Search results for " volatili."
showing 10 items of 128 documents
Does Inflation Targeting Affect the Trade-off Between Output Gap and Inflation Variability?
2002
We utilize a stochastic volatility model to analyse the possible effects of inflation targeting on the trade–off between output gap variability and inflation variability. We find that the adoption of inflation targets (in New Zealand, Australia, Canada, the UK, Sweden and Finland) might result in a more favourable monetary policy trade–off (except in Australia and Finland). This conclusion is reached by comparing, first, the economic performance of targeting countries in the 1980s and the 1990s; and second, the economic performance in the 1990s of targeting and non–targeting countries (the USA, Japan, Switzerland, Germany, France and the Netherlands). We focus on two possible explanations f…
The International Business Cycle in a Changing World: Volatility and the Propagation of Shocks
2003
This paper examines the changing relationships between the G-7 countries through VAR models for the quarterly growth rates, estimated both over sub-periods and using a rolling data window. Six trivariate models are estimated, all of which include the US and a European (E15) aggregate. In relative terms, the conditional volatility of E15 growth has declined more since 1980 than the well-documented decline for the US. The propagation of shocks has also changed, with the volatility and propagation effects separated by applying shocks of pre-1980 magnitude to VARs estimated over various periods. Rolling estimation reveals that E15 has a steadily increasing impact on the US economy over time, wh…
Enhancement of stability in systems with metastable states
2007
The investigation of noise‐induced phenomena in far from equilibrium systems is one of the approach used to understand the behaviour of physical and biological complex systems. Metastability is a generic feature of many nonlinear systems, and the problem of the lifetime of metastable states involves fundamental aspects of nonequilibrium statistical mechanics. The enhancement of the life‐time of metastable states through the noise enhanced stability effect and the role played by the resonant activation phenomenon will be discussed in models of interdisciplinary physics: (i) Ising model (ii) Josephson junction; (iii) stochastic FitzHugh‐Nagumo model; (iv) a population dynamics model, and (v) …
Switching to floating exchange rates, devaluations, and stock returns in MENA countries
2012
Abstract We test for the impact of the announcements of floating and/or devaluating the exchange rate on stock returns in three MENA countries after the financial crises they experienced. We, first, use an event-study methodology to test for event-induced abnormal volatility of stock returns in Egypt, Morocco and Turkey. We, then, use three different methodologies to test for abnormal returns: a traditional approach and two approaches that control for event-induced volatility. We find clear evidence of abnormal volatility and abnormal returns due to the floating of the Egyptian and Turkish exchange rates in 2003 and 2001, respectively. In contrast, our results do not show that the devaluati…
Country size and business cycle volatility: Scale really matters
2007
Abstract In a recent study Andrew Rose found that country size does not matter for several economic outcomes [Rose, A.K., 2006. Size really doesn't matter: In search of a national scale effect. J. Japanese Int. Economies 4, 482–507]. However, he did not consider the effect that country size may have on business-cycle volatility. To investigate the empirical relationship between business cycle volatility and country size, we use a panel data set that includes 167 countries from 1960 to 2000. The results suggest very strongly that the relationship between country size and business cycle volatility is negative and statistically significant. This implies that smaller countries are subject to mo…
Fiscal Convergence, Business Cycle Volatility and Growth
2009
This paper analyzes the effects of fiscal convergence on business cycle volatility and growth. Using a panel 21 OECD countries (including 11 EMU countries) and 40 years of data, we find that countries with similar government budget positions tend to have smoother business cycles. That is, fiscal convergence (in the form of persistently similar ratios of government surplus/deficit to GDP) is systematically associated with smoother business cycles. We also find evidence that reduced business cycle volatility through higher fiscal convergence stimulates growth. Our empirical results are economically and statistically significant and robust.
Forecasting US Growth During the Great Recession: Is the Financial Volatility the Missing Ingredient?
2012
The Great Recession endured by the main industrialized countries during the period 2008-2009, in the wake of the financial and banking crisis, has pointed out the major role of the financial sector on macroeconomic fluctuations. In this respect, many researchers have started to reconsider the linkages between financial and macroeconomic areas. In this paper, we evaluate the leading role of the daily volatility of two major financial variables, namely commodity and stock prices, in their ability to anticipate the output growth. For this purpose, we propose an extended MIDAS model that allows the forecasting of the quarterly output growth rate using exogenous variables sampled at various high…
On the Link Between Volatility and Growth
2011
A model of growth with endogenous innovation and distortionary taxes is presented. Since innovation is the only source of volatility, any variable that influences innovation directly affects volatility and growth. This joint endogeneity is illustrated by working out the effects through which economies with different tax levels differ in their volatility and growth process. We obtain analytical measures of macro volatility based on cyclical output and on output growth rates for plausible parametric restrictions. This analysis implies that controls for taxes should be included in the standard growth-volatility regressions. Our estimates show that the conventional Ramey-Ramey coefficient is af…
The Stabilizing Role of Government Size
2007
This paper presents an analysis of how alternative models of the business cycle can replicate the stylized fact that large governments are associated with less volatile economies. Our analysis shows that adding nominal rigidities and costs of capital adjustment to an otherwise standard RBC model can generate a negative correlation between government size and the volatility of output. However, in the model, we find that the stabilizing effect is only due to a composition effect and it is not present when we look at the volatility of private output. Given that empirically we also observe a negative correlation between government size and the volatility of consumption, we modify the model by i…
Can fiscal decentralization alleviate government consumption volatility?
2016
We analyse how fiscal decentralization affects the volatility of government consumption extending the existing literature that mainly deals with the effects of the former on government size. Using data for 97 developed and developing countries from 1971 to 2010, we find that a higher degree of fiscal decentralization leads to lower government consumption volatility. This result holds for the sub-sample of advanced economies, while it is not confirmed for those less-developed. This mechanism seems to work mainly through a lower volatility of the non-discretionary spending, which typically belongs to the central government’s policy. We also confirm existing findings according to which country…