Estimating the Costs and Benefits of EMU: The Impact of External Shocks on Labour Markets

Discussions of the economic costs and benefits of EMU usually take as their basis the optimum currency area (OCA) approach. This approach starts from the premise that when an external shock hits the economy, it is easier to adjust the exchange rate than domestic prices or wages. Most economists accept the general idea behind this approach, namely that nominal wages are usually sticky in the shortrun and that it is therefore easier to adjust to external shocks and obtain changes in the real exchange rate or the terms of trade through a movement in the exchange rate. But there is little agreement on how important these "external" shocks are in reality. We try to measure the importance of external shocks for (un)employment. We find that external shocks have little impact on unemployment, but are more important in the evolution of employment in manufacturing. The results differ, however, strongly from country to country and for about half of EU member countries we did not find any significant relationship. Taking into account various potential shock absorbers (exchange rate movements, fiscal and monetary policy) does not affect the results. We conclude that the loss of the exchange rate instrument will not lead to massive unemployment problems.exchange rates;export demand;external shocks;optimal currency area;(un)employment

High Temperature Strength Reduces Soldering In Aluminum High Pressure Die Casting

Die soldering, an adhesion defect in high pressure die casting (HPDC), is a symptom of localized sticking where a localized portion of the cast material is adhered to the tooling surface causing build up over time. This requires the tooling to be serviced which incurs additional costs to the process that gets passed on to the parts. Historically, soldering has been mitigated using lubricants, coatings, and alloy chemistry modifications but solder persists. The Tresca friction thermomechanical model suggests soldering occurs when the local interfacial shear stress between the casting and die surface exceeds the local shear strength of the casting. The ratio of these shear strengths, as a function of temperature, has been shown to predict solder. Research up to this point has focused on reducing the friction coefficient, and in turn the interface shear strength, with no work done on the strengthening of the castings regarding solder. Chemistry of the alloy has been shown to influence soldering behavior, but for the wrong reason as Al-Fe intermetallics are the commonly accepted soldering mechanism. High temperature strengthening mechanisms through chemistry modifications were investigated to support the Tresca friction model. First, the improvement of the solid solution and Orowan strengthening mechanisms was quantified for several aluminum HPDC alloys through the addition of magnesium, improving the hot shear strength of the alloys. Next, the improved alloy shear strength was applied to the Tresca model and tested using a laboratory scale permanent mold designed to solder along with a full scale HPDC production trial with results pointing towards a new soldering mechanism. Finally, the relationship between solder and the casting surface chill zone or “skin” is examined and discussed

Refractory effects in picture naming as assessed in a semantic blocking paradigm

In the cyclic semantic blocking paradigm participants repeatedly name sets of objects with semantically related names (homogeneous sets) or unrelated names (heterogeneous sets). The naming latencies are typically longer in related than in unrelated sets. In we replicated this semantic blocking effect and demonstrated that the effect only arose after all objects of a set had been shown and named once. In , the objects of a set were presented simultaneously (instead of on successive trials). Evidence for semantic blocking was found in the naming latencies and in the gaze durations for the objects, which were longer in homogeneous than in heterogeneous sets. For the gaze-to-speech lag between the offset of gaze on an object and the onset of the articulation of its name, a repetition priming effect was obtained but no blocking effect. showed that the blocking effect for speech onset latencies generalized to new, previously unnamed lexical items. We propose that the blocking effect is due to refractory behaviour in the semantic system

The Euro Area Crisis Management Framework – Consequences and Institutional Follow-Ups

The current instruments in the EU to deal with debt and liquidity crises include among others the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM). Both are temporary in nature (3 years). In terms of an efficient future crisis management framework one has to ask what follows after the EFSF and the EFSM expire in 3 years time. In this vein, this briefing paper addresses the question of the political and economic medium-to long-term consequences of the recent decisions. Moreover, we assess what needs to be done using this window of opportunity of the coming 3 years. Which institutions need to be formalized, into what format, in order to achieve a coherent whole structure? This briefing paper presents and evaluates alternatives as regards the on-going debate on establishing permanent instruments to support the stability of the euro. Among them are the enhancement of the effectiveness of the Stability and Growth Pact combined with the introduction of a European semester and a macroeconomic surveillance and crisis mechanism, fiscal limits hard-coded into each country's legislation in the form of automatic, binding and unchangeable rules and, as the preferred solution, the European Monetary Fund

