II.1. Debt reduction and fiscal multipliers. dbt da dpbal da dg. bal
|
|
- Jasper Chase
- 8 years ago
- Views:
Transcription
1 Quarerly Repor on he Euro Area 3/202 II.. Deb reducion and fiscal mulipliers The deerioraion of public finances in he firs years of he crisis has led mos Member Saes o adop sizeable consolidaion packages. However, in view of he persisence of he crisis and he signs of weakening economic aciviy a vas public debae has arisen on he effeciveness of fiscal consolidaion in he curren siuaion, cenred on he quesion of wheher "auseriy can be self-defeaing". In his conex, "self-defeaing" would mean ha "a reducion in governmen expendiure leads o such a srong fall in aciviy ha fiscal performance indicaors acually ge worse" (Gros (20)). ( 29 ) Fiscal mulipliers are key o assess he response of he public deb raio o a fiscal consolidaion. This secion analyses he effecs of fiscal consolidaions on he public deb raio in alernaive scenarios for he key parameers affecing deb dynamics. The main facors affecing he deb response are he fiscal mulipliers and he financial markes' horizon. The work presened here summarizes he more deailed analysis presened in Par III of he European Commission 202 Public Finance Repor. ( 30 ) The secion begins wih a presenaion of he analyical framework ha formalizes he deb dynamics following a consolidaion shock and is relaionship wih fiscal mulipliers. I proceeds wih an analysis of he condiions influencing he number of years ha, in case of a shor-erm consolidaion-induced deb-increase, are needed for a consolidaion o show is effecs on he deb raio. I concludes wih a discussion of some policy implicaions. Deb dynamics and effecs from consolidaions In he absence of any sock-flow adjusmens, he governmen deb o GDP raio (b) evolves according o he following formula: ( 29 ) See also Bui, M. and L. Pench, (202) 'Fiscal auseriy and policy credibiliy', VoxEU.org, 20 April; Cafiso, G. and R. Cellini (20), 'Fiscal consolidaions for deb-o-gdp raio conainmen? Maybe bu wih much care', VoxEU.org, 20 March; Gros, D. (20), 'Can auseriy be self-defeaing?', VoxEU.org, 29 November; Corsei, G. and G. Müller, (202), 'Has auseriy gone oo far?', VoxEU.org, 20 February; Coarelli, C. (202), 'Fiscal Adjusmen: oo much of a good hing?' VoxEU.org, 8 February; Krugman, P. (202), 'Europe s Economic Suicide', New York Times, April 5. ( 30 ) European Economy. 4 July 202. b = b ( g ) bal = b ( + r g ) bal where bal represens he budge balance o GDP raio, pbal he primary budge balance, r he average effecive ineres rae on governmen deb and g nominal GDP growh. The evoluion of he deb raio can herefore be undersood as being driven by he primary balance and he snowball effec, which is he difference beween he average effecive ineres rae and he growh rae of he economy. Over he medium-erm, he snowball effec is of paricular imporance as i deermines he magniude of primary balances ha are necessary in order o ensure ha governmen deb remains susainable. Shor-run effecs of fiscal consolidaions The effec of a consolidaion ("a" in he following) is measured by is induced change on deb. A posiive consolidaion effec is found if he deb raio under consolidaion is smaller han he deb raio in he baseline. Arihmeically, he change induced on deb by consolidaion is: db db dpbal db = + da dpbal da dg dg da In he shor-erm, a consolidaion affecs he deb raio boh via is effec on he primary balance and via is effec on he rae of growh of GDP. In urn, he firs of hese wo effecs is he sum of wo componens reflecing he direc increase in he primary balance due o he consolidaion measures adoped, and he indirec impac on growh of he primary balance via he auomaic sabilizers (which leads o a parly offseing decrease of he primary balance). ( 3 ) The second effec reflecs he so-called "denominaor effec", i.e. he fac ha a lower level of GDP enails a higher deb raio for a given level of deb. Overall, he shor-erm effec of consolidaions on he deb level is a funcion of he exising deb level, he oupu muliplier of fiscal policy measures (i.e. he overall GDP response o he fiscal shock) and he cyclical budge semielasiciy, ε, which measures he response of he ( 3 ) If m is he one-year oupu muliplier and ε is he semielasiciy of budge balance o growh, he precise formula, where m and ε are posiive parameers, is dpbal pbal g pbal = + = ε m + da g a a
2 II. Special opics on he euro area economy general governmen balance-o-gdp raio o he GDP growh rae: ( 32 ) db da = ( b + ε ) m This equaion leads o he conclusions ha i) a high saring level of deb ends o dampen he deb-reducing impac of consolidaion all else equal, which operaes hrough he denominaor effec. If he iniial deb raio is large enough, consolidaions can even bring abou increases in he shor erm. The same holds for he elasiciy of he governmen balance o he cycle; and ii) he larger he shor-erm muliplier, he smaller he deb-reducing impac of consolidaions. This effec is acually independen of he economic growh rae and of he ineres rae prior o he fiscal consolidaion. four quarers (one year) are usually found o be above uniy. Tax-based consolidaions are usually found o enail somewha lower mulipliers han expendiure-based consolidaions, alhough here is much variaion across he differen sudies depending on he mehodology o idenify ax shocks and he counry concerned. Mulipliers derived from he European Commission's QUEST model amoun o around 0.4 o 0.7 for he euro area for a balanced consolidaion relying equally on expendiures and revenues in normal economic imes, depending on credibiliy and o 0.7 o around.2 in crisis siuaions. Table II..: Criical firs year mulipliers in he euro area a consan ineres raes (20) I is herefore possible o compue a criical value for he muliplier beyond which a consolidaion leads o a negaive raher han posiive impac. This criical value is compued as: m c = b + ε I diminishes wih he level of deb he higher he deb he larger he growh impac on he deb o GDP dynamic and wih he response of he governmen balance-o-gdp raio o GDP growh he effec of consolidaion measures on defici are smaller he more he auomaic sabilizers reac o diminished growh. For a deb raio equal o 00% of GDP, a ypical order of magniude on he value of he criical mulipliers can be compued o be 2/3 if i is assumed ha he semielasiciy of he budge balance o growh is /2. Table II.. shows he esimaed criical mulipliers for he euro-area Member Saes, for he 20 levels of Maasrich deb and he semielasiciies currenly employed o gauge he cyclical componen of he budge balance. A review of he empirical lieraure indicaes ha in many cases he empirical mulipliers are close o or even higher han he criical values presened in he able. In paricular, for European counries cumulaive mulipliers of public expendiure afer ( 32 ) All he previous compuaions are done wih respec of a baseline, i.e. hey show he comparison beween he