trade openness tax reform and tax revenue in developing countries this article investigates empirically whether the effect of tax reform involving the progressive replacement of trade tax revenue with domestic tax revenue in developing countries tax revenue performance measured by tax revenue to gdp ratio depends on the degree of trade openness of these countries the analysis has used an unbalanced panel data set of 95 developing countries over the period 1981 2015 and the two system gmm approach results suggest that tax reform is positively and significantly associated with tax revenue performance in developing countries with the magnitude of this positive effect increasing as countries experience a higher development level additionally and more importantly countries that further open up their economies to international trade enjoy a higher positive effect of tax reform on tax revenue than countries that experience a lower degree of trade openness therefore these findings should help dissipate the concerns of policymakers in developing countries that greater openness to international trade would further erode their tax revenue including by lowering their international trade tax revenue in fact the implementation of an appropriate tax reform in the context of greater trade openness would generate higher tax revenue while concurrently allowing countries to reap the well known benefits of international trade

does economic recession reduce material use empirical evidence based on 157 economies worldwide abstract the research on economic recession has been more focused on the interactions between macroeconomic and financial variables however whether material use has been affected during the recession period has remained under explored in order to fill up this gap this study investigates the relationship between material use and economic recession as well as other socio economic drivers by using the material flow analysis and the system generalized method of moments for 157 economies worldwide during 1980 2011 results show that economic recession poses significant and negative impact on domestic material consumption at 1 level illustrating its role as a determinant factor on material mitigation by dividing the research sample into extractive and non extractive economies as well as high mid and low income groups we again confirmed the significant negative correlations as expected no significant sign is found between recession and physical trade balance besides other drivers such as population gross domestic production gdp per capita and technological variables also exert marked effects at different situations this research work provides an empirical study on how recession and other factors affect material use at various scenarios which have essential implications for understanding material flow dynamics in different economic cycles

wto membership and the shift to consumption taxes abstract this paper explores tax policy effects and revenue implications of joining the world trade organization wto and its predecessor the general agreement on tariffs and trade gatt it documents that countries joining gatt wto after 1990 have implemented tariff cum tax reforms lowering tariff rates and raising consumption tax rates in particular through reform or introduction of a value added tax vat employing a panel of 97 developing and transitional countries 31 of which joined gatt wto between 1990 and 2011 using robust difference in difference specifications as well as the synthetic control method we find a statistically and economically significant decline in revenues from import duties this finding supports concerns about revenue losses but also corroborates the efficacy of the late uruguay gatt and the wto trade regimes in promoting free trade among new members regarding consumption taxes we find robust evidence that revenue substitution was successful since revenue losses from import duties were more than compensated for by enhanced revenues from consumption taxes with regard to the timing of the revenue effects our results show that revenue losses in import duties mostly take place at the time of membership or later changes in consumption taxation however exhibit pre membership effects as revenues are increased and vat is adopted often a few years ahead of losses in import duties no such effects are found before the start of the accession negotiations indicating that consumption tax reforms are initiated once a country is on the road to gatt wto membership

the american business cycle continuity and change in recent decades the american economy has experienced the worst peace time inflation in its history and the highest unemployment rate since the great depression these circumstances have prompted renewed interest in the concept of business cycles which joseph schumpeter suggested are like the beat of the heart of the essence of the organism that displays them in the american business cycle some of the most prominent macroeconomics in the united states focuses on the questions to what extent are business cycles propelled by external shocks how have post 1946 cycles differed from earlier cycles and what are the major factors that contribute to business cycles they extend their investigation in some areas as far back as 1875 to afford a deeper understanding of both economic history and the most recent economic fluctuations seven papers address specific aspects of economic activity consumption investment inventory change fiscal policy monetary behavior open economy and the labor market five papers focus on aggregate economic activity in a number of cases the papers present findings that challenge widely accepted models and assumptions in addition to its substantive findings the american business cycle includes an appendix containing both the first published history of the nber business cycle dating chronology and many previously unpublished historical data series

