what determines the duration of a fiscal consolidation program abstract this paper assesses the determinants of the length of fiscal consolidation using annual data for 17 industrial countries over the period 1978 2009 relying on a narrative approach to identify fiscal consolidation episodes we show that fiscal variables such as the budget deficit and the level of public debt and economic factors such as the degree of openness the inflation rate the interest rate and per capita gdp are crucial for the fiscal consolidation process additionally we employ duration analysis over a set of consolidation spells and find that as time goes by the likelihood of a fiscal consolidation ending is higher however the hazard function is not monotonic indeed it increases until the eighth or ninth year and starts decreasing afterwards we also find that i spending driven consolidations are shorter than tax driven consolidations ii both types of consolidation are longer in non european countries than for european countries and iii the size of the consolidation program in percentage of gdp does not significantly affect duration all in all our results support the importance of cuts in government spending as a way of bringing economies into a sustainable path for public debt moreover they highlight the role played by a fiscal framework that imposes discipline in governments as a device to credibly shorten the length of fiscal consolidation episodes

us monetary policy and sectoral commodity prices abstract using a structural var svar model we examine the effects of the monetary policy of the united states on sectoral commodity prices including the non fuel commodity prices food prices beverage prices prices of agricultural raw materials prices of metals and prices of fuel energy commodities and macroeconomic activity the empirical evidence suggests that a u s monetary contraction leads to an immediate rise in the broad commodity price index which possibly reflects an aggregation bias greater expected inflation and speculation high production costs or some overshooting due to overreactions then the response erodes after six quarters as the positive interest rate shock vanishes and higher interest rates and liquidity drainage take traction despite this the aggregate price response masks the existence of significant heterogeneity in the price responses of the different types of commodity sectors more specifically a positive interest rate shock leads to i an initial pop in the price returns of the non fuel commodities which later reverses path and becomes negative as in the case of the prices of agricultural raw materials ii a positive and persistent rise in the volatile food prices iii a fall in the beverage prices and iv a persistent reduction in the prices of metals and the prices of energy prices our results also remain globally intact with respect to alternative specifications and identification schemes as well as to unconventional monetary policy effects similar results are also found when commodity futures prices are used we conclude that policymakers should recognize the source of sector inflation before embarking on contractionary monetary policy the design of core inflation targeting is also preferable to headline inflation targeting

assessing long term fiscal developments a new approach abstract we use a new approach to assess long term fiscal developments by analyzing the time varying behaviour of the two components of government spending and revenue responsiveness and persistence a feature not captured by automatic stabilisers we are able to infer about the sources of fiscal deterioration improvement drawing on quarterly data we estimate recursively these components within a system of government revenue and spending equations using a three stage least square method for eight european union countries plus the us the results suggest that significant changes in the fiscal stance including those related to the current crisis are reflected in the estimates of persistence and responsiveness

decentralization and the duration of fiscal consolidation shifting the burden across layers of government this paper analyzes the relationship between fiscal decentralization the duration of fiscal consolidation episodes and their success for 17 oecd countries between 1978 and 2009 the consolidation of the general government budget appears to be of longer duration when expenditure decisions are more decentralized we also find that transfers from higher levels of government are cut during consolidation episodes suggesting that central governments shift the burden of consolidation towards lower tiers of government this is especially true when the latter have little legal autonomy to raise tax revenues and have little influence over executive decisions taken at the central level we document that this increases local governments public debt gdp ratios in terms of the success of consolidation episodes countries with greater degrees of decentralization appear to make smaller improvements in their primary balance when consolidating

fiscal policy in real time in this paper i estimate the ex ante or intentional cyclical stance of fiscal policy in oecd countries i use the fiscal plans reported at the time of budgeting together with other information available to fiscal policy makers in real time indeed fiscal plans might be significantly different from ex post outcomes because governments do not have complete control over their implementation which is influenced by several exogenous factors when fiscal policy rules are estimated using real time data i show in this paper that oecd countries have often planned a counter cyclical fiscal stance especially during economic expansions this contrasts with conventional findings based on actual data which tend to point towards a cyclicality or pro cyclicality forecast errors for the government structural balance and the output gap play a central role in explaining the differences between estimates based on ex ante and ex post data

