1,721,064 research outputs found
Deficit Limits and Fiscal Rules for Dummies
No full textThe paper presents a simple model for discussing the effects of deficit limits and budget rules
on fiscal policy. I find that limits on deficit-output ratios provide incentives to implement
procyclical policies when the economy is in intermediate states, and countercyclical policies
only in very “good” and very “bad” economic times. As a result, fiscal “reaction functions”
are not monotonically related to the state of the economy. Deficit limits are found to exert
discipline only provided the limit is tight and the expected sanction large, albeit at a
relatively large welfare cost. Moreover, when fiscal choices are made under a veil of
ignorance about the output gap, an increase in volatility is likely to raise the level of the
budget deficit. Finally, concerning the design of fiscal frameworks, when excessive deficits
arise from a political bias, deficit limits should be symmetric and not state-contingent
Debt sustainability and economic convergence of euro-area Member States: Challenges and Solutions
Full text linkThis paper argues that fiscal convergence in the Euro area has been achieved at the expenses of real
divergence in unemployment, investment and at, at least temporarily, growth. Statistical and
econometric analysis support the view that the current fiscal framework has addressed debt
sustainability concerns, but has imparted a pro-cyclical bias, which has contributed to economic
divergence. The recent flexibility guidelines are a step in the right direction, but they are unlikely to
have sizable effects. A reform of the fiscal framework and a mechanism for an intra-European
unemployment insurance scheme is proposed
CONDONO, RISTRUTTURAZIONE, O RIFINANZIAMENTO DEL DEBITO? IL RUOLO DEL FMI
No full textThis paper looks at the recent debt crisis in Greece and argues that the crisis exemplifies a sequence of systematic mistakes made by International Financial Institutions, mistakes whose consequences had been clearly anticipated at the time of the first bail-out and could have been avoided. I will argue that the “original sin” of international creditors has been that of refinancing, rather than partially writing off, the debt. This mistake has led to excessively restrictive policies, and has ultimately to interventions of bail-out/in much larger than those which would have solved the problem at the outset, causing unnecessary pain to the economy and damaging both creditors’ and debtors’ interest
Fiscal policy in Europe: The credibility implications of real wage rigidity
No full textThis paper presents a a simple model that complements the standard result that nominal rigidity generates lack of credibility for monetary policy . Here credibility problems arise for fiscal policy in the presence of real rigidities: these cause the policy not to counteract deflationary real shocks, as it would had the government been able to pre-commit itself. It is the lack of credibility when information is complete, not the attempt to establish a reputation, when information is incomplete, that is here responsible for a sub-optimal policy response
Rules of tyumb for sovereign debt crises
No full textThis paper contains an empirical investigation of the set of economic and political conditions
that are associated with a likely occurrence of a sovereign debt crisis. We use a new
statistical approach (Binary Recursive Tree) that allows us to derive a collection of “rules of
thumb” that help identify the typical characteristics of defaulters. We find that not all crises
are equal: they differ depending on whether the government faces insolvency, illiquidity, or
various macroeconomic risks. We also characterize the set of fundamentals that can be
associated with a relatively “risk free” zone. This classification is important for discussing
appropriate policy options to prevent crises and improve response time and predictio
Brexit ed il Rischio di Default Sovrano
No full textIn questo lavoro ci proponiamo di ricavare informazioni dall’andamento dei prezzi dei contratti CDS di assicurazione contro l’insolvenza degli Stati in prossimità della data del Referendum britannico. Il nostro obiettivo è rispondere a queste due domande. 1. Cosa possiamo inferire dall’andamento degli spread dei CDS prima del risultato del Referendum, circa le aspettative del mercato sulle conseguenze per la solvibilità degli Stati sovrani? 2. In che misura queste aspettative sono state confermate dall’andamento di questi premi assicurativi ex-post, cioè dopo l’esito del voto? I mercati in hanno peccato di ottimismo o pessimismo a seconda dei diversi paesi
Trade, wages and superstars
No full textWe study the effects of 'globalization' on income inequality in an economy where sellers with higher skills enjoy larger market shares and higher earnings. In our 'global' economy: (a) innovations in production and communication technologies enable suppliers to reach a larger mass of consumers and to improve the (perceived) quality of their products, and (b) trade barriers fall. When transport costs fall, income is redistributed away from the non-exporting to the exporting sector of the economy. As the latter turns out to employ workers of higher skill and pay, the effect is to raise wage inequality. Whether the least skilled stand to lose or gain from improved production or communication technologies, in contrast, depends on how technological change relates with skills. The model provides an intuitive explanation for why changes in wage premia are significantly associated with the export status of firms in recent firm-level empirical investigations. (C) 2001 Elsevier Science B.V. All rights reserved
Imperfect information and employment variability: A note
No full textThis paper studies the effects of uncertainty about the workers' skills or productivity on the hiring decisions of a monopolistic firm. When productivity is not observable, and cannot be conditioned upon, less-than-full information is shown to impart a downward bias to hirings across all states of nature. The reason is that the firm, by keeping employment lower than under full information, exploits its hiring decisions in order is shape the probability distribution of workers' types at the firm level
Credibility and seigniorage in a common currency area
No full textIn the paper we show that common currency areas tend to amplify the inefficiencies associated with lack of credibility of monetary policy. Lack of commitment in redistribution of seigniorage leads to excessive inflation and suboptimal taxation in the Monetary Union. Lack of commitment to inflation creates multiple inefficient equilibria that do not exist in a regime of national monetary independence
Can We Predict the Next Capital Account Crisis?; ; November 9 and 10, 2006
No full textThis paper uses binary classification trees (BCTs) to predict capital account
crises. BCTs successively compare candidate variables and thresholds to split
the data into two subsamples, allowing for a large number of indicators to be
considered and complex interactions to emerge in a way that standard
regressions cannot easily replicate. We identify a robust leading indicator role
for three variables (international reserves, current account balance, and shortterm
external debt) as well as a reserve cover measure that combines them.
External indebtedness and domestic GDP growth forecasts are also important
predictors of vulnerability. Out of sample, we were able to capture some of the
main emerging market crises with relatively few false alarms but the overall
out-of-sample performance of our forecasts was mixed. Global cyclical
variables help explain vulnerability to crises but they are difficult to predict
and, therefore, are of limited use for forecasting purposes
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