deb raio a ime afer he consolidaion and he deb raio ha would have prevailed a ime in he absence of consolidaion. Source: Commission services' calculaion The comparison beween he criical mulipliers in Table II.. and he esimaes found in he lieraure would sugges ha Greece is he only counry where shor-run deb increases could be observed even in normal imes and if consolidaion is balanced. However, in he curren siuaion more han one hird of he euro area counries are likely o see heir deb raio increasing compared o he baseline in he firs year when a consolidaion process is implemened. This is due o several facors. Firs, he public deb has increased furher relaive o he 20 level shown in he able. Second, fiscal mulipliers are likely o be high a he curren juncure for a number of reasons: consolidaion is parly spending-based and some households and firms are credi consrains and he ransmission of moneary policy is parly broken. In addiion, in case of doubs abou he credibiliy of he consolidaion sraegy fiscal mulipliers could even be higher
3 Quarerly Repor on he Euro Area 3/202 Medium-run effecs of fiscal consolidaions The medium-erm evoluion of he deb raio, in he absence of any effec on governmen yields, is he sum of he same hree effecs indicaed in he previous subsecion: i) he cumulaive effec of growh on deb, which is larger he larger he iniial deb sock and he larger he medium-erm mulipliers; ii) The cumulaive effec of growh on governmen balance via he operaion of he auomaic sabilisers on he budge balance, which is greaer he larger he size of he mulipliers and he size of auomaic sabilisers and; iii) he cumulaive effec from he adjusmen of governmen balance, which increases wih he number of years and wih he size of he consolidaion implemened. The firs wo effecs increase he deb raio, while he hird lowers i. One way o look a he medium-erm effecs of a consolidaion is o consider he number of years n * (hereafer "he criical year") necessary for he consolidaion o lead o a decrease in deb wih respec o a baseline scenario ha keeps he primary balance-o-gdp raio consan (i.e. nonconsolidaion scenario). The criical period n* is differen from he number of years required for he deb o go below is level before saring o consolidae unless he baseline corresponds o a scenario wih a consan deb raio. However, when he baseline scenario is characerized by an increasing deb-o-gdp raio, he number of years needed o bring he raio below he preconsolidaion level exceeds n*. In his connecion, i is worhwhile noicing ha he size of he consolidaion does no affec n*, whereas i is key o deermine he number of years needed o reduce he deb raio below he exising level before he adopion of he consolidaion measures. low-persisence mulipliers pah under differen assumpions abou he impac muliplier. The baseline scenario is one of a consan deb raio of 00% of GDP and a cyclical budgeary semielasiciy of ε=0.55. When he firs-year muliplier lies below 0.7 corresponding o he value of he criical muliplier, he consolidaion lowers he deb raio from he firs year. I should be noed ha a firs year muliplier of.5 is on he high side of exising esimaes as i is he esimae of a emporary consolidaion based on governmen spending. Graph II..: Deb dynamics wih no effec on ineres raes, low persisence (% of GDP, ime horizon: 6 years) () () baseline seady sae, b0 = 00% Graph II..2: Deb dynamics wih no effec on ineres raes, high persisence (% of GDP, ime horizon: 6 years) () The higher he mulipliers in he firs year and he larger he change in GDP induced by he consolidaion, he larger he value of n* and he longer i will ake for a consolidaion o be effecive in reducing he public deb raio. The response of oupu o he fiscal consolidaion, i.e. he fiscal muliplier, can be very persisen or can decay rapidly in he firs years. ( 33 ) Graph II.. shows he deb-o-gdp raio dynamics for he ( 33 ) Medium erm mulipliers are obained by applying a decay funcion wih powers of 0.5 for he low persisence case and of 0.8 for he high persisence case. In he low persisence case around 47% of he iniial effec on oupu vanishes a he 2 nd year and around 90% hereof a he 6 h year. In he high persisence case only around 8% of he iniial effec on oupu disappears he following year afer he shock and a he 6 h year around 3.7% of he iniial effec sill remains. () baseline seady sae, b0 = 00% Graph II..2 shows he corresponding case for a high persisence of he muliplier. The higher persisence generaes longer-lasing negaive effecs from fiscal consolidaion. If he firs-year
4 II. Special opics on he euro area economy Graph II..3: Confidence effecs on deb dynamics, firs-year m=.5 (in % of GDP, ime horizon: 6 years) muliplier is.5 he consolidaion-based deb increase lass for one more year so ha hree years are needed before deb goes below baseline. Inroducing changes of governmen yields The analysis has so far been based on he assumpion of consan ineres rae. This is obviously a very srong assumpion as consolidaion affecs solvabiliy and hereby ineres raes which in urn affec fiscal balances and he dynamics of consolidaion. Over he medium-erm, changes o he average effecive ineres rae are as imporan a facor for he deb o GDP dynamics as he growh rae of GDP. The impac of consolidaion on average effecive ineres raes is more visible in he medium-erm han in he shor-erm, wih limied firs-year impac on he deb level. The sign of his effec however is no clear cu as i depends crucially on he way marke expecaions are generaed. In he simulaions presened hereafer i is assumed ha he change on average effecive ineres raes is driven by he risk premium so ha he change of he average effecive ineres rae ri due o a consolidaion a is expressed as: dri db = µ + γ da da i+ h dr=0 where µ can be inerpreed as he effec on he ineres rae (via he risk premium) linked o he credibiliy of he consolidaion measures adoped ( 34 ), while γ represens he yield sensiiviy o he deb level and h refers o he horizon considered by he financial markes. The normal case would be ha consolidaion improves marke confidence and reduces yields, leading o a lower average effecive ineres rae r. In his case, he effec of consolidaion on deb is reinforced and deb-o-gdp raios are likely o decrease a a higher speed (or increase less) han wih consan yields. This is he case illusraed by Graph II..3 under he condiion ha he firs-year muliplier is.5 and no reacion of ineres raes o public deb increases (γ=0) akes place. I can be seen ha he criical number of years before he deb is reduced o below is saring level declines somewha wih respec o he simulaion where hese confidence affecs are no accouned for. Myopic behaviour and deb raio However, under cerain condiions markes migh reac o consolidaions by increasing yields, especially when saring levels of deb are very high, he consolidaion sraegy lacks credibiliy, he expecaions abou fuure GDP growh are subdued or when he ime horizon considered by financial markes is very shor. In such a case, he increase in ineres raes would enail a rise in he deb raio, which would involve an increase in he number of years needed o resume o he saring ( 34 ) A consan coefficien associaed o he credibiliy of he adjusmen is arguably a srong assumpion, alhough helpful o illusrae is implicaions for deb dynamics. Anoher inconvenien of his linear specificaion is ha i does no ake ino accoun hresholds effecs, which can be poenially relevan in crisis periods
