Unemployment and Debt Dynamics in a Highly Indebted Small Open Economy

The paper analyzes the dynamic effects of a total factor productivity shock and an interest rate risk premium shock in a highly indebted open economy. In contrast to the standard open economy framework, search unemployment and wage bargaining are introduced. We find that a negative total factor productivity shock primarily has effects on the economy’s production side and on welfare, but not on its stock of foreign debt and the country specific risk premium, and large part of the adjustment happens in the short run. In contrast, a pure increase in the country specific risk premium causes substantial dynamics and a considerable reduction in foreign debt, allowing higher consumption in the long run and creating an intertemporal welfare gain, even though unemployment increases strongly in the short run. A 50% haircut of foreign debt significantly reduces the initial response of the unemployment rate. In case of a temporary productivity shock, sticky wages imply smaller employment, but generate higher welfare than flexible wages.unemployment, debt, interest rate premium, haircut, sticky wages

THE ECONOMIC EFFECTS OF ADVERTISING ON TOURISM DEMAND

In this paper we introduce a dynamic model to study the macroeconomic effects of advertising activities in tourism. The agents of the model are a representative consumer which optimize their intertemporal welfare, a representative firm that produces tourism services, an authority which organizes tourism advertising abroad and foreigner tourists. We show that in the short run, an increase in marketing expenditures raises foreigner's tourism demand, leads to an increase in the relative price of tourism services, makes tourism production more attractive and stimulates capital investment. As time passes, the capital stock increases and tourism production expands, leading to a falling price of tourism. In the long run, the increase in marketing activities results in a higher rate of tourism production, a higher capital stock, a lower relative price of tourism services and a reduction of net foreign assets.

On the Geographic and Cultural Determinants of Bankruptcy

This paper examines the role of geography and culture in explaining bankruptcy. We adopt survival analyses to model the bankruptcy risk of a firm, allowing for time-varying covariates. Based on a large sample from all major sectors of the Swiss economy, we find the following results: (i) The geographic location of a firm, which is characterized using a core-periphery approach, has a significant impact on its bankruptcy risk; (ii) Variables proxying for the cultural environment of a firm have significant explanatory power; (iii) The results of the previous literature on the standard determinants of bankruptcy are confirmed.bankruptcy, geography, culture, exit

Managed competition in health care in the Netherlands and Germany: Theoretical foundation, empirical findings and policy conclusions

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The Dynamic Effects of Subsidizing the Tourism Sector

The paper studies the short run and long run effects of a production subsidy to the tourism sector of a small open economy, which can also be thought as a region within a country. We introduce a two-sector dynamic general equilibrium model where the tourism sector is considered to be labor-intensive and produces traded services. The other sector is capital-intensive and produces a nontraded good, which is also used for capital accumulation. Labor and capital can freely move between sectors. Economic decisions are made by forward-looking representative agents, which optimize their intertemporal welfare by choosing consumption of both the nontraded good and tourism services, the sectoral allocation of labor, and the rate of wealth accumulation. We discuss the short run, dynamic and long run effects of a production subsidy to the tourism sector. In the short run, the introduction of a subsidy to tourism production leads to a boom in that sector. As time passes, the economy-wide capital stock is decumulated, and production of tourism is falling. In the long run, compared to the situation before the subsidy was implemented, tourism production remains on a higher level, whereas output of the nontraded good drops.dynamic open economy two-sector model; tourism; subsidies; deindustrialization

Background information about Avian Infl uenza and hints for ornithologists

Wildvögel, v.a. Wassergeflügel, sind Reservoir für alle Influenzaviren. Von wirtschaftlicher Bedeutung sind die Subtypen H5 und H7, während H1, H2 und H3 Erreger der Humangrippe sind. Diese niedrig pathogenen Vogelgrippeviren verursachen normalerweise bei infi zierten Vögeln keine klinischen Symptome. Nach Transfer niedrig pathogener Vogelgrippeviren in Geflügelhaltungen mit den daraus resultierenden, rasch aufeinander folgenden Virenzyklen durch rasche Vogelpassagen und sofortige Neuinfektion kann sich ein solches niedrig pathogenes Virus jedoch in ein hoch pathogenes Vogelgrippevirus (HPAI-Virus) umwandeln. Diese hoch pathogenen Viren können dann sowohl wieder über Wildvögel, als auch über Transport kontaminierter Vögel, Gefl ügelprodukte und Materialien sowie über Wasser weiterverbreitet werden. Der aktuelle, große Ausbruch der Gefl ügelgrippe geht auf den HPAI-Virus H5N1 zurück, der vermutlich in den späten 1990er Jahren in Hausenten in Südchina entstanden ist. Im Jahr 2005 begann diese Krankheit, sich von Südostasien aus westwärts zu verbreiten und trat damit als direkte Bedrohung für europäische Geflügelbestände in Erscheinung. Außerdem wurden einige wenige menschliche Fälle einer HPAI H5N1-Erkrankung aus Südostasien gemeldet. Alle diese menschlichen Erkrankungen standen mit sehr engen Kontakten zu oder Verspeisen von infizierten Tieren (vor allem Hühner, Enten und Schweine) in Verbindung und eine mögliche Mensch-zu-Mensch-Übertragung wird noch kontrovers diskutiert. Obwohl die Vogelgrippe nach wie vor eine Geflügelkrankheit ist, besteht die Möglichkeit, dass sich das Virus in seiner genetischen Struktur – z.B. durch Vermischung mit einem Humangrippevirus – so verändern kann, dass es leicht zwischen Menschen übertragen werden kann und bei diesen auf ein weitgehend unvorbereitetes Immunsystem trifft. Obwohl sich die Wahrscheinlichkeit einer solchen Veränderung nicht abschätzen lässt, liefern drei Pandemien im 20 Jahrhundert, die alle auf mutierte Vogelgrippeviren zurückzuführen sind, genug Anlass zur sorgfältigen Beobachtung der momentanen Lage.Waterfowl are known to be the major reservoir for all 16 H- and 9 N- Subtypes of low pathogenic avian infl uenza viruses (LPAIV), including the subtypes H5 and H7 being a serious economic threat to the poultry industry as well as H1, H2, H3 that are the main source for human infl uenza. LPAI neither cause any signs of disease in the infected wild birds nor in poultry. However, low pathogenic avian infl uenza virus of the subtypes H5 and H7 can be introduced into poultry holdings. Especially in industrial holdings with large numbers of highly susceptible animals, the previously stable viruses of low pathogenicity begin to evolve rapidly and may mutate into highly pathogenic avian infl uenza (HPAI) (known as fowl plague and also called „bird flu“) causing up to 100% mortatlity in infected birds. Aft erwards, infections of HPAI are usually spread by movement of stock, infectious feces, contaminated water or bird products. Free fl ying birds are usually also blamed to spread the disease, but this could be never proven to have happened. Since 1959 none of the outbreaks of HPAI has approached the size of the ongoing epizootic in Southeast Asia, which most probably originated in the late 1990 ies presumbly in captured ducks in Southern China and is caused by a new HPAI virus of the subtype H5N1. In 2005 the disease started to spread westwards and appears to be a threat for European poultry. Th e asian H5N1 cause serious public health concern for at least three reasons. Th ese AIV isolates can cause heavy economic losses in the poultry industry and through loss of poultry may exaggerate to human food protein defi cits in the developing world. In addition, they have the potential to cross the species barriers and cause human disease and death though only when connected to very close contacts with infected animals or raw consumption of infected birds (chicken, ducks). Last but not least there is the potential of the virus to change it‘s genetic structure – most probably by mixing with a human infl uenza virus (H1, H2, H3) that may achieve human-to-human spread by meeting the unprepared immune system of men resulting in a new human pandemia. Th ree pandemias during the 20 th century – all originating from HPAI viruses- emphasise the danger of the probability of H5N1 becoming the next pandemia virus

Merge or Fail? The Determinants of Mergers and Bankruptcies in Switzerland, 1995-2000

This paper examines the determinants of mergers and bankruptcies, using firm level data from the Swiss Business Census and the Dun & Bradstreet exit database for Switzerland (1995-2000). Employing duration analysis, we find considerable differences in the determinants of mergers and bankruptcies, in particular with respect to firm size, location and the impact of macroeconomic conditions. Our results support the notion that mergers are often undertaken to seize growth opportunities.merger, bankruptcy, failure, survival, exit

A Dynamic Model of Economic Growth in a Small Tourism Driven Economy

The paper studies the dynamics of economic growth caused by an increase in the growth rate of tourism demand. We develop a simple dynamic model of a small open economy, which is completely specialized in the production of tourism services (island economy model), populated by a large number of intertemporally optimizing agents, deriving utility from consuming an imported good. Tourism services are produced by means of a simple AK technology by using imported capital, its accumulation associated with adjustment costs. Moreover, the economy can lend or borrow at the international financial markets at the given world interest rate. Adjustments in the relative price of tourism services ensure market clearance for tourism services. The long-run growth rate of the economy is tied to the growth rate in tourism demand. An increase in the latter increases thus the economy’s long-run balanced growth rate. In contrast to the standard one-good small open economy endogenous growth model, where the economy is always on its balanced growth path, we show that there are transitional dynamics after an increase in the growth rate of tourism demand. In particular, the short-run growth rate of output rises gradually towards its higher long-run level, and the market price of tourism increases during transition. Thus, an increase in the growth of tourism demand, say, caused by higher economic growth abroad, leads to a boom in the small open economy and increasing terms of trade. Adjustments of the relative price of tourism services (i. e. the real exchange rate) can therefore not protect the economy from demand disturbances.tourism demand; growth; economic dynamics