Macroeconomic Shocks in Euroland vs. the UK: Supply, Demand, or Nominal?

currency; economic integration; EMU; Euro; European Central Bank; political economy; U.K.

What Can an Open-Economy DSGE Model Tell Us about Hong Kong’s Housing Market?

This paper develops an open-economy DSGE model with a housing-market sector and a borrowing constraint. Contrary to standard conventions, domestic households are allowed to invest in foreign housing and vice versa. Using Bayesian methods, the model is applied to data for Hong Kong. The results show that Hong Kong’s housing market is quite open to foreign investment, and perhaps more significantly, that variations in the loan-to-value ratio and housing preference shocks largely explain business cycle volatility.DSGE models; housing; open economy; Hong Kong

Does the Nominal Exchange Rate Regime Matter for Investment?

This paper analyses the impact of exchange rate uncertainty upon the pattern of investment in different exchange rate regimes (very hard pegs, intermediate regimes, and floats) by means of a unified approach. The comparison of different exchange rate regimes indicates that currency volatility exerts only a small influence upon the level of investment spending. On the other hand, firms turn out to be more cautious about responding to exchange rate shocks in a credible target zone model than in a flexible exchange rate regime or in a target zone model with stochastic realignments.investment, uncertainty, irreversibility, exchange rate regimes

Taxation, growth and welfare: Dynamic effects of Estonia’s 2000 income tax act

This paper analyses the long-run effects of Estonia’s 2000 Income Tax Act with a dynamic general equilibrium model. Specifically, we consider the impact of the shift from an imputation system to one where companies only pay taxes on distributed profits. Balanced growth paths, transitional dynamics and welfare costs are computed. Our results indicate that the 2000 Income Tax Act leads to higher per capita income and investment, but lower welfare. A sensitivity analysis shows the results are rather robust.growth; welfare; taxation; tax reform; Estonia

Dundee Discussion Papers in Economics 220:China's new labour contract law: no harm to employment?

In January 2008, China imposed a new labour contract law. This new law is the most significant reform to the law of employment relations in mainland China in more than a decade. The paper provides a theoretical framework on the inter-linkages between labour market regulation, option value and the choice and timing of employment. All in all, the paper demonstrates that the Labour Contract Law in it´s own right will have only small impacts upon employment in the fast-growing Chinese economy. On the contrary, induced increasing unit labour costs represent the real issue and may reduce employment