5 Quarerly Repor on he Euro Area 3/202 Graph II..4: Deb evoluion as a funcion of marke horizon, firs year m=.5 (in % of GDP, ime horizon: 6 years) level. Such an effec would be raher unusual, however. In paricular, where h= indicaes ha markes look a he deb in he year of he consolidaion, hereby indicaing a high degree of myopia of financial markes. In his case, if a consolidaion increases he deb raio due o he denominaor effec, a high sensiiviy of ineres raes o he deb raio could make consolidaions self-defeaing and ac as a driver for a divergen deb raio. The presence of myopia in financial markes can play a role in increasing he number of years afer which he deb raio remains above baseline. However, as simulaions in Graph II..4 shows, only in very exreme cases characerized by high and persisen mulipliers and elevaed deb raios, financial markes myopia would lead o a deb increase in he medium run. In hese simulaions a posiive reacion of ineres raes o deb increases (γ=0.3) has been assumed. Conclusions The reacion of deb raios o fiscal consolidaions is largely driven by he size of he GDP muliplier. In his regard, i is likely ha one-year mulipliers are larger in he curren crisis period han in normal imes. Accordingly, he currenly high deb levels and he presumably sizeable fiscal mulipliers due o he crisis, joinly wih normal values for cyclical elasiciies, are likely o lead o deb rises in response o consolidaions in he shor run in several Member Saes. consolidaions are generally successful in reducing he deb-o-gdp-raio as long as hey are based on measures wih permanen effecs on he budge. However, deb increases following fiscal consolidaions can be more proraced if mulipliers are high and very persisen or if ineres raes rise abnormally in response o a fiscal ighening accompanied by a shor-erm rise in deb. A credible consolidaion sraegy would significanly reduce such risks. A fully selfdefeaing dynamics would only be generaed under very unlikely configuraions for which, in addiion o very large mulipliers and brisk increases in sovereign ineres raes in response o he consolidaion, a high degree of financial marke myopia is required. The analysis presened in his secion implies ha, for a number of euro-area Member Saes, i will ake some ime before consolidaion brings deb raios back o curren levels. In he curren seing, involving high fiscal mulipliers, i is likely ha some consolidaion packages will lead o emporary shor-erm deb increases ha will lenghen he horizon over which public deb will sar o decrease. To speed up he process of deb reducion in he sense of bringing deb below is pre-consolidaion level, sizeable consolidaions are warraned. Moreover, given he currenly high deb levels in many of hese counries, consolidaing is of primary imporance, as delaying he adjusmen implies rising deb raios, which increases significanly he likelihood of fully self-defeaing dynamics in he fuure. However, for high bu plausible values of he mulipliers, such couner-inuiive effecs are shor-lived. Over he medium-erm,
The Greek financial crisis: growing imbalances and sovereign spreads. Heather D. Gibson, Stephan G. Hall and George S. Tavlas
The Greek financial crisis: growing imbalances and sovereign spreads Heaher D. Gibson, Sephan G. Hall and George S. Tavlas The enry The enry of Greece ino he Eurozone in 2001 produced a dividend in he
More informationHow To Calculate Price Elasiciy Per Capia Per Capi
Price elasiciy of demand for crude oil: esimaes for 23 counries John C.B. Cooper Absrac This paper uses a muliple regression model derived from an adapaion of Nerlove s parial adjusmen model o esimae boh
More informationCan Austerity Be Self-defeating?
DOI: 0.007/s07-0-0-7 Auseriy Can Auseriy Be Self-defeaing? Wih European governmens cuing back on spending, many are asking wheher his could make maers worse. In he UK for insance, recen OECD esimaes sugges
More informationEconomics Honors Exam 2008 Solutions Question 5
Economics Honors Exam 2008 Soluions Quesion 5 (a) (2 poins) Oupu can be decomposed as Y = C + I + G. And we can solve for i by subsiuing in equaions given in he quesion, Y = C + I + G = c 0 + c Y D + I
More informationChapter 6: Business Valuation (Income Approach)
Chaper 6: Business Valuaion (Income Approach) Cash flow deerminaion is one of he mos criical elemens o a business valuaion. Everyhing may be secondary. If cash flow is high, hen he value is high; if he
More informationWhy Did the Demand for Cash Decrease Recently in Korea?
Why Did he Demand for Cash Decrease Recenly in Korea? Byoung Hark Yoo Bank of Korea 26. 5 Absrac We explores why cash demand have decreased recenly in Korea. The raio of cash o consumpion fell o 4.7% in
More informationMeasuring macroeconomic volatility Applications to export revenue data, 1970-2005
FONDATION POUR LES ETUDES ET RERS LE DEVELOPPEMENT INTERNATIONAL Measuring macroeconomic volailiy Applicaions o expor revenue daa, 1970-005 by Joël Cariolle Policy brief no. 47 March 01 The FERDI is a
More information11/6/2013. Chapter 14: Dynamic AD-AS. Introduction. Introduction. Keeping track of time. The model s elements
Inroducion Chaper 14: Dynamic D-S dynamic model of aggregae and aggregae supply gives us more insigh ino how he economy works in he shor run. I is a simplified version of a DSGE model, used in cuing-edge
More information4. International Parity Conditions
4. Inernaional ariy ondiions 4.1 urchasing ower ariy he urchasing ower ariy ( heory is one of he early heories of exchange rae deerminaion. his heory is based on he concep ha he demand for a counry's currency
More informationThe Real Business Cycle paradigm. The RBC model emphasizes supply (technology) disturbances as the main source of
Prof. Harris Dellas Advanced Macroeconomics Winer 2001/01 The Real Business Cycle paradigm The RBC model emphasizes supply (echnology) disurbances as he main source of macroeconomic flucuaions in a world
More informationBALANCE OF PAYMENTS. First quarter 2008. Balance of payments
BALANCE OF PAYMENTS DATE: 2008-05-30 PUBLISHER: Balance of Paymens and Financial Markes (BFM) Lena Finn + 46 8 506 944 09, lena.finn@scb.se Camilla Bergeling +46 8 506 942 06, camilla.bergeling@scb.se
More informationDuration and Convexity ( ) 20 = Bond B has a maturity of 5 years and also has a required rate of return of 10%. Its price is $613.
