macroeconomic effects of precautionary demand for oil summary we evaluate the macroeconomic effects of shocks specific to the oil market which mainly reflect fluctuations in precautionary demand for oil driven by uncertainty about future supplies a two stage identification procedure is used first daily changes in the futures spot price spread proxy for precautionary demand shocks and the path of oil prices is estimated this information is then exploited to restrict the oil price response in a vector autoregression impulse responses suggest that such shocks reduce output and raise prices historical decomposition shows that they contributed significantly to the us recessions in the 1990s and in the early 2000s but not to the most recent slump copyright 2014 john wiley sons ltd

economic shocks wealth and welfare the immediate effects of the asian crisis on the well being of indonesians are examined using the indonesia family life survey an on going longitudinal household survey there is tremendous diversity in the effect of the shock for some households it was devastating for others it brought new opportunities a wide array of mechanisms were adopted in response to the crisis households combined to more fully exploit benefits of scale economies in consumption labor supply increased even as real wages collapsed households reduced spending on semi durables while maintaining expenditures on foods rural households used wealth particularly gold to smooth consumption

distance bank heterogeneity and entry in local banking markets we examine the determinants of entry into italian local banking markets during the period 1991 2002 and build a simple model in which the probability of branching in a new market depends on the features of both the local market and the potential entrant econometric findings show that banks are more likely to expand into those markets that are closest to their pre entry locations large banks are also more able to cope with distance related entry costs than small banks finally banks have become increasingly able to open branches in distant markets due to the advent of information and communication technologies

identifying the effects of a lender of last resort on financial markets lessons from the founding of the fed abstract we use the founding of the federal reserve to identify the effects of a lender of last resort we examine stock return and interest rate volatility during september and october when markets were vulnerable because of financial stringency from the harvest stock volatility fell by 40 and interest rate volatility by more than 70 following the monetary regime change the drop is insignificant if major panic years are omitted from the analysis however because business cycle downturns occurred in the same year as financial crises our results suggest that the existence of the federal reserve reduced liquidity risk

remittance and financial inclusion in refugee migrants inverse probability of treatment weighting using the propensity score abstractthis paper investigates the impact on remittances on financial inclusion of refugee migrants while financial inclusion is gaining traction in the humanitarian and development literature t

the role of collateral in credit markets with imperfect information abstract the paper analyzes the structure of credit market equilibrium under imperfect information collateralization and credit rationing are compared as alternative means to cope with problems of adverse selection and moral hazard it is shown that lenders may use collateral as a self selection and incentive mechanism rationing occurs only if the borrowers collaterizable wealth is too small to allow perfect sorting or to create sufficiently strong incentives whenever there is rationing in an equilibrium some borrowers are charged the maximum amount of collateral

technological change and the rebound effect in the stirpat model a critical view abstract technological change is key to understand the explanatory variables behind environmental impacts in the context of the stirpat stochastic impacts by regression on population affluence and technology model an adequate representation and analysis of the significance of the technology variable t in the stirpat model becomes crucial even more if one aims to better understand underlying processes such as the environmental rebound effect e re a critical review of the application of the stirpat model has been conducted to understand the diversity and value of the variables scopes assumptions statistical approaches and the environmental impacts commonly studied the findings highlight that despite the multiple applications and the high potential of the stirpat model inconclusive results and or knowledge gaps remain notably 1 a geographical imbalance in the scope of studies 2 the almost exclusive focus on carbon emissions 3 a lack of agreement on the choice of data additional explanatory variables and regression models 4 a lack of consensus on how to approximate t and 5 a lack of explicit analyses of the e re our findings are useful to both policymakers and academics for method design further research and policy evaluation

do workers remittances reduce the probability of current account reversals the authors combine the literature on financial crises in emerging markets and developing economies with that on international migrations by investigating whether the increasingly large flows of workers remittances can help reduce the probability of current account reversals the rationale for this stands in the great stability and low cyclicality of remittances as compared with other private capital flows these properties combined with the fact that remittances are cheap inflows of foreign currencies might reduce the probability that foreign investors suddenly flee out of emerging markets and developing economies and trigger a dramatic current account adjustment the authors find that remittances can have such a beneficial effect in particular they show that a high level of remittances as a ratio of gdp makes the relationship between a decreasing stock of international reserves over gdp and a higher probability of current account crises less stringent the same occurs though less neatly for the positive relationship between an increasing stock of external debt over gdp and the probability of current account reversals the results point also to a threshold effect of remittances the mechanisms just described are in fact much stronger when remittances are above 3 percent of gdp

population aging and carbon emissions in oecd countries accounting for life cycle and cohort effects this paper investigates the relationship between emissions of carbon dioxide and the ongoing process of demographic transition in oecd countries our research is motivated by suggestions in the literature that emission relevant consumption patterns may depend on the position in the life cycle and on the birth cohort to which people belong we augment standard macroeconomic emission regressions by including the age and cohort composition of the population our estimation results on a panel of data for 26 countries spanning the period 1960 2005 suggest that both life cycle and cohort effects belong in a macroeconomic emission function for carbon dioxide we find that shifts in both the age and the cohort composition have contributed to rising carbon emissions in oecd countries

