Financial Development, Financial Constraints, and the Volatility of Industrial Output

More financially developed countries show lower volatility of industrial output. Volatility is particularly reduced in industries that are more financially dependent. Most of the reduction is in idiosyncratic volatility. Systematic volatility is reduced less strongly, implying that industries are more closely correlated with GDP in more financially developed countries. At the firm level, short-term debt is negatively correlated with output as financial development increases, suggesting that debt is used in a countercyclical way to stabilize production. The results indicate that financial development relaxes financial constraints mainly to smooth negative cashflow shocks

The New Keynesian business cycle achievements and challenges

The New-Keynesian (NK) business cycle model has presented itself as a potential “workhorse” model for business cycle analysis. This paper seeks to assess afresh the performance of the baseline NK model and its various extensions. The main theme of the paper is that although the dynamic NK literature has secured a robust defence to criticism arising, inter alia, on account of lack of microfoundations, it still has a long way to go in terms of providing a fully satisfactory model of the business cycle. In this regard, it is conjectured that explicitly accounting for the role of heterogeneity in business- cycle dynamics could lead towards a viable solution.info:eu-repo/semantics/publishedVersio

Revisiting German labour market reform effects—a panel data analysis for occupational labour markets

There is an ongoing discussion that centres on the German labour market reforms (2003- 2005) and the role of these reforms in boosting the German economy. Considering that one of the main objectives of the reforms was to improve the matching process on the labour market, I use rich, high-frequency, and recent administrative panel data to present new details regarding the development of job-matching performance before and after the reform years. The results show that matching productivity increased during all reform stages and slightly deteriorated in 2009 (the year of the financial crisis), even after controlling for the recession. Furthermore, increases in matching productivity have become smaller in recent years. Beyond these findings, the results show detailed differences in the changes in matching productivity on occupational labour markets.Über einen etwaigen Beitrag der deutschen Arbeitsmarktreformen (2003-2005) zur Stabilisierung der deutschen Wirtschaft wird sowohl in Wissenschaft als auch Politik nach wie vor debattiert. Dabei war die Verbesserung der Effizienz des Arbeitsmarktausgleichs eines der erklärten Hauptziele der Reformen. Zur Frage, ob dieses Ziel erreicht wurde, stelle ich präzise und neue detaillierte Befunde auf der Basis von umfangreichen administrativen Daten vor, die auch die Zeit der Wirtschafts- und Finanzkrise (2008/2009) einschließen. Die Effizienz des Arbeitsmarktausgleichs erhöhte sich während und nach den Reformjahren deutlich. Dies lässt sich nun auch für die Einführung der letzten Reformstufe im Jahr 2005 belegen. Jedoch waren die Arbeitsmarktausgleichsprozesse nicht vollständig immun gegen die Wirtschafts- und Finanzkrise; die positive Entwicklung wurde hier unterbrochen und setzte sich danach nicht in dem gleichen Maße fort. Darüber hinaus zeigen die Analysen eine unterschiedliche Entwicklung der Matchingeffizienz in beruflichen Teilarbeitsmärkten auf

Determinants of the income velocity of money in Portugal: 1891–1998

This paper performs a long-run time series analysis of the behaviour of the income velocity of money in Portugal between 1891 and 1998 by assessing the importance of both macroeconomic and institutional factors and looking for particularities in the Portuguese case. We estimate two cointegration vectors for the income velocity of money, macroeconomic variables and institutional variables. It is apparent that one of these vectors reflects the relationship between income velocity and macroeconomic variables, while the other reflects the relationship between income velocity and institutional variables. Moreover, a regression analysis reveals that the usual U-shaped pattern is displayed with a relatively late inflection point located around 1970, which is consistent with the Spanish case. It is further noted that this is a feature of countries with a late economic and institutional development process.info:eu-repo/semantics/publishedVersio

Eyes on the Prize: How Did the Fed Respond to the Stock Market?

The appropriate role for equity prices in monetary policy deliberations has been hotly debated for some time. Recent work suggests that equity prices have affected monetary policy decisions above and beyond their indirect effect on the traditional goal variables of the FOMC. However, the correlation between stock price movements and these other goal variables has made the identification of the equity price effect problematic. Previous studies have used a forecast that embodies a different information set from the one used by the FOMC, which could bias the estimated coefficient on equity prices. The authors show that, in fact, the methods used in the earlier literature fail to adequately disentangle the observational equivalence problem. The authors then show that after controlling for the information that actually enters the FOMC's decision-making process, equity prices have had no independent effect on monetary policy