financial markets shutdown and reaccess we employ a discrete time parametric duration model on a group of 121 countries over the period 1970 2011 and find that the probability of the end of financial markets shutdown and reaccess falls as these events become longer we also show that 1 shutdown episodes are longer when economic prospects are poor and the degree of financial openness falls the chief executive has been in office for long periods and the country has a default history and 2 spells of reaccess tend to be longer when economic growth improves and financial openness increases there are neither government crises nor government instability and the country did not default in the past jel c41 g15

tales of fiscal adjustment fiscal adjustments why they can be expansionary this paper examines the evidence on fiscal adjustments in oecd countries from the early 1960s to today the results shed light on the recently observed phenomenon of fiscal tightening that produces non keynesian expansionary effects one interpretation is that a serious fiscal tightening increases demand wealth rises when future tax burdens decline and when interest rates decline credibility is restored and inflation or default risks abate both consumption and investment rise for this effect to produce an expansion the tightening must be sizeable and occur after a period of stress when the budget is quickly deteriorating and public debt is building up another interpretation emphasizes the supply side typically a fiscal consolidation based on tax increases is short lived to be long lasting it must include cuts in public employment transfers and government wages to be politically possible such a policy must be supported by trade unions these measures result in more efficient labour markets and boost the supply side based both on statistical evidence and on a detailed analysis of ten cases of major fiscal adjustment this article provides cautious support to the supply side view without denying a more limited role for the demand side channel alberto alesina and silvia ardagna

detrending and business cycle facts a user s guide this note argues that it is hardly the case that the profession is fully aware that the application of di erent filters to the data leads to di erent outcomes and that we have enough evidence to claim that these di erences are unimportant to evaluate the fit models to the data 1998 elsevier science b v all rights reserved jel classification b41 e32

the impact of international migration on real wages another look abstract this paper examines the issue of how emigration alters real wages in the source country the analysis is carried out first using the two class framework developed by rivera batiz 1984 and then by means of a simple model of scale economies and imperfect competition our results indicate that within these contexts real wages are likely to decline in response to emigration if 1 the migrants possess a large fraction of physical or human capital that they take with them when migration occurs or 2 emigration reduces the scale of operation of domestic firms our conclusions are compared to those of quibria 1989

processed food exports from developing countries patterns and determinants abstract a noteworthy recent development in world trade is the rapid expansion of processed food exports this development and its policy implications have received little attention in the literature on export led industrialisation in developing countries dcs the purpose of this paper is to redress this oversight firstly by providing an overview of the growth patterns of processed food exports and then examining the determinants of inter country differences in growth performance the results point to the growing importance of food manufacturing as a dynamic export line for many dcs there is also evidence that the policy regime is far more important than resource endowments and other country specific factors in explaining inter country differences in export success in this product area as in the case of conventional manufactured exports

international migration increasing returns and real wages the present paper makes an exploratory attempt to investigate the impact of emigration on real wages in the presence of increasing returns to scale in production the problem has been posed in the context of a 2 x 2 model of international trade where one of the commodities is a non traded good and is subject to a type of increasing returns to scale that are external to the firm but internal to the industry analysis indicates that in this instance international emigration unambiguously increases real wages in the source country this result which seems to be at odds with the general presumption in this area is quite robust to variations in the underlying assumptions behind the analysis summary in fre excerpt

fiscal consolidations quality economic conditions and success recent research has demonstrated theimportance of good quality of fiscaladjustments for the success of governmentbudget consolidations we extend thisapproach to analyze the importance of theeconomic conditions in which fiscalconsolidations are started for theirsuccess the cyclical positions of thedomestic and international economy theinitial debt level and the stance of fiscalpolicy in the oecd are all importantdeterminants of the likelihood of fiscalconsolidations they also affect thegovernment s choice of consolidationstrategy making them importantdeterminants of the success of fiscalconsolidations in contrast the monetarypolicy stance plays only a negligible rolefor fiscal consolidations we use theanalysis to test for any maastricht effectson the performance of european governmentsduring the 1990s such effects are weak atbest and occurred only during the firsthalf of the decade

why is fiscal policy often procyclical many countries especially developing ones follow procyclical fiscal policies namely spending goes up taxes go down in booms and spending goes down taxes go up in recessions we provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for less than benevolent government to appropriate rents voters have incentives similar to the starving the leviathan classic argument and demand more public goods or fewer taxes to prevent governments from appropriating rents when the economy is doing well we test this argument against more traditional explanations based purely on borrowing constraints with a reasonable amount of success

