has job stability decreased population data from a small open economy we use a population based employer employee dataset to analyze changes in job stability in norway we first present descriptive analyses of tenure and separation rates followed by regression adjusted measures controlling for changes in demographics and the business cycle we see only weak evidence of changes in the tenure rates in particular for the public sector we find a slight increase in short tenures and a decrease in tenures above eight years however we do not find that this tendency towards less stable jobs leads to an increase in the flow to unemployment or out of the labor force

the real effects of financial integration abstract this paper shows how correlations in gdp fluctuations rise with financial integration finance serves to increase international correlations in both consumption and gdp fluctuations which explains the persistent gap between the two in the data a quantity puzzle the positive association between financial integration and gdp correlation constitutes a puzzle as theory suggests a negative relation if anything nevertheless it prevails in the data even after the effects of finance on trade and specialization are accounted for

international financial integration and crisis contagion international financial integration helps to diversify risk but also may spread crises across countries we provide a quantitative analysis of this trade off in a two country general equilibrium model with collateral constrained borrowing using a global solution method borrowing constraints bind occasionally depending upon the state of the economy and levels of inherited debt we examine different degrees of international financial integration moving from financial autarky to bond and equity market integration financial integration leads to a significant increase in global leverage substantially escalates the probability of crises for any one country and dramatically increases the degree of contagion across countries outside of crises the impact of financial integration on macroeconomic aggregates is relatively small but the impact of a crisis with integrated international financial markets is much less severe than that under financial market autarky thus a trade off emerges between the probability of crises and the severity of crises using a large cross country database of financial crises in developing and developed economies over a forty year period we find evidence in support of the model

optimal monetary policy exchange rate misalignments and incomplete financial markets abstract recent literature shows that when international financial trade is restricted to autarky or a single bond there are internal and external welfare trade offs that imply optimal monetary policy in principle deviates from inflation targeting in order to offset real exchange rate misalignments this paper develops a more realistic model of incomplete markets where there is international trade in multiple assets the analysis shows that the presence of multiple assets creates a potentially powerful interaction between monetary policy and household portfolio allocation this interaction is by definition not present when there is financial autarky or a single tradeable bond and this paper shows that the interaction with portfolio allocation can imply that optimal monetary policy generates a quantitatively much more significant stabilisation of the real exchange rate gap than implied by simpler models of financial market incompleteness

a dual liquidity model for emerging markets the last few years have seen a significant re evaluation of the models used to analyze crises in emerging markets recent models typically stress financial constraints or distorted financial incentives while this certainly represents progress these models share a weakness with the earlier work neither is uniquely about emerging markets adaptations of the mundell fleming model represent argentina as a belgium with larger external shocks likewise emerging market models of financial constraints are adaptations of developed economy ones with tighter financial constraints in our work we have advocated a model which distinguishes between the financial constraints affecting borrowing and lending among agents within an emerging economy and those affecting borrowing from foreign lenders this dual liquidity model offers a parsimonious description of the behavior of firms governments and asset prices during financial crises it also provides prescriptions for optimal policy responses to these crises

credit constraints and the international propagation of us financial shocks abstract this paper investigates whether credit constraints in the us economy amplify the international propagation of us financial shocks we model the dynamics of the us economy jointly with global macroeconomic and financial variables using a threshold vector autoregression this model captures regime specific dynamics conditional on the severity of credit constraints in the us economy we identify three main episodes of tight credit in us financial history over the past thirty years these occur in the late 1980s in the early 2000s and during the 2007 09 financial crisis we find that us financial shocks are associated with a significant contraction in global economic activity in times of tight credit by contrast there is little impact of us financial shocks on the global economy in normal times this asymmetry highlights an international dimension of the us financial accelerator mechanism

sectoral transformation and labour market flows in this chapter we examine the dynamics of adjustment in the labour market and in particular the movement of workers between industries it is often assumed that the speed with which the labour market must adjust has increased due to globalisation and or technological change if this is the case then these forces may be responsible for greater instability in the workplace the displacement of growing numbers of especially unskilled workers from declining sectors longer periods of unemployment and wage losses

