1,721,032 research outputs found
INNOVATION, GROWTH, and OPTIMAL MONETARY POLICY
No full textThis paper examines how innovation-led growth affects optimal monetary policy. We consider the Ramsey policy in a New Keynesian model where R&D leads to an expanding variety of intermediate goods and compare the results with those obtained when the expansion occurs exogenously. Positive trend inflation is found to be optimal under both assumptions, but much higher with profit-seeking innovation. Optimal monetary policy must be counter-cyclical in response to both technology and public spending shocks, yet the intensity of the reaction crucially depends on the presence of an R&D sector. However, the small amount of short-run deviations of prices from the non-zero trend inflation observed in response to shocks suggests inflation targeting as a robust policy recommendation
Long-run consequences of finite exchange rate bubbles
Full text linkThis paper draws on the literature on exchange rate instability and on sunk-cost hysteresis to analyze the long-run effects of exchange rate bubbles. To address the issue, after discussing the implications of sunk-cost hysteresis for aggregate supply, we propose two versions of the Dornbusch (1976) model of exchange rate determination. We modify it so as to allow for endogenous adjustment in productive capacity, with the aggregate investment function being linear with respect to the exchange rate in one version and non-linear in the other. For both versions, we provide solutions for a Blanchard-type bubble developing on the foreign exchange market. We find that, if capacity adjusts non-linearly, such a bubble will affect the steady state of the economy. Copyright Kluwer Academic Publishers 1993exchange-rate bubbles, sunk-cost hysteresis,
Aid to agriculture, trade and structural change
Full text linkThis paper studies the effect on the industrialization process of developing countries of foreign aid given to agriculture to expand its productive capacity. According to our theoretical analysis, this effect is conditional on the openness of receiving countries. Our empirical results based on panel data for developing countries confirm this analysis, as we find that the effect of this kind of agricultural aid on the rate of growth of the industrial sector of landlocked countries is indeed positive
What are we learning from the life satisfaction literature?
No full textThe recent availability of cross-sectional and longitudinal survey data
on life satisfaction in a large number of countries gives us the opportunity to verify
empirically (and not just to assume) what matters for individuals and what economists
and policymakers should take into account when trying to promote personal
and societal well-being. We now have ample evidence, generally robust to different
cultural backgrounds, on the effects of some important happiness drivers (income,
health, unemployment, marital status, etc.) which can be considered ‘‘quasi-stylized
facts’’ of happiness. If economic policies, for many obvious reasons, cannot maximize
self-declared life satisfaction as such, we are nonetheless learning a lot from
these findings. In particular, results on the relevance of relational goods, on the
inflation/unemployment trade-off in terms of welfare and, more in general, on the
measurement of the shadow value of non-market goods obtained with life satisfaction
estimates are conveying relevant information about individual preferences
and what is behind utility functions. Such findings suggest that the anthropological
reductionism characterizing most economic models can be misleading and that
target indicators of economic policies have to be refocused if we want to minimize
the distance between economic development and human progress
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