what stirpat tells about effects of population and affluence on the environment abstract in the literature on the application of stirpat to environmental impacts of population and affluence the parameter estimates differ from study to study one example is the effect of population size on co 2 emissions which is concluded to be very close to 1 in some studies e g york et al 2003 while far from 1 in others e g shi 2003 what can explain these differences in results in the present paper i offer an alternative model equivalent to stirpat which explicitly specifies the different role of technology t in stirpat from ipat by the alternative model i conclude that different functional forms of stirpat can be one explanation for the difference among estimates in the studies on environmental impacts of population and affluence the alternative model can also help to determine which factors to be added in stirpat

risk based pricing of interest rates for consumer loans abstract by focusing on observable default risk s role in loan terms and the subsequent consequences for household behavior this paper shows that lenders increasingly used risk based pricing of interest rates in consumer loan markets during the mid 1990s it tests three resulting predictions first the premium paid per unit of risk should have increased over this period second debt levels should have reacted accordingly third fewer high risk households should have been denied credit further contributing to the interest rate spread between the highest and lowest risk borrowers for people obtaining loans the premium paid per unit of risk did indeed become significantly larger after the mid 1990s for example for a 0 01 increase in the probability of bankruptcy the corresponding interest rate increase tripled for first mortgages doubled for automobile loans and rose nearly six fold for second mortgages additionally changes in borrowing levels and debt access reflected these new pricing practices particularly for secured debt borrowing increased most for the low risk households who saw their relative borrowing costs fall furthermore while very high risk households gained expanded access to credit the increases in their risk premiums implied that their borrowing as a whole either rose less or sometimes fell

on analyzing the world distribution of income consideration of world inequality should cause reexamination of the key concepts underlying the welfare approach to measuring income inequality and its relation to measuring poverty this reexamination leads to exploration of a new measure that allows poverty and inequality to be considered in the same framework incorporates different approaches to measuring inequality and allows varied expressions of the cost of inequality applied to the world distribution of income for 1820 1992 the new measure provides different perspectives on the evolution of global inequality

remittances and household consumption instability in developing countries this paper analyzes the impact of remittances on household consumption instability in a large panel of developing countries there are four main results first remittances significantly reduce household consumption instability second remittances play an insurance role by dampening the effects of various sources of consumption instability in developing countries natural disasters agricultural shocks discretionary fiscal policy systemic financial and banking crises and exchange rate instability third the stabilizing role played by remittances is stronger in less financially developed countries fourth the overall stabilizing effect of remittances is mitigated when remittances exceed 6 of gdp

quantifying economic damages from climate change author s auffhammer m abstract climate scientists have spent billions of dollars and eons of supercomputer time studying how increased concentrations of greenhouse gases and changes in the reflectivity of the earth s surface affect dimensions of the climate system relevant to human society surface temperature precipitation humidity and sea levels recent incarnations of physical climate models have become sophisticated enough to be able to simulate intensities and frequencies of some extreme events like tropical storms under different warming scenarios in a stark juxtaposition the efforts involved in and the public resources targeted at understanding how these physical changes translate into economic impacts are disproportionately smaller with most of the major models being developed and maintained with little to no public funding support the goal of this paper is first to shed light on how mostly economists have gone about calculating the social cost of carbon for regulatory purposes and to provide an overview of the past and currently used estimates in the second part i will focus on where empirical economists may have the highest value added in this enterprise specifically the calibration and estimation of economic damage functions which map weather patterns transformed by climate change into economic benefits and damages a broad variety of econometric methods have recently been used to parameterize the dose climate response economic outcome functions the paper seeks to provide an accessible and comprehensive overview of how economists think about parameterizing damage functions and quantifying the economic damages of climate change

per customer quantity limit and price discrimination evidence from the u s residential mortgage market abstract theoretically if firms face a regulatory per customer quantity limit they should have an incentive to discriminatively charge high demand customers higher prices and make them just willing to buy a quantity equal to the limit in the u s residential mortgage industry mortgages with origination balances above the conforming loan limits cannot be guaranteed by government sponsored enterprises which make lenders face a per customer quantity limit this paper finds that borrowers bunching at the limit pay higher interest rates due to price discrimination this study rules out the alternative explanation that those borrowers are of higher risk lending cost than other borrowers

