population increase economic growth educational inequality and income distribution some recent evidence abstract using a recent inter country sample impacts of population increase short run growth rate and educational level and inequality on income distribution are assessed as in almost all other studies high population increase is observed to be a disequalizer however unlike the position indicated in several earlier studies rapid short run economic growth seems to reduce income inequality while higher mean schooling level appears to be a mild equalizer contrary to the results reported by earlier researchers no adverse effect of educational inequality on income distribution is found

inequality in the globalizing asia this article investigates the impact of globalization on the inequality of asia it is the first attempt to examine 11 asian countries panel data allowing nonlinearity between globalization and inequality from 1960 to 2003 with robustness check we also survey the literature on growth globalization and inequality and reflect their endogenous relationships to our article we found the significant turning point of globalization at which inequality starts decreasing as further globalization proceeds it will offer us policy implications for the ongoing process of globalization in the asian economies

managing currency pegs the combination of a fixed exchange rate and downward nominal wage rigidity creates a real rigidity in turn this real rigidity makes the economy prone to involuntary unemployment during external crises this paper presents a graphical analysis of alternative policy strategies aimed at mitigating this source of inefficiency first and second best monetary and fiscal solutions are analyzed second best solutions are prudential whereas first best solutions are not

development and inequality revisited three decades after the seminal article of kuznets 1955 and one decade after the empirical investigation of ahluwalia 1976b the relationship between income inequality and economic developement is still controversial this paper examines the above relationship within a time series cross section framework in a sample of countries which are representative of the non centrally planned economies of the world we use gdp per capita in real un international comparison project dollors as an indicator of a country s level of economic development the results lend support to the kuznets inverse u hypothesis although other factors relfecting the institutional setting of a country are found to affect income inequality significantly during the development process as well similar results are obtained if we exclude developed countries from the sample

excessive volatility in capital flows a pigouvian taxation approach this paper analyzes prudential controls on capital flows to emerging markets from the perspective of a pigouvian tax that addresses externalities associated with the deleveraging cycle it presents a model in which restricting capital inflows during boom times reduces the potential outflows during busts this mitigates the feedback effects of deleveraging episodes when tightening financial constraints on borrowers and collapsing prices for collateral assets have mutually reinforcing effects in our model capital controls reduce macroeconomic volatility and increase standard measures of consumer welfare

price changes in the euro area and the united states some facts from individual consumer price data prices of goods and services do not adjust immediately in response to changing demand and supply conditions this paper characterizes the average frequency and size of price changes in the euro area and its member countries investigates the determinants of the probability of price changes and compares the evidence for the euro area with available u s results the facts documented in this paper are based on evidence from individual price data recorded at the store level in all euro area countries except ireland and greece that is in datasets covering austria belgium finland france germany italy luxembourg the netherlands portugal and spain which together account for around 97 percent of euro area gdp the data used are the monthly price records underlying the computation of national consumer price indices and harmonized consumer price indices these data cover a large number of products selected on the basis of extensive household budget surveys

money growth targeting by the bundesbank abstract the recent debate over monetary strategies concludes that monetary and inflation targeting lead to very similar patterns of central bank behavior why then do central banks insist on the strategies they use in this paper we develop an answer from political economy arguing that monetary strategies are helpful in solving internal and external coordination problems for the central bank we illustrate the point by reviewing the bundesbank s experience with money growth targeting in the mid 1970s monetary targeting was a signal that the previous monetary regime had been overcome and a means to define the role of monetary policy vis a vis other players in the macroeconomic policy game and to structure the internal monetary policy debate

real wage rigidities and the new keynesian model most central banks perceive a trade off between stabilizing inflation and stabilizing the gap between output and desired output however the standard new keynesian framework implies no such trade off in that framework stabilizing inflation is equivalent to stabilizing the welfare relevant output gap in this paper we argue that this property of the new keynesian framework which we call the divine coincidence is due to a special feature of the model the absence of nontrivial real imperfections we focus on one such real imperfection namely real wage rigidities when the baseline new keynesian model is extended to allow for real wage rigidities the divine coincidence disappears and central banks indeed face a trade off between stabilizing inflation and stabilizing the welfare relevant output gap we show that not only does the extended model have more realistic normative implications but it also has appealing positive properties in particular it provides a natural interpretation for the dynamic inflation unemployment relation found in the data

occbin a toolkit for solving dynamic models with occasionally binding constraints easily abstract the toolkit adapts a first order perturbation approach and applies it in a piecewise fashion to solve dynamic models with occasionally binding constraints our examples include a real business cycle model with a constraint on the level of investment and a new keynesian model subject to the zero lower bound on nominal interest rates compared with a high quality numerical solution the piecewise linear perturbation method can adequately capture key properties of the models we consider a key advantage of the piecewise linear perturbation method is its applicability to models with a large number of state variables

capital controls spillovers abstract i set up a three country business cycle model with one advanced ae and two emerging economies emes to analyze the spillover effects arising from capital controls following a push factor shock from the ae if one eme tightens capital controls the other eme experiences an additional wave of foreign investments which amplify the macroeconomic boom the spillovers effects are welfare improving for the other eme which can borrow at a lower interest rate moderate capital controls may be useful to emes to affect the interest rate at which they trade international bonds coordination among emes in setting capital controls delivers relatively small welfare gains compared with the nash equilibrium

