economics in the backyard how much convergence is there between china and her special regions this paper tests the hypothesis that the links and dependency relationships between china and her special regions have changed over the past 20 years with the industrialisation of china and the emergence of taiwan as a source of investment and sophisticated manufactures and hong kong as financial centre and supplier of services has this changed the size and direction of spillovers in the region and has it curtailed or eliminated american economic leadership we use time varying spectral methods to decompose the links between six advanced asian economies and the us we find a the links with the us have been weakening while those within a bloc based on china have strengthened b that this is not new it has been happening since the 1980s but has now been reversed by the surge in trade c that taiwan is more integrated with and dependent on the chinese economy while hong kong continues her separate development based on specialisation and comparative advantage d that the links with the us are rather complex with the us able to shape the cycles elsewhere through her control of monetary conditions but the china zone able to control the size of their cycles and e there appears to be no real evidence that pegged exchange rates encourage convergence in fact the reverse may be true

minimum wage effects on employment and school enrollment we argue in this article that the focus on employment effects in recent studies of minimum wages ignores an important interaction between schooling employment and the minimum wage to study these linkages we estimate a conditional logit model of employment and enrollment outcomes for teenagers using state year observations for the period 1977 to 1989 the results show a negative influence of minimum wages on school enrollment and a positive effect on the proportion of teens neither employed nor in school we further suggest that our results are consistent with substitution by employers of higher for lower skilled teenagers with the displaced teens ending up both out of work and out of school

the butterfly effect of small open economies abstract the rational expectations equilibrium of a small open economy can be subject to indeterminacy if foreign monetary policy does not satisfy the taylor principle we study the implications of foreign induced indeterminacy in the two country version of the sticky price small open economy model our main finding is that smallness is a property of the unique rational expectations equilibrium of the large economy and not a general property of the small open economy model if the large economy fails to anchor expectations shocks to the small economy can affect the large one this form of indeterminacy gives rise to a butterfly effect additional assumptions are required to preserve the smallness of the small economy

monetary policy synchronization in the asean 5 region an exchange rate perspective in light of the long standing vision of economic and monetary integration in the asean association of southeast asian nations region and the importance of coordinating monetary policies to achieve it the objective of this article is to assess the monetary policy synchronization among the founding members of the asean that is indonesia malaysia the philippines singapore and thailand due to the importance of exchange rate movements to monetary policies we approach this issue from a currency exchange rate perspective specifically multivariate trend cycle decomposition is employed to investigate common trends and common cycles among the exchange rates of these countries during the period 1976 2012 our analysis reveals that the real exchange rates of malaysia the philippines singapore and thailand share common cycles in the short term and have common trends in the long term but the indonesian currency does not share these relationships thus our results augur well for the synchronization of mo

common trends and common cycles the existence of a serial correlation common feature among the first differences of a set of i 1 variables implies the existence of a common cycle in the beveridge nelson stock watson decomposition of those variables a test for the existence of common cycles among cointegrated variables is developed the test is used to examine the validity of the common trend common cycle structure implied by flavin s excess sensitivity hypothesis and campbell and mankiw s mixture of rational expectations and rule of thumb hypothesis for consumption and income linear independence between the cointegration and the cofeature vectors is exploited to decompose consumption and income into their trend and cycle components copyright 1993 by john wiley sons ltd

long term impact of minimum wages on workers careers evidence from two decades of longitudinal linked employer employee data i acknowledge the support of the spanish ministry of the economy severo ochoa programme for centres of excellence in r d sev20150563 the aei spain and feder ue grant eco2016 76734 p

minimum wages and the gender wage gap estimates are made of the effect of minimum wages on the size and composition of the gender wage gap in canada in 1986 it is found that minimum wages close the wage gap substantially for young workers and less so for adults the reduction in the gap is most attributable to the adverse employment effects of minimum wages the results also indicate that most of the reduction in the gap is realized through a fall in the discriminatory component