evaluating international financial integration in a center periphery economy abstract does opening up capital markets facilitate risk diversification across borders are all countries gradually better off in the process of international financial integration this paper explores welfare implications for various countries in a center periphery framework with endogenous portfolio choice financial integration is divided into four stages financial autarky two country integration center periphery integration and global integration two effects from financial integration emerge diversification effects and financial terms of trade effects results show that financial integration between the center and a new periphery in center periphery integration generates welfare losses for the peripheral country already integrated and welfare gains for the central country allowing for financial integration between peripheries in global integration leads the welfare in the center to deteriorate from two country integration directly to global integration the large country gains while the small one loses

monetary information and monetary neutrality abstract the monetary theory of business fluctuations in market clearing models constructed under the rational expectations assumption as advanced by lucas and others involves the idea that suppliers and demanders will typically misinterpret movements in the general level of prices as representing more or less favorable relative opportunities for real activities the present paper examines the consequences of agents possessing contemporaneous monetary information of a potentially noisy variety for the non neutrality of unanticipated monetary events within such an equilibrium business cycle model this modification of the information structure has the strong testable implication that real activity will be uncorrelated with contemporaneous monetary data

exchange rates and trade the case of irish exports to britain this paper examines the effect of changes in the punt sterling exchange rate on exports from ireland to britain the approach used here differs significantly from that used in most other studies in that the long run neutrality of the punt sterling exchange rate with regard to exports from ireland to britain is tested using a recently developed technique there is strong evidence that the exchange rate is neutral in the long run

long run neutrality high inflation and bank insolvencies in argentina and brazil abstract using long low frequency data on money and output over 1884 1996 for argentina and over 1912 1995 for brazil it is found that money is long run neutral but not long run superneutral with regard to real output a rise in money growth is associated with a decline in output the opposite of the tobin effect the introduction of dummy variables for 1930s or to capture recent periods of financial disruption associated with bank insolvencies does not restore long run superneutrality for either country however results indicate that bank insolvency episodes have a distinct and negative influence on output

asset pledgeability and international transmission of financial shocks abstract this paper studies the international transmission of pledgeability shocks as the recent crisis involved a negative shock to the pledgeability of assets the paper develops a two country portfolio model with leveraged investors that incorporates this type of shock and a solution approach for the corresponding portfolio choice problem this approach captures the effect of pledgeability on asset risk premiums the paper finds that the equilibrium portfolios play a heightened role as transmission channels moreover by complementing the effect of productivity shocks under borrowing constraints the pledgeability shocks improve the fit of an otherwise standard international macroeconomic model for the g7 countries especially during crises

testing long run neutrality using intra year data previous tests of the long run neutrality hypothesis have generally relied on annual time series data this paper analyses the long run neutrality of money in australia using different sources of intra year data which permits an examination of the effects of seasonality and the robustness of previous empirical results a reduced form arima model is used with both quarterly seasonally unadjusted and adjusted australian real gdp and nominal money supply to test the neutrality hypothesis using two measures of money stock namely m1 and m3 it is shown that the hypothesis is supported using m1 as the measure of money supply while it is rejected using m3 recent trends and developments in the money and credit markets in australia provide a possible explanation of the sensitivity of the outcome to the measure of money stock employed in the analysis

mind the gap please the changing nature of entry jobs in britain we examine wages in jobs taken by those out of work entry jobs and the characteristics of the individuals who fill them there are large entry wage gaps relative to other jobs more importantly real entry wages have fallen by around 20 log points relative to all other jobs since 1979 one quarter of this decline is accounted for by differences in individual and job characteristics and around 40 from an unexplained fall in the position of entry jobs in the wage distribution that entry wages differ from the stock of all wages should be incorporated into labour supply modelling

nominal stability and financial globalization over the past four decades advanced economies experienced a large growth in gross external portfolio positions this phenomenon has been described as financial globalization over roughly the same time frame most of these countries also saw a substantial fall in the level and variability of inflation many economists have conjectured that financial globalization contributed to the improved performance in the level and predictability of inflation in this paper we explore the causal link running in the opposite direction we show that a monetary policy rule which reduces inflation variability leads to an increase in the size of gross external positions both in equity and bond portfolios this appears to be a robust prediction of open economy macro models with endogenous portfolio choice it holds across different modeling specifications and parameterizations we also present preliminary empirical evidence which shows a negative relationship between inflation volatility and the size of gross external positions