Early activation of object names in visual search

In a visual search experiment, participants had to decide whether or not a target object was present in a four-object search array. One of these objects could be a semantically related competitor (e.g., shirt for the target trousers) or a conceptually unrelated object with the same name as the target-for example, bat (baseball) for the target bat (animal). In the control condition, the related competitor was replaced by an unrelated object. The participants' response latencies and eye movements demonstrated that the two types of related competitors had similar effects: Competitors attracted the participants' visual attention and thereby delayed positive and negative decisions. The results imply that semantic and name information associated with the objects becomes rapidly available and affects the allocation of visual attention

Banking Union as a Shock Absorber

This study investigates the shock-absorbing properties of a banking union by providing a detailed comparison between the way regional financial shocks have been absorbed at the federal level in the US, but have led to severe regional (national) financial dislocation and tensions in the euro area. The extent to which the institutions of the banking union, which is now emerging in the euro area, should increase its capacity to deal with future regional boom and bust cycles is also discussed. Cross-border capital flows in the form of equity appear to be much more stable than those taking the form of credit, especially inter-bank credit. Moreover, credit booms and bust leave a debt overhang and losses can materialise only via insolvencies, whereas equity flows absorb automatically losses in case of a bust and provide the cross border owner with incentives to continue to provide financing. It follows that cross-border banks can absorb regional shocks. But large banks pose the 'too big to fail' problem and they would also propagate regional shocks, especially if they originate in large countries, to the entire area

Exchange Rate Bands of Inaction and Play -- Hysteresis in Greek Exports to the Euro Area, the US and Turkey -- Sectoral Evidence

In this paper a non-linear model is applied, where suddenly strong spurts of exports occur when changes of the exchange rate go beyond a zone of inaction, which we call 'play' area - analogous to mechanical play. We implement an algorithm describing path-dependent play-hysteresis into a regression framework. The hysteretic impact of real exchange rates on Greek exports is estimated based on the period from 1995Q1 to 2014Q4. Looking at some of the main export partners of Greece, the euro area, Turkey and the US, and some of its most important tradeable sectors we identify significant hysteretic effects for a part of the Greek exports. We find that Greek export activity is characterized by 'bands of inaction' with respect to changes in the real exchange rate and calculate the further real depreciation needed to trigger a spurt in Greek exports. To check for robustness we (a) estimate Greek export equations for a limited sample excluding the recent financial crisis, (b) use export weight instead of deflated nominal exports as the dependent variable, (c) employ a political uncertainty variable as a determinant of the width of the area of weak reaction. Overall, we find that those specifications which take uncertainty into account display the best goodness of fit. In other words: the option value of waiting dominates the real exchange rate effect on Greek exports.Analog zu mechanischem Spiel wendet dieses Paper ein nichtlineares Modell an, in dem plötzlich starke Reaktionen der Exporte auftreten, wenn die Wechselkursveränderung eine inaktive Zone überschreitet, welche als 'play area' bezeichnet wird. Wir implementieren einen Algorithmus, der pfadabhängige Hysterese beschreibt, in einem Regressionsmodell. Der hysteretische Einfluss des realen Wechselkurses auf griechische Exporte wird für die Periode von 1995Q1 bis 2014Q4 geschätzt. Wir finden signifikante hysteretische Effekte für einen Teil der griechischen Exporte bei der Betrachtung einiger Hauptexportpartner Griechenlands, wie die Eurozone, die Türkei und die USA unter der Berücksichtigung der wichtigsten Handelssektoren. Es zeigt sich, dass griechische Exporte durch ein 'Band of Inaction' in Bezug auf Veränderungen des realen Wechselkurses charakterisiert sind, und wir berechnen die weitere Abwertung, die benötigt wird, um eine starke Exportreaktion für Griechenland auszulösen. Um auf Robustheit zu prüfen; (a) schätzen wir die Exportgleichungen für einen begrenzten Zeitraum und berücksichtigen nicht die jüngste Finanzkrise, (b) verwenden wir Mengenangaben für die Exportreihen statt nominaler Werte, (c) wird politische Unsicherheit als Determinante für die Breite der schwachen Exportreaktionen implementiert. Allgemein stellt sich heraus, dass jene Spezifikationen, die Unsicherheit berücksichtigen, die beste Güte zeigen. Anders formuliert dominiert der Optionswert abzuwarten den realen Wechselkurseffekt griechischer Exporte

Liquidity and the Dynamic Pattern of Asset Price Adjustment: A Global View

Global liquidity expansion has been very dynamic since 2001. Contrary to conventional wisdom, high money growth rates have not coincided with a concurrent rise in goods prices. At the same time, however, asset prices have increased sharply, significantly outpacing the subdued development in consumer prices. We investigate the interactions between money and goods and asset prices at the global level. Using aggregated data for major OECD countries, our VAR results support the view that different price elasticities on asset and goods markets explain the observed relative price change between asset classes and consumer goods