timing and real indeterminacy in monetary models an increasingly common approach to the theoretical analysis of monetary policy is to ensure that a proposed policy does not introduce real indeterminacy and thus sunspot fluctuations into the model economy policy is typically conducted in terms of directives for the nominal interest rate this paper uses a discrete time money in the utility function model to demonstrate how seemingly minor modifications in the trading environment result in dramatic differences in the policy restrictions needed to ensure real determinacy these differences arise because of the differing pricing equations for the nominal interest rate

the new theory of optimum currency areas highbrow opinion is like a hunted hare if you stand long enough it will come back to the place it started from dennis robertson

using regional variation in wages to measure the effects of the federal minimum wage the imposition of a national minimum wage standard provides a natural experiment in which the treatment effect varies across states depending on the fraction of workers initially earning less than the new minimum the author exploits this fact to evaluate the effect of the april 1990 increase in the federal minimum wage on teenagers wages employment and school enrollment comparisons of grouped and individual state data confirm that the rise in the minimum wage increased teenagers wages there is no evidence of corresponding losses in teenage employment or changes in teenage school enrollment

employment effects of minimum and subminimum wages panel data on state minimum wage laws using panel data on state minimum wage laws and economic conditions for the years 1973 89 the authors reevaluate existing evidence on the effects of a minimum wage on employment their estimates indicate that a 10 increase in the minimum wage causes a decline of 1 2 in employment among teenagers and a decline of 1 5 2 in employment for young adults similar to the ranges suggested by earlier time series studies the authors also find evidence that youth subminimum wage provisions enacted by state legislatures moderate the disemployment effects of minimum wages on teenagers

exchange rate volatility and exports new empirical evidence from the emerging east asian economies this paper examines the impact of bilateral real exchange rate volatility on real exports of five emerging east asian countries among themselves as well as to 13 industrialised countries we recognise the specificity of the exports between the emerging east asian and industrialised countries and employ a generalised gravity model in the empirical analysis we use a panel comprising 25 years of quarterly data and perform unit root and cointegration tests to verify the long run relationship among the variables the results provide strong evidence that exchange rate volatility has a negative impact on the exports of emerging east asian countries in addition the results suggest that the pattern of bilateral exports is influenced by third country variables an increase in the price competitiveness of other emerging east asian countries has a negative impact on a country s exports to a destination market but the magnitude of the impact is relatively small these results are robust across different estimation techniques and do not depend on the variable chosen to proxy exchange rate uncertainty the results of the gmm iv estimation also confirm the negative impact of exchange rate volatility on exports and suggest that this negative relationship is not driven by simultaneous causality bias

do minimum wage hikes raise us long term unemployment evidence using state minimum wage rates partridge m d and partridge j s 1999 do minimum wage hikes raise us long term unemployment evidence using state minimum wage rates reg studies 33 713 726 several recent studies have challenged the conventional notion that raising the minimum wage reduces employment this study considers a related but relatively unexplored issue by examining the minimum wage s influence on long durations of unemployment by considering long term unemployment rates this study extends the previous minimum wage literature by examining the persistence of minimum wage effects the empirical analysis considers state data from the latter 1980s a unique period when many states raised their minimum wage above the federal level the results suggest that a greater minimum wage increases long term unemployment rates further evidence indicates that increased minimum wage coverage also raises long term unemployment rates subsequent analysis yielded similar patterns for other aggregate labour market measures thus state

interest rate rules for fixed exchange rate regimes abstract this paper shows that properly designed interest rate rules can be consistent with maintaining exchange rate stability it sheds light on the relation between interest rate rules exchange rate regimes and determinacy of the rational expectation equilibrium in a modern macroeconomic framework

lessons from the eurocrisis for east asian monetary relations i analyse the sources of the eurozone crisis the major conclusion is that the eurozone is insufficiently embedded in a monetary union thereby making it fragile and prone to crises the lesson i draw for east asia is that despite the fact that this region appears to satisfy the traditional optimal currency area oca criteria to form a monetary union the complete absence of political unification makes the prospect of a monetary union in that region of the world both unrealistic and undesirable