growth and defense pooled estimates for the nato alliance 1951 1988 in two provocative and influential contributions emile benoit 4 5 uncovered a net positive association between defense spending and economic growth for 44 less developed countries ldcs during the 1950 65 period apparently a larger defense burden as measured by the share of national income devoted to defense may have promoted growth for these countries this finding was controversial and generated an extensive literature that either found fault with benoit s methodology or else investigated the relationship between growth and defense with alternative methodologies one such methodology relied on an aggregate production function to derive an equation for the sources of growth owing to technological change labor growth investment productivity differences among sectors and externalities this supply side approach was associated with feder 13 and ram 22 when a feder ram model was used researchers typically discovered either a small positive effect or else no impact of defense on growth except for alexander 1 the feder ram approach has been applied to large cross sections of ldcs to cross sections of ldcs and developed countries or to individual countries over time the purpose of this paper is fivefold first we extend the three sector feder ram model to allow for the influence of defense spillin externalities as the defense expenditures of a nation s allies affect the nation s own defense and civilian sectors in either a positive or negative fashion spillin externalities can stem from input complementarity or substitutability procurement practices joint ventures or operational considerations second we check the data for unit roots and when appropriate cointegration these tests help us to avoid a dynamic misspecification third we estimate a three sector feder ram growth equation for each of ten nato allies for the 1951

preference erosion government revenues and non tariff trade barriers developing countries benefiting from developed country unilateral trade preferences fear that doha round tariff cuts will erode the value of those preferences that these programmes confer significant benefits however is not clear studies indicate that the impact of preference erosion would be minimal for most developing countries but for a small subset of middle income and least developed countries concern may be warranted wto members should address affected countries concerns perhaps by tailoring wto tariff negotiations to lessen adjustment pressures and providing development assistance developing countries also are anxious that lower tariffs will reduce government revenues dependence on tariff revenue is diminishing and trade liberalisation need not result in lower total tax revenues or even lower customs revenues much depends on a country s current tariff and trade regime its tax structure and its overall economic structure at some point a country does need to broaden its tax base and look to other revenue sources to offset declining tariff revenues tax reform therefore complements trade reform a third area of developing country concern is non tariff barriers ntbs which may limit market access even after tariffs are reduced despite prior wto work in this area ntbs remain a thorny issue for all wto members

the theory of taxation for developing countries tax policy has far reaching implications for economic development and public administration this book which presents a modern theory of public finance brings together many of the most distinguished economists who have written on the subject they provide coherent principles for tax design and a systematic framework for the analysis of practical questions of tax reform and pricing policy in developing countries the book is especially timely as countries experience increasing shortages of government revenue and the distortions brought about by poorly designed tax systems it pays particular attention to the special problems of developing countries such as the taxation of agriculture the aim throughout is to develop techniques that can be quantitatively applied given the data available and empirical case studies illustrate the methods in action the authors analyze the links between tax theory social cost benefit analysis and the pricing of publicly supplied goods and services they also explore the empirical and econometric problems of identifying the tradeoffs between equity and efficiency other topics treated include the analysis of labor markets the taxation of foreign private investment and of fuel and the pricing of education although the models used concentrate on developing countries most of the methods and discussion apply as well to the problems of more affluent countries

what happens during recessions crunches and busts we provide a comprehensive empirical characterization of the linkages between key macroeconomic and financial variables around business and financial cycles for 21 oecd countries over the period 1960 2007 in particular we analyse the implications of 122 recessions 113 28 credit contraction crunch episodes 114 28 episodes of house price declines busts 245 61 episodes of equity price declines busts and their various overlaps in these countries over the sample period our results indicate that the interactions between macroeconomic and financial variables can play a major role in determining the severity and duration of a recession specifically we find evidence that recessions associated with credit crunches and house price busts tend to be deeper and longer than other recessions stijn claessens m ayhan kose and marco e terrones

the effect of trade openness on women s welfare and work life summary this study of 134 countries analyzes whether women are generally the losers or winners of globalization the results show that economic integration does not directly improve women s life expectancies women s access to primary and secondary education may improve slightly although women s welfare does not seem to improve more than that of men on the other hand economic integration does influence women s professional lives in developing countries trade openness increases female labor force participation in industrialized states it decreases the share of working women trade openness in developed countries increases the number of women employed in the service sector while in developing states it increases the number of women working in industrial jobs and in agriculture

fiscal faux pas an analysis of the revenue implications of trade liberalization abstract this paper examines the argument that trade liberalization depresses tax revenue gdp ratios in developing countries this occurs because the structural characteristics associated with developing countries limit their ability to make the transition from trade to domestic taxes using a panel of 80 developing and industrialized countries over 1970 98 the econometric analysis carried out employs a fixed effects regression framework to examine the evidence the results indicate that low income and upper middle income countries have experienced declining tax revenues as a result of falling income and trade tax revenues and that structural characteristics have been significant in explaining the decline

