Liquidity and the Dynamic Pattern of Asset Price Adjustment: A Global View

Global liquidity expansion has been very dynamic since 2001. Contrary to conventional wisdom, high money growth rates have not coincided with a concurrent rise in goods prices. At the same time, however, asset prices have increased sharply, significantly outpacing the subdued development in consumer prices. We investigate the interactions between money and goods and asset prices at the global level. Using aggregated data for major OECD countries, our VAR results support the view that different price elasticities on asset and goods markets explain the observed relative price change between asset classes and consumer goods

Exchange Rate Bands of Inaction and Play -- Hysteresis in Greek Exports to the Euro Area, the US and Turkey -- Sectoral Evidence

In this paper a non-linear model is applied, where suddenly strong spurts of exports occur when changes of the exchange rate go beyond a zone of inaction, which we call 'play' area - analogous to mechanical play. We implement an algorithm describing path-dependent play-hysteresis into a regression framework. The hysteretic impact of real exchange rates on Greek exports is estimated based on the period from 1995Q1 to 2014Q4. Looking at some of the main export partners of Greece, the euro area, Turkey and the US, and some of its most important tradeable sectors we identify significant hysteretic effects for a part of the Greek exports. We find that Greek export activity is characterized by 'bands of inaction' with respect to changes in the real exchange rate and calculate the further real depreciation needed to trigger a spurt in Greek exports. To check for robustness we (a) estimate Greek export equations for a limited sample excluding the recent financial crisis, (b) use export weight instead of deflated nominal exports as the dependent variable, (c) employ a political uncertainty variable as a determinant of the width of the area of weak reaction. Overall, we find that those specifications which take uncertainty into account display the best goodness of fit. In other words: the option value of waiting dominates the real exchange rate effect on Greek exports.Analog zu mechanischem Spiel wendet dieses Paper ein nichtlineares Modell an, in dem plötzlich starke Reaktionen der Exporte auftreten, wenn die Wechselkursveränderung eine inaktive Zone überschreitet, welche als 'play area' bezeichnet wird. Wir implementieren einen Algorithmus, der pfadabhängige Hysterese beschreibt, in einem Regressionsmodell. Der hysteretische Einfluss des realen Wechselkurses auf griechische Exporte wird für die Periode von 1995Q1 bis 2014Q4 geschätzt. Wir finden signifikante hysteretische Effekte für einen Teil der griechischen Exporte bei der Betrachtung einiger Hauptexportpartner Griechenlands, wie die Eurozone, die Türkei und die USA unter der Berücksichtigung der wichtigsten Handelssektoren. Es zeigt sich, dass griechische Exporte durch ein 'Band of Inaction' in Bezug auf Veränderungen des realen Wechselkurses charakterisiert sind, und wir berechnen die weitere Abwertung, die benötigt wird, um eine starke Exportreaktion für Griechenland auszulösen. Um auf Robustheit zu prüfen; (a) schätzen wir die Exportgleichungen für einen begrenzten Zeitraum und berücksichtigen nicht die jüngste Finanzkrise, (b) verwenden wir Mengenangaben für die Exportreihen statt nominaler Werte, (c) wird politische Unsicherheit als Determinante für die Breite der schwachen Exportreaktionen implementiert. Allgemein stellt sich heraus, dass jene Spezifikationen, die Unsicherheit berücksichtigen, die beste Güte zeigen. Anders formuliert dominiert der Optionswert abzuwarten den realen Wechselkurseffekt griechischer Exporte

The modulating effect of education on semantic interference during healthy aging

Aging has traditionally been related to impairments in name retrieval. These impairments have usually been explained by a phonological transmission deficit hypothesis or by an inhibitory deficit hypothesis. This decline can, however, be modulated by the educational level of the sample. This study analyzed the possible role of these approaches in explaining both object and face naming impairments during aging. Older adults with low and high educational level and young adults with high educational level were asked to repeatedly name objects or famous people using the semantic-blocking paradigm. We compared naming when exemplars were presented in a semantically homogeneous or in a semantically heterogeneous context. Results revealed significantly slower rates of both face and object naming in the homogeneous context (i.e., semantic interference), with a stronger effect for face naming. Interestingly, the group of older adults with a lower educational level showed an increased semantic interference effect during face naming. These findings suggest the joint work of the two mechanisms proposed to explain age-related naming difficulties, i.e., the inhibitory deficit and the transmission deficit hypothesis. Therefore, the stronger vulnerability to semantic interference in the lower educated older adult sample would possibly point to a failure in the inhibitory mechanisms in charge of interference resolution, as proposed by the inhibitory deficit hypothesis. In addition, the fact that this interference effect was mainly restricted to face naming and not to object naming would be consistent with the increased age-related difficulties during proper name retrieval, as suggested by the transmission deficit hypothesis.This research was supported by grants PSI2013-46033-P to A.M., PSI2015-65502-C2-1-P to M.T.B., PCIN-2015-165-C02-01 to D.P., PSI2017-89324-C2-1-P to DP from the Spanish Ministry of Economy and Competitiveness (http://www.mineco.gob.es/)

Current Account Imbalances in the Euro Area: Catching Up or Competitiveness?