Graduae School of Business Adminisraion Universiy of Virginia UVA-F-38 Duraion and Convexiy he price of a bond is a funcion of he promised paymens and he marke required rae of reurn. Since he promised
More informationPresent Value Methodology
Presen Value Mehodology Econ 422 Invesmen, Capial & Finance Universiy of Washingon Eric Zivo Las updaed: April 11, 2010 Presen Value Concep Wealh in Fisher Model: W = Y 0 + Y 1 /(1+r) The consumer/producer
More informationWorking paper No.3 Cyclically adjusting the public finances
Working paper No.3 Cyclically adjusing he public finances Thora Helgadoir, Graeme Chamberlin, Pavandeep Dhami, Sephen Farringon and Joe Robins June 2012 Crown copyrigh 2012 You may re-use his informaion
More informationDebt Accumulation, Debt Reduction, and Debt Spillovers in Canada, 1974-98*
Deb Accumulaion, Deb Reducion, and Deb Spillovers in Canada, 1974-98* Ron Kneebone Deparmen of Economics Universiy of Calgary John Leach Deparmen of Economics McMaser Universiy Ocober, 2000 Absrac Wha
More informationPublic finance: structural deficit, sensitivity and long-term sustainability
Direzione I STUDY VISIT ALBANIAN MINISTRY OF FINANCE Public finance: srucural defici, sensiiviy and Michele Posigliola Ouline of he presenaion Paricular look a he Ialian Sabiliy and Convergence Programme:
More informationDebt Relief and Fiscal Sustainability for HIPCs *
Deb Relief and Fiscal Susainabiliy for HIPCs * Craig Burnside and Domenico Fanizza December 24 Absrac The enhanced HIPC iniiaive is disinguished from previous deb relief programs by is condiionaliy ha
More informationMACROECONOMIC FORECASTS AT THE MOF A LOOK INTO THE REAR VIEW MIRROR
MACROECONOMIC FORECASTS AT THE MOF A LOOK INTO THE REAR VIEW MIRROR The firs experimenal publicaion, which summarised pas and expeced fuure developmen of basic economic indicaors, was published by he Minisry
More informationWorking Paper No. 482. Net Intergenerational Transfers from an Increase in Social Security Benefits
Working Paper No. 482 Ne Inergeneraional Transfers from an Increase in Social Securiy Benefis By Li Gan Texas A&M and NBER Guan Gong Shanghai Universiy of Finance and Economics Michael Hurd RAND Corporaion
More informationPROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART ONE
Profi Tes Modelling in Life Assurance Using Spreadshees PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART ONE Erik Alm Peer Millingon 2004 Profi Tes Modelling in Life Assurance Using Spreadshees
More informationDOES TRADING VOLUME INFLUENCE GARCH EFFECTS? SOME EVIDENCE FROM THE GREEK MARKET WITH SPECIAL REFERENCE TO BANKING SECTOR
Invesmen Managemen and Financial Innovaions, Volume 4, Issue 3, 7 33 DOES TRADING VOLUME INFLUENCE GARCH EFFECTS? SOME EVIDENCE FROM THE GREEK MARKET WITH SPECIAL REFERENCE TO BANKING SECTOR Ahanasios
More informationWhen Is Growth Pro-Poor? Evidence from a Panel of Countries
Forhcoming, Journal of Developmen Economics When Is Growh Pro-Poor? Evidence from a Panel of Counries Aar Kraay The World Bank Firs Draf: December 2003 Revised: December 2004 Absrac: Growh is pro-poor
More informationMorningstar Investor Return
Morningsar Invesor Reurn Morningsar Mehodology Paper Augus 31, 2010 2010 Morningsar, Inc. All righs reserved. The informaion in his documen is he propery of Morningsar, Inc. Reproducion or ranscripion
More informationPerformance Center Overview. Performance Center Overview 1
Performance Cener Overview Performance Cener Overview 1 ODJFS Performance Cener ce Cener New Performance Cener Model Performance Cener Projec Meeings Performance Cener Execuive Meeings Performance Cener
More informationEvidence on Fiscal Consolidations and the Evolution of Public Debt in Europe
Evidence on Fiscal Consolidaions and he Evoluion of Public Deb in Europe Gianluca Cafiso and Robero Cellini (Universiy of Caania, Deparmen of Economics and Business) February 22 Absrac The objecive of
More informationRisk Modelling of Collateralised Lending
Risk Modelling of Collaeralised Lending Dae: 4-11-2008 Number: 8/18 Inroducion This noe explains how i is possible o handle collaeralised lending wihin Risk Conroller. The approach draws on he faciliies
More informationFiscal Consolidation in an Open Economy
Fiscal Consolidaion in an Open Economy Chrisopher J. Erceg Federal Reserve Board Jesper Lindé Federal Reserve Board and CEPR December 29, 2 Absrac This paper uses a New Keynesian small open economy model
More informationMathematics in Pharmacokinetics What and Why (A second attempt to make it clearer)
Mahemaics in Pharmacokineics Wha and Why (A second aemp o make i clearer) We have used equaions for concenraion () as a funcion of ime (). We will coninue o use hese equaions since he plasma concenraions
More informationUNDERSTANDING THE DEATH BENEFIT SWITCH OPTION IN UNIVERSAL LIFE POLICIES. Nadine Gatzert
UNDERSTANDING THE DEATH BENEFIT SWITCH OPTION IN UNIVERSAL LIFE POLICIES Nadine Gazer Conac (has changed since iniial submission): Chair for Insurance Managemen Universiy of Erlangen-Nuremberg Lange Gasse
More informationCURRENT ACCOUNTS IN THE EURO AREA: AN INTERTEMPORAL APPROACH. José Manuel Campa Angel Gavilán
CIIF Working Paper WP no 651 Sepember, 2006 CURRENT ACCOUNTS IN THE EURO AREA: AN INTERTEMPORAL APPROACH José Manuel Campa Angel Gavilán IESE Business School Universiy of Navarra Avda. Pearson, 21 08034
More informationA Note on Using the Svensson procedure to estimate the risk free rate in corporate valuation
A Noe on Using he Svensson procedure o esimae he risk free rae in corporae valuaion By Sven Arnold, Alexander Lahmann and Bernhard Schwezler Ocober 2011 1. The risk free ineres rae in corporae valuaion
More informationSupplementary Appendix for Depression Babies: Do Macroeconomic Experiences Affect Risk-Taking?