core and periphery in the european monetary union bayoumi and eichengreen 25 years later bayoumi and eichengreen 1993 establish a emu core periphery pattern using 1963 1988 data we use same methodology sample window length 1989 2015 and a novel over identifying restriction test to ask whether the emu strengthened or weakened the core periphery pattern our results suggest the latter

post crisis business investment in the euro area and the role of monetary policy business investment in the euro area strongly declined during the global financial crisis and the sovereign debt crisis it has not yet rebounded to its pre crisis trend despite the very expansiona

rainfall shocks local revenues and intergovernmental transfer in mali summary this paper explores the implications of rainfall shocks for municipal tax revenues and intergovernmental transfers in mali i found that exogenous phenomena such as weather not under the control of local actors could affect the way de facto decentralization plays out by influencing the fiscal capacity of local governments in a panel data of 692 municipalities from 2000 to 2008 i found that rainfall shocks through the fluctuations they induce in agricultural incomes affect revenue collection of local governments and in turn drive further revenues local governments receive through transfer by the central government

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

financial and fiscal interaction in the euro area crisis this time was different abstract this paper highlights the anomalous characteristics of the euro area twin crises by contrasting the aggregate macroecosnomic dynamics in the period 2009 2013 with the business cycle fluctuations of the previous decades we report three novel stylised facts first the contraction in output was marked by an anomalous downfall in private investment and an increase in households savings while consumption and unemployment followed their historical relation with gdp second households and financial corporations debts and house prices deviated from their pre crisis trends while non financial corporations debt followed historical regularities third the jumps in the public deficit gdp and debt gdp ratios in 2008 2009 were unprecedented and so was the fiscal consolidation that followed our analysis points to the financial nature of the crisis as a likely explanation for these facts importantly the anomalous increase in public debt is in large part explained by extraordinary measures in support of the financial sector which show up in the stock flow adjustments and reveal a keyinteraction between the fiscal and the financial sectors

interconnections between eurozone and us booms and busts using a bayesian panel markov switching var model summary the proposed panel markov switching var model accommodates changes in low and high data frequencies and incorporates endogenous time varying transition matrices of country specific markov chains allowing for interconnections an efficient multi move sampling algorithm draws time varying markov switching chains using industrial production growth and credit spread data several important data features are obtained three regimes appear with slow growth becoming persistent in the eurozone turning point analysis indicates the usa leading the eurozone cycle amplification effects influence recession probabilities for eurozone countries a credit shock results in temporary negative industrial production growth in germany spain and the usa core and peripheral countries exist in the eurozone copyright 2016 john wiley sons ltd

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

worldwide economic recoveries from financial crises through the decades abstract the profiles of economic recoveries after a financial crisis are identified through a self organizing map covering 104 countries during 1973 2017 first and surprisingly only 55 of the 276 events belong to the usual v u l classification new s shaped bounce back recoveries d oomed ones and double dip m occur in 23 18 and 4 of the cases respectively second the frequencies of profiles vary with the crisis type countries development and location and over time third unlike government spending supporting domestic credit liquidity foreign trade or else the exchange rate after the crisis may help activity bounce back

is the 2007 u s sub prime financial crisis so different an international historical comparison the first major financial crisis of the twentyfirst century involves esoteric instruments unaware regulators and skittish investors it also follows a well trodden path laid down by centuries of financial folly is the special prob lem of sub prime mortgages really different our examination of the longer historical record which is part of a larger effort on cur rency and debt crises finds stunning qualitative and quantitative parallels across a number of standard financial crisis indicators to name a few the run up in us equity and housing prices that graciela l kaminsky and reinhart 1999 find to be the best leading indicators of crisis in countries experiencing large capital inflows closely tracks the average of the previous 18 post world war ii banking crises in industrial countries so too does the inverted v shape of real growth in the years prior to the crisis despite widespread concern about the effects on national debt of the tax cuts of the early 2000s the run up in us public debt is actually some what below the average of other crisis episodes in contrast the pattern of us current account deficits is markedly worse at this juncture the book is still open on how the current dislocations in the united states will play out the precedent found in the aftermath of other episodes suggests that the strains can be quite severe depending especially on the initial degree of trauma to the financial system and to some extent the policy response the average drop in real per capita output growth is over 2 percent and it typically takes two years to return to trend for the five most catastrophic cases which include episodes in finland japan

