on the international spillovers of us quantitative easing this article analyses the effects of the federal reserve s quantitative easing qe on global portfolio flows differentiating across recipient region of the flows type of flow and qe rounds furthermore the analysis differentiates between the impact of qe expansionary announcements and the actual market operations the analysis shows that qe1 resulted in slight rebalancing towards the us while qe2 and qe3 resulted in rebalancing towards non us assets this suggests that qe increased the pro cyclicality of flows outside the us in particular into emerging market equities the results also suggest a link between us macro financial conditions and the transmission of qe to portfolio flows

the impact of the federal reserve s large scale asset purchase programs on corporate credit risk estimating the effect of federal reserve s announcements of large scale asset purchase lsap programs on corporate credit risk is complicated by the simultaneity of policy decisions and movements in prices of risky financial assets as well as by the fact that both interest rates of assets targeted by the programs and indicators of credit risk reacted to other common shocks during the recent financial crisis this paper employs a heteroskedasticity based approach to estimate the structural coefficient measuring the sensitivity of market based indicators of corporate credit risk to declines in the benchmark market interest rates prompted by the lsap announcements the results indicate that the lsap announcements led to a significant reduction in the cost of insuring against default risk as measured by the cdx indexes for both investment and speculative grade corporate credits while the unconventional policy measures employed by the federal reserve to stimulate the economy have substantially lowered the overall level of credit risk in the economy the lsap announcements appear to have had no measurable effect on credit risk in the financial intermediary sector

aid and growth what meta analysis reveals abstract recent literature in the meta analysis category where results from a range of studies are brought together throws doubt on the ability of foreign aid to foster economic growth and development this article assesses what meta analysis has to contribute to the literature on the effectiveness of foreign aid in terms of growth impact we re examine key hypotheses and find that the effect of aid on growth is positive and statistically significant this significant effect is genuine and not an artefact of publication selection we also show why our results differ from those published elsewhere

occupation induced status social norms and economic growth abstract we analyse a monetary growth model where entrepreneurs borrow funds to invest in projects that produce capital goods in addition to their varying pecuniary returns different projects also vary with respect to the status they confer to the entrepreneurs who operate them we show that i social status increases the growth rate but this effect is mitigated by a social norm that inversely links overall levels of employment in the high return project with the status conferred to it ii the combined effect of social status and inflation is a source of transitional dynamics in an environment where such dynamics would not emerge if considerations of occupational prestige were absent iii when the social norm affects social status the economy s dynamics may be manifested in the form of endogenous volatility iv the presence and characteristics of social status can generate a negative correlation between volatility and growth

aid policies and growth a nonlinear reassessment the association between foreign aid and growth has been controversial for decades and the evidence is quite mixed with results sensitive to data samples and modelling approaches we reassess the re

us monetary policy and international bond markets this paper analyzes how u s monetary policy affects the pricing of dollar denominated sovereign debt we document that yields on dollar denominated sovereign bonds are highly responsive to u s monetary policy surprises during both the conventional and unconventional policy regimes and that the passthrough of unconventional policy to foreign bond yields is on balance comparable to that of conventional policy in addition a conventional u s monetary easing tightening leads to a significant narrowing widening of credit spreads on sovereign bonds issued by countries with a speculative grade credit rating but has no effect on the corresponding weighted average of bilateral exchange rates for a basket of currencies from the same set of risky countries this indicates that an unanticipated tightening of u s monetary policy widens credit spreads on risky sovereign debt directly through the financial channel as opposed to indirectly through the exchange rate channel during the unconventional policy regime yields on both investment and speculative grade sovereign bonds move one to one with policy induced fluctuations in yields on comparable u s treasuries we also examine whether the response of sovereign credit spreads to us monetary policy differs between policy easings and tightenings and find no evidence of such asymmetry

disease and development the effect of life expectancy on economic growth we exploit the major international health improvements from the 1940s to estimate the effect of life expectancy on economic performance we construct predicted mortality using preintervention mortality rates from various diseases and dates of global interventions predicted mortality has a large impact on changes in life expectancy starting in 1940 but no effect before 1940 using predicted mortality as an instrument we find that a 1 percent increase in life expectancy leads to a 1 7 2 percent increase in population life expectancy has a much smaller effect on total gdp however consequently there is no evidence that the large increase in life expectancy raised income per capita

what is the aggregate economic rate of return to foreign aid in recent years academic studies have been converging towards the view that foreign aid promotes aggregate economic growth we employ a simulation approach to i validate the coherence of empirical aid growth studies published since 2008 and ii calculate plausible ranges for the rate of return to aid our results highlight the long run nature of aid financed investments and the importance of channels other than accumulation of physical capital we find the return to aid lies in ranges commonly accepted for public investments and there is little to justify the view that aid has had a significant pernicious effect on productivity

global implications of self oriented national monetary rules author s obstfeld maurice rogoff kenneth abstract it is well known that if international linkages are relatively small the potential gains to international monetary policy coordination are typically quite limited but what if goods and financial markets are tightly linked is it then problematic if countries unilaterally design their institutions for monetary stabilization are the stabilization gains from having separate currencies largely squandered in the absence of effective international monetary coordination we argue that under plausible assumptions the answer is no unless risk aversion is very high lack of coordination in rule setting is a second order problem compared to the overall gains from monetary policy stabilization

