Search results for "Monetary economics"
showing 10 items of 361 documents
When fiscal consolidation meets private deleveraging
2020
Abstract Inspired by the recent experience in some euro area countries, we analyze the interaction between fiscal consolidation and private deleveraging in a model of a small open economy in a monetary union. The coexistence of long-term private debt and collateral constraints on new loans implies that, following an adverse financial shock, the economy enters a slow private deleveraging process, the duration of which is endogenous to collateral and debt dynamics. In this context, large and/or front-loaded consolidations increase the length and depth of private deleveraging, causing higher relative output losses over the medium run. As a result, such aggressive consolidation strategies entai…
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…
Efficiency, endogenous and exogenous credit risk in the banking systems of the Euro area
2005
The implantation of the Euro in 11 of the EU states has driven the big banks to expand their presence in other European countries, which may have negative consequences on their credit risk in view of the disadvantages involved in entering new markets. The aim of this study is to analyse the efficiency and the credit risk of the banks of the most important countries of the Euro area, using a one-stage parametric stochastic procedure that allows one to identify whether the behaviour towards risk of the banks analysed was more cautious or more reckless during the period analysed. The results indicate that adjustments for risk are important in the case of profit efficiency but not in the case o…
Why banks are not too big to fail - evidence from the CDS market
2013
This paper argues that bank size is not a satisfactory measure of systemic risk because it neglects aspects such as interconnectedness, correlation, and the economic context. In order to differentiate the effect of bank size from that of systemic importance, we control for systemic risk using the CoVaR measure introduced by Adrian and Brunnermeier (2011). We show that a bank's contribution to systemic risk has a significant negative effect on banks’ credit default swap (CDS) spreads, supporting the too‐systemic‐to‐fail hypothesis. Once we control for systemic risk, bank size (relative to gross domestic product (GDP)) has either no or a positive effect on banks’ CDS spreads. The effect of ba…
Tax Design in the OECD: A Test of the Hines-Summers Hypothesis
2011
This paper investigates the effects of economic size and trade openness on tax design in the OECD. Using data for 30 OECD countries over the 1965–2007 period, we test the recently proposed Hines-Summers [2009] Hypothesis, according to which the smaller the size and the greater the openness of the economy, the more it will rely on expenditure taxes and the less on income taxes. Our findings show that the Hines-Summers Hypothesis can claim broad, statistically significant, and robust empirical support in the OECD data sets we examined.
A rationale for macroeconomic policy coordination: Evidence based on the Spanish peseta
1995
Abstract In the present paper two types of monetary model for the determination of the peseta/DM exchange rate have been specified for the period 1980–1989. One includes the fundamental variables corresponding to the two countries concerned (Germany and Spain) and the other is an aggregate model, where the explanatory variables are the ratios between the fundamentals from the countries inside the ERM of the EMS, and the Spanish fundamentals. The empirical results show that the aggregate model has greater explanatory power, supporting (indirectly) further monetary policy coordination.
Deficit sustainability, and monetary versus fiscal dominance: The case of Spain, 1850–2000
2014
Abstract In this paper, we provide a test of the sustainability of the Spanish government deficit over the period 1850–2000, emphasizing the role played by monetary and fiscal dominance in order to get fiscal solvency. Since the condition of fiscal solvency was satisfied, government deficit would have been sustainable along the sample period. In addition, the whole period can be characterized as one of fiscal dominance.
FINANCIAL MARKETS' SHUTDOWN AND REACCESS
2017
We employ a discrete-time parametric duration model on a group of 121 countries over the period 1970–2011 and find that the probability of the end of financial markets' shutdown and reaccess falls as these events become longer. We also show that: (1) shutdown episodes are longer when economic prospects are poor and the degree of financial openness falls, the chief executive has been in office for long periods, and the country has a default history and (2) spells of reaccess tend to be longer when economic growth improves and financial openness increases, there are neither government crises nor government instability, and the country did not default in the past. (JEL C41, G15)
The macroeconomic effects of public investment: Evidence from advanced economies
2015
This paper provides new evidence of the macroeconomic effects of public investment in advanced economies. Using public investment forecast errors to identify the causal effect of government investment in a sample of 17 OECD economies since 1985 and model simulations, the paper finds that increased public investment raises output, both in the short term and in the long term, crowds in private investment, and reduces unemployment. Several factors shape the macroeconomic effects of public investment. When there is economic slack and monetary accommodation, demand effects are stronger, and the public-debt-to-GDP ratio may actually decline. Public investment is also more effective in boosting ou…
Structural reforms in a debt overhang
2014
We assess the effects of reforms in product and labor markets in a model economy featuring credit restrictions and pre-existing long-term debt. Both elements, which are core features of the current scenario faced by some euro area countries, combine to produce a slow and protracted deleveraging of the private sector and a persistent recession following a negative financial shock. In this environment, we show that product and labor market reforms may stimulate output and employment even in the short run, despite their defl ationary effects. Furthermore, by favoring a faster recovery of investment and collateral values, product market reforms bring forward the end of deleveraging and the exit…