the role of worker flows in the dynamics and distribution of uk unemployment unemployment varies substantially over time and across sub groups of the labour market worker flows among labour market states act as key determinants of this variation we examine how the structure of unemployment across groups and its cyclical movements across time are shaped by changes in labour market flows using novel estimates of flow transition rates for the uk over the last 35 years we decompose unemployment variation into parts accounted for by changes in rates of job loss job finding and flows via non participation close to two thirds of the volatility of unemployment in the uk over this period can be traced to rises in rates of job loss that accompany recessions the share of this inflow contribution has been broadly the same in each of the past three recessions decreased job finding rates account for around one quarter of unemployment cyclicality and the remaining variation can be attributed to flows via non participation digging deeper into the structure of unemployment by gender age and education the flow approach is shown to provide a richer understanding of the unemployment experiences across population sub groups

international evidence on the historical properties of business cycles we contrast properties of real quantities with those of price levels and stocks of money for ten countries over the last century although the magnitude of output fluctuations has varied across countries and periods relations among real quantities have been remarkably uniform properties of price levels however exhibit striking differences between periods inflation rates are more persistent after world war ii than before and price level fluctuations are typically procyclical before world war ii and countercyclical afterward fluctuations in money are less highly correlated with output in the postwar period but are no more persistent than in earlier periods jel e32 e31

quantitative implications of a debt deflation theory of sudden stops and asset prices abstract this paper shows that the quantitative predictions of an equilibrium asset pricing model with financial frictions are consistent with key features of the sudden stop phenomenon foreign traders incur costs in trading assets with domestic agents and a collateral constraint limits external debt to a fraction of the market value of domestic equity holdings when this constraint does not bind standard productivity shocks cause typical real business cycle effects when it binds the same shocks cause strikingly different effects depending on the leverage ratio and asset market liquidity with high leverage and a liquid market the shocks force fire sales of assets and fisher s debt deflation mechanism amplifies the responses of asset prices consumption and the current account precautionary saving makes these sudden stops infrequent in the long run

sudden spikes in global risk abstract recent episodes october 2008 may 2010 august 2011 have witnessed huge spikes in equity price risk implied volatility apart from their large size several features characterize these risk panics they are global phenomena shared among a broad set of countries there is substantial variation though in the extent to which individual countries are impacted while the impact bears little relation to financial linkages with the epicenter of the crisis in addition there is usually not a large shock to fundamentals that sets off these panics we provide an explanation for these risk panic features in the context of a two country model that allows for self fulfilling shifts in risk

global banks financial shocks and international business cycles evidence from an estimated model this paper estimates a two country model with a global bank using us and euro area ea data and bayesian methods the estimated model matches key us and ea business cycle statistics empirically a model version with a bank capital requirement outperforms a structure without such a constraint a loan loss originating in one country triggers a global output reduction banking shocks matter more for ea macro variables than for us real activity during the great recession 2007 09 banking shocks accounted for about 20 of the fall in us and ea gdp and for more than half of the fall in ea investment and employment

international business cycles with endogenous incomplete markets backus kehoe and kydland 1992 baxter and crucini 1995 and stockman and tesar 1995 find two major discrepancies between standard international business cycle models with complete markets and the data in the models cross country correlations are much higher for consumption than for output while in the data the opposite is true and cross country correlations of employment and investment are negative while in the data they are positive this paper introduces a friction into a standard model that helps resolve these anomalies the friction is that international loans are imperfectly enforceable any country can renege on its debts and suffer the consequences for future borrowing to solve for equilibrium in this economy with endogenous incomplete markets the methods of marcet and marimon 1999 are extended incorporating the friction helps resolve the anomalies more than does exogenously restricting the assets that can be traded

an alternative test of purchasing power parity abstract the fisher and seater fisher m e and seater j j 1993 long run neutrality and superneutrality in an arima framework american economic review 83 402 415 methodology is applied to taylor s taylor a t 2002 a century of purchasing power parity review of economics and statistics 84 139 150 data to test for purchasing power parity generally the evidence is supportive of ppp further fs test statistics have no size distortion problem and test power is improved with longer samples