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

the youth entitlement demonstration subsidized employment with a schooling requirement the during program employment and school enrollment effects of the youth incentive entitlement pilot projects yiepp are reported this program offered a minimum wage job part time during the school year and full time during the summer to 16 19 year olds from low income households the effect of yiepp is to provide a horizontal demand curve at the minimum wage permitting all target population youths who wish to work at this wage to do so 4 study sites denver cincinnati baltimore and 8 rural counties in southern mississippi and 4 comparison sites phoenix louisville cleveland and a group of counties in western and eastern mississippi were studied through household interviews some results are 1 yiepp increase the site wide average share of days spent both enrolled in school and employed form 9 4 of a youths time without the program to 28 with it 2 time spent in school and not employed decreased by 16 8 and 3 yiepp decreased the share of days spent neither enrolled in school nor employed by 5 3 the ratio of employment sector effects to yiepp employment rates is 74 2 for the public 52 9 for private and 68 4 for total employment unique features of this program are its entitlement nature with sufficient funds available to provide jobs to all eligibles who applied and the fact that school enrollment is required for participation subsidized employment increased total employment for the target population but this occurred with a displacement rate of 31 6 these estimates must be input into future benefit cost calculations of program efficacy

fiscal policy in a currency union at the zero lower bound this paper constructs a two country core periphery new keynesian model of a currency union to address the interaction between the objectives of regionally directed fiscal policy constrained by a single currency and the aggregate use of fiscal policy in face of the zero lower bound zlb on policy interest rates we identify an optimal path of aggregate and relative fiscal policy responses to a negative region specific demand shock our results show that i in a monetary union the optimal policy response to an asymmetric reduction in demand concentrated in the periphery always entails a relative shift of fiscal expenditure toward the worse affected regions ii though no aggregate fiscal response is required outside the zlb and iii optimal union wide fiscal policy is expansionary at the zlb therefore optimal policy always entails an expansion in the periphery at the zlb but the optimal fiscal response in the core regions can be either expansionary or contractionary depending on the parameters of the model however iv fiscal expansion in the core is warranted if the periphery cannot implement an expansion due to constraints on public spending

the effect of a common currency on the volatility of the extensive margin of trade abstract this paper studies the effects of the european monetary unification on the volatility of the extensive margin of trade first we highlight empirical novel facts about the effects of monetary unification we build country level measures of the extensive margin of intra emu exports and describe how their volatilities evolved over time we show that the adoption of a common currency has been associated with an increase of the volatility of the extensive margin of exports for most countries and a decrease in the volatility of the extensive margin of exports for germany second we address this question theoretically and build a two country version of the model of ghironi and melitz 2005 with endogenous entry heterogenous firms endogenous tradability endogenous labor supply and sticky prices we compare the volatility of the extensive margin of trade under fixed exchange rates and in a monetary union monetary unification does imply an increase in the volatility of the extensive margin of trade for pre emu followers such as france or the netherlands and a decrease in the volatility of the extensive margin of trade for the leader germany this pattern is qualitatively consistent with the data but arises only if monetary policy responds moderately to output

on the indeterminacy of equilibrium exchange rates in this paper we consider a particular international economic policy regime the laissez faire regime the distinguishing features of which are unrestricted portfolio choice and floating exchange rates and as we show this regime although favored by many economists is not economically feasible it does not have a determinate equilibrium that is an implication of an overlapping generations model more basically it is an implication of the notion that money is wanted only in order to accomplish trades

some evidence on cross sector effects of the minimum wage this paper tests mincer s minimum wage model by estimating reduced form wage and employment equations for both the covered and uncovered sectors in nine regions of the united states as theory predicts in regions with comparatively small covered sector demand elasticities the northern and midwestern regions the uncovered sector wage increases after a minimum wage hike and in regions with comparatively large demand elasticities the southern and western regions the uncovered sector wage decreases because of data limitations the uncovered sector employment effect could not be estimated sharply and so its relationship to the covered sector demand elasticity is weak

minimum wage policy and community college enrollment patterns in this article the author studies the effect of the minimum wage on community college enrollment using cross border variation in state minimum wages to address spatial correlation in local labor