international business cycles world region and country specific factors the paper investigates the common dynamic properties of business cycle fluctuations across countries regions and the world we employ a bayesian dynamic latent factor model to estimate common components in macroeconomic aggregates output consumption and investment in a 60 country sample covering seven regions of the world the results indicate that a common world factor is an important source of volatility for aggregates in most countries providing evidence for a world business cycle we find that region specific factors play only a minor role in explaining fluctuations in economic activity we also document similarities and differences across regions countries and aggregates jel f41 e32 c11 c32

dissecting the cycle a methodological investigation following burns and mitchell we define the cycle as a pattern in the level of aggregate economic activity an algorithm to locate turning points is developed as is a new measure of pro cyclicality a link between turning points and the moments of the series is established thereby providing the statistical foundation that burns and mitchell s work lacked using these tools we are able to dissect cycles in terms of the contributions made by trend growth volatility serial correlation and non linear effects we dissect several models and find little evidence that certain non linear effects are important to the nature of business cycles

business cycles for g7 and european countries this article proposes classical business cycle turning points for the g7 and a number of european countries based on industrial production this enables the authors to examine the international nature of cyclical movements free from arbitrary assumptions about the trend in particular they show that cyclical assymetry is common with slopes during declines being generally larger in magnitude than during expansions a binary measure of association for expansion and contradiction regimes indicates a core group of european countries related to each other and apparently linked to the united states and japan through germany copyright 1997 by university of chicago press

booms and banking crises banking crises are rare events that break out in the midst of credit intensive booms and bring about deep and long lasting recessions this paper presents a textbook dynamic stochastic general equilibrium model to explain these phenomena the model features a nontrivial banking sector where bank heterogeneity gives rise to an interbank market moral hazard and asymmetric information in this market may lead to sudden market freezes banking crises credit crunches and severe financial recessions those recessions follow credit booms and are not necessarily triggered by large exogenous adverse shocks

the high price of dematerialization a dynamic panel data analysis of material use and economic recession abstract dematerialization at the national level occurs almost exclusively during periods of economic recession or low growth while recession is not a sustainable strategy to curb environmental impact such periods may offer important insights on the possibilities of reducing material use economic recession research has focused on the interactions between macroeconomic and financial variables with little systematic research dedicated to uncovering how resource use develops during periods of recession using a dynamic panel model we investigate whether and to what extent material use in a sample of 150 economies between 1970 and 2010 was affected by recession and low growth recession occurred most frequently and in more than two thirds of all countries during the 1980s and the 1990s in the 2000s more than half of the recessions occurred during the financial crisis of 2008 periods of recession were significantly and negatively correlated with material use they tended to coincide with dematerialization material use decreased in recession years but the significant correlations with growth in material use became weaker as growth rates increased construction minerals and metals used to build stocks of manufactured capital reacted more strongly to economic fluctuations than the throughput dominated flows of biomass and fossil fuels we conclude that the systematic link between recession and dematerialization can become policy relevant if the mechanisms causing reductions in material use during these periods are identified

changes in business cycles evidence and explanations this paper shows that the volatility of annual real macroeconomic indicators for the united states and the average severity of recessions have declined only slightly between the pre world war i and post world war ii eras recessions have however become somewhat less frequent and more uniform it argues that the advent of macroeconomic policy after world war ii can account for both the observed continuity and change countercyclical monetary policy and automatic stabilizers have prolonged postwar expansions and prevented severe depressions at the same time policy induced booms and recessions have led to continued volatility of the postwar economy

how similar are country and sector responses to common shocks within the euro area abstract ever since the introduction of the euro there have been discussions about whether europe constitutes an optimal currency area the great recession and the european debt crisis have rekindled and intensified this debate heterogeneous country experiences have led to questioning the rationale for a common monetary policy in the absence of a common fiscal framework to cushion macroeconomic shocks in this paper we examine whether the impact of typical macroeconomic shocks at the european monetary union emu level varies across countries and sectors we follow furlanetto et al 2017 and estimate common euro area macroeconomic supply demand monetary investment and financial shocks using sign restrictions we calculate the impulse responses to these shocks at the country sector level using local linear projections and propose a measure for business cycle synchronisation based on the similarity of the responses we find varying degrees of heterogeneity across member countries responses to common emu shocks although the responses of economic sectors are themselves heterogeneous different sector decompositions across countries cannot explain the cross country heterogeneity contrary to e g bayoumi and eichengreen 1993 2017 we identify italy to be a core country in line with recent literature the level of heterogeneity was the most pronounced during the financial crisis compared to pre and post crisis periods