short term gdp forecasting with a mixed frequency dynamic factor model with stochastic volatility in this article we develop a mixed frequency dynamic factor model in which the disturbances of both the latent common factor and of the idiosyncratic components have time varying stochastic volatilities we use the model to investigate business cycle dynamics in the euro area and present three sets of empirical results first we evaluate the impact of macroeconomic releases on point and density forecast accuracy and on the width of forecast intervals second we show how our setup allows to make a probabilistic assessment of the contribution of releases to forecast revisions third we examine point and density out of sample forecast accuracy we find that introducing stochastic volatility in the model contributes to an improvement in both point and density forecast accuracy supplementary materials for this article are available online

looking behind mortgage delinquencies abstract delinquency rates for mortgages originated before and after the financial crisis are examined using a novel and large panel obtained by merging data from tax records and credit registers first we estimate the selection into the mortgage market using an exogenous index of local credit supply as exclusion restriction second controlling for selection we estimate the impact of income shocks on the delinquency rate we find that since 2008 the selection process has led to the halving of the delinquency rate conditional on the creation of a new mortgage job losses nearly double the delinquency risk estimates uncorrected for selection are severely downward biased

do remittances facilitate a sustainable current account we examine how workers remittances impact on the current account in doing so we focus on how remittances affect the sustainability rather than the size of current account balances we find that the presence of remittances makes it more likely that exports and imports are cointegrated thereby lending support to current account sustainability furthermore quantile regression analysis suggests that increased remittances are associated with a faster speed of current account adjustment towards long run equilibrium particularly for those countries characterised by already highly persistent current account balances in contrast to a literature that emphasises an adverse dutch disease impact of workers remittances on the real exchange rate in terms of reduced external competitiveness our findings suggest that remittances are actually beneficial to the current account balance

the role of demographic and economic drivers on the environment in traditional and standardized stirpat analysis abstract the stirpat approach identifies human impacts on the environment most studies find higher ecological elasticities related to population compared to gdp per capita growth applying the logarithmic form of the stirpat equation which mitigates the problem of the variables different variances and units further allows for appealing economic interpretation and policy conclusions at the same time the question of the predictor variables relative importance cannot be finally answered by this approach in response the present paper complements the traditional ecological elasticities by the calculation of standardized coefficients for a sample of 84 countries and the period between 1980 and 2014 results indicate that gdp per capita rather than population growth matters more for explaining environmental impacts admittedly interpretation of standardized coefficients is not without limitations first they are sample specific and cannot be compared across different studies second a predictor variable might not affect the environment only on its own but joint impacts could be present the paper addresses these problems and provides a careful interpretation of and comparison between non standardized and standardized coefficients overall there is good reason to assume that environmental impacts can be reduced more readily by a policy giving priority to economic rather than population growth

multilateral resistance to migration the rate of migration observed between two countries does not depend solely on their relative attractiveness but also on the one of alternative destinations following the trade literature we term the influence exerted by other destinations on bilateral flows as multilateral resistance to migration and we show how it can be accounted for when estimating the determinants of migration rates in the context of a general individual random utility maximization model we propose the use of the common correlated effects estimator pesaran 2006 and apply it to high frequency data on the spanish immigration boom between 1997 and 2009 compared to more restrictive estimation strategies developed in the literature the bias goes in the expected direction we find a smaller effect of gdp per capita and a larger effect of migration policies on bilateral rates

urbanization and co2 emissions a semi parametric panel data analysis this paper investigates the relationship between urbanization and co2 emissions in a sample of 20 emerging countries over the period 1992 2008 using the semi parametric panel data model with fixed effects proposed by baltagi and li 2002 we find little evidence in support of an inverted u curve and thus the kuznets hypothesis is not confirmed by our analysis our findings shed new light on the urbanization co2 emissions nexus

workers remittances and the real exchange rate a paradox of gifts abstract we test the impact of workers remittances on the real exchange rate using a panel of 13 latin american and caribbean countries the analysis reveals that workers remittances have the potential to inflict economic costs on the export sector of receiving countries by reducing its international competitiveness our findings raise concerns parallel to those raised by dutch disease or resource boom models where resource discoveries result in real exchange rate appreciation and shifting of resources from the traded to the nontraded sectors of the economy

technological change and the households demand for currency abstract it is shown that accounting for technology variations across households and periods is important to obtain theoretically consistent estimates of the demand for currency an inventory model is presented where the withdrawal technology is explicitly modeled both the level and the interest rate elasticity of cash holdings depend on the withdrawal technology available to households empirical proxies for the household withdrawal technology based on the diffusion of cash withdrawal points measured at city level are used to test the model predictions on a panel of italian household data over the 1993 2004 period

determinants of workers remittances an empirical investigation for a panel of eleven developing asian economies we explore the key motives of migrant workers remittances from abroad for 11 major asian migrant sending countries using panel regressions we find that relative higher growth rate interest rate and capital market returns of home over the host investment financial deepening at home have significant impact on remittance inflows into asia along with higher per capita incomes and international crude oil prices with incorporation of per capita incomes and lagged impact of remittances we observe an emergence of consumption motives to remit therefore we conclude that both investment and altruistic motives are the driving forces for remittances inflows into the asian economies

