Search results for "monetary"
showing 10 items of 502 documents
Estimating the Effect of Common Currencies on Trade: Blooming or Withering Roses?
2013
Abstract Using a gravity model and data on 182 countries worldwide, this paper estimates the effects of exchange rate volatility and currency unions on international trade for ten years spanning 1980 through 2010. We provide added confirmation and further strengthen the empirical findings in Rose (2000) prior to 1999, but we find a gradually diminishing Rose effect for the 2000-2010 period, when the Euro Zone is added to the currency union dummy. The rest of the coefficients generally comply in magnitude and sign with what is standard in the “gravity” literature. Our findings support a much stronger effect of a currency union on trade than the hypothetical effect of reducing exchange rate v…
HARVARD MEETS THE CRISIS: THE MONETARY THEORY AND POLICY OF LAUCHLIN B. CURRIE, JACOB VINER, JOHN H. WILLIAMS, AND HARRY D. WHITE
2015
The paper discusses the interpretation of the Great Depression and the policy decision making by four Harvard economists: Lauchlin B. Currie, Jacob Viner, John H. Williams, and Harry D. White. All were eminent scholars in the field of monetary and international economics, and were deeply involved in policy decisions during the New Deal. We will discuss how their Harvard training provided them with a common methodological and analytical perspective, and how this common perspective translated into specific policies when they moved from the academia to public service in the US administration. Their interpretation of the causes of the Great Depression and their policy proposals show the eclecti…
Abnormal Stock Market Returns Around Peaks in VIX: The Evidence of Investor Overreaction?
2016
Even though the VIX index was intended to be a measure of future volatility of the stock market, researchers argue that in reality VIX measures the investor sentiment. Anecdotal evidence suggests that peaks in VIX coincide with stock market bottoms followed by rallies, yet so far there have been no scientific evidence confirming this casual observation. In this paper we perform an event study of abnormal stock market returns around peaks in VIX and discuss our findings within the framework of behavioral finance theory. First of all, we detect peaks in VIX using formal turning-point identification procedures and provide detailed descriptive statistics of periods of rising and falling VIX. Th…
Circuit Theory and the Employment Issue.
2005
The circuit is a time-honoured concept in economics. It can be traced back to the Physiocrats of eighteenth-century France, who viewed production as a circular process initiated by advances, that is, capital expenditures which are recouped when goods are produced and then sold. Ever since then, however, this conception, without being explicitly discarded, has been left on the sidelines. For instance, Schumpeter, Keynes, Kalecki and J. Robinson, to mention twentieth-century economists only, undoubtedly made allowance for the circuit but did not give it prominence.1 In fact, the idea of making use of this conception as a research tool remained largely dormant until the late 1960s in France an…
Franco Modigliani e l’Unione Monetaria Europea
2020
This essay examines Franco Modigliani's contribution to the debate on European monetary integration, from the seventies to the early 2000s as emerging from his articles published mainly on the newspapers of the time and on professional journals. From the debate around the European monetary system to the creation of the single currency, Modigliani generally stood for the integration process and sought to encourage Italian politicians to engage in macroeconomic stabilization processes and to take an active part in the formulation and management of European agreements. At the same time, Modigliani criticized the overly rigid approaches supported by other European countries, in particular Germa…
Assessing commodity price risks and terms of trade exposures in emerging and developing countries
2020
This paper provides novel evidence on commodity exposure (impacts of commodity price and terms of trade fluctuations) amongst 46 emerging and developing countries (EMDCs) in Africa, Asia and the Latin American and Caribbean (LAC) region. We focus on the exposures of six macroeconomic variables to the commodity prices and terms of trade, based on the real business cycle (RBC) theory. Our empirical results indicate that, overall, about 10% of the macroeconomic variation amongst the EMDCs is due to commodity market-related exposures. The Asian and LAC economies are especially sensitive to changes in commodity prices. The changes in the prices of world trade have an imminent impact on non-commo…
Exchange Rate and Macroeconomic Fluctuations as Sources of Luck in CEO Compensation
2011
Exchange rate and other macroeconomic fluctuations can be considered sources of good or bad “luck” for corporate performance. Incentive effects of performance-based compensation for management may be weakened or biased by macroeconomic influences on remuneration depending on the ability of management to adjust operations. We decompose the changes in CEO-compensation to distinguish between (anticipated-and unanticipated) macroeconomic and “intrinsic” sources. Total US CEO-compensation is measured both including options awarded and options exercised. Both depend strongly on variations in macro-factors but the time patterns differ. Allowing for asymmetric effects on compensation we find that c…
The Effects of Fiscal Redistribution
2016
Every discussion on income distribution and inequality distinguishes between market income, namely income before tax and without transfers, and disposable, or net income, which is after tax and including transfers. Hence, taxation and transfers create a redistribution of income. This redistribution is usually progressive, as direct taxes and subsidies are progressive, and thus it is supposed to reduce inequality, in the transition from market income to disposable income. This paper focuses on measuring the effect of fiscal policy in income redistribution and in reducing inequality. It also examines which type of fiscal policy is most strongly related to the redistribution of income, are the…
When Aiyagari meets Piketty: Growth, Inequality and Capital Shares
2021
We incorporate the division of income between capital and labor into analysis on the relationship between inequality and growth. Using historical data, we document that changes in the top 1 % income shares are positively associated with subsequent growth of per capita GDP when the capital share of income is low, whereas under high capital share, the association is negative. We show that these findings are compatible with a theoretical analysis that emphasises how changes in the distribution of income translate into the accumulation of capital and overall economic activity through the interplay between precautionary saving motives and consumption smoothing. We also investigate how accounting…
Policy uncertainty and foreign direct investment
2020
While foreign direct investment (FDI) is known to be the most stable type of international capital flows, it may be particularly susceptible to heightened uncertainty because of its high fixed costs. We investigate the effect of domestic policy uncertainty on FDI inflows into 16 host countries using the OECD bilateral FDI panel data set and the economic policy uncertainty index from 1985 to 2013. The bilateral structure of the data enables us to disentangle pull factors of FDI from its push factors, thereby obtaining a cleaner causal identification of the higher domestic policy uncertainty effect. To alleviate remaining endogeneity concerns, we use the timing of “exogenous” elections as an …