gross credit flows the paper estimates gross credit flows for the u s banking system between 1979 and 1999 and shows that sizable gross flows coexist at any phase of the cycle even within narrowly defined loan categories bank size categories and regional units to investigate the macroeconomic dimensions of gross credit flows the paper studies the cyclical behavior of aggregate credit flows and documents three key cyclical facts first excess credit reallocation is countercyclical for any given rate of change of net credit gross flows are larger in a recession than in a boom second gross credit flows are highly volatile with a cyclical volatility which appears more than an order of magnitude larger than gdp volatility third credit contraction is more volatile than credit expansion furthermore the behavior of gross flows over the 1991 recession suggests that persistent and historically high credit contraction is a key feature of the relatively mild cyclical downturn the results lends some support to aggregate models that emphasize the asymmetric behavior of credit expansion and credit contractions

did technology shocks cause the 1990 91 recession real business cycle theory has been used to determine the statistical properties of aggregate fluctuations induced by technology shocks the finding is that technology shocks have been an important contributor to fluctuations in the u s economy for example finn e kydland and prescott 1991 estimate that if the only impulses were technology shocks the u s economy would have been 70 percent as volatile as it has been over the postwar period in this paper we employ the theory to answer the question did technology shocks cause the 1990 1991 recession answering this question requires the determination of the effects of technology shocks on the path of the economy the procedure that we use to make this determination is as follows first we construct a model economy and calibrate it so that its steady state matches actual 1987 values data for other years are used to determine the realizations of the shocks and the nature of the stochastic processes generating these shocks given these stochastic processes the equilibrium decision rules for our calibrated economy are computed we then construct the path for the economy implied by the model for the period 1984 1 1992 3 we set 1984 1 model values of the state variables equal to actual 1984 1 values and use the decision rules and the realized shocks to construct this path finally we examine whether the model economy experiences a recession in 1991 as did the u s economy business cycles are variations in output per adult that are in large part accounted for by variation in the per adult time allocated to market production figure 1 plots the time path of the per adult labor input during the 1983 1 1989 1 period there was a remarkable 12 percent increase in the labor input per adult beginning in 1990 2 there has been a decline of nearly 6 percent in this per adult labor input an unusual feature of the recovery subsequent to the 1990 1991 recession is that this labor input variable has continued to decline well into the recovery this unusual behavior leads to a related question did technology shocks cause the slow recovery we found it necessary to modify the standard real business cycle model in four ways in order to answer the posed question first given the enormous changes in the relative prices of durables as depicted in figure 2 we could not treat technology change as being neutral with respect to different types of final goods following john b long and charles plosser 1983 and jeremy greenwood et al 1992 we consider multiple production sectors with technology change differing across sectors second we assume that there is a technology employed within the household sector that produces a consumption flow from the stock of consumer durables third we consider land to be a factor of production in addition to labor and capital our fourth modification is to introduce population growth

how does globalization affect the synchronization of business cycles this paper examines the impact of rising trade and financial integration on international business cycle comovement among a large group of industrial and developing countries the results provide at best limited support for the conventional wisdom that globalization has increased the degree of synchronization of business cycles the evidence that trade and financial integration enhance global spillovers of macroeconomic fluctuations is mostly limited to industrial countries one striking result is that on average cross country consumption correlations have not increased in the 1990s precisely when financial integration would have been expected to result in better risk sharing opportunities especially for developing countries this abstract was borrowed from another version of this item

buying a home with a resale value location location location we develop a dynamic multiregion model where a household s choice of housing location depends on its current wealth and its current type and involves both consumption and investment considerations the relative strength of the consumption motive and the investment motive determines the equilibrium pattern of residential sorting a strong investment consumption motive implies sorting according to household type wealth the model predicts that large house price fluctuations are associated with a low degree of sorting by type this prediction is consistent with evidence from us metropolitan areas when income education and age are used as proxies for household type