the general equilibrium effects of fiscal policy estimates for the euro area abstract this paper describes a dynamic stochastic general equilibrium model featuring a fraction of non ricardian agents in order to estimate the effects of fiscal policy in the euro area the model takes into account distortionary taxation on labor and capital income and on consumption while expenditures are broken down into purchases of goods and services compensation of public employees and transfers to households a newly computed quarterly data set of fiscal variables is used our results point to the prevalence of mild keynesian effects of public expenditures in particular although innovations in fiscal policy variables tend to be rather persistent government purchases of goods and services and compensations for public employees have small and short lived expansionary effects on private consumption while innovations in transfers to households show a slightly more sizeable and lasting effect the effects are more significant on the revenue side decreases in labor income and consumption tax rates have sizeable effects on consumption and output while a reduction in capital income tax favors investment and output in the medium run finally our estimates suggest that fiscal policy variables contribute little to the cyclical variability of the main macro variables

credibility of a new monetary regime the currency board in bulgaria abstract low credibility reflected in persistent expectations of high inflation is the usual suspect in costly disinflation efforts a currency board is a monetary regime that attempts to establish credibility by reducing uncertainty regarding the inflation preferences of the policymaker and the environment in which the policymaker operates this paper uses unique survey data from bulgaria and finds that expected inflation is indeed lowered by the prospect of a currency board but to a different degree for different agents priors of the type of the policymaker and familiarity with the operation of the currency board contribute to explaining the differences

the role of regulation on entry evidence from the italian provinces this paper studies the effects of differences in local administrative burdens in italy in the years 2005 2007 preceding a major reform that sped up firm registration procedures combining regulatory data from a survey on italian provinces before the reform costs and time to start a business with industry level entry rates of limited liability firms it explores the effects of regulatory barriers on the average of the annual entry rates across industries with different natural propensities to enter the market the estimates of the cross sectional analysis show that lengthier and to some extent more costly procedures reduced entry in sectors with naturally high entry a one day delay in registration procedures reduces the entry rate in highly dynamic sectors by more than 1 percent these results hold when i include measures of local financial development and of efficiency of bankruptcy procedures are included

currency crashes in emerging markets an empirical treatment we use a panel of annual data for over 100 developing countries from 1971 through 1992 to characterize currency crashes we define a currency crash as a large change of the nominal exchange rate that is also a substantial increase in the rate of change of nominal depreciation we examine the composition of the debt as well as its level and a variety of other macroeconomic factors external and foreign crashes tend to occur when output growth is low the growth of domestic credit is high and the level of foreign interest rates are high a low ratio of fdi to debt is consistently associated with a high likelihood of a crash

migration networks and microenterprises in mexico are migration networks associated with lower capital costs or the alleviation of capital constraints we examine these questions with data measuring access to remittance flows among small scale entrepreneurs in mexico using a survey of more than 6000 self employed workers and small firm owners located in 44 urban areas of mexico we estimate the impact of attachment to migration networks on the level of capital investment the capital output ratio sales and profits of microenterprises the impact is identified from the geographic pattern of migration from mexico driven by the completion of rail lines in the early 1900s for the full sample of firms we find that migration is associated with higher investment levels and higher profits but not higher sales the strongest effects on investment are in the categories of automobiles tools and inventories when the sample is limited to firms in high capital sectors investment sales and profits all increase with attachment to the migration networks suggesting that attachment to the migration network alleviates capital constraints in those sectors

remittances and financial access is there really a link and for whom evidence from mexican household data in policy discussions it has frequently been claimed that migrants remittances could function as a catalyst for financial access among receiving households this paper provides empirical evidence on this hypothesis from mexico a major receiver of remittances worldwide using the mexican family life survey panel mxfls for 2002 and 2005 the results from the fixed effects logit model show that receiving remittances is strongly correlated with the ownership of savings accounts and to a limited degree with the availability of borrowing options effects are particularly important for microfinance institutions and more important for rural households compared to urban households

do international migration and remittances reduce poverty in developing countries summary few studies have examined the impact of international migration and remittances on poverty in the developing world this paper fills this lacuna by constructing and analyzing a new data set on international migration remittances inequality and poverty from 71 developing countries the results show that both international migration and remittances significantly reduce the level depth and severity of poverty in the developing world after instrumenting for the possible endogeneity of international migration and controlling for various factors results suggest that on average a 10 increase in the share of international migrants in a country s population will lead to a 2 1 decline in the share of people living on less than 1 00 per person per day after instrumenting for the possible endogeneity of international remittances a similar 10 increase in per capita official international remittances will lead to a 3 5 decline in the share of people living in poverty