how do us credit supply shocks propagate internationally a gvar approach abstract we study how us credit supply shocks are transmitted to other economies we use the recently developed gvar approach to model financial variables jointly with macroeconomic variables in 33 countries for the period 1983 2009 we experiment with inter country links based on bilateral trade portfolio investment foreign direct investment and banking exposures capturing both bilateral trade and financial exposures in a gvar fits the data better than using trade weights only we use sign restrictions on the short run impulse responses in the us model to identify the credit supply shocks we find that negative credit supply shocks have strong negative effects on us and foreign gdp credit and equity markets in several countries respond clearly to the shocks exchange rate responses are consistent with a flight to quality to the us dollar the credit supply shocks explain about a fifth of one year ahead output forecast error variance in the us and about a tenth in the euro area and the uk but considerably less elsewhere

financial globalization and real regionalization over the period 1972 1986 the correlations of gdp employment and investment between the united states and an aggregate of europe canada and japan were respectively 0 76 0 66 and 0 63 for the period 1986 to 2000 the same correlations were much lower 0 26 0 03 and 0 07 real regionalization at the same time u s international asset trade has significantly increased for example between 1972 and 1999 united states gross fdi and equity assets in the same group of countries rose from 4 to 23 percent of the u s capital stock financial globalization we argue that these two trends are intimately related we document that the correlation of real shocks between the u s and the rest of the world has declined we then present a model in which international financial market integration occurs endogenously in response to less correlated shocks financial integration further reduces the international correlations in gdp and factor supplies we find that both less correlated shocks and endogenous financial market development are needed to account for all the changes in the international business cycle

the long horizon regression approach to monetary neutrality how should the evidence be interpreted abstract fisher and seater american economic review 83 1993 402 develop a long horizon regression test of long run monetary neutrality and reject it in a long annual u s sample this test often fails to be rejected elsewhere we can resolve the conflicting results

searching for a break in gnp it has been suggested that existing estimates of the long run impact of a surprise move in income may have a substantial upward bias due to the presence of a trend break in postwar u s gross national product data this article shows that the statistical evidence does not warrant abandoning the no trend break null hypothesis a key part of the argument is that conventionally computed p values overstate the likelihood of the trend break alternative hypothesis this is because they do not take into account that in practice the date is chosen based on pretest examination of the data

social security policy in a changing labour market conditions in the uk labour market of the 1990s are markedly different from those which prevailed in the post war period when the modern welfare state was created the main differences include a growth in long term unemployment in female part time employment and in low paid employment and self employment in some respects social security policy has adapted to reflect these new patterns the clearest example of this is the introduction and enhancement of in work benefits such as family credit however two of the main strands of benefit policy in recent decades greater reliance on family based means testing and an increased role for private insurance do not fit so well with labour market trends in the case of the privatization of mortgage insurance the result is likely to be further redistribution away from those in insecure or low paid employment copyright 1995 by oxford university press

evaluating international financial integration under leverage constraints abstract the global financial crisis has undermined many economists views about the benefits of open financial markets anecdotal evidence seems to indicate that financial linkages may propagate shocks during crises this paper develops a simple two country model in which financial liberalisation across countries takes place in the presence of credit market distortions within countries countries may be subject to macro risk coming from productivity shocks and direct shocks to the credit system financial shocks three different degrees of financial linkages between countries are examined it is shown that the type of financial integration is critical for both macroeconomic outcomes and welfare in particular financial integration in bond markets alone may increase aggregate consumption volatility and reduce welfare financial integration in both bond and equity markets generates high positive co movement across countries but is welfare improving

international risk sharing and financial shocks abstract a canonical two country real business cycle model with complete international asset markets fails to replicate the correlation between relative consumptions and real exchange rates i e the consumption real exchange rate anomaly or backus smith puzzle i show that when preferences are non separable between consumption and leisure the same two country model augmented by domestic financial frictions and shocks can account for this correlation positive financial shocks create important fluctuations in the labor wedge inducing firms to demand more labor these procyclical movements in hours worked significantly affect the marginal utility of consumption and help to explain the correlation between relative consumptions and real exchange rates