housing cycles and macroeconomic fluctuations a global perspective abstract this paper investigates the international spillovers of housing demand shocks on real economic activity the global economy is modeled using a global var with a novel house price data set for both advanced and emerging economies the impulse responses to an identified u s housing demand shock confirm the existence of strong international spillovers to advanced economies in contrast the response of some major emerging economies is not significantly different from zero moreover the analysis of synchronized housing demand shocks speaks in favor of the recent evidence of increased resilience of emerging economies to shocks originating in advanced economies and it also suggests that a close monitoring of housing cycles in advanced economies as well as in emerging economies should be of interest for policy makers

when is fiscal adjustment an illusion fiscal adjustment is an illusion when it lowers the budget deficit or public debt but leaves government net worth unchanged conventional measures of the budget deficit largely show the change in public sector debt ideally the measured deficit would reflect the change in public sector net worth many people consider it impractical to try to measure public sector assets my paper does not discuss what the deficit should measure but instead proposes a positive and testable theory of how governments actually behave when an outside agent forces a reduction in a government s conventional deficit and debt accumulation the government responds by lowering asset accumulation or increasing hidden liabilities since government net worth is unchanged such fiscal adjustment is an illusion using data from countries with world bank and imf fiscal adjustment programmes and case studies of emu countries compliance with the maastricht criteria i confirm my theoretical predictions fiscal adjustment in these countries was at least partly an illusion

credit booms and lending standards evidence from the subprime mortgage market this paper links the u s subprime mortgage crisis to demand side factors that contributed to the rapid expansion of the u s mortgage market we show that denial rates were relatively lower in areas that experienced faster credit demand growth and that lenders in these high growth areas attached less weight to applicants loan to income ratios the results are robust to controlling for supply side factors including house price appreciation mortgage securitization and other economic fundamentals and to several robustness tests controlling for endogeneity the results are consistent with the notion that a relaxation of lending standards triggered by an increased demand for loans contributed to the boom and the ensuing crisis together with other supply side explanations these findings shed new light on the relationship between credit booms and financial instability

credit crises money and contractions an historical view abstract the relatively infrequent nature of major credit distress events makes an historical approach particularly useful using a combination of historical narrative and econometric techniques we identify major periods of credit distress from 1875 to 2007 examine the extent to which credit distress arises as part of the transmission of monetary policy and document the subsequent effect on output using turning points defined by the harding pagan algorithm we identify and compare the timing duration amplitude and co movement of cycles in money credit and output regressions show that financial distress events exacerbate business cycle downturns both in the 19th and 20th centuries and that a confluence of such events makes recessions even worse

faraway so close coupled climate and economic dynamics in an agent based integrated assessment model abstract in this work we develop an agent based model that offers an alternative to standard computable general equilibrium integrated assessment models iams the dystopian schumpeter meeting keynes dsk model is composed of heterogeneous firms belonging to capital good consumption good and energy sectors production and energy generation lead to greenhouse gas emissions which affect temperature dynamics climate damages are modelled at the individual level as stochastic shocks hitting workers labour productivity energy efficiency capital stock and inventories of firms in that aggregate damages emerge from the aggregation of losses suffered by heterogeneous interacting and boundedly rational agents the model is run focusing on a business as usual carbon intensive scenario consistent with a representative concentration pathway 8 5 we find that the dsk model is able to account for a wide ensemble of micro and macro empirical regularities concerning both economic and climate dynamics simulation experiments show a substantial lack of isomorphism between the effects of micro and macro level shocks as it is typical in complex system models in particular different types of shocks have heterogeneous impact on output growth unemployment rate and the likelihood of economic crises pointing to the importance of the different economic channel affected by the shock overall we report much larger climate damages than those projected by standard iams under comparable scenarios suggesting possible shifts in the growth dynamics from a self sustained pattern to stagnation and high volatility and the need of urgent policy interventions

household debt repayment behaviour what role do institutions play despite the lively policy debate on rising household debt arrears and personal bankruptcy filings there is relatively little empirical evidence on the determinants of households debt repayment behaviour or on the incidence of arrears even less is known about how arrears compare between countries although debt levels are known to vary widely using data from the european community household panel we first show that arrears are frequently associated with subsequent adverse consequences such as future unemployment or bad health second we find that arrears are often precipitated by an adverse shock to the household s income or health but that there are large differences between countries in how households react to these events finally we show that these differences can be partly explained by local financial and judicial institutions as captured by contract enforcement and information sharing indicators in other words we show that while adverse shocks are highly important the extent to which they affect repayment behaviour depends crucially on the penalty for defaulting this finding suggests that although repayment problems often arise from a genuine inability to repay some households seem to behave strategically burcu duygan bump and charles grant