the bond price support program as a change in policy regimes evidence from the term structure of interest rates recently mankiw miron and weil 1987 argued that a change in policy regimes generally affects the public s expectations of future interest rates to illustrate this influence they compare the operation of the gold standard with the post gold standard regime in the united states they find that nominal short term interest rates were mean reverting before 1914 but became nonstationary after the creation of the federal reserve system we extend mankiw miron and weil s analysis by noting that the period from 1914 to the present cannot be characterized as one uninterrupted episode of policy discretion the united states temporarily abandoned discretion for a rule in the 1940s the fed and treasury agreed in april 1942 that the fed would adjust federal reserve credit in a manner that would produce relatively low market rates on longterm securities in particular the fed committed itself to support twenty year government bond prices at a level consistent with a 2 5 percent interest rate ceiling we investigate the possibility that the bond price support program of the 1940s conditioned the behavior of short term interest rates in a predictable way according to the expectation theory of the term structure a binding long term interest rate ceiling implies that an increase in the current short rate must cause the sum of the innovation and the change in future expected rates to be zero otherwise the long rate rises above the ceiling and the public perceives a violation of the bond rate commitment placing a binding ceiling on long term interest rates tends to make short term interest rates mean reverting

the federal reserve amendments of 1917 the beginning of a seasonal note issue policy the federal reserve adopted a policy of smoothing the seasonal behavior of interest rates after the amendments of 1917 these amendments reduced the collateral requirements for notes issued and thereby increased note issue capability notes in circulation more than doubled from june to december 1917 these amendments were passed to assist with war related financing as their timing coincided with the entry of the united states into world war i the smoothing of interest rates seasonals between 1914 and 1917 was not due to the founding of the federal reserve system but rather to trade related gold flows copyright 1991 by ohio state university press

the optimal migration duration and activity choice after re migration if migrants return to their origin countries two questions arise which are of immediate economic interest for both immigration and emigration country what determines their optimal migration duration and what are the activities migrants choose after a return little research has been devoted to these two issues this paper utilises a unique survey data set which records activities of returned migrants we first illustrate the activities of immigrants after returning we show that more than half of the returning migrants are economically active after return and most of them engage in entrepreneurial activities we then develop a model where migrants decide simultaneously about the optimal migration duration and their after return activities guided by this model we specify and estimate an empirical model where the after return activity and the optimal migration duration are simultaneously chosen

international migration remittances and household investment evidence from philippine migrants exchange rate shocks how do households respond to overseas members economic shocks overseas filipinos in dozens of countries experienced sudden heterogeneous changes in exchange rates during the 1997 asian financial crisis appreciation of a migrant s currency against the philippine peso leads to increases in household remittances from overseas the estimated elasticity of philippine peso remittances with respect to the exchange rate is 0 60 positive migrant shocks lead to enhanced human capital accumulation and entrepreneurship in origin households child schooling and educational expenditure rise while child labour falls households also work more hours in self employment and become more likely to start relatively capital intensive household enterprises

temporal aggregation of univariate and multivariate time series models a survey abstract we present a unified and up to date overview of temporal aggregation techniques for univariate and multivariate time series models explaining in detail although intuitively the technical machinery behind the results some empirical applications illustrate the main issues

does openness to trade make countries more vulnerable to sudden stops or less using gravity to establish causality openness to trade is one factor that has been identified as determining whether a country is prone to sudden stops in capital inflows several authors have offered empirical evidence that having a large tradable sector reduces the contraction necessary to adjust to a given cut off in funding such studies may however be subject to the problem that trade is endogenous we use the gravity instrument for trade openness which is constructed from geographical determinants of bilateral trade we find that openness indeed makes countries less vulnerable to crises and that the relationship is even stronger when correcting for the endogeneity of trade

does urbanization lead to less energy use and lower co2 emissions a cross country analysis despite the relationship between urbanization energy use and co2 emissions has been extensively studied in recent years little attention has been paid to differences in development stages or income levels most previous studies have implicitly assumed that the impact of urbanization is homogenous for all countries this assumption can be questionable as there are many characteristic differences among countries of different levels of affluence this paper investigates empirically the effects of urbanization on energy use and co2 emissions with consideration of the different development stages using the stochastic impacts by regression on population affluence and technology stirpat model and a balanced panel dataset of 99 countries over the period 1975 2005 the findings suggest that the impact of urbanization on energy use and emissions varies across the stages of development surprisingly urbanization decreases energy use in the low income group while it increases energy use in the middle and high income groups the impact of urbanization on emissions is positive for all the income groups but it is more pronounced in the middle income group than in the other income groups these novel findings not only help advance the existing literature but also can be of special interest to policy makers and urban planners

uncertainty and currency crises evidence from survey data this paper studies empirically how uncertainty aects speculation in the foreign ex change markets we use the dispersion of survey forecasts of key macroeconomic variables to measure uncertainty about fundamentals we nd that uncertainty has a non monotone eect on exchange rate pressures namely uncertainty heightens speculative pressures when expected fundamentals are good and eases them when they are bad we prove that this prediction arises from a broad class of currency crisis theories ranging from rst generation to global game models we also show that the proposed empirical strategy remains valid in the presence of forecasters with strategic objectives and use a novel set of instrumental variables to address potential endogeneity bias

the federal reserve and panic prevention the roles of financial regulation and lender of last resort this paper surveys the role of the federal reserve within the financial regulatory system with particular attention to the interaction of the fed s role as both a supervisor and a lender of last resort the institutional design of the federal reserve system was aimed at preventing banking panics primarily due to the permanent presence of the discount window this new system was successful at preventing a panic in the early 1920s after which the fed began to discourage the use of the discount window and intentionally create stigma for window borrowing policies that contributed to the panics of the great depression the legislation of the new deal era centralized fed power in the board of governors and over the next 75 years the fed expanded its role as a supervisor of the largest banks nevertheless prior to the recent crisis the fed had large gaps in its authority as a supervisor and as lender of last resort with the latter role weakened further by stigma the fed was unable to prevent the recent crisis during which its lender of last resort function expanded significantly as the fed begins its second century there are still great challenges to fulfilling its original intention of panic prevention

the rise of risk based pricing of mortgage interest rates in italy abstract this paper assesses how much mortgage interest rates in italy are priced on credit risk as proxied by the probability of household mortgage delinquency estimated using the eu silc database owing to data availability we restrict the analysis of mortgage pricing to italian households consistent with the more widespread use of credit scoring estimates indicate that italian lenders have increasingly priced mortgage interest rates on household credit risk for mortgages granted between 2000 and 2007 we find that a 1 point increase in the probability of default is associated with a 21 basis point rise in mortgage interest rates lower than the 38 basis point premium edelberg 2006 estimated for the us at the end of the 1990s

international migration remittances and schooling evidence from el salvador abstract we examine the effect of remittances from abroad on households schooling decisions using data for el salvador following the massive war related emigration of the 1980s remittances became a significant source of household income throughout the 1990s we use the cox proportional hazard model to examine the determinants of school attendance measuring income from a source that is uncorrelated with parental schooling remittances we find that remittances have a large significant effect on school retention we estimate that while household income net of remittances has a small though significant impact on the hazard of leaving school in rural and urban areas remittances have a much larger impact on the hazard of leaving school in urban areas the effect of remittances is at its smallest 10 times the size of the effect of other income in rural areas the effect of remittances is about 2 6 times that of other income our finding is of interest in that it suggests that subsidizing school attendance particularly in poor areas may have a large impact on school attendance and retention even if parents have low levels of schooling

remittances and portfolio values an inquiry using immigrants from africa europe and the americas summary using a recent spanish database we show that remittances respond to cross country differences in portfolio values behavior consistent with immigrant s access to trans national networks responsiveness to portfolio variables is found to persist regardless of education level there are however differences in the portfolio variables to which immigrants respond as we would expect given migrants diverse backgrounds region of origin and motive for emigrating remitting patterns are found to change with the length of migration spells suggestive that remittances sent for portfolio motives become more likely as the immediate needs of home family are addressed and asset accumulation becomes more important

the founding of the fed and the behavior of interest rates what can be learned from small samples abstract we take issue with angelini s 1994 claim that the founding of the federal reserve was not responsible for a change in the stochastic process followed by short term interest rates we argue that angelini s failure to reject the null hypothesis of no regime change around the date of the founding of the fed is due to the low power of his test

the start of interest rate smoothing in the us is it a monetary or fiscal story this article revisits the key issue raised by researchers who have empirically investigated the behaviour of short term us interest rates during the period 1890 1933 the seminal article of mankiw miron and weil 1987 argues that changes in the behaviour of nominal interest rates is best explained as a monetary regime shift that occurred with the founding of the federal reserve in 1914 this explanation is rejected by newbold lehybourne sollis and wohar 2001 who show that fiscal and regulatory changes driven by the needs of world war1 financing best explain the changing behaviour of interest rates that they identify as beginning in mid 1917 we find using three different statistical procedures that a structural break in the second moment of interest rates occurred in early 1915 this supports the monetary regime shift argument of mmw by illustrating that the interest rate smoothing policies of the fed can be observed as a variance break in short term interest rates

risk aversion wealth and background risk we use household survey data to construct a direct measure of absolute risk aversion based on the maximum price a consumer is willing to pay for a risky security we relate this measure to consumer s endowments and attributes and to measures of background risk and liquidity constraints we find that risk aversion is a decreasing function of the endowment thus rejecting cara preferences we estimate the elasticity of risk aversion to consumption at about 0 7 below the unitary value predicted by crra utility we also find that households attributes are of little help in predicting their degree of risk aversion which is characterized by massive unexplained heterogeneity we show that the consumer s environment affects risk aversion individuals who are more likely to face income uncertainty or to become liquidity constrained exhibit a higher degree of absolute risk aversion consistent with recent theories of attitudes toward risk in the presence of uninsurable risks jel d1 d8

migration remittances and male and female employment patterns little is known about the labor market impacts of workers remittances despite their magnitude in countries with considerable outmigration reports that families receiving international remittances severely curtail their work efforts are fairly common in the popular press e g robert frank 2001 yet we lack rigorous analyses of how male and female labor supplies respond to increases in remittance income to either support or refute these anecdotal observations according to the neoclassical model of labor leisure choice mark r killingsworth 1983 remittances a source of nonlabor income may lift budget constraints raise reservation wages and through an income effect reduce the employment likelihood and hours worked by remittance receiving individuals the receipt of remittances is usually preceded by the out migration of working aged household members however which may induce changes in the labor supply of nonmigrating household members in order to compensate for forgone income or to defray migration related expenses distinguishing the disruptive effect from the income effect of remittance inflows is problematic as most surveys do not contain detailed information on household outmigration and remittance receipt to the extent that these two effects are expected to have opposite impacts on labor supply however we can assess which effect dominates the impact of remittances on the decision to work has been previously examined by edgard rodriguez and erwin r tiongson 2001 in manila and by edward funkhouser 1992 in managua without accounting for the endogeneity of remittances with respect to labor supply they conclude that remittances reduce employment funkhouser also finds that remittances slightly increase self employment while informative these studies focus on the decision to work and do not consider that without altering employment rates remittances may change the hours worked and or the type of work performed in the receiving economy furthermore the impact may be different on male and female labor supplies and responsiveness to remittance income may vary from rural to urban areas using data from mexico a country with a large and growing remittance inflow we address the following questions how does the employment status and hours worked by men and women vary owing to international remittances do male and female labor supplies differ across various types of employment in rural versus urban areas due to higher remittance inflows

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

do remittances lead to a public moral hazard in developing countries an empirical investigation abstract this article tests the hypothesis that in a context of bad governance remittance inflows strongly reduce public spending on education and health in receiving countries a phenomenon called the public moral hazard problem using a large sample of 86 developing countries over the period 1996 2007 and after factoring in the endogeneity of remittances the results suggest a negative impact of remittances on public spending on education and health when governance is bad in remittance dependent economies

testing for structural breaks trade off between power and spurious effects abstract i argue that in order to test for the effect of the foundation of the federal reserve on the behavior of short term interest rates extending the sample size on either side of the interval 1908 1918 will generate spurious results mankiw miron and weil 1987 1994 do not address data problems pointed out by other authors nor do they take into account some historical events and institutional changes in the new york money market that had an impact on the behavior of short term interest rates given these reasons for restricting the sample size i argue that their monte carlo evidence is largely irrelevant to the issue and that lack of power confirms my claim that no regime change can be detected astride the foundation of the fed

more on the behavior of interest rates and the founding of the fed abstract the paper addresses the issue of the impact of the foundation of the federal reserve system in 1914 on the behavior of short term interest rates empirical evidence is presented showing that no change of regime can be detected in the process governing short term rates in the years straddling the foundation of the fed since the behavior of this process did change in the decade 1910 1920 the paper discusses some historical events and institutional changes in the new york money market that had an impact on the behavior of short term interest rates between 1908 and 1920

sharp reductions in current account deficits an empirical analysis abstract we study determinants and consequences of sharp reductions in current account imbalances reversals in low and middle income countries we pose two questions what triggers reversals and what factors explain how costly reversals are we find that both domestic variables such as the current account balance openness and the level of reserves and external variables such as terms of trade shocks us real interest rates and growth in industrial countries seem to play an important role in explaining reversals in current account imbalances we also find some evidence that countries with a less appreciated real exchange rate higher investment and more openness prior to the reversal tend to grow faster after a reversal occurs

shadow banks and macroeconomic instability we develop a macroeconomic model in which in which commercial banks can o oad risky loans to a highly levered shadow banking sector and financial intermediaries trade in securitized assets we highlight the liquidity creation role played by securitization we show how an endogenous tightening of credit constraints can exacerbate the e ect of shocks by limiting the ability of shadow banks to supply collateral and of banks to securitize the model is able to reproduce the cyclical behavior of bank and non bank credit and leverage macroeconomic shocks that directly impact the worth of financial sector are particularly harmful to economic activity but purely redistributive intra financial shocks can also generate recessions we discuss how government policy can stabilize the securitization market when the shadow banking system becomes impaired

debt maturity choice of nonpublic italian firms this paper focuses on debt maturity of nonpublic italian firms of small and medium size by international standards and that mainly use bank loans as source of external financing compared to few similar studies the main contributions are that panel estimations allow to control for unobserved firm heterogeneity firms are also permitted to choose simultaneously leverage and debt maturity the evidence is that debt maturity is shorter for companies that are riskier and affected by asymmetric information in areas of the country with poorer legal enforcement in choosing debt maturity lenders lay greater emphasis on indicators of firm information opacity

mortgage arrears regulation and institutions cross country evidence abstract using a newly constructed database for 26 countries over 2000 2014 we analyze cross country and within country differences in mortgage arrears we find that restrictive macro prudential policies in particular lower regulatory loan to value ratios are significantly associated with a lower share of mortgage arrears in total residential debt likewise better institutions are related with lower delinquency rates both directly and by enhancing the impact of macro prudential policies and the right to recourse we also find that the effect of macro prudential policies is conditioned by several mortgage market characteristics such as the maturity of loans interest rate fixity and tax deductibility of interest payments

monetary policy effects new evidence from the italian flow of funds new evidence on the transmission of monetary policy to the economy is provided through an analysis of the effects of a restrictive monetary policy shock on italian flow of funds over the period 1980 to 2002 firms reduce issuance of debt and decrease the acquisition of financial assets providing no support for the existence of strong financial frictions following the shock in the first quarter households increase short tem liabilities and diminish the acquisition of liquid assets and shares the public sector increases net borrowing during the first 2 years financial corporations decrease their borrowing for three quarters while in the same period the foreign sector increases borrowed funds we claim that our results shed new light on the role of the financial decisions of the economic sectors in the transmission mechanism of monetary policy

a note on the expectations hypothesis at the founding of the fed abstract one of the most influential tests of the expectations hypothesis is mankiw and miron q j econ 101 1986 211 who found that the spread between the long term and short term rates provided predictive power for the short term rate before the fed s founding but not after they suggested that the failure of the expectations hypothesis after the fed s founding was due to the fed s practice of smoothing short term interest rates we show that their finding that the expectations hypothesis fares better prior to the fed s founding is due to the fact that the test they employ tends to generate results that are more favorable to the expectations hypothesis during periods when there is extreme volatility in the short term rate

the economic consequences of euro area macro modelling shortcuts should euro area economies be modelled in an aggregate area wide fashion or in a disaggregate multi country one this article tackles that question from both statistical and economic viewpoint from a statistical viewpoint aggregation bias criteria are found to signal that the degree of structural heterogeneity among euro area economies is such that the loss of information entailed by an aggregate modelling approach may be far from trifling from an economic viewpoint we investigate the following issue are those statistically detectable heterogeneities of any practical relevance when it comes to supporting monetary policy decision making to provide an answer to this question we compute simple optimal monetary policy reaction functions on the basis of either an aggregate model or a disaggregate one and compare the associated welfare losses the results suggest that the welfare under performance of an area wide model based rule is not only nonnegligible but also robust with respect to a number of

financial openness sudden stops and current account reversals in this paper i use a panel data set to investigate the mechanics of sudden stops of capital inflows and current account reversals i am particularly interested in four questions a what is the relationship between sudden stops and current account reversals b to what extent does financial openness affect the probability of a country being subject to a current account reversal in other words do restrictions on capital mobility reduce the probability of such occurrences c does openness both trade openness and financial openness play a role in determining the effect of current account reversals on economic performance i e gdp growth and d does the exchange rate regime affect the intensity with which reversals affect real activity the empirical analysis shows that sudden stops and current account reversals have been closely related the econometric analysis suggests that restricting capital mobility does not reduce the probability of experiencing a reversal current account reversals in turn have had a negative effect on real growth that goes beyond their direct effect on investment the regression analysis indicates that the negative effects of current account reversals on growth will depend on the country s degree of trade openness more open countries will suffer less in terms of lower growth relative to trend than countries with a lower degree of trade openness on the other hand the degree of financial openness does not appear to be related to the intensity with which reversals affect real economic performance the empirical analysis also suggests that countries with more flexible exchange rate regimes are able to accommodate better shocks stemming from a reversal than countries with more rigid exchange rate regimes this abstract was borrowed from another version of this item

interaction of market and credit risk abstract experience during the financial crisis illustrates that the integrated measurement and management of different forms of risk remains a challenge for industry practitioners researchers and financial supervisors alike in the context of related literature this article summarizes new research on the interaction of market and credit risk and implications for risk management that is presented in this special issue the research covered highlights in particular the errors that can occur in the aggregation of the two types of risk and the strong relationships between them that suggest caution in the use of pragmatic distinctions between them the article also touches on some research based lessons for supervisory policies and suggests some directions for future research

the modern history of exchange rate arrangements a reinterpretation we develop a novel system of reclassifying historical exchange rate regimes one key difference between our study and previous classifications is that we employ monthly data on market determined parallel exchange rates going back to 1946 for 153 countries our approach differs from the imf official classification which we show to be only a little better than random it also differs radically from all previous attempts at historical reclassification our classification points to a rethinking of economic performance under alternative exchange rate regimes indeed the breakup of bretton woods had less impact on exchange rate regimes than is popularly believed