No Need to Run Millions of Regressions

We argue that in modelling cross-country growth models one should first identify so-called outlying observations. For the data set of Sala-i-Martin, we use the least median of squares (LMS) estimator to identify outliers. As LMS is not suited for inference, we then use reweighted least squares (RLS) for our cross-country growth models. We identify 27 variables that are significantly related to economic growth. Subsequently, applying Sala-i-Martin's approach for the data set without outliers hardly reveals any additional information. Variables that are insignificant according to the RLS method are generally not significantly related to economic growth under the Sala-i-Martin approach.Sensitivity analysis, outliers, economic growth

Do Ifo Indicators Help Explain Revisions in German Industrial Production?

This paper studies the information content of some Ifo indicators. In particular, we investigate whether two Ifo indicators, one on the current business situation, the other on current production development, provide information on revisions of German industrial production. A new feature of our analysis is the construction and use of a real-time dataset. We conclude that the Ifo indicators play a role in explaining revisions, but counterintuitively the business situation indicator performs better than the production indicator.Ifo Business Survey indicators, German industrial production, real-time analysis, data revision

A real-time analysis of the Swiss trade account

First estimates of trade account statistics attract quite some attention in the media as they contain substantial information on recent economic developments. It is well known, however, that subsequent revisions of in particular this series can sometimes have substantial consequences for ex post evaluations of the economy. As a small open economy, Swiss overall growth as measured by its GDP is particularly prone for these revisions. This paper sets up a real-time dataset which is then used to analyze to what extent the first release of current account data (as compared to its revision) contains a structural bias and/or can be improved upon by the use of survey results as gathered by KOF at the ETH Zurich. If this is the case, this would allow for improvements in its future first release and thereby enhance the current assessment of the Swiss economycurrent account statistics, real-time analysis, data revision

Do IMF and World Bank Influence Voting in the UN General Assembly?

Using panel data for 188 countries over the period 1970-2002 this paper empirically analyzes the influence of the IMF and the World Bank on voting patterns in the UN General Assembly. Countries receiving adjustment programs and larger non-concessional loans from the World Bank vote more frequently in line with the average G7 country. The same is true for countries obtaining non-concessional IMF programs. Regarding voting coincidence with the US, World Bank (concessional and non-concessional) loans have a significant impact, while the IMF has not. These results are robust to the inclusion of control variables and method of estimation.IMF, World Bank, UN General Assembly, voting, aid

Deregulation, Entry of Foreign Banks and Bank Efficiency in Australia

This study considers the efficiency of banking in Australia during the post-deregulation period 1988-2001. Since 1986 restrictions upon foreign bank entry and foreign ownership have been affectively abolished. Using Data Envelopment Analysis (DEA) and Malmquist Indices, we find that the new foreign banks are more (input) efficient than domestic banks, mainly due to their superior scale efficiency. However, this superior efficiency did not necessarily result in superior profits. Our results are consistent with the limited global advantage hypothesis of Berger et al (2000). We argue that the major Australian banks have used size as a barrier to entry to the new entrants in the post-deregulation period. Furthermore, bank efficiency seems to have increased post-deregulation and the competition resulting from diversity in bank types was important to prompt improvements in efficiency. Finally, the recession of the early 1990s resulted in a distinct shift in the process of efficiency changes.foreign banks, deregulation, data envelopment analysis, Malmquist indices

What Determines Differences in Foreign Bank Efficiency? Australian Evidence

This study applies parametric distance functions to estimate the efficiency of foreign banks in Australia, and subsequently employs extreme bounds analysis to establish the determinants of foreign bank efficiency that are robust to model specification. The limited global advantage hypothesis of Berger et al (2000) is supported. Following clients is found to reduce the efficiency of the profit-creation process. The market share of the incumbent banks acts as a barrier to entry to efficiency in the retail market, with acquisition of a domestic bank reducing this effect. Internet-based bank product delivery reduces the efficiency of profit creation in the initial phases of operation, and parent profits do not improve efficiency in the host market.foreign bank efficiency, distance functions, extreme bounds analysis, barriers to entry, following clients

How to Measure the Tax Burden on Labour at the Macro-Level?

The purpose of this paper is threefold. First, we survey the way in which the tax burden on labour has been proxied for in recent multi-country macro-economic studies. Second, we critically evaluate these proxies. Finally, we examine to what extent the conclusions of some studies change if some alternative indicator for the tax burden on labour is employed. We conclude that the widely used tax ratios as developed by Mendoza et al. (1994) may not be very reliable. The choice of the indicator for the tax burden on labour is also shown to affect the conclusions of some well-known empirical models.tax ratios, labour, average effective tax rates, unemployment

Using Taylor Rules to Understand ECB Monetary Policy

Over the last decade, the simple instrument policy rule developed by Taylor (1993) has become a popular tool for evaluating monetary policy of central banks. As an extensive empirical analysis of the ECB’s past behaviour still seems to be in its infancy, we estimate several instrument policy reaction functions for the ECB which might shed some light on actual monetary policy in the euro area in the recent past and answer questions like whether the ECB has actually followed a stabilising or a destabilising rule so far?Looking at contemporaneous Taylor rules, the presented evidence suggests that the ECB is accommodating changes in inflation and hence follows a destabilising policy. However, this impression seems to be largely due to the lack of a forward-looking perspective in such specifications. Either assuming rational expectations and using a forward-looking specification, or using expectations as derived from surveys result in Taylor rules which do imply a stabilising role of the ECB. The use of real-time industrial production data does not seem to play such a significant role as in the case of the U.S.Taylor rule, European Central Bank, real-time data

Has the EMU Reduced Wage Growth and Unemployment? Testing a Model of Trade Union Behaviour

By using a model of trade union behaviour Grüner (2010) argues that the introduction of the European Monetary Union (EMU) led to lower wage growth and lower unemployment in participating countries. Following Grüner’s model, monetary centralization lets the central bank react less flexibly to national business cycle movements. This increases the amplitude of national business cycles which, in turn, leads to higher unemployment risk. In order to counter-balance this effect, trade unions lower their claims for wage mark-ups resulting in lower wage growth and lower unemployment. This paper uses macroeconomic data on OECD countries and a difference-in-differences approach to empirically test the implications of this model. Although we come up with some weak evidence for increased business cycle amplitudes within the EMU, we neither find a significant general effect of the EMU on wage growth nor on unemployment.common currency areas, EMU, Phillips curve, unemployment, wages