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

how the world achieved consensus on monetary policy the worldwide progress in monetary policy is a great achievement and especially considering the situation 30 years ago a remarkable success story i describe how the world achieved a working consensus on the core principles of monetary policy by the late 1990s i survey the muddled state of affairs in the 1970s and then ask what happened in federal reserve policy to produce an understanding of the practical principles of monetary policy how did formal institutional support for targeting low inflation abroad follow from an international acceptance of these ideas and how did a consensus theoretical model develop in academia i explain how the modern theoretical consensus known alternatively as the new neoclassical synthesis or the new keynesian model of monetary policy reinforces key advances the priority for price stability the targeting of core rather than headline inflation the importance of credibility for low inflation and preemptive interest rate policy supported by transparent objectives and procedures of course a working consensus does not constitute complete agreement accordingly the conclusion identifies important monetary policy issues that remain to be explored

an alternative source of measurement error as an explanation for the inverted u hypothesis in the rapidly growing literature on the relationship between income distribution and economic development two of the most frequently investigated issues are the so called inverted u hypothesis otherwise known as the kuznets curve and short run trends in income distribution the inverted u hypothesis alleges that the relationship between income inequality and per capita income resembles an inverted u wherein at low levels of development there is little inequality but as income per capita rises inequality rises also but only up to a point after which it gradually decreases irrespective of the u shape of the relationship there is also very considerable interest in the direction size and explanation for trends in income distribution in developing countries

optimal simple and implementable monetary and fiscal rules welfare maximizing monetary and fiscal policy rules are studied in a model with sticky prices money and distortionary taxation the ramsey optimal policy is used as a point of comparison the main findings are the size of the inflation coefficient in the interest rate rule plays a minor role for welfare it matters only insofar as it affects the determinacy of equilibrium optimal monetary policy features a muted response to output interest rate rules that feature a positive response to output can lead to significant welfare losses the welfare gains from interest rate smoothing are negligible optimal fiscal policy is passive the optimal monetary and fiscal rule combination attains virtually the same level of welfare as the ramsey optimal policy

the effect on income distribution of development the growth rate and economic strategy abstract an analysis of cross section and time series data for 83 countries confirms some and contradicts other work on income distribution new findings include a dualistic socio political system is highly unfavorable for equality neither the extent of government intervention in the economy nor the rate of manufactured exports are systematically related to income distribution the analysis confirms that there is no systematic relationship between equality and the rate of economic growth educational participation and a reduction in the share of primary exports in gdp are both favorable for equality there is some support for the kuznets hypothesis that inequality increases as per capita income rises to about 400 and then declines with further income increase but the empirical support is not strong and may be weakening over time these findings lead to more optimistic conclusions then other work that rapid growth in a mixed economy is quite consistent with unchanged or even improved income distribution even at early stages of development

capital controls and monetary policy autonomy in a small open economy abstract is there a link between capital controls and monetary policy autonomy in a country with a floating currency shocks to capital flows into a small open economy lead to volatility in asset prices and credit supply to lessen the impact of capital flows on financial instability a central bank finds it optimal to use the domestic interest rate to manage the capital account capital account restrictions affect the behavior of optimal monetary policy following shocks to the foreign interest rate capital controls allow optimal monetary policy to focus less on the foreign interest rate and more on domestic variables

development and distribution a critique of the cross country u hypothesis abstract this paper questions the validity of a modern paradigm viz the u hypothesis it argues that notwithstanding contrary claims the recent cross country econometric studies by ahluwalia and others have little in common from a methodological point of view with kuznets earlier intertemporal national studies ahluwalia s cross country u curve is found to be based on defective statistics and questionable methodological premises in specific the estimation of one u curve from observations on both ldcs and dcs is criticised a sample restricted to the ldc group considerably weakens support for the u hypothesis further even marginal variations in the data set lead to the virtual disappearance of ahluwalia s empirical relationship the paper concludes that the cross country u hypothesis is more of a hindrance than an aid to our comprehension of the relationship between economic growth and income distribution