real output co movements in east asia any evidence for a monetary union of integration in the region would greatly shape the economic structure of each individual economy an d has direct implications for the effectiveness of domestic stabilisation policy and policy coordination this paper empiricall y examines the feasibility of forming a monetary union in east asia by assessing the real output co movements among these economies as suggested by the optimum curr ency area oca theory that losing monetary independence would be the major cost for adopting

debt deleveraging and the exchange rate abstract deleveraging from high debt can provoke deep recession with significant international side effects swings in the nominal exchange rate and large variations in consumption output and terms of trade can happen during the adjustment all these movements are inefficient and interesting trade offs emerge from the perspective of global welfare the optimal adjustment to global imbalances should not necessarily require large movements in the nominal exchange rate a global liquidity trap can be desirable when countries are more open to trade

is a monetary union feasible for east asia the empirical suitability of the east asian economies for potential monetary integration is assessed the structural vector autoregression var method is employed to identify the underlying shocks using a three variable var model across the east asian economies the estimates of the eec are used as a benchmark to compare the size of the underlying shocks and the speed of adjustment to shocks in both regions to determine the feasibility of forming an optimum currency area oca in east asia the empirical results do not display strong support for forming an oca in the east asian region the results do imply however that some small subregions are potential candidates for ocas since their disturbances are correlated and small and these economies adjust rapidly to shocks

disentangling the minimum wage puzzle an analysis of worker accessions and separations changes in the legislation in the mid 1980s in portugal provide remarkably good conditions for analysis of the employment effects of mandatory minimum wages as the minimum wage increased sharply for a very specific group of workers relying on a matched employer employee panel data set we model gross worker flows accessions and separations in continuing firms as well as in new firms and those going out of business using a count regression model applied to proportions employment trends for teenagers the affected group are contrasted to those of older workers before and after the raise in the youth minimum wage the major effect on teenagers of a rising minimum wage has been the reduction of separations from the employer which during the period under analysis has compensated for the reduction of accessions to new and continuing firms in this sense our results can reconcile some of the previous evidence in the empirical literature when analyzing the aggregate impact of the minimum wage on youth employment without decomposing it by type of worker flow jel d21 j23 j38

borders and nominal exchange rates in risk sharing models of risk sharing predict that relative consumption growth rates are positively related to changes in real exchange rates we investigate this hypothesis using a new multicountry and multiregional data set within countries we find evidence for risk sharing episodes of high relative regional consumption growth are associated with regional real exchange rate depreciation across countries however the association is reversed relative consumption and real exchange rates are negatively correlated we define this reversal as a border effect we find the border effect and show that it accounts for over half of the deviations from full risk sharing since cross border real exchange rates involve different currencies it is natural to ask how much of the border effect is accounted for by movements in exchange rates our measures indicate that a large part of the border effect comes from nominal exchange rate fluctuations we develop a simple open economy model that is consistent with the importance of nominal exchange rate variability in accounting for deviations from cross country risk sharing

the effect of the minimum wage on the fast food industry using a longitudinal survey of fast food restaurants in texas the authors examine the impact of recent increases in the federal minimum wage on a low wage labor market less than 5 of fast food restaurants were using the new youth subminimum wage in july august 1991 even though the vast majority paid a starting wage below the new hourly minimum wage immediately before it became effective although some restaurants increased wages beyond the level needed to comply with higher minimum wages in both 1990 and 1991 those federal minimum wage increases greatly compressed the distribution of starting wages in the texas fast food industry two findings at variance with conventional predictions are that 1 employment increased more in those firms likely to have been most affected by the 1991 minimum wage increase than in other firms and 2 price changes were unrelated to mandated wage changes

monetary policy targets and the stabilization objective a source of tension in the ems abstract this paper evaluates two different monetary regimes in the ems an asymmetric regime with ems monetary policy oriented towards german targets and a symmetric regime with ems wide targets deterministic and stochastic simulations of a macroeconometric model are used to study spillovers adjustment and stabilization in ems economies they show that there exists a significant trade off between the two regimes in terms of output and price deviations from target while germany enjoys more stability under the asymmetric regime the other ems economies are stabilized more effectively by a symmetric target the resulting tension must have been at least partly responsible for the recent ems crises