sticky goods prices flexible asset prices monopolistic competition and monetary policy a monetary general equilibrium asset pricing model with sticky goods prices is developed goods prices are set by monopolistically competitive firms that maximize stock market value equilibria with underutilization of resources excess capacity in some states result in contrast to previous monetary asset pricing models the degree of competition affects capacity utilization monetary policy can affect output and resource utilization in addition to real asset prices depending upon the amount of information available to the monetary authority

a short history of labour turnover job tenure and job security 1975 93 how extensive is labour turnover and how does it vary by gender skill and over time using survey data from britain between 1975 and 1993 this study documents these features and discovers evidence of widening inequalities in job stability and security for the majority still in full time employment average job durations are little changed from those of twenty years ago for those seeking employment however current patterns of job creation mean that entry jobs are now of shorter duration more unstable and relatively less well paid nor do entry jobs offer sufficient access into stable jobs as a result entry jobs are increasingly taken by those with a partner in work polarising the distribution of employment and thereby disenfranchising around one fifth of working age households from regular access to earned incomes copyright 1995 by oxford university press

the changing international transmission of financial shocks evidence from a classical time varying favar we study the changing international transmission of financial shocks over the period 1971 2012 global financial shocks are measured as unexpected changes of a u s financial conditions index fci developed by hatzius et al 2010 we model the fci jointly with a large international data set through a time varying parameter factor augmented var and find that financial shocks have a considerable impact on growth in the nine countries considered moreover financial shocks during the global financial crisis are found to be large by historical standards they explain approximately 20 of gdp growth variation on average over 2008 9 compared to an average of 5 prior to the crisis

global banks and crisis transmission abstract we study the effect of financial integration through banks on the transmission of international business cycles in a sample of 18 20 developed countries between 1978 and 2009 we find that in periods without financial crises increases in bilateral banking linkages are associated with more divergent output cycles this relation is significantly weaker during financial turmoil periods suggesting that financial crises induce co movement among more financially integrated countries we also show that countries with stronger direct and indirect financial ties to the u s experienced more synchronized cycles with the u s during the recent 2007 2009 crisis we then interpret these findings using a simple general equilibrium model of international business cycles with banks and shocks to banking activity the model suggests that the relation between integration and synchronization depends on the type of shocks hitting the world economy and that shocks to global banks played an important role in triggering and spreading the 2007 2009 crisis

empirical evidence on the long run neutrality hypothesis using low frequency international data abstract we use the backus and kehoe american economic review 1992 82 864 888 long low frequency data on real gnp gdp prices and money for australia canada denmark germany italy japan norway sweden the united kingdom and the united states to examine the long run neutrality proposition in doing so we apply the fisher and seater american economic review 1993 83 402 415 non structural methodology paying explicit attention to the univariate time series properties of the variables we conclude that the data are generally supportive of the quantity theoretic proposition that money is long run neutral

the synchronization of credit cycles abstract this paper proposes a simple econometric procedure to test for the synchronization of credit cycles using a century of data for 14 advanced economies we find that credit cycle synchronization dropped in the early 1920s from initially relatively high levels between the 1920s and the 1970s synchronization was overall low and concentrated within five predominantly regional clusters however synchronization has significantly increased in the post bretton woods era and has become less associated with geographic proximity australia denmark france italy japan norway spain switzerland the uk and the us form a single major credit cycle cluster since the 1970s a smaller cluster is formed by canada the netherlands and sweden while the german credit cycle follows a distinct path using logistic regressions we find that the synchronization of credit and business cycles go hand in hand our findings are especially relevant for the international coordination of macroprudential policy as well as to spur and inform further analysis on credit cycle dynamics

effects of foreign currency component in monetary aggregates on money neutrality abstract we test the money neutrality from a new angle the in sample investigation provides evidence that m1 and m2 with or without foreign currency component affect nominal gdp the out of sample approach shows money tends to affect nominal more than real gdp