monopolistic competition and the effects of aggregate demand how important is monopolistic competition to an understanding of the effects of aggregate demand on output we ask the question at three levels can monopolistic competition by itself explain why aggregate demand movements affect output can it together with other imperfections generate effects of aggregate demand in a way that perfect competition cannot if so can it give an accurate account of the response of the economy to aggregate demand movements the answers are no yes and yes

optimal interest rate smoothing this paper considers the desirability of the observed tendency of central banks to adjust interest rates only gradually in response to changes in economic conditions it shows in the context of a simple model of optimizing private sector behaviour that assignment of an interest rate smoothing objective to the central bank may be desirable even when reduction of the magnitude of interest rate changes is not a social objective in itself this is because a response of policy to irrelevant lagged variables may be desirable owing to the way it steers private sector expectations of future policy

the benefits and costs of monetary union in southern africa a critical survey of the literature with the 14 members of the southern african development community sadc having set the objective of adopting a common currency for the year 2018 an expanding empirical literature has emerged evaluating the benefits and costs of a common currency area in southern africa this paper reviews that literature focusing on two categories of studies 1 those that assume that a country s characteristics are invariant to the adoption of a common currency and 2 those that assume that a monetary union alters an economy s structure resulting in trade creation and credibility gains the literature reviewed suggests that a relatively small group of countries typically including south africa satisfies the criteria necessary for monetary unification the literature also suggests that in a monetary union comprising all sadc countries and a regional central bank that sets monetary policy to reflect the average economic conditions e g fiscal balances in the region the potential losses i e higher inflation from giving up an existing credible national central bank a relevant consideration for south africa could outweigh any potential benefits of trade creation resulting from a common currency

inequality and development across and within countries summary this paper provides a cross country comparison of how income inequality has evolved within countries at different levels of development it uses overlapping nonparametric regression which allows visual comparisons of inequality both within and across countries as a result the methodology allows more specific conclusions than cross country regressions and yet is more general than within country case studies the approach highlights the problematic conclusions that can arise with parametric regressions in particular with tests of the kuznets curve while some previous results are confirmed some new results on inequality across countries are also discovered

testing the determinants of income distribution in major league baseball i introduction income of professional athletes is a frequent topic of discussion of fans sportscasters and the general public economists have also increasingly been attracted to this topic because the distribution of income of these players has both policy and business implications as a consequence the report of major league baseball s mlb blue ribbon panel formed in 1998 by mlb commissioner bud selig received quite a lot of attention this panel was charged with describing and explaining the economic condition of mlb comprised of such dignitaries as former federal reserve chairman paul volker senator george mitchell yale university president richard levin and columnist george will this panel reported that team payrolls have become increasingly disparate the gap between rich and poor teams is not only wide but is growing levin et al 2000 a case in point is the fact that the salary of the highest paid player in the 2000 season los angeles kevin brown at 15 7 million was 95 of the entire payroll of the poorest team the minnesota twins the effect according to the panel s report is a dramatic decline in parity and competitiveness of mlb since 1994 a team in the top payroll quartile has won every world series game in 1999 the teams with the five largest payrolls had an average winning percentage of 0 557 whereas the five poorest teams had a comparable figure of 0 444 the report discusses various recommendations that may narrow this gap leading to what one might call convergence in team payrolls this article examines the distribution of income in mlb for 1985 to 2000 we revive and extend a technique first suggested by thurow 1970 and show how it can be used to test for time trends versus cross sectional demographic and economic aspects influencing income distribution thurow 1970 discusses the impact of various measures on median income in the present case by calculating the gini coefficient we can discuss the impact that the explanatory variables have on income inequality in the context of mlb we attempt to shed light on the reasons why teams have greater or lesser payroll disparity we leave the question of the effect of between team payroll inequality on team wins and team revenues for future research the issue of whether to use an inequality measure that is based on a particular distribution or one that is distribution free has been widely discussed in the income distribution literature silber 1999 ryu and slottje 1999 in advocating the use of parametric distributions point to several benefits of estimating the lorenz curve in this manner these benefits include the ability to summarize thousands of observation points with a few parameters the ability to estimate the density function at any point an enhanced ability to construct inequality measures and the ability to formulate possible laws that would otherwise not be possible to detect however there are problems associated with the use of a parametric lorenz curve such as the choice of a suitable distribution the problem is compounded by the fact that income data are often grouped and have an open ended highest income category making it difficult to obtain accurate estimates one advantage of using professional sports data is the fact that the salary is available per individual and is not grouped consequently an actual number is available for the highest income this study analyzes payroll inequality in a professional sport by team that is for each year we calculate a measure of inequality for each mlb team and consider the characteristic differences in within team payroll distributions our study is not however the first to consider income inequality within professional team sports depken 2000 and jewell and molina 2004 find that mlb teams with greater wage disparity have fewer wins furthermore sommers 1998 finds a negative relationship between team success and within team payroll inequality using national hockey league data

