Estimating the New Keynesian Phillips Curve for Italian Manufacturing Sectors

The purpose of this paper is to test the general validity of the NKPC previsions for the Italian manufacturing industries. In particular we are interested in estimating the extent to which the degree of nominal inertia and the fraction of backward-looking price-setters differ from industry to industry. We attempt to address this issue by testing three different model specifications: a pure forward-looking model versus a hybrid model where an income labour share marginal cost measure is considered, and a modified hybrid model specification where marginal costs are corrected to include intermediate inputs. Our results show that the backward-looking component is statistically significant and quantitatively large for all industries. Moreover, this estimate does not depend on the model’s specification. Conversely, the parameter measuring the extent of price rigidity is sensitive to the definition of firms’ cost. Interpreting the overall results, we conclude that price-setting behaviour is not totally homogeneous among Italian firms.Phillips curve, Inflation, Unit labour cost

Bidding and Performance in Repo Auctions: Evidence from ECB Open Market Operations

Repo auctions are used to inject central bank funds against collateral into the banking sector. The ECB uses standard discriminatory auctions and hundreds of banks participate. The amount auctioned over the monthly reserve maintenance period is in principle exactly what banks collectively need to fulfil reserve requirements. We study bidder-level data and find: (i) Bidder behavior is different from what is documented for treasury auctions. Private information and the winner’s curse seem to be relatively unimportant. (ii) Underpricing is positively related to the difference between the interbank rate and the auction minimum bid rate, with the latter appearing to be a binding constraint. (iii) Bidders are more aggressive when the imbalance of awards in the previous auction is larger. (iv) Large bidders do better than small bidders. Some of our findings suggests that bidders are concerned with the loser’s nightmare and have limited amounts of the cheapest eligible collateral.Repo auctions, Multiunit auctions, Reserve requirements, Loser’s nightmare, Money markets, Central bank, Collateral, Open market operations

Use of Ecolabels in Promoting Exports from Developing Countries to Developed Countries: Lessons from the Indian LeatherFootwear Industry

This paper tries to understand whether importers in the North are able to push exporters in the South towards sustainable production, with the help of a case study of the Indian leather industry. After providing a short description of the global leather footwear industry, the first section provides insights into the competitive advantages of different countries, characteristics of developing country exporters and the difference between large and small European buyers of Indian leather footwear. The subsequent section provides an insight into the different chains of influence that exist in trying to make international trade more sustainable with the help of a broad understanding of the means, their effectiveness, their constraints and a few examples of such chains of influence. Section four studies whether ecolabels are in a position to be suitable indicators of sustainability. Further it delves into understanding the perspectives of consumers, producers and regulators on whether ecolabels are useful in promoting sustainable exports. The explanation of how ecolabels conflict with brand dynamics is quite interesting. The policy measures provide clear options for targeting sustainable production. Suggestions include use of eco-elasticity indicator, toolbox approach to environment policy, introducing comprehensive sustainability labels, maintaining a level of mandatory legislations as well as a constructive effort to increase transparency in supply chains. The annexure include the research methodology adopted for the paper, the reason for choosing Europe as destination for the research, a brief overview about types of ecolabels and a small description of integrated product policies.Ecolabels, Export promotion, Leather footwear, Market access

How Consistent are Alternative Short-Term Climate Policies with Long-Term Goals?

Choosing long-term goals is a key issue in the climate policy agenda. Targets should be easily measurable and feasible, but also effective in damage control. Once goals are set globally, given the uncertainty affecting long-term strategies and region-specific preferences for different policy instruments, policies will be better represented by a diversified portfolio to be revised over time, rather than “once and forever” decisions. It therefore becomes crucial to understand to what extent different strategies (or policy portfolios) are consistent with long-term targets, that is, when they imply emission paths which do not irreversibly diverge from globally set goals. The present paper aims to investigate emission paths implied by plausible policy scenarios against those derived by imposing alternative long-term targets, comparing, for example, differences in peak periods. Plausible policy scenarios are for instance Kyoto-type targets with or without participation by the U.S. and/or by developing countries. Different long-term targets considered focus on stabilisation of CO2 concentrations, radiative forcing and the increase in atmospheric temperature relative to pre-industrial levels. In order to account for the uncertainty surrounding the climate cycle, for each long-term goal multiple paths of emission - the most probable, the optimistic and the pessimistic ones - are considered in the comparison exercise. Comparative analysis is performed using a newly developed version of the FEEM-RICE model, a regional economy-climate model of optimal economic growth which is based on Nordhaus and Boyer’s RICE model crucially extended in order to account for induced technical change. In particular, both carbon and energy intensity are affected by a new endogenous variable – Technical Progress – which captures both the role of Learning by Researching and of Learning by Doing. These are in turn determined by the optimal levels of Research and Development and of Emission Abatement.Climate policy, Long-term climate targets, Climate sensitivity uncertainty, Capping radiative forcing

