Structural Time Series Models and the Kalman Filter: a concise review

The continued increase in availability of economic data in recent years and, more impor- tantly, the possibility to construct larger frequency time series, have fostered the use (and development) of statistical and econometric techniques to treat them more accurately. This paper presents an exposition of structural time series models by which a time series can be decomposed as the sum of a trend, seasonal and irregular components. In addition to a detailled analysis of univariate speci?cations we also address the SUTSE multivariate case and the issue of cointegration. Finally, the recursive estimation and smoothing by means of the Kalman ?lter algorithm is described taking into account its di¤erent stages, from initialisation to parameter?s estimation. JEL codes: C10, C22, C32

Does democracy foster or hinder growth? Extreme-type political regimes in a large panel

Using a panel dataset of 86 countries from 1960-2005, this paper empirically assesses the effect of several democracy proxies (by means of the Polity IV database), together with a set of control variables, such as human capital and the initial level of GDP per capita, on the rate of economic growth. By means of pooled OLS regressions, fixed effects and TSLS estimation procedures our results support the long-run conditional convergence hypothesis and they show a positive and statistically significant effect of democracy and human capital on economic growth. Furthermore, these findings are robust to several sensitivity exercises, such as the consideration of different time spans and groupings (rich and poor countries). Our evaluation allows us to conclude that electoral democracy, by itself, increases GDP growth per capita while almost no support is found for the hypothesis that autocracy, by itself, increases it.endogeneity, autocracy, human capital, convergence, Polity-IV

The impact of fiscal consolidations on human development

We find that fiscal austerity is associated with a reduction of human development standards, with the negative effect being particularly severe in the case of spending-driven consolidation episodes. Fiscal adjustments are especially damaging for human development in developing countries (namely, African and Latin American countries). Additionally, the empirical evidence shows that: (i) government stability is a crucial institutional determinant of human development; and (ii) while investment in physical capital can boost human development, government consumption and inflation are detrimentalto it

Do Oil Prices Matter? The Case of a Small Open Economy

This paper empirically evaluates the impact and effect of oil price fluctuations and shocks on French aggregate economic performance, industrial production index and inflation rate. Our methodology makes use of a multivariate VAR approach to analyse the stability and magnitude of this system by adopting different oil price specifications, together with a robustness check through the estimation of a St.Louis-type equation. We adopt several oil price specifications. Our results show that the main French macroeconomic aggregate variables have become progressively less reactive to oil price fluctuations and that the adjustment towards equilibrium levels have been done increasingly faster.Oil price fluctuations, Multivariate VAR, Causality, Impulse Response, St.Louis Equation

Trends and cycles in CO2 emissions and incomes: Cross-country evidence on decoupling

This paper provides cross-country evidence on the relationship between growth in CO2 emissions and real GDP growth from 1960 to 2018. The focus is on distinguishing longer-run trends in this relationship from short-run cyclical fluctuations, and on documenting changes in these relationships over time. Using two filtering techniques for separating trend and cycle, we find that long-run trends show evidence of decoupling in richer nations—particularly in European countries—but not yet in developing economies, and that there is stronger evidence of decoupling over the 1990 to 2018 sub-period than over the earlier 1960 to 1989 sub-period. There is also a strong cyclical relationship between emissions and real GDP growth in both advanced and developing economies, and the strength of this relationship has not weakened much over time. The cyclical relationship is largely symmetric: emissions fall about as much during recessions as they rise during booms. The transition to a low-carbon economy will thus require continued progress not only in bringing down trend emissions, particularly in developing economies, but also in taming the increase in emissions that occurs during the boom phase of the business cycle

Single currency and fiscal performance: the early Euro Area in perspective

We examine how exchange rate regimes affect fiscal discipline by investigating European countries as they transitioned from flexible to fully fixed exchange rates under the Euro. We apply the synthetic control method to estimate, for each Eurozone country, its counterfactual budget stance under flexible rates. Our evidence strongly suggests that fixing exchange rates negatively impacted negatively fiscal discipline. However, effects were not homogeneous, as they were mediated by political factors. For example, countries where policymakers faced a longer political horizon and operated within a more cohesive political environment, managed to perform better in terms of fiscal discipline