on relative wealth effects and the optimality of growth abstract we present a model of endogenous growth in which a desire for social status lead individuals to care about their relative wealth the growth rate of the economy is socially optimal if the status motive is sufficiently important but the presence of status seeking may also lead to excessive growth

does foreign aid corrupt abstract we estimate the impact of foreign aid on corruption using geographical and cultural distance to the donor countries as instrumental variables to assess causality aid decreases corruption our results are statistically and economically significant and robust to different controls

foreign aid and the question of fungibility this paper analyzes whether the foreign assistance provided for specific categories of expenditure is shifted among them contrary to the wishes of donors it also considers whether aid reduces the tax effort of recipient governments econometric results are presented for the dominican republic that show that the fungibility of aid has resulted in a thwarting of the intentions of donors an attempt is made to account for the observed differences in behavior of individual countries in altering expenditures copyright 1993 by mit press

monetary policy surprises and interest rates evidence from the fed funds futures market abstract this paper estimates the impact of monetary policy actions on bill note and bond yields using data from the futures market for federal funds to separate changes in the target funds rate into anticipated and unanticipated components interest rates response to anticipated target rate changes is small while their response to unanticipated changes is large and highly significant these responses are generally consistent with the expectations hypothesis of the term structure surprise target rate changes have little effect on expectations of future actions however which helps to explain the lack of empirical support for the expectations hypothesis at the short end of the yield curve

consumption externalities habit formation and equilibrium efficiency we analyze the welfare properties of the competitive equilibrium in a capital accumulation model where individual preferences are subject to both habit formation and consumption spillovers using an additive specification for preferences according to which the argument in the utility function is a linear combination of present and past values of own consumption and consumption spillovers we analyze the circumstances under which these spillovers are a source of inefficiency it is shown that consumption externalities have to interact with habits in order to generate an inefficient dynamic equilibrium finally we characterize optimal tax policies aimed at restoring efficient decentralized paths

the effect of health on economic growth a production function approach abstract we estimate a production function model of aggregate economic growth including two variables that microeconomists have identified as fundamental components of human capital work experience and health our main result is that good health has a positive sizable and statistically significant effect on aggregate output even when we control for experience of the workforce we argue that the life expectancy effect in growth regressions appears to be a real labor productivity effect and is not the result of life expectancy acting as a proxy for worker experience

the fed and interest rates a high frequency identification we measure monetary policy shocks as changes in the fed funds target rate that surprise bond markets in daily data these shock series avoid the omitted variable time varying parameter and orthogonalization problem of monthly vars and do not impose the expectations hypothesis we find surprisingly large and persistent responses of bond yields to these shocks 10 year rates rise as much as 8 10 of a percent to a one percent target shock the usual view that monetary policy only temporarily raises long term rates and influences inflation would lead one to predict a negative long rate response this abstract was borrowed from another version of this item

aid infrastructure and fdi assessing the transmission channel with a new index of infrastructure official development assistance oda and foreign direct investment fdi are widely perceived to be alternative means of supplementing domestic savings and promoting economic development in low and middle income countries however possible complementarities of aid and fdi have received limited attention so far it remains open to debate whether aid could render recipient countries more attractive to fdi by removing specific bottlenecks that prevent higher fdi inflows in particular we raise the hypothesis that aid specifically targeted at economic infrastructure helps developing countries attract higher fdi inflows through improving their endowment with infrastructure in transportation communication energy and finance by performing 3sls estimations we explicitly account for dependencies between three structural equations on the allocation of sector specific aid the determinants of infrastructure and the determinants of fdi we find strong and robust evidence that aid in infrastructure is effective in improving the recipient countries endowment with infrastructure in sharp contrast other aid is not effective in improving infrastructure infrastructure consistently proves to be an important determinant of developing countries attractiveness to fdi consequently only targeted aid promotes fdi indirectly through the infrastructure channel in addition aid in infrastructure has direct effects on fdi it appears that foreign investors anticipate longer term effects of aid on the country s endowment with infrastructure and expect aid financed infrastructure to serve them particularly well

aid effectiveness opening the black box this paper examines the causality chain linking aid flows to development outcomes it argues that many of the questions policymakers and economists would like data to answer simply cannot be answered due to the complexity and noise along links in the chain and the problem of attribution it then examines what is known about aid effectiveness along different links in the causality chain finally it turns to recent trends in the way aid is delivered and the new model that appears to be emerging

assessing foreign aid s long run contribution to growth in development this paper confirms recent evidence of a positive impact of aid on growth and widens the scope of evaluation to a range of outcomes including proximate sources of growth e g physical and human capital indicators of social welfare e g poverty and infant mortality and measures of economic transformation e g share of agriculture and industry in value added focusing on long run cumulative effects of aid in developing countries and taking due account of potential endogeneity a coherent and favorable pattern of results emerges aid has over the past forty years stimulated growth promoted structural change improved social indicators and reduced poverty