Supplemenary Appendix for Depression Babies: Do Macroeconomic Experiences Affec Risk-Taking? Ulrike Malmendier UC Berkeley and NBER Sefan Nagel Sanford Universiy and NBER Sepember 2009 A. Deails on SCF
More informationABSTRACT KEYWORDS. Term structure, duration, uncertain cash flow, variable rates of return JEL codes: C33, E43 1. INTRODUCTION
THE VALUATION AND HEDGING OF VARIABLE RATE SAVINGS ACCOUNTS BY FRANK DE JONG 1 AND JACCO WIELHOUWER ABSTRACT Variable rae savings accouns have wo main feaures. The ineres rae paid on he accoun is variable
More informationFiscal consolidation in an open economy with sovereign premia
Fiscal consolidaion in an open economy wih sovereign premia Aposolis Philippopoulos y (Ahens Universiy of Economics and Business, and CESifo) Peros Varhaliis (Ahens Universiy of Economics and Business)
More informationRelationships between Stock Prices and Accounting Information: A Review of the Residual Income and Ohlson Models. Scott Pirie* and Malcolm Smith**
Relaionships beween Sock Prices and Accouning Informaion: A Review of he Residual Income and Ohlson Models Sco Pirie* and Malcolm Smih** * Inernaional Graduae School of Managemen, Universiy of Souh Ausralia
More informationChapter 4: Exponential and Logarithmic Functions
Chaper 4: Eponenial and Logarihmic Funcions Secion 4.1 Eponenial Funcions... 15 Secion 4. Graphs of Eponenial Funcions... 3 Secion 4.3 Logarihmic Funcions... 4 Secion 4.4 Logarihmic Properies... 53 Secion
More informationChapter 1.6 Financial Management
Chaper 1.6 Financial Managemen Par I: Objecive ype quesions and answers 1. Simple pay back period is equal o: a) Raio of Firs cos/ne yearly savings b) Raio of Annual gross cash flow/capial cos n c) = (1
More informationNBER WORKING PAPER SERIES IS THE U.S. CURRENT ACCOUNT DEFICIT SUSTAINABLE? AND IF NOT, HOW COSTLY IS ADJUSTMENT LIKELY TO BE?
NBER WORKING PAPER SERIES IS THE U.S. CURRENT ACCOUNT DEFICIT SUSTAINABLE? AND IF NOT, HOW COSTLY IS ADJUSTMENT LIKELY TO BE? Sebasian Edwards Working Paper 11541 hp://www.nber.org/papers/w11541 NATIONAL
More informationAppendix D Flexibility Factor/Margin of Choice Desktop Research
Appendix D Flexibiliy Facor/Margin of Choice Deskop Research Cheshire Eas Council Cheshire Eas Employmen Land Review Conens D1 Flexibiliy Facor/Margin of Choice Deskop Research 2 Final Ocober 2012 \\GLOBAL.ARUP.COM\EUROPE\MANCHESTER\JOBS\200000\223489-00\4
More informationPremium Income of Indian Life Insurance Industry
Premium Income of Indian Life Insurance Indusry A Toal Facor Produciviy Approach Ram Praap Sinha* Subsequen o he passage of he Insurance Regulaory and Developmen Auhoriy (IRDA) Ac, 1999, he life insurance
More informationResearch. Michigan. Center. Retirement. Behavioral Effects of Social Security Policies on Benefit Claiming, Retirement and Saving.
Michigan Universiy of Reiremen Research Cener Working Paper WP 2012-263 Behavioral Effecs of Social Securiy Policies on Benefi Claiming, Reiremen and Saving Alan L. Gusman and Thomas L. Seinmeier M R R
More informationCRISES AND THE FLEXIBLE PRICE MONETARY MODEL. Sarantis Kalyvitis
CRISES AND THE FLEXIBLE PRICE MONETARY MODEL Saranis Kalyviis Currency Crises In fixed exchange rae regimes, counries rarely abandon he regime volunarily. In mos cases, raders (or speculaors) exchange
More informationChapter 8: Regression with Lagged Explanatory Variables
Chaper 8: Regression wih Lagged Explanaory Variables Time series daa: Y for =1,..,T End goal: Regression model relaing a dependen variable o explanaory variables. Wih ime series new issues arise: 1. One
More informationMeasuring the Effects of Exchange Rate Changes on Investment. in Australian Manufacturing Industry
Measuring he Effecs of Exchange Rae Changes on Invesmen in Ausralian Manufacuring Indusry Robyn Swif Economics and Business Saisics Deparmen of Accouning, Finance and Economics Griffih Universiy Nahan
More informationIndividual Health Insurance April 30, 2008 Pages 167-170
Individual Healh Insurance April 30, 2008 Pages 167-170 We have received feedback ha his secion of he e is confusing because some of he defined noaion is inconsisen wih comparable life insurance reserve
More informationDebt management and optimal fiscal policy with long bonds 1
Deb managemen and opimal fiscal policy wih long bonds Elisa Faraglia 2 Alber Marce 3 and Andrew Sco 4 Absrac We sudy Ramsey opimal fiscal policy under incomplee markes in he case where he governmen issues
More informationMonetary Policy & Real Estate Investment Trusts *
Moneary Policy & Real Esae Invesmen Truss * Don Bredin, Universiy College Dublin, Gerard O Reilly, Cenral Bank and Financial Services Auhoriy of Ireland & Simon Sevenson, Cass Business School, Ciy Universiy
More informationCURRENT ACCOUNTS IN THE EURO AREA: AN INTERTEMPORAL APPROACH. José Manuel Campa and Ángel Gavilán an. Documentos de Trabajo N.