In the debate on global imbalances, the euro area countries did not receive much attention so far. While the current account is on balance for the entire area, divergences between individual member states have increased since the introduction of the common currency. In this paper, the imbalances are traced back to catching up and competitiveness factors using paneleconometric techniques. In line with the intertemporal approach to the current account, low income countries tend to run deficits, while rich countries realize surpluses. However, the effect diminishes, if early years are dropped from the sample. The competitiveness channel is more robust and shows the expected sign, i.e. a real appreciation leads to external deficits. To restore competitiveness, a reduction of unit labour costs is on the agenda. Since a deterioration of competitiveness is not a feasible strategy for the surplus countries, an asymmetric response across countries is required in order to reduce the imbalances.In der Diskussion über globale Ungleichgewichte spielen die Länder der Eurozone bisher nicht die zentrale Rolle. Während die Leistungsbilanz für die gesamte Währungsunion ausgeglichen ist, sind die Ungleichgewichte zwischen den Mitgliedsländern erheblich und haben sich seit der Einführung der gemeinsamen Währung erhöht. In diesem Papier werden die Ungleichgewichte auf ökonomische Aufholprozesse und Wettbewerbsfähigkeit zurückgeführt. Dabei kommen panelökonometrische Methoden zum Einsatz. Bei Wohlfahrtunterschieden sollten Länder mit niedrigen Einkommen Defiziten, reichen Länder hingegen Überschüsse realisieren. Dieser Effekt nimmt jedoch im Zeitablauf ab. Eeine Erklärung über die Wettbewerbsfähigkeit ist robuster und zeigt die erwarteten VorZeichen, d.h. eine reale Aufwertung führt zu externen Defizite. Zur Wiederherstellung der Wettbewerbsfähigkeit steht eine Reduzierung der Lohnstückkosten steht auf der Tagesordnung. Da eine Verschlechterung der Wettbewerbsfähigkeit keine geeignete Strategie für die Überschussländer ist, scheint eine asymmetrische Reaktion in den einzelnen Ländern erforderlich zu sein, um die Ungleichgewichte in der Währungsunion zu verringern

Global Liquidity and House Prices: A VAR Analysis for OECD Countries

Global monetary dynamics has been particularly strong in recent years. At the same time, house prices in many OECD countries increased sharply, significantly outpacing the relatively subdued development in consumer prices. In this paper we argue that different price elasticities on asset and consumer markets help to explain the observed relative price change between assets and consumer goods. Using a VAR analysis and aggregated data for the major OECD countries, our empirical results are supportive of this relationship. Both house and consumer prices are determined by global monetary conditions; however, while global liquidity shocks lead to relatively fast responses in global house prices, significant responses of the global CPI index to money shocks occur only after long time lags. In addition, we find subsequent spillovers from asset prices to consumer prices on a global scale

Exchange Rate Pass-Through into German Import Prices – A Disaggregated Perspective

This study analyzes the exchange rate pass-through into German import prices based on disaggregated data taken on a monthly basis between 1995 and 2012. Our main contribution is twofold: firstly, we employ various time-series techniques to analyze data for different product categories, and also cointegration techniques to carefully distinguish between short-run and long-run pass-through coefficients. Secondly, in a panel data approach we estimate time-varying pass-through coefficients and explain their development with regard to various macroeconomic factors. Our results show that long-run pass-through is only partly observable and incomplete, while short-run pass-through shows a more unique character, although heterogeneity across product groups does exist. We are also able to identify several macroeconomic factors which determine changes in the degree of pass-through, which is especially relevant for policymakers

Exchange Rate Bands of Inaction and Play-Hysteresis in German Exports – Sectoral Evidence for Some OECD Destinations

A non-linear model is applied where suddenly strong spurts of exports occur when changes of the exchange rate go beyond a zone of inaction. We call the latter a 'play' area - analogous to mechanical play and implement an algorithm describing path-dependent play-hysteresis into a regression framework. The hysteretic impact of real exchange rates on German exports is then estimated based on quarterly data from 1995Q1 to 2010Q3. For some of the main export partners of Germany outside the euro area and some of the most important tradable sectors we fi nd significant hysteretic effects for a part of the German exports.Ein nicht-lineares Modell wird angewendet, in dem plötzliche starke Reaktionen der Exporte auftreten, sobald eine Inaktivitätszone des realen Wechselkures überschritten wird. Analog zum mechanischen Spiel wird dieses Phänomen eines pfadabhängigen Inaktivitätsbandes 'play' genannt. Mittels eines Algorithmus wird die Play-Hysterese in einen ökonometrischen Schätzansatz implementiert. Für Quartalsdaten deutscher Exporte in wichtige Nicht-Euro-Empfängerländer im Zeitraum von 1995Q1 bis 2010Q3 finden wir für verschiedene deutsche Exportsektoren signifikante hysteretische Play-Effekte