minimum wages and teenagers enrollment employment outcomes a multinominal logit model this paper tests the hypothesis that the effect of minimum wage legislation on teenagers education decisions is asymmetrical across family income classes with the legislation inducing children from low income families to reduce their levels of schooling and children from higher income families to increase their educational attainment we use data from the national longitudinal surveys nls and exploit the fact that although the minimum wage is fixed at a point in time its value relative to adult wages varies across areas multinomial logit models of teenagers enrollment employment outcomes are estimated the hypothesis appears to be confirmed for white teens however the evidence for nonwhites is more ambiguous

an empirical study of re enrolement behaviour for male high school dropouts to understand further the behaviour of high school dropouts during their periods away from school this paper studied empirically the decisions of male dropouts on whether to return to school we applied the bivariate probit multinomial logit and waiting time models to analyse this issue the estimation results from all three models indicate that the armed forces qualification test score age experience of using drugs local labour market situation and the duration of the period out of school had significant effects on a male dropout s return decision family background variables contrary to what we expected had little effect on this decision

taylor rules in the open economy abstract taylor rules which link short term interest rates to fluctuations in inflation and output have been shown to be a good guide both positively and normatively to the conduct of monetary policy as a result they have been used extensively to model policy in the context of both closed and open economy models their determinacy properties have also been analysed in the context of closed and to a more limited degree in small open economy models in this paper we extend the analysis of the determinacy properties of taylor rules to the case of a benchmark two country model when the rules are specified in terms of output price inflation we confirm and extend the conventional results from the closed economy literature satisfying the taylor principle is the key to ensuring determinacy although the presence of backward looking price setting can affect the determinacy properties of the two country model however the conventional results do not hold when we replace output price inflation with consumer price inflation in the specification of the rule in this case taylor rules which satisfy the taylor principle will be indeterminate unless there is an unusually large home bias in consumption similar indeterminacy problems arise when one country targets cpi inflation and the other output price inflation in this case we show that even if determinacy is achieved large spillovers may occur between countries

on the optimality of a gcc monetary union structural var common trends and common cycles evidence this paper examines the suitability of the proposed monetary union among the members of the gulf cooperation council gcc to do so we identify the underlying structural shocks that these economies are subject to and assess the extent to which the shocks are symmetric additionally we test for common trends and common business cycles among the gcc economies we find that while the transitory demand shocks are typically symmetric the permanent supply shocks are asymmetric furthermore we do not find synchronous long run and short run movements in output despite the progress that has been made in terms of integration our findings indicate that the conditions for forming a gcc monetary union have not as yet been met

exchange rate determination under interest rate rules we propose a theory of exchange rate determination under interest rate rules in a two country model we first show that simple interest rate feedback rules can determine a unique and stable equilibrium without any explicit reaction to the nominal exchange rate we characterize how the behavior of the exchange rate and of the terms of trade depends in a critical way on the monetary regime chosen though not necessarily on monetary shocks we give a simple account of exchange rate volatility in terms of monetary policy rules we provide an explanation of the relation between nominal exchange rate volatility and macroeconomic variability in terms of the monetary regime adopted by monetary authorities

labor market search and schooling investment we generalize a search matching and bargaining model to allow individuals to acquire productivity enhancing schooling prior to labor market entry in general search frictions and weakness in bargaining position contribute to underinvestment in schooling from an efficiency perspective using estimates of a general equilibrium version of the model in which firm vacancy creation decisions are included we find that minimum wages and schooling subsidies improve aggregate welfare but have very different welfare impacts across the ability distribution in particular policies that maximize the average welfare of workers have strongly negative effects on the welfare of the least able

implications for minimum wage policies of an s shaped labor supply curve abstract a model of family labor supply provides a rationale for raising minimum wages when the labor supply response is negative at low wages under those circumstances the labor market can be caught in a malthusian poverty trap of excess supply unemployment overextended workdays child labor and falling wages raising minimum wages may therefore help resorb this excess supply and stabilize the labor market setting a virtuous cycle in motion in a two sector context such a policy would increase wages in both the covered and uncovered sectors evidence from a study of costa rica in particular is consistent with those conclusions