have business cycles changed over the last two decades an empirical investigation abstract we document the properties of business cycles of 71 countries 23 industrial countries and 48 emerging market economies or emes from 1970q1 to 2012q4 using the harding and pagan dating algorithm first recessions are deeper steeper and costlier among emes especially in east asia and latin america second recoveries are swifter and stronger among emes partly due to stronger rebound effects third recessions became less costly during the globalization period 1985 2007 for industrial countries and emes thus reflecting institutional changes made during the great moderation fourth the dynamic behavior of macroeconomic indicators around peaks in real gdp is more volatile in downturns associated with crisis compared to other downturns fifth peaks in financial cycles credit and asset prices tend to precede peaks in real output cycles finally although both industrial and emerging markets have experienced deep recessions during the recent global financial crisis the emerging markets have recovered faster

a simple framework for analysing bull and bear markets bull and bear markets are a common way of describing cycles in equity prices to fully describe such cycles one would need to know the data generating process dgp for equity prices we begin with a definition of bull and bear markets and use an algorithm based on it to sort a given time series of equity prices into periods that can be designated as bull and bear markets the rule to do this is then studied analytically and it is shown that bull and bear market characteristics depend upon the dgp for capital gains by simulation methods we examine a number of dgps that are known to fit the data quite well random walks garch models and models with duration dependence we find that a pure random walk provides as good an explanation of bull and bear markets as the more complex statistical models in the final section of the paper we look at some asset pricing models that appear in the literature from the viewpoint of their success in producing bull and bear markets which resemble those in the data copyright 2002 john wiley sons ltd

the economic effects of energy price shocks large fluctuations in energy prices have been a distinguishing characteristic of the u s economy since the 1970s turmoil in the middle east rising energy prices in the u s and evidence of global warming recently have reignited interest in the link between energy prices and economic performance this paper addresses a number of the key issues in this debate what are energy price shocks and where do they come from how responsive is energy demand to changes in energy prices how do consumers expenditure patterns evolve in response to energy price shocks how do energy price shocks affect u s real output inflation and stock prices why do energy price increases seem to cause recessions but energy price decreases do not seem to cause expansions why has there been a surge in the price of oil in recent years why has this new energy price shock not caused a recession so far have the effects of energy price shocks waned since the 1980s and if so why as the paper demonstrates it is critical to account for the endogeneity of energy prices and to differentiate between the effects of demand and supply shocks in energy markets when answering these questions

tax revenue and or trade liberalization abstract with the public finances of many developing and emerging market countries still heavily dependent on trade tax revenues further trade liberalization may be hindered unless they are able to develop alternative sources of revenue against a background of and to inform heightened theoretical controversy as to the appropriate balance between trade and other taxes not least the vat this paper uses panel data for 117 countries over 32 years cleaned for a variety of problems in standard data sources to address a central question of fact have countries recovered from domestic taxes the revenues they have lost from past episodes of trade liberalization for high income countries the answer is clearly yes for middle income countries there are robust signs of strong replacement both concurrently with the revenue loss and essentially dollar for dollar in the long run signs of significant recovery by low income countries are flimsier however and their experiences appear to have varied widely the picture that emerges for low income countries is thus that replacement has been and become higher than previous studies have suggested but sufficiently incomplete in many cases to give cause for concern

aftershocks of monetary unification hysteresis with a financial twist abstract in the 1990s it was widely agreed that neither europe nor the united states satisfied the conditions for constituting an optimum currency area although the u s came closer bayoumi and eichengreen 1993 moderating this concern about europe was the fact that it was possible to distinguish a regional core and periphery using updated data we confirm that the united states remains closer to an optimum currency area more intriguingly the euro area shows striking changes in correlations and responses we interpret these as reflecting hysteresis with a financial twist in which the financial system causes aggregate supply and demand shocks to reinforce each other an implication is that the euro area needs vigorous coordinated regulation of its banking and financial systems by a single supervisor that monetary union without banking union will not work