CURRENT ACCOUNTS IN THE EURO AREA: AN INTERTEMPORAL APPROACH 2006 José Manuel Campa and Ángel Gavilán an Documenos de Trabajo N.º 0638 CURRENT ACCOUNTS IN THE EURO AREA: AN INTERTEMPORAL APPROACH CURRENT
More informationAnalysis of tax effects on consolidated household/government debts of a nation in a monetary union under classical dichotomy
MPRA Munich Personal RePEc Archive Analysis of ax effecs on consolidaed household/governmen debs of a naion in a moneary union under classical dichoomy Minseong Kim 8 April 016 Online a hps://mpra.ub.uni-muenchen.de/71016/
More informationPrincipal components of stock market dynamics. Methodology and applications in brief (to be updated ) Andrei Bouzaev, bouzaev@ya.
Principal componens of sock marke dynamics Mehodology and applicaions in brief o be updaed Andrei Bouzaev, bouzaev@ya.ru Why principal componens are needed Objecives undersand he evidence of more han one
More informationWORKING PAPER SERIES STOCKS, BONDS, MONEY MARKETS AND EXCHANGE RATES MEASURING INTERNATIONAL FINANCIAL TRANSMISSION NO.
WORKING PAPER SERIES NO. 452 / MARCH 25 STOCKS, BONDS, MONEY MARKETS AND EXCHANGE RATES MSURING INTERNATIONAL FINANCIAL TRANSMISSION by Michael Ehrmann, Marcel Frazscher and Robero Rigobon WORKING PAPER
More informationVector Autoregressions (VARs): Operational Perspectives
Vecor Auoregressions (VARs): Operaional Perspecives Primary Source: Sock, James H., and Mark W. Wason, Vecor Auoregressions, Journal of Economic Perspecives, Vol. 15 No. 4 (Fall 2001), 101-115. Macroeconomericians
More informationChapter 10 Social Security 1
Chaper 0 Social Securiy 0. Inroducion A ypical social securiy sysem provides income during periods of unemploymen, ill-healh or disabiliy, and financial suppor, in he form of pensions, o he reired. Alhough
More informationCointegration: The Engle and Granger approach
Coinegraion: The Engle and Granger approach Inroducion Generally one would find mos of he economic variables o be non-saionary I(1) variables. Hence, any equilibrium heories ha involve hese variables require
More informationCHARGE AND DISCHARGE OF A CAPACITOR
REFERENCES RC Circuis: Elecrical Insrumens: Mos Inroducory Physics exs (e.g. A. Halliday and Resnick, Physics ; M. Sernheim and J. Kane, General Physics.) This Laboraory Manual: Commonly Used Insrumens:
More informationJournal Of Business & Economics Research September 2005 Volume 3, Number 9
Opion Pricing And Mone Carlo Simulaions George M. Jabbour, (Email: jabbour@gwu.edu), George Washingon Universiy Yi-Kang Liu, (yikang@gwu.edu), George Washingon Universiy ABSTRACT The advanage of Mone Carlo
More informationCapital Budgeting and Initial Cash Outlay (ICO) Uncertainty
Financial Decisions, Summer 006, Aricle Capial Budgeing and Iniial Cash Oulay (ICO) Uncerainy Michael C. Ehrhard and John M. Wachowicz, Jr. * * The Paul and Beverly Casagna Professor of Finance and Professor
More informationDebt and Fiscal Sustainability in Sri Lanka
Inernaional Journal of Scienific and Research Publicaions, Volume 2, Issue 3, March 212 1 Deb and Fiscal Susainabiliy in Sri Lanka N. P. Ravindra Deyshappriya Uva Wellassa Universiy SRI LANKA Absrac- Fiscal
More informationTerms of Trade and Present Value Tests of Intertemporal Current Account Models: Evidence from the United Kingdom and Canada
Terms of Trade and Presen Value Tess of Ineremporal Curren Accoun Models: Evidence from he Unied Kingdom and Canada Timohy H. Goodger Universiy of Norh Carolina a Chapel Hill November 200 Absrac This paper
More informationMEDDELANDEN FRÅN SVENSKA HANDELSHÖGSKOLAN SWEDISH SCHOOL OF ECONOMICS AND BUSINESS ADMINISTRATION WORKING PAPERS
MEDDELANDEN FRÅN SVENSKA HANDELSHÖGSKOLAN SWEDISH SCHOOL OF ECONOMICS AND BUSINESS ADMINISTRATION WORKING PAPERS 3 Jukka Liikanen, Paul Soneman & Oo Toivanen INTERGENERATIONAL EFFECTS IN THE DIFFUSION
More informationPENSION REFORM IN BELGIUM: A NEW POINTS SYSTEM BETWEEN DB and DC
PENSION REFORM IN BELGIUM: A NEW POINS SYSEM BEWEEN B and C Pierre EVOLER (*) (March 3 s, 05) Absrac More han in oher counries, he Belgian firs pillar of public pension needs urgen and srucural reforms
More informationEstimating the Term Structure with Macro Dynamics in a Small Open Economy
Esimaing he Term Srucure wih Macro Dynamics in a Small Open Economy Fousseni Chabi-Yo Bank of Canada Jun Yang Bank of Canada April 18, 2006 Preliminary work. Please do no quoe wihou permission. The paper
More informationCapital Flows and Current Account Sustainability: The Ghanaian Experience