Trust and Fiscal Performance: A Panel Analysis with Swiss Data

Citizens are willing to abandon their short-term financial interest in free-riding considerably, if governments act in their interest, if procedures of the public decisions-making process are felt to be fair and if other fellow-citizens have to contribute also an adequate share to the community. In such a situation trustworthiness of a government and trust in a government is high. This paper provides empirical evidence that trust is crucial for fiscal performance using data for the full sample of Swiss cantons over the 1981-2001 period. In cantons with high levels of trust, the level of indebtedness is significantly lower. Trust supports fiscal discipline. In order to get a useful approximation for mutual trust among citizens and between citizens and their representatives, we use information from direct voter participation on political issues (initiatives and public referenda) held in Swiss state (cantonal) governments. Electoral support of government proposals reveals an important aspect of trust in a real world setting. Hence, our trust variable measures the behavior at the ballots thereby reducing possible subjective biases derived from surveys and questionnaires.Trust, Social capital, Fiscal performance, Indebtedness

Trademarks, Triggers, and Online Search

Internet search engines display advertisements along with search results, providing them with a major source of revenue. The display of ads is triggered by the use of keywords, which are found in the searches performed by search engine users. The fact that advertisers can buy a keyword that contains a trademark they do not own has caused controversy worldwide. To explore the actual effects of trademark and keyword advertising policies, we exploit a natural experiment in Europe. Following a decision by the Court of Justice of the European Union, Google relaxed its AdWords policy in continental Europe in September 2010. After the policy change, Google allowed advertisers to select a third party's trademark as a keyword to trigger the display of ads, with only a limited complaint procedure for trademark owners. We use click-stream data from European Internet users to explore the effect this policy change had on browsing behavior. Based on a data set of 5.38 million website visits before and after the policy change, we find little average change. However, we present evidence that this lack of average effect stems from an aggregation of two opposing effects. While navigational searches are less likely to lead to the trademark owner's website, non-navigational searches are more likely to lead to the trademark owner's website after the policy change. The effect of changing keyword advertising policies varies with the purpose of the consumers using the trademark, and it is more pronounced for lesser-known trademarks. The article points to tradeoffs trademark policy is facing beyond consumer confusion. More generally, the article proposes a novel way of analyzing the effect of different allocations of property rights in intellectual property law

Multilateral Environmental Agreements and Trade Obligations: A Theoretical Analysis of the Doha Proposal

The Doha declaration on trade and environment proposed to clarify the relationship between multilateral environmental agreement (MEA) trade obligations and WTO rules by only guaranteeing economic integration upon ratification of certain MEAs. In other words, it pushed to authorize the use of trade measures against non-compliance, denying a non-signatory of its WTO rights to exercise countervailing tariffs. This paper demonstrates that the Doha proposal can be effective when environmental policy and its trade obligations are endogenous. Under plausible circumstances, ratification by a non-signatory to the MEA along with free trade as a reward is the unique equilibrium outcome. Delocation to pollution havens does not occur, as optimal tariffs are positive if standards are not adopted. Tariffs however only work as a credible threat and do not emerge in equilibrium. Results are consistent with broad empirical evidence that opposes the pollution haven hypothesis and suggests capital movements to be non-pollution related.Environmental policy, WTO, Location of firms, Green tariffs, Multilateral environmental agreements, Doha declaration