job tenure and job mobility in britain using work history data from the british household panel survey the authors examine job mobility and job tenure over the period 1915 90 british men and women held an average of five jobs over the course of their work lives and half of all lifetime job changes occurred in the first ten years separation hazards were higher for more recent cohorts implying an increase in job instability as jobs accumulated average tenure lengthened but the proportion of involuntary separations increased for both men and women the rise in job instability was particularly marked in the lowest occupational classification in general job insecurity was greater for men than women

country portfolios in open economy macro models this paper develops a simple approximation method for computing equilibrium portfolios in dynamic general equilibrium open economy macro models the method is widely applicable simple to implement and gives analytical solutions for equilibrium portfolio positions in any combination or types of asset it can be used in models with any number of assets whether markets are complete or incomplete and can be applied to stochastic dynamic general equilibrium models of any dimension so long as the model is amenable to a solution using standard approximation methods we first illustrate the approach using a simple two asset endowment economy model and then show how the results extend to the case of any number of assets and general economic structure

the role of selective job search in uk unemployment selective search where unemployed job losers confine their job seeking efforts to matches in the pre separation sector has attracted consid erable attention as a possible source of high and persistent unemployment however this idea is questionable those opting for selection may do so because this strategy is more effective at gener ating an acceptable offer using uk microdata i find evidence in support of the latter view selective searchers cannot account for the persistence of high unemployment since the early 1980s

two illustrations of the quantity theory of money breakdowns and revivals by extending his data we document the instability of low frequency regression coefficients that lucas 1980 used to express the quantity theory of money we impute the differences in these regression coefficients to differences in monetary policies across periods a dsge model estimated over a subsample like lucas s implies values of the regression coefficients that confirm lucas s results for his sample period but perturbing monetary policy rule parameters away from the values estimated over lucas s subsample alters the regression coefficients in ways that reproduce their instability over our longer sample jel c51 e23 e31 e43 e51 e52 robert e lucas jr 1980 used near unit slopes of univariate regressions of moving averages of inflation and interest rates on money growth for the united states for the period 1953 1977 to illustrate two central implications of the quantity theory of money that a given change in the rate of change in the quantity of money induces i an equal change in the rate of price inflation and ii an equal change in nominal rates of interest lucas said that those two quantity theoretic propositions

the shortage of safe assets in the us investment portfolio some international evidence this paper develops a bayesian global var gvar model to track the international transmission dynamics of two stylized shocks namely a supply and demand shock to us based safe assets our main findings can be summarized as follows first we find that positive supply sided shocks lead to pronounced increases in economic activity which spills over to foreign countries the impact of supply sided shocks can also be seen for other quantities of interest most notably equity prices and exchange rates in europe second a demand sided shock leads to an appreciation of the us dollar and generally lower yields on us securities forcing investors to shift their portfolios towards foreign fixed income securities this yields sizable positive effects on us output equity prices and a general decrease in financial market volatility

on the neutrality of inside and outside money outside money and real economic activity are explored using data on checkable deposits m2 excluding currency the monetary base and real income in the united states from 1900 to 1992 this is done by calculating the long run elasticities of real output with respect to inside and outside components of the money stock small but significant deviations from neutrality are detected for inside money over a range of identifying assumptions the evidence suggests however that the source of non neutrality is not the one hypothesized by gurley and shaw 1960

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite

two illustrations of the quantity theory of money of two central implications of the quantity theory of money that a given change in the rate of change in the quantity of money induces i an equal change in the rate of price inflation and ii an equal change in nominal rates of interest the illustrations were obtained by comparing moving averages of the three variables in question using quarterly u s time series for the period 1953 77 readers may find the results of interest as additional confirmation of the quantity theory as an example of one way in which the quantity theoretic relationships can be uncovered via atheoretical methods from time series which are subject to a variety of other forces or as a measure of the extent to which the inflation and interest rate experience of the postwar period can be understood in terms of purely classical monetary forces the theoretical background of the study is reviewed very briefly as it is familiar material in the next section the data processing methods are described and rationalized in section ii the illustrations

some further evidence on the long run neutrality of money abstract a recently developed reduced form test for long run neutrality is applied to twentieth century australian data on real output and the nominal money stock the results show that narrowly defined money is neutral however real output is not invariant in the long run to a broader based measure of the money stock