effects. The liquidity injection, while directly channelled at the stressed regions or sectors, has indirectly supported the financial sector at large. In different institutional contexts, the financial centres in Germany and in the New York district have been strengthened. They have been net recipients of payment inflows from the rest of the respective currency areas, equivalent in amounts to a third of the liquidity injection
during the crisis.
year: 2013, volume: 64, Issue 3, pages: 293-324
show details »The Endgame of Telecommunications Policy? A Survey
by Ingo Vogelsang, Boston University, 2013-11-18
+ show abstract- hide abstractTelecommunications policy has come a long way from regulation of vertically integrated
monopolies to the current state of competition. As competition becomes selfsustainable, will telecommunications policy in the form of industry-specific regulation go away or, if not, what form will it take? The economics literature suggests that the regulatory efficiency frontier is shifted by new technological and market developments, such as convergence of networks, fixed-mobile substitution (and integration) and next generation access networks. The frontier is also affected by the existing capital stock and other physical and institutional characteristics of a country. The insights from a review of the theoretical and empirical literature are applied to five policy areas. They are: (1) termination monopoly; (2) local bottleneck access; (3) net neutrality; (4) spectrum management; and (5) universal service. While in some of them, deregulation and a move to competition policy will soon be the efficient state of the art, regulation will remain efficient in others for some time. Deregulation will likely become efficient for one-way access and universal service, with the exception of some universal service policies in remote areas and for the poor. Termination will move to bill and keep with a duty to interconnect. In addition, some (more symmetric) regulation should persist for net neutrality in the form of transparency requirements, (quasi-) common carrier obligations and minimum quality standards. Also, spectrum management, while moving towards full-blown ownership rights, will continue to see regulators providing zoning and other services, particularly for unlicensed spectrum. All these assessments are premised on the success of making additional spectrum as the key resource available. They are also premised on the absence of a killer technology like P2P FTTH that potentially dominates all other technologies. What determines the endgame in telecommunications regulation? Although technical and market developments will dominantly shape the regulatory efficiency frontier, institutional and political economy factors have an additional and mostly slowing effect on policy changes.
year: 2013, volume: 64, Issue 3, pages: 193-270
download as pdf-fileshow details »Non-Standard Monetary Policy Measures – Magic Wand or Tiger by the Tail?
by Ansgar Belke, University of Duisburg-Essen, 2013-10-22
+ show abstract- hide abstractThis paper briefly assesses the effectiveness of the different non-standard monetary
policy tools in the Euro Area. Its main focus is on the Outright Monetary Transactions
(OMT) Programme which is praised by some as the ECB’s “magic wand”. Moreover, it discloses further possible unintended consequences of these measures in the current context of weak economic activity and subdued growth going forward. For this purpose, it investigates specific risks for price stability and asset price developments in the first main part of the paper. It is not a too remote issue that the Fed does have a “tiger by the tail”, as Hayek (2009) expressed it, i. e. that the bank will finally have to accept either a recession or inflation and that there is no choice in between. Furthermore, it checks on whether the OMT programme really does not impose costs onto the taxpayer. Finally, it comes up with some policy implications from differences in money and credit growth in different individual countries of the Euro Area. The second main part of the paper assesses which other tools the ECB could use in order to stimulate the economy in the Euro Area. It does so by delivering details on whether and how the effectiveness of the ECB’s policies can be improved through more transparency and “forward guidance”.
year: 2013, volume: 64, Issue 3, pages: 341-366
show details »The Great Export Recovery in German Manufacturing Industries, 2009/2010
by Joachim Wagner, Leuphana University Lueneburg and CESIS, Stockholm, 2013-10-01
+ show abstract- hide abstractThis paper uses comprehensive high-quality panel data from official statistics for
exporting enterprises to investigate the micro-structure of the recent export recovery
in 2010 in manufacturing industries in Germany after the great recession of 2008/
2009. Almost all of the increase in exports was due to positive changes of exports in
firms that continue to export (i. e. at the so-called intensive margin) while the increase
of exports due to export starters (at the so-called extensive margin) was tiny. It is
shown that very large firms played a decisive role in shaping the export recovery.