searching for non linear effects of fiscal policy evidence from industrial and developing countries several recent studies suggest that the response of national saving to scal policy may be non linear in this paper we use two data sets to search for the circumstances in which such non linear response may arise a sample of oecd countries already used in previous studies and a sample of developing countries using more recent world bank data we nd that in both samples non linear e ects tend to be associated with large and persistent scal impulses in the oecd sample the non linearity of the response is stronger for scal contractions than for expansions an increase in net taxes has no e ect on national saving during large scal contractions while it has a positive e ect in less pronounced contractions high or rapidly growing public debt does not appear to be a good predictor of non linear e ects in the world bank sample of developing countries non linearities in the response national saving to scal policy are not limited to large scal contractions and also tend to occur in periods in which debt is accumulating rapidly regardless of its initial level 2000 elsevier science b v all rights reserved jel classixcation e21 e62 h31

how costly are debt crises the aim of this paper is to assess the short and medium term impact of debt crises on gdp using an unbalanced panel of 154 countries from 1970 to 2008 the paper shows that debt crises produce significant and long lasting output losses reducing output by about 10 percent after 8 years the results also suggest that debt crises tend to be more detrimental than banking and currency crises the significance of the results is robust to different specifications identification and endogeneity checks and datasets

fiscal stabilizations when do they work and why abstract this paper studies the determinants and channels through which fiscal contractions influence the dynamics of the debt to gdp ratio and gdp growth using data from a panel of oecd countries the paper shows that the success of fiscal adjustments in decreasing the debt to gdp ratio depends on the size of the fiscal contraction and less on its composition the rate of growth of output matters too but higher gdp growth does not drive the success of a fiscal stabilization in contrast whether a fiscal adjustment is expansionary depends largely on the composition of the fiscal maneuvre in particular stabilizations implemented by cutting public spending lead to higher gdp growth rates the effects of the composition on growth work mostly through the labor market rather than through agents expectations of future fiscal policy finally the evidence suggests that successful and expansionary fiscal contractions are not the result of accompanying expansionary monetary policy or exchange rate devaluations

economic risk and political risk in fiscal unions a fiscal programme that redistributes income from rich to poor individuals indirectly redistributes tax revenues from regions hit by a favou rable shock to regions hit by an unfavourable one centralised fiscal redistribution has therefore been advocated as a way to insure individuals against region specific shocks in this paper we argue that a centralised fiscal policy while reducing the uncertainty on the tax base may create additional uncertainty on the tax rate using a simple model we show that the higher uncertainty on the policy instrument might more than offset the lower uncertainty on the tax base several countries around the world are breaking up e g the former soviet union and in others regional movements are becoming more vocal in demanding more autonomy e g italy spain at the same time several western european countries are integrating in a supernational community fiscal policy issues and in particular the level of centralisation of fiscal decisions are important considerations in the formation or collapse of political jurisdictions or of federations of regions and countries 1 a long tradition in public finance argues that a centralised fiscal system can reach more efficient outcomes by better internalising the numerous externalities associated with both the expenditure and the revenue sides of fiscal policy particularly when factors are mobile this line of argument applies to both the provision of public goods gordon 1983 and to redistributive fiscal policy pauli 1973 ladd and doolittle 1982 brown and oates 1987 a counter argument to this conclusion is developed in perotti 1997 who shows that in the presence of differences in say labour markets or the administration of fiscal policy centralised redistribution can lead to a more inefficient allocation of resources a second argument in favour of centralised fiscal policy is based on the insurance properties of redistribution when different countries are hit by

social spending and automatic stabilizers in the oecd the macroeconomic literature on automatic stabilization tends to focus on taxes and dismiss the relevance of government expenditure except for unemployment compensation our results go sharply contrary to this view we engage in an empirical analysis of 21 oecd countries from 1982 to 2003 and find that age and health related social expenditure as well as incapacity and sick benefits all react to the cycle in a stabilizing manner while possibly new in the macro literature this conforms to many results in studies in labour economics the policy implications are broad since much previous analysis of discretionary fiscal policy rests on official figures for automatic stabilization there are also major implications for efforts to incorporate automatic fiscal policy in simulation models julia darby and jacques melitz

business cycle duration dependence a parametric approach this paper reexamines duration dependence in u s business cycles using parametric hazard models positive duration dependence would indicate that expansions or contractions are more likely to end as they become older this paper provides statistically significant evidence of positive duration dependence for expansions before world war ii and contractions after world war ