13,027 research outputs found
Household's Preferences and Monetary Policy Inertia
The estimation of monetary policy rules suggests that the interest rates set by central banks move with a certain inertia. Although a number of hypotheses have been suggested to explain this phenomenon, its ultimate origin is unclear, thus delineating this issue as a modern "puzzle" in monetary economics. We show that household's preferences can play an important role in determining optimal interest rate inertia. Importantly, this can occur even when the central bank has egligible preferences for smoothing the interest rate
Political Economy Reasons for Government Inertia: The Role of Interest Groups in the Case of Access to Medicines
The reluctant reaction of western governments to the AIDS crisis in developing countries is only one example for policy areas where we observe a lack of political action despite a public interest in policy change. The reasons for that lie in the two-stage structure of the political decision-making process: Interest groups influence both the policy choice and the subsequent decision on the level of policy implementation. The lobbies' interest in reform and the
issue-specific chance for compromise determine the policy choice. The interest groups' failure to agree on political strategies creates reduced incentives to support policy implementation
The Political Economy of Corruption and the Role of Financial Institutions
In transition and developing countries, we observe rather high levels of
corruption even if they have democratic political systems. This is
surprising from a political economy perspective, as the majority of people
generally suffers from high corruption levels. Our model is based on the
fact that corrupt officials have to pay an entry fee to get lucrative
positions. In a probabilistic voting model, we show that a lack of financial
institutions can lead to more corruption as more voters become part of the
corrupt system. Well-functioning financial institutions, in turn, can
increase the political support for anti-corruption measures
Financial (in)stability, supervision and liquidity injections : a dynamic general equilibrium approach
This paper develops a dynamic stochastic general equilibrium model with interactions between an heterogeneous banking sector and other private agents. We introduce endogenous default probabilities for both firms and banks, and allow for bank regulation and liquidity injection into the interbankmarket. Our aim is to understand the importance of supervisory and monetary authorities to restore financial stability. The model is calibrated against real data and used for simulations. We show that liquidity injections reduce financial instability but have ambiguous effects on output fluctuations. The model also confirms the partial equilibrium literature results on the procyclicality of Basel II.DSGE, Banking sector, Default risk, Supervision, Money
Social trust and the growth of schooling
The paper develops a simple model to exemplify how social trust might affect the growth of schooling through lowering transaction costs associated with employing educated individuals. In a sample of 52 countries, the paper thereafter provides empirical evidence that trust has led to faster growth of schooling in the period 1960-2000. The findings are robust to the inclusion of a set of control variables and being estimated using an instrumental variables approach.Trust; Schooling; Economic development
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