These findings are remarkably symmetric to the results from an analysis of the great
export collapse of 2008/09.
year: 2013, volume: 64, Issue 3, pages: 325-340
show details »Potential anti-competitive effects of emission permit markets - A survey on theoretical findings and evidence
by Johanna Reichenbach, WINGAS GmbH & Till Requate, University of Kiel, 2013-10-01
+ show abstract- hide abstractEmissions trading has been established as an important instrument of pollution
control in many world regions. However concerns have been raised whether or not
emission-trading schemes may distort competition either on the permit market itself
or on related output markets. In this paper we review tradable emission-allowance
schemes with special reference to anti-competitive effects. Such distortions may be
caused by large firms exercising market power on the allowance market by holding
down supply or suppressing demand in order to manipulate prices to their advantage.
Firms may also try to abuse the allowance market to put other firms, with whom they
compete on the output market, at a competitive disadvantage. Further distortions and
abuses may be caused by special or ill-defined rules on the allowance market or other
markets. In this paper we survey theoretical insights on potential anti-comptitive
effects of emissions trading and also provide some empirical evidence for market
power abuses on auctioned and grandfathered allowance markets with a particular
focus on the (alleged) allowance market abuse by power utilities in Germany and
California.
year: 2013, volume: 64, Issue 3, pages: 271-292
show details »Opening Clauses in Collective Bargaining Agreements: More Flexibility to Save Jobs?
by Tobias Brändle, Institute for Applied Economic Research Tübingen & Wolf Dieter Heinbach, Ministry for Science, Research and Arts Baden-Württemberg, 2013-08-12
+ show abstract- hide abstractThis paper analyses the impact of opening clauses in German collective bargaining
agreements (CBAs) on job flows. Opening clauses should provide firms with more
flexibility in economic crises. Therefore, firms operating under a CBA with opening
clauses are expected to have lower job turnover, in particular lower job destruction
under bad business conditions, and – if job creation is not adversely affected – higher
job growth. We analyse this question empirically using data from the IAB Establishment
Panel, a large and representative data set on German establishments. We supplement
the data with additional information on the existence of opening clauses in CBAs in the West German manufacturing sector (using the IAW Data Set on Opening Clauses). By means of a matching approach, we address selection problems in flexible CBAs and reveal that the existence of opening clauses has a positive, albeit not always significant, effect on job growth. In contrast, there are no significant effects on job destruction and job creation per se, and, based on information given in the IAB Establishment Panel itself, explicit knowledge of opening clauses or their application have no additional effect on job flows.
year: 2013, volume: 64, Issue 2, pages: 159-192
show details »Do Smaller Governments Raise the Level or Growth of Output? A Review of Recent Evidence
by Norman Gemmell, Victoria University of Wellington & Joey Au, The Treasury, 2013-08-12
+ show abstract- hide abstractTheoretical developments, improved methodologies and more extensive data have
helped generate a dramatic increase in the literature testing for the impact of government size and fiscal policy on economic growth in recent years. We review a range of the more recent evidence and examine (1) the consistency or robustness of the results; (2) how these results differ from the earlier literature and (3) their usefulness as a guide to policy reform in practice. We find that the last decade has produced more robust evidence and more plausible orders of magnitude on the impact of fiscal policy on growth. However, the value of this evidence remains limited as a basis for quantifying
macro-economic responses to fiscal policy reform in practice.
year: 2013, volume: 64, Issue 2, pages: 85-116
download as pdf-fileshow details »The Effects of Terrorist Activities on Foreign Direct Investment: Nonlinear Evidence from Turkey
by Tolga Omay, Cankaya University, Bahar Araz-Takay, Baskent University, Ayşegül Eruygur, Cankaya University & İlker Kılıç, Cankaya University , 2013-08-12
+ show abstract- hide abstractIn this study, we examine the relationship between foreign direct investment (FDI)
and terrorist incidents that took place in Turkey during the period 1991:12 to 2003:12. By doing so we contribute to the literature by allowing for a possible nonlinear relationship between terrorism and FDI. The data used to measure the intensity of terrorism were collected from a major newspaper of Turkey, and therefore is limited to the direct signals given to the market. Empirical evidence from both linear and non-linear models confirms that terrorism has a large negative impact on foreign direct investment. As far as the results of the nonlinear model estimation are concerned, the impact of terrorism on FDI is estimated to be more severe during periods of high terrorism where the intensity of terrorism passes a certain threshold level. This threshold level can be interpreted as a warning ‘signal’ that FDI may decrease severely and thereby can be used by policy makers to design effective policy measures and by potential investors as an indicator of a country’s risk profile.