refitting the kuznets curve using a gender specific threshold model abstractprevious studies have reached mixed conclusions regarding the relationship between inequality and per capita income these studies however fail to consider gender differences in income inequality and how these may impact on the relationship between income inequality and per capita income using australian taxation statistics we derive three sets of gini coefficients i e female male and total for the period 1950 2013 we then examine the relationship between inequality and real per capita income and find that a gender specific threshold panel regression outperforms three other conventional models our findings suggest that one set of coefficients does not fit all in that the use of aggregate and constant coefficients may mask variations within and between gender inequality over time

optimal trade policy with trade imbalances abstract optimal trade and capital control policies are characterized under a dynamic model with endogenous trade imbalances in the absence of capital controls optimal trade protection is counter cyclical optimal use of capital controls however dampens the time variation of optimal trade taxes generally trade imbalances are not predictive of optimal policy however optimal trade policy and equilibrium trade imbalances move together when a country grows consistently faster or slower than the rest of the world quantifying the model for the u s economy shows that welfare gains from optimal policy are largely due to static terms of trade effects implying that gains from time varying tariffs or capital controls are small

monetary targets as a policy rule lessons from the swiss experience abstract this paper provides a survey and analysis of swiss monetary policy since the shift to a floating exchange rate in 1973 although the swiss national bank snb by international comparison managed to achieve a high degree of price stability it could not prevent temporary bursts of inflation i argue that the problem lay in an inappropriate snb response to such disturbances as unexpected exchange rate shocks and show that in constructing optimum feedback rules the snb must take account of the logs in the effects of monetary policy i also discuss the snb s current strategy resting on a medium term growth target for the monetary base

monetary policy divergence and net capital flows accounting for endogenous policy responses abstract this paper measures the effect of monetary tightening in key advanced economies on net capital flows around the world measuring this effect is complicated by the fact that the domestic monetary policies of affected economies respond endogenously to the foreign tightening shock using a structural var framework with quarterly panel data we estimate the impulse responses of domestic policy variables and net capital flows to a foreign monetary tightening shock we find that the endogenous response of domestic monetary policy depends on each economy s capital account openness and exchange rate regime we use a method to compute counterfactual impulse responses for net capital outflows under the assumption that the domestic policy rate does not respond to foreign monetary tightening our results suggests that failing to account for the endogenous response of domestic monetary policy biases down the estimated elasticity of net capital flows to foreign interest rates by as much as one third for countries with open capital accounts

income distribution and sociopolitical instability as determinants of savings a cross sectional model the purpose of this cross national study is twofold first it introduces income distribution and sociopolitical instability as arguments in the savings function second it presents some empirical evidence in relation to their quantitative effects on savings it is shown that sociopolitical instability has profound effects on the savings ratio it is also shown that the bulk of savings is produced by the middle income class as a result a redistribution of income at the expense of the upper income class yields a constant or an increased savings ratio developing on whether such a redistribution includes the lower income class or not

financial crises and exchange rate policy this paper studies exchange rate policy in a small open economy model featuring an occasionally binding collateral constraint and fisherian deation the goal is to evaluate the performance of alternative exchange rate policies in sudden stop prone economies the key element of the analysis is a pecuniary externality arising from frictions in the international credit markets which creates a trade o between price

income distribution and development some stylized facts in recent years the relationship between income distribution and the process of development has come under increasing scrutiny much of the debate has focused on the hypothesis originally advanced by simon kuznets that the secular behavior of inequality follows an inverted u shaped pattern with inequality first increasing and then decreasing with development this hypothesis has become so much a part of the conventional wisdom on this subject that it has generated considerable skepticism about the welfare implications of the development process indeed on some interpretations developing countries face the grim prospect not just of increasing relative inequality but also of declining absolute incomes for the lower income groups

a panel data heterogeneous bayesian estimation of environmental kuznets curves for co2 emissions this article investigates the environmental kuznets curves ekc for co2 emissions in a panel of 109 countries during the period 1959 to 2001 the length of the series makes the application of a heterogeneous estimator suitable from an econometric point of view the results based on the hierarchical bayes estimator show that different ekc dynamics are associated with the different sub samples of countries considered on average more industrialized countries show evidence of ekc in quadratic specifications which nevertheless are probably evolving into an n shape based on their cubic specification nevertheless it is worth noting that the eu and not the umbrella group led by us has been driving currently observed ekc like shapes the latter is associated to monotonic income co2 dynamics the eu shows a clear ekc shape evidence for less developed countries consistently shows that co2 emissions rise positively with income though there are some signs of an ekc analyses of future performance neverthe