Identifying fiscal shocks and policy regimes in OECD countries

JEL Classification: E62, H30Fiscal Policy, SVAR

Spatial Externalities and Empirical Analysis: The case of Italy

In the last ten years the space issue, i.e. the study of the role played by space in economic phenomena, has attracted a lot of interest from many economic fields. Both the suitability of spatial economics to address questions posed by globalization, and improves in modeling techniques are at the basis of this revolution. The combination of increasing returns, market imperfections, and trade costs creates new forces that, together with factor endowments, determine the distribution of economic activities. These spatial externalities makes agents' location choice highly interdependent, thus allowing to understand the empirical spatial correlation between demand and production previously observed by the market potential literature. Despite their theoretical relevance, there is still little evidence, especially at large scale level, on the effective contribution of this new identified forces to agents' location decisions. The aim of this work is to directly estimate a model of economic geography on some Italian regional data in order to both test the empirical relevance of this theory and try to give a measure of the geographic extent of spatial externalities.Economic Geography; Spatial Externalities; Market Potential

A preliminary assessment of the effects of migration on the production structure in Europe: A labor task approach

We assess the effect of migration on the production structure in a selection of European countries for the pre-Great Recession period 2001-2009. We propose a labor-task approach where the inflow of migrants raises the relative supply of manual-physical (or simple) tasks and therefore favors simple-task intensive sectors. We use the US O*NET database in conjunction with European labor data to calculate the index of simple-task intensity at the industry and country level. The analysis confirms that a rise in employment migration rates has a generalized positive impact, but that value added increases significantly more in sectors that use more intensively simple tasks. A traditional shift-share instrument is used to overcome possible endogeneity problems

Collapses of Fixed Exchange-Rate Regimes as Breakdown in Cooperation: the EMS in 1992-1993 and the Transition to EMU

In this paper the collapse of a bilateral fixed exchange-rate regime is described as the optimizing decision of the two countries' monetary authorities on when to break down the cooperative exchange-rate agreement. In particular, the two countries experience a trade-off between (a) fixing the nominal exchange rate, and therefore losing monetary independence, but having exogenous benefits from the agreement, and (b) letting the nominal exchange rate freely fluctuate so as to isolate the countries from asymmetric shocks on nominal variables. The paper derives the optimal exit decision in a stochastic framework when there are exogenous and irreversible benefits from the fixed exchange-rate regime. As a result, the agreement tends to last longer than it would in a deterministic framework even though big asymmetric shocks hit the two countries. This could well describe why the exchange-rate arrangement among the European countries (i.e. the Exchange Rate Mechanism of the European Monetary System) lasted so long with no realignments after 1987. In particular, the crisis occurred a few years after both German Monetary Unification and the burst of the last European recession.Center for Research on Economic and Social Theory, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/100672/1/ECON145.pd

Monetary policy shocks and transmission in Italy: A VAR analysis

This paper provides updated empirical evidence about the real and nominal effects of monetary policy in Italy, by using structural VAR analysis. We discuss different empirical approaches that have been used in order to identify monetary policy exogenous shocks. We argue that the data support the view that the Bank of Italy, at least in the recent past, has been targeting the rate on overnight interbank loans. Therefore, we interpret shocks to the overnight rate as purely exogenous monetary policy shocks and study how different macroeconomic variables react to such shocks.Monetary policy shocks and indicators, structural VAR

Migration, labor tasks and production structure

We assess the effect of migrants’ stock on the production structure of the Italian provinces (NUTS3) in 1995–2006. Although the investigated time span is very short, the effect is small but statistically significant: a doubling in the ratio of foreign-born residents to the province population induces a significant increase in manufactures’ value added with respect to services’ value added between 12 and 21 per cent. These effects are more intense when considering an increase in foreign-born populations drawn from countries more different to Italy (in terms of GDP per capita and educational attainment). These results are compatible with the reduced form of a two-sector model where we assume that production is performed with one mobile factor and two sector-specific CES labor composites of simple and complex tasks. If migrants and natives have different productivity when performing simple or complex tasks, an inflow of migrants induces production restructuring in favor of the simple-task intensive sector

Firms’ Clustering and SEE Export Performance: Lessons from the Italian Experience

Like all transition economies, South Eastern Europe (SEE) countries stand to gain most from an export-led growth. Unfortunately, though, productive structure in these countries is largely made up of small and medium enterprises (SMEs) that, due to their limited size, may face obstacles to gain access to international markets. A possible way out of the conundrum is for SMEs to cluster together and, by sharing the costs of internationalization, jointly tap foreign markets. This approach has been at the heart of the successful export performance of SMEs clustered within Italy’s industrial districts. In this paper we use historical data on Italian exports (in 1971 and 1961) to quantify the boosting effect due to firms’ clustering. In particular, we use detailed data on export classified by sector and by destination country to estimate a panel gravity model on which we compute the firms’ clustering effect. Next, building on the Italian experience we design four scenarios for firms’ clustering in three SEE economies (Bulgaria, Romania and Slovenia). By means of these scenarios and applying the estimated coefficient for firms’ clustering in Italy, we simulate the firms’ clustering effect for the three SEE economies and obtain the gain in export growth over the benchmark case. Results show that an additional export growth between 3% and 11% over a five- year period could be expected.

Intentions to Return of Irregular Migrants: Illegality as a Cause of Skill Waste

In this paper we show that highly skilled illegal migrants may be more likely to return home than migrants with low or no skills when illegality causes skill waste, i.e. reduced ability of making use of individual capabilities both in the labor and the financial markets. This result is in contrast with common wisdom on return migration, according to which low-skill individuals are more likely to go back home rather than high-skill migrants. The simple theoretical life-cycle framework that shows the former result is tested on a sample of illegal migrants crossing Italian borders in 2003. The estimation results confirm that highly skilled illegal migrants are more willing to return home.Illegal migration, labor skills, skill waste.

Currency Crises During the Great Recession: Is This Time Different?

During the 2007-2009 financial crisis the foreign exchange market was characterized by large volatility and wide currency swings. In this paper we evaluate whether during the period of the Great Recession there has been a structural break in the relationship between fundamentals and exchange rates within an early-warning framework. This is done by extending the original data set by Kaminsky and Reinhart (1999) and including not only the most recent period, but also 17 new countries. Our analysis considers two variations of the original early-warning system. First, we propose two new methods to obtain the probability distribution of the early-warning indicator (conditional on the occurrence of a crisis) – one fully parametric and one based on a novel distribution-free semi-parametric approach. Second, we compare the original early-warning indicator with a core indicator that includes only “pseudo-financial variables” (domestic credit/GDP, the real exchange rate, international reserves and the real interest-rate differential) and we evaluate their performance not only for currency crises during the Great Recession, but also for the Asian Crisis. All tests make us conclude that “this time is different”, i.e. early-warning systems based on traditional macroeconomic variables have not only failed to forecast currency crises during the Great Recession, but have also significantly worsened with respect to the period of the Asian crisis.Early Warning Systems; Exchange Rates; Semi-parametric Meth- ods

Commercio internazionale e disuguaglianze

Le recenti tendenze del commercio internazionale sembrano aver aumentato le disuguaglianze all'interno dei paesi, ma aver diminuito quelle tra paesi. In questo contributo si fa il punto sulla situazione attual