the dampening effect of bank foreign liabilities on monetary policy revisiting monetary cooperation in east asia abstract this paper addresses the cost of formal monetary cooperation from the perspective of monetary policy effectiveness as banks tend to borrow from abroad in foreign currencies to fund domestic lending monetary policy may have a reduced effect on the credit market and the economy results derived from bank level data in east asia indicate that bank foreign liabilities significantly reduce the effectiveness of the credit channel of monetary policy implying a relatively low cost of giving up monetary autonomy

convergence and anchoring of yield curves in the euro area we study the convergence of european bond markets and the anchoring of inflation expectations in the euro area using high frequency bond yield data for france germany italy and spain as well as smaller euro area countries and a control group comprising the uk denmark and sweden we find that economic and monetary union emu has led to substantial convergence in euro area sovereign bond markets in terms of interest rate levels unconditional daily fluctuations and conditional responses to major macroeconomic announcements our findings also suggest a substantial increase in the anchoring of long term inflation expectations since emu particularly for italy and spain which have seen their long term interest rates become much lower much less volatile and much better anchored in response to news finally we present evidence that the elimination of exchange rate risk and the adoption of a common monetary policy were the primary drivers of bond market convergence in the euro area as opposed to fiscal policy restraint and the loose exchange rate peg of the 1990s jel no e52 e58

the distributional impacts of minimum wage increases when both labor supply and labor demand are endogenous we develop and estimate a one shot search model with endogenous firm entry and therefore zero expected profits and endogenous labor supply positive employment effects from a minimum wage increase can result as the employment level depends upon both the numbers of searching firms and workers welfare implications are similar to the classical analysis workers who most want the minimum wage jobs are hurt by the minimum wage hike with workers marginally interested in minimum wage jobs benefiting we estimate the model using cps data on teenagers and show that small changes in the employment level are masking large changes in labor supply and demand teenagers from well educated families see increases in their employment probabilities and push out their less privileged counterparts from the labor market this article has supplementary material online

exchange rate flexibility under the zero lower bound an independent monetary policy and a flexible exchange rate generally help a country in adjusting to macroeconomic shocks but recently in many countries interest rates have been pushed down close to the lower bound limiting the ability of policy makers to accommodate shocks even with flexible exchange rates this paper argues that when the zero bound constraint on nominal interest rates is binding and policy lacks an effective forward guidance mechanism a flexible exchange rate system may be inferior to a single currency area with monetary policy constrained by the zero bound a flexible exchange rate exacerbates the impact of shocks remarkably this may hold true even if only a subset of countries are constrained by the zero bound and other countries optimally adjust their interest rate targets for a regime of multiple currencies to dominate a single currency in a zero bound environment it is necessary to have effective forward guidance in monetary policy

minimum wage effects in the longer run exposure to minimum wages at young ages could lead to adverse longer run effects via decreased labor market experience and tenure and diminished education and training while beneficial longer run effects could arise if minimum wages increase skill acquisition evidence suggests that as individuals reach their late 20s they earn less the longer they were exposed to a higher minimum wage at younger ages and the adverse longer run effects are stronger for blacks if there are such longer run effects of minimum wages they are likely more significant than the contemporaneous effects on youths that are the focus of research and policy debate

criminal behaviour and youth in the labour market the case of the pernicious minimum wage this paper empirically tests the relationship between variations in uniform crime reports ucr index crime rates for teenagers 16 19 years of age with changes in the real minimum wage adjusted for industry coverage in the united states for the period 1960 1987 the analysis reveals that there exists a positive relationship between changes in the real minimum wage and teenage criminal homicide forcible rape and motor vehicle theft crime rates these findings are consistent with the empirical evidence concerning the impacts of the minimum wage on youth labour market opportunities and also with the theoretical ad empirical evidence regarding the incidence of criminal activity made as an occupational choice decision formulated under risk and uncertainty however the results indicate no impact of the minimum wage on the other teenage ucr index crime rates as found by hashimoto 1987 the evidence also suggests that variations in real criminal justice expenditures per capita reduce teenage propety crime ra