CREDIT Research Paper No. 07/07 Capial Flows and Curren Accoun Susainabiliy: The Ghanaian Experience by Absrac Maxwell Opoku-Afari Boh heoreical and operaional definiions of curren accoun susainabiliy
More informationOrder Flows, Delta Hedging and Exchange Rate Dynamics
rder Flows Dela Hedging and Exchange Rae Dynamics Bronka Rzepkowski # Cenre d Eudes rospecives e d Informaions Inernaionales (CEII) ABSTRACT This paper proposes a microsrucure model of he FX opions and
More informationINTEREST RATE PASS-THROUGH IN COLOMBIA: A MICRO-BANKING PERSPECTIVE* Rocío Betancourt Hernando Vargas Norberto Rodríguez**
INTEREST RATE PASS-THROUGH IN COOMBIA: A MICRO-BANKING PERSPECTIVE* Rocío Beancour Hernando Vargas Norbero Rodríguez** Bogoá, Sepember 2006 *The opinions expressed in his paper are hose of he auhors and
More informationShocks Do SVAR Models Justify Discarding the Technology Shock-Driven Real Business Cycle Hypothesis? Abstract
Shocks Do SVAR Models Jusify Discarding he Technology Shock-Driven Real Business Cycle Hypohesis? Hyeon-seung Huh School of Economics Yonsei Universiy Republic of Korea hshuh@yonsei.ac.kr David Kim School
More informationTable of contents Chapter 1 Interest rates and factors Chapter 2 Level annuities Chapter 3 Varying annuities
Table of conens Chaper 1 Ineres raes and facors 1 1.1 Ineres 2 1.2 Simple ineres 4 1.3 Compound ineres 6 1.4 Accumulaed value 10 1.5 Presen value 11 1.6 Rae of discoun 13 1.7 Consan force of ineres 17
More informationLEASING VERSUSBUYING
LEASNG VERSUSBUYNG Conribued by James D. Blum and LeRoy D. Brooks Assisan Professors of Business Adminisraion Deparmen of Business Adminisraion Universiy of Delaware Newark, Delaware The auhors discuss
More informationMIKLÓS SZABÓ: GENERATIONAL ACCOUNTING FOR HUNGARY
PHD PROGRAM IN ECONOMICS BUDAPEST CORVINUS UNIVERSITY MIKLÓS SZABÓ: GENERATIONAL ACCOUNTING FOR HUNGARY FISCAL SUSTAINABILITY AND INTERGENERATIONAL REDISTRIBUTION (PHD THESIS) JUNE 2005 SUPERVISOR: PROF.
More informationBid-ask Spread and Order Size in the Foreign Exchange Market: An Empirical Investigation
Bid-ask Spread and Order Size in he Foreign Exchange Marke: An Empirical Invesigaion Liang Ding* Deparmen of Economics, Macaleser College, 1600 Grand Avenue, S. Paul, MN55105, U.S.A. Shor Tile: Bid-ask
More informationEnergy prices and business cycles: Lessons from a simulated small open economy. Torsten Schmidt, RWI Essen * Tobias Zimmermann, RWI Essen *
Energy prices and business cycles: Lessons from a simulaed small open economy model Torsen Schmid, RWI Essen * Tobias Zimmermann, RWI Essen * Preliminary Version, Ocober 2008 Absrac Despie energy price
More informationA Re-examination of the Joint Mortality Functions
Norh merican cuarial Journal Volume 6, Number 1, p.166-170 (2002) Re-eaminaion of he Join Morali Funcions bsrac. Heekung Youn, rkad Shemakin, Edwin Herman Universi of S. Thomas, Sain Paul, MN, US Morali
More informationMarkov Chain Modeling of Policy Holder Behavior in Life Insurance and Pension
Markov Chain Modeling of Policy Holder Behavior in Life Insurance and Pension Lars Frederik Brand Henriksen 1, Jeppe Woemann Nielsen 2, Mogens Seffensen 1, and Chrisian Svensson 2 1 Deparmen of Mahemaical
More informationFifth Quantitative Impact Study of Solvency II (QIS 5) National guidance on valuation of technical provisions for German SLT health insurance
Fifh Quaniaive Impac Sudy of Solvency II (QIS 5) Naional guidance on valuaion of echnical provisions for German SLT healh insurance Conens 1 Inroducion... 2 2 Calculaion of bes-esimae provisions... 3 2.1
More informationPrice and Income Elasticity of Australian Retail Finance: An Autoregressive Distributed Lag (ARDL) Approach
Ausralasian Accouning Business and Finance Journal Volume 8 Issue 1 Aricle 7 Price and Income Elasiciy of Ausralian Reail Finance: An Auoregressive Disribued Lag (ARDL) Approach Helen Higgs Griffih Universiy,
More informationDoes International Trade Stabilize Exchange Rate Volatility?
Does Inernaional Trade Sabilize Exchange Rae Volailiy? Hui-Kuan Tseng, Kun-Ming Chen, and Chia-Ching Lin * Absrac Since he early 980s, major indusrial counries have been suffering severe muli-laeral rade
More information9. Capacitor and Resistor Circuits
ElecronicsLab9.nb 1 9. Capacior and Resisor Circuis Inroducion hus far we have consider resisors in various combinaions wih a power supply or baery which provide a consan volage source or direc curren
More informationexpressed here and the approaches suggested are of the author and not necessarily of NSEIL.
