Linkages between the Financial and the Real Sector of the Economy: A Literature Survey

This document reviews the literature on the relationship between financial markets and the real economy. In the light of the recent financial crises, we focus on channels that are likely to be important in times of financial stress. Some channels�are governed by balance sheet effects�like the Financial Accelerator and the Bank Lending Channel. We discuss the significance of these channels in the light of empirical evidence and try to extract their quantitative importance from the literature. Both channels seem to have played an important role in the aftermath of the crisis. Further, we discuss the role of trade finance in the collapse in world trade following the financial crisis 2007-2009. While finance is important for trade, the literature is not conclusive on whether finance was also the reason for the observed collapse. Naturally, risk is important during a financial crisis. Taking a look at risk channels, we find risk also to play an important role in feedback loops between finance and the real economy. The theoretical and empirical evidence found in the literature appears to be useful in explaining the severe and long-lasting effects of the recent financial crisis.

Extending the Coinvariant Theorems of Chevalley, Shephard--Todd, Mitchell and Springer

We extend in several directions invariant theory results of Chevalley, Shephard and Todd, Mitchell and Springer. Their results compare the group algebra for a finite reflection group with its coinvariant algebra, and compare a group representation with its module of relative coinvariants. Our extensions apply to arbitrary finite groups in any characteristic.Comment: The applications and Examples in section 4 have been extende

Growth and welfare distribution in an Ageing society: An applied general equilibrium analysis for the Netherlands

This paper studies the effects of the imminent ageing of the population on economic growth and the distribution of welfare in the Netherlands. It shows that in the current system of social security ageing leads to a considerable welfare loss for future generations. It discusses the effect of reform measures in the pay-as-you-go social security system. It shows that a cut in PAYG pensions is efficiency-improving, but hurts the lower income groups of current generations. This effect can be ameliorated by a debt-financed cut in indirect taxes. In that case the negative welfare effect of the reform for current generations is smaller than the redistribution caused by the demographic shift itself

The Elasticities of Complementarity and Substitution

This paper argues that the conventional definition of the elasticity of complementarity is not well suited to deal with the case of increasing returns. It proposes a slightly different formula, that uses a distance function formulation instead of a production function. The proposed definition coincides with the Hicksian measure in case the production function displays constant returns. It is more informative in case returns to scale are not constant, as it disentangles entry effects and substitution effects of factor supplies. The new definition is also preferable in that it is fully symmetric with the definition of the elasticity of substitution

Lifetime labor supply in a search model of unemployment

This paper investigates the age-dependency of participation and unemployment by integrating job search with intertemporal optimizing behavior of finitely-lived households. We find that search frictions and tax rates distort the decisions of older workers to a much larger extent than that of young workers. This finding provides an explanation of the observed fall of participation rates of elder workers as a result of the post-war increase in tax rates and replacement rates. We show that the age pattern of search unemployment does not match observed unemployment and we propose a new concept of ‘voluntary’ unemployment that agrees well with observations

The Budgetary and Economic: Consequences of Ageing in the Netherlands

The Netherlands will be confronted with an almost doubling of the old-age dependency ratio over the next forty years. The costs of the ageing population are primarily reflected in larger expenditures on pensions and health care. This paper explores the consequences of ageing in a baseline scenario simulated with a dynamic general equilibrium model. The sensitivity of the results are discussed under alternative scenarios for the interest rate and population projections. Finally, the effects of two types of reform measures in the pay-as-you-go social security system are explored

Vergrijzing, aanvullende pensioenen en de Nederlandse economie

De vergrijzingsproblematiek betreft alle Westerse landen. De gecombineerde effecten van een lager geboortecijfer, een lager sterftecijfer en de naoorlogse geboortegolf leiden ertoe dat de bevolkingsopbouw aan het veranderen is. Volgens het CBS zal het bevolkingsaandeel van ouderen (met een leeftijd van 65 jaar of hoger) de komende jaren stijgen van 13% naar ruim 22%. Deze verandering zal zijn weerslag hebben in de hele economie, en bijzonder gevoeld worden in de pensioensector