theory and history behind business cycles are the 1990s the onset of a golden age the theory presented in this paper ties together profits investment credit stock prices inflation and interest rates the author discusses new estimates of profit and investment functions with important roles for growth and demand and productivity price and cost levels risk perception credit volume and credit difficulties the relationships among these endogenous variables are viewed as constituting an enduring core of business cycles the exogenous shocks and policy effects as more transitory and peripheral

the great recession us dynamics and spillovers to the world economy abstract this paper provides an empirical investigation of both the within us and international channels of transmission of macroeconomic and financial shocks by means of a 50 country macroeconometric model estimated over the 1980 2009 period including measures of excess liquidity and financial fragility specifically designed in order to evaluate the relevance of the boom bust credit cycle view put forward as an interpretation of the recent great recession episode we find that such a view is consistent with the empirical evidence moreover concerning the real effects of financial shocks within the us we detect stronger evidence of an asset prices channel rather than a liquidity channel concerning the spillovers to the world economy we find that while financial disturbances are transmitted to foreign countries through us house and stock price dynamics as well as excess liquidity creation the trade channel is the key trasmission mechanism of real shocks

understanding the evolution of world business cycles abstract this paper studies the changes in world business cycles during the period 1960 2003 we employ a bayesian dynamic latent factor model to estimate common and country specific components in the main macroeconomic aggregates output consumption and investment of the g 7 countries we then quantify the relative importance of the common and country components in explaining comovement in each observable aggregate over three distinct time periods the bretton woods bw period 1960 1 1972 2 the period of common shocks 1972 3 1986 2 and the globalization period 1986 3 2003 4 the results indicate that the common g 7 factor explains on average a larger fraction of output consumption and investment volatility in the globalization period than it does in the bw period

what can we learn about commodity and credit cycles evidence from african commodity exporting countries abstract this study analyzes the relationship between commodity prices and credit to the private sector in commodity exporting developing countries particularly three nations in sub saharan africa in this regard we extend the findings of non empirical studies dealing with this issue for the case of african countries and complement the literature on the methodological side by investigating this relationship using wavelet analysis this frequency approach is appropriate as it takes into account investor heterogeneity and the time variant characteristic of the studied relationship further it explains the lead lag relationship between the studied series first we observe that credit and commodities are strongly related over long timescales suggesting that the credit market reacts strongly to long term change in commodity markets and thus tends to be sensitive to persistent commodity shocks second for medium and short timescales the interaction is high and significant only during periods of turmoil in terms of the lead lag relationship our results also show that the commodity market causes fluctuations in the credit market

understanding real business cycles he 1 960s were a time of great optimism for macroeconomists many economists viewed the business cycle as dead the keynesian model was the reigning paradigm and it provided all the necessary instructions for manipulating the levers of monetary and fiscal policy to control aggregate demand inflation occurred if aggregate demand was stimulated excessively and unemployment arose if demand was insufficient the only dilemma faced by policymakers was determining the most desirable location along this inflation unemployment tradeoff or phillips curve the remaining intellectual challenge was to establish coherent microeconomic foundations for the aggregate behavioral relations posited by the keynesian framework but this was broadly regarded as a detail that should not deter policymakers in their efforts to stabilize the economy the return of the business cycle in the 1970s after almost a decade of economic expansion and the accompanying high rates of inflation came as a rude awakening for many economists it became increasingly apparent that the basic keynesian framework was not the appropriate vehicle for understanding what happens during a business cycle nor did it seem capable of providing the empirically correct answers to questions involving changes in the economic environment or changes in monetary or fiscal policy the view that keynesian economics was an empirical success even if it lacked sound theoretical foundations could no longer be taken seriously the essential flaw in the keynesian interpretation of macroeconomic phenomenon was the absence of a consistent foundation based on the choice theoretic framework of microeconomics two important papers one by milton friedman 1968 and the other by robert lucas 1976 forcefully demonstrated examples of

an econometric analysis of some models for constructed binary time series macroeconometric and financial researchers often use binary data constructed in a way that creates serial dependence we show that this dependence can be allowed for if the binary states are treated as markov processes in addition the methods of construction ensure that certain sequences are never observed in the constructed data together these features make it difficult to utilize static and dynamic probit models we develop modeling methods that respect the markov process nature of constructed binary data and explicitly deals with censoring constraints an application is provided that investigates the relation between the business cycle and the yield spread