year: 2013, volume: 64, Issue 2, pages: 139-158
show details »A Structural Approach to Estimate Short-Term and Long-Term Country Default Risk from Market Data: The Case of Argentina 2000/2001
by Dominik Maltritz, University of Erfurt, 2013-05-06
+ show abstract- hide abstractWe apply a structural pricing model to bond market data in order to estimate the
default risk for Argentina in 2000/2001. The model explicitly considers short-term
and long-term debt service payments and their dependencies by employing compound
option theory. In this way, it is possible to take into account both the empirically
observed dependency between the term structure of bond spreads and the default risk
as well as the finding that the ratio of short-term to long-term debt is of special importance for default risk. The model parameters are estimated using Duan’s (1994) time series-based maximum likelihood approach.
year: 2013, volume: 64, Issue 1, pages: 29-50
show details »Layoffs in a Recession and Temporary Employment Subsidies when a Recovery is Expected
by Matthias Göcke, Justus-Liebig-University Gießen, 2013-05-06
+ show abstract- hide abstractSunk firing and hiring costs shelter existent employment. This effect is typically
amplified by uncertainty due to an option value of waiting. Thus, if (i) sunk firing
costs are high, for example due to an employment protection legislation or due to the
loss of firm-specific human capital, or if (ii) (after a future recovery) recruiting a new
qualified staff is difficult and recession-related losses are expected to be only transitory,
firms have to consider labour hoarding as a relevant strategy. In this environment
a moderate temporary employment subsidy will be sufficient to avoid layoffs by
firms currently operating at losses. Depending on the size of sunk (re-)hiring costs,
cyclical layoffs or even permanent job destruction can be avoided by short run subsidies
during the beginning of a recession.
year: 2013, volume: 64, Issue 1, pages: 73-84
show details »The Effect of Public Capital on Aggregate Output. Empirical Evidence for 22 OECD Countries
by Jan-Erik Wesselhöft, Helmut-Schmidt-University Hamburg, 2013-05-06
+ show abstract- hide abstractBased on new estimates of public and private capital stocks for 22 OECD countries
we study the dynamic effect of public capital on the real gross domestic product
using a vector autoregression approach. Whereas most former studies put effort on
examining the effects of public capital in a single country, this paper covers a large
set of OECD countries. The results show that public capital has a positive effect on
output in the short-, medium- and long-run in most countries. In countries where the
effect is negative, possible explanations as the different productivities of investments,
crowding out or high growth rates of government debt are analyzed.
year: 2013, volume: 64, Issue 1, pages: 51-72
show details »What Drives Investment in Telecommunications Markets? Evidence from OECD Countries
by Ulrich Heimeshoff, Heinrich Heine University Düsseldorf, 2013-05-06
+ show abstract- hide abstractRecent studies provide clear evidence that the quality of telecommunications infrastructure has strong impacts on economic growth. Especially in Germany there is a
controversial debate how to stimulate telecommunications investment to foster the
introduction of Next Generation Networks. To find appropriate policies to enhance
infrastructure investment one has to get a thorough understanding of the determinants
of infrastructure investment. Using a panel consisting of 30 OECD countries for the
period 1990 to 2011 and taking account of possible non-stationarities in aggregate
data, we investigate the main drivers of telecommunications investment on an aggregate level applying dynamic panel data methods. Our main finding is an inverted
U-shaped relationship between per capita telecommunications investment and competition.
year: 2013, volume: 64, Issue 1, pages: 7-28
show details »Corporate Balance Sheet Adjustment: Stylized Facts, Causes and Consequences
by Guntram B. Wolff, Bruegel Brussels & Eric Ruscher, European Commission , 2013-05-06
+ show abstract- hide abstractUsing national account data, we define corporate balance sheet adjustment episodes
as periods during which major increases in non-financial corporations’ net lending/
borrowing are experienced. An analysis of such episodes in Germany and Japan,
and a more systematic exploration of a sample of 30 countries, show that corporate
balance sheet adjustment tends to be long lasting and associated with significant effects on current accounts, wages and investment. Adjustment episodes lead to significant changes in corporate balance sheets ratios with a build-up of liquidity and a
reduction of leverage. The adjustment is generally achieved by reducing investment
and increasing savings on the back of a falling wage share. A panel econometric
exercise shows that balance sheet adjustment periods are triggered by macroeconomic
downturns as well as balance sheet stress due to high debt, low liquidity and negative
equity price shocks.
year: 2013, volume: 64, Issue 2, pages: 117-138
show details »