aid econometrics lessons from a stochastic growth model abstract this paper evaluates the standard empirical methods employed in the study of foreign aid when the data generating process is a calibrated stochastic growth model in which aid recipients make optimal investment and consumption decisions when recipients receive a stochastic flow of aid and wish to smooth consumption standard methods fail to distinguish between the response to transient and permanent aid shocks and hence yield misleading results concerning the object of interest to policy makers the long run impact of aid

ecb spillovers and domestic monetary policy effectiveness in small open economies abstract in this paper we examine whether financial spillovers from the european central bank s monetary policy have consequences for the effectiveness of domestic monetary policy in three small open economies soes that are highly integrated with the european monetary union denmark norway and sweden we find significant spillovers that are particularly strong for longer maturity yields at the same time domestic monetary policy in norway and sweden is effective for the shorter end of the yield curve but much less so for the longer end of the curve recent work suggests that the trilemma in international economics as we used to know it may be a dilemma soes can only have effective monetary policies when the capital account is managed our results imply something in between although spillovers impose challenges on domestic monetary policy effectiveness small open economies still have some control over their yield curve

keeping one step ahead of the joneses status the distribution of wealth and long run growth assuming that the utility of each agent depends on its relative wealth position in the society this chapter constructs an endogenous growth model it is shown that even if the subjective discount rates differ across agents there exists a unique balanced growth equilibrium in which each agent owns a positive share of the world wealth it is also shown that if the agents are identical then an increase in savings incentives always raises the long run growth rate but if they are heterogeneous then an increase in savings incentives may lower the long run growth rate

revisiting cross country poverty convergence in the developing world with a special focus on sub saharan africa abstract the literature on poverty convergence is sparse and much of the empirical evidence relies on ravallion 2012 who found a lack of poverty convergence across some ninety less developed countries ldcs during 1980 2007 this paper revisits cross country poverty convergence using data from the same sources but an extended period of 1980 2014 we find that while poverty convergence remains absent across ldcs it is present in sub saharan africa ssa during the extended period initial poverty canceling the effectiveness of growth in reducing poverty explains the lack of poverty convergence across ldcs while a strong growth effect dominating the adverse effect of initial poverty on growth effectiveness explains the strong poverty convergence found in ssa a direct adverse link between initial poverty and subsequent growth which ravallion 2012 recognized as the main impediment to poverty convergence during 1980 2007 is not found in this study

aid dutch disease and manufacturing growth abstract we examine the effects of aid on the growth of manufacturing using a methodology that exploits the variation within countries and across manufacturing sectors and corrects for possible reverse causality we find that aid inflows have systematic adverse effects on a country s competitiveness as reflected in the lower relative growth rate of exportable industries we provide some evidence suggesting that the channel for these effects is the real exchange rate appreciation caused by aid inflows we conjecture that this may explain in part why it is hard to find robust evidence that foreign aid helps countries grow

the long run effect of aid on health evidence from panel cointegration analysis abstractalthough a major objective of aid donors is to improve health outcomes in recipient countries there is relatively little research on whether aid to the health sector leads to improved heal

relative consumption relative wealth and growth abstract in a growth model where individuals care about their social status measured both by consumption and wealth comparisons we show that status comparison in wealth heightens economic growth while status comparison in consumption may affect negatively economic growth

aid and growth what does the cross country evidence really show abstract we examine the effects of aid on growth in cross sectional and panel data after correcting for the possible bias that poorer or stronger growth may draw aid contributions to recipient co

what does monetary policy do to long term interest rates at the zero lower bound this article uses a structural var with daily data to identify the effects of monetary policy shocks on various longer term interest rates since the federal funds rate has been stuck at the zero lower bound the var is identified using the assumption that monetary policy shocks are heteroskedastic monetary policy shocks have especially high variance on days of fomc meetings and certain speeches while there is otherwise nothing unusual about these days a complementary high frequency event study approach is also used i find that stimulative monetary policy shocks lower treasury and corporate bond yields but the effects die off fairly fast

aid and growth regressions this paper examines the relationship between foreign aid and growth in real gdp per capita as it emerges from simple augmentations of popular cross country growth specifications it is shown that aid in all likelihood increases the growth rate and this result is not conditional on good policy there are however decreasing returns to aid and the estimated effectiveness of aid is highly sensitive to the choice of estimator and the set of control variables when investment and human capital are controlled for no positive effect of aid is found yet aid continues to impact on growth via investment we conclude by stressing the need for more theoretical work before this kind of cross country regressions are used for policy purposes

dynamic scoring a back of the envelope guide abstract this paper uses the neoclassical growth model to examine the extent to which a tax cut pays for itself through higher economic growth the model yields simple expressions for the steady state feedback effect of a tax cut the feedback is surprisingly large for standard parameter values half of a capital tax cut is self financing the paper considers various generalizations of the basic model including elastic labor supply general production technologies departures from infinite horizons and non neoclassical production settings it also examines how the steady state results are modified when one considers the transition path to the steady state