I. Inroducion Do Fuures and Opions rading increase sock marke volailiy Dr. Premalaa Shenbagaraman * In he las decade, many emerging and ransiion economies have sared inroducing derivaive conracs. As was
More informationMika Kortelainen. Adjustment of the US current account deficit
Mika Korelainen Adjusmen of he US curren accoun defici Bank of Finland Research Discussion Papers 9 2007 Suomen Pankki Bank of Finland P.O.Box 160 FI-00101 HELSINKI Finland + 358 10 8311 hp://www.bof.fi
More informationTask is a schedulable entity, i.e., a thread
Real-Time Scheduling Sysem Model Task is a schedulable eniy, i.e., a hread Time consrains of periodic ask T: - s: saring poin - e: processing ime of T - d: deadline of T - p: period of T Periodic ask T
More informationReal Return Bonds, Inflation Expectations, and the Break-Even Inflation Rate Ian Christensen, Frédéric Dion, and Christopher Reid
Bank of Canada Banque du Canada Working Paper 2004-43 / Documen de ravail 2004-43 Real Reurn Bonds, Inflaion Expecaions, and he Break-Even Inflaion Rae by Ian Chrisensen, Frédéric Dion, and Chrisopher
More informationTHE FIRM'S INVESTMENT DECISION UNDER CERTAINTY: CAPITAL BUDGETING AND RANKING OF NEW INVESTMENT PROJECTS
VII. THE FIRM'S INVESTMENT DECISION UNDER CERTAINTY: CAPITAL BUDGETING AND RANKING OF NEW INVESTMENT PROJECTS The mos imporan decisions for a firm's managemen are is invesmen decisions. While i is surely
More informationWP/15/85. Financial Crisis, US Unconventional Monetary Policy and International Spillovers. by Qianying Chen, Andrew Filardo, Dong He, and Feng Zhu
WP/15/85 Financial Crisis, US Unconvenional Moneary Policy and Inernaional Spillovers by Qianying Chen, Andrew Filardo, Dong He, and Feng Zhu 2015 Inernaional Moneary Fund WP/15/85 IMF Working Paper European
More informationOptimal Investment and Consumption Decision of Family with Life Insurance
Opimal Invesmen and Consumpion Decision of Family wih Life Insurance Minsuk Kwak 1 2 Yong Hyun Shin 3 U Jin Choi 4 6h World Congress of he Bachelier Finance Sociey Torono, Canada June 25, 2010 1 Speaker
More informationFiscal Limits, External Debt, and Fiscal Policy in Developing Countries
WP/14/49 Fiscal Limis, Exernal Deb, and Fiscal Policy in Developing Counries Huixin Bi,Wenyi Shen, and Shu-Chun S. Yang 2014 Inernaional Moneary Fund WP/14/49 IMF Working Paper Research Deparmen and Sraegy,
More informationTax Externalities of Equity Mutual Funds
Tax Exernaliies of Equiy Muual Funds Joel M. Dickson The Vanguard Group, Inc. John B. Shoven Sanford Universiy and NBER Clemens Sialm Sanford Universiy December 1999 Absrac: Invesors holding muual funds
More informationThe Impact of Surplus Distribution on the Risk Exposure of With Profit Life Insurance Policies Including Interest Rate Guarantees.
The Impac of Surplus Disribuion on he Risk Exposure of Wih Profi Life Insurance Policies Including Ineres Rae Guaranees Alexander Kling 1 Insiu für Finanz- und Akuarwissenschafen, Helmholzsraße 22, 89081
More informationThe impact of Federal Reserve asset purchase programmes: another twist 1
Jack Meaning jm583@ken.ac.uk eng Zhu feng.zhu@bis.org The impac of ederal Reserve asse purchase programmes: anoher wis 1 This aricle examines he effeciveness of recen ederal Reserve asse purchase programmes.
More informationMaking Use of Gate Charge Information in MOSFET and IGBT Data Sheets
Making Use of ae Charge Informaion in MOSFET and IBT Daa Shees Ralph McArhur Senior Applicaions Engineer Advanced Power Technology 405 S.W. Columbia Sree Bend, Oregon 97702 Power MOSFETs and IBTs have
More informationThe Effect of Monetary Policy on Private Money Market Rates in Jamaica: An Empirical Microstructure Study. Derek Leith
The Effec of Moneary Policy on Privae Money Marke Raes in Jamaica: An Empirical Microsrucure Sudy Derek Leih Research Services Deparmen Research and Economic Programming Division Bank of Jamaica Absrac
More informationThe High Yield Spread as a Predictor of Real Economic Activity: Evidence of a Financial Accelerator for the United States
The High Yield Spread as a Predicor of Real Economic Aciviy: Evidence of a Financial Acceleraor for he Unied Saes Ashoa Mody Research Deparmen Inernaional Moneary Fund Mar P. Taylor Universiy of Warwic
More informationARCH 2013.1 Proceedings
Aricle from: ARCH 213.1 Proceedings Augus 1-4, 212 Ghislain Leveille, Emmanuel Hamel A renewal model for medical malpracice Ghislain Léveillé École d acuaria Universié Laval, Québec, Canada 47h ARC Conference
More informationInterest Rates and the Market For New Light Vehicles
Federal Reserve Bank of New York Saff Repors Ineres Raes and he Marke For New Ligh Vehicles Adam Copeland George Hall Louis Maccini Saff Repor No. 741 Sepember 2015 This paper presens preliminary findings
More informationDoes informed trading occur in the options market? Some revealing clues
Does informed rading occur in he opions marke? Some revealing clues Blasco N.(1), Corredor P.(2) and Sanamaría R. (2) (1) Universiy of Zaragoza (2) Public Universiy of Navarre Absrac This paper analyses
More informationThe Impact of Surplus Distribution on the Risk Exposure of With Profit Life Insurance Policies Including Interest Rate Guarantees
1 The Impac of Surplus Disribuion on he Risk Exposure of Wih Profi Life Insurance Policies Including Ineres Rae Guaranees Alexander Kling Insiu für Finanz- und Akuarwissenschafen, Helmholzsraße 22, 89081
More informationChapter 9 Bond Prices and Yield
Chaper 9 Bond Prices and Yield Deb Classes: Paymen ype A securiy obligaing issuer o pay ineress and principal o he holder on specified daes, Coupon rae or ineres rae, e.g. 4%, 5 3/4%, ec. Face, par value
More informationContrarian insider trading and earnings management around seasoned equity offerings; SEOs
Journal of Finance and Accounancy Conrarian insider rading and earnings managemen around seasoned equiy offerings; SEOs ABSTRACT Lorea Baryeh Towson Universiy This sudy aemps o resolve he differences in
More informationResiliency, the Neglected Dimension of Market Liquidity: Empirical Evidence from the New York Stock Exchange
Resiliency, he Negleced Dimension of Marke Liquidiy: Empirical Evidence from he New York Sock Exchange Jiwei Dong 1 Lancaser Universiy, U.K. Alexander Kempf Universiä zu Köln, Germany Pradeep K. Yadav
More informationReal exchange rate variability in a two-country business cycle model
Real exchange rae variabiliy in a wo-counry business cycle model Håkon Trevoll, November 15, 211 Absrac Real exchange rae flucuaions have imporan implicaions for our undersanding of he sources and ransmission
More informationThe Identification of the Response of Interest Rates to Monetary Policy Actions Using Market-Based Measures of Monetary Policy Shocks
The Idenificaion of he Response of Ineres Raes o Moneary Policy Acions Using Marke-Based Measures of Moneary Policy Shocks Daniel L. Thornon Federal Reserve Bank of S. Louis Phone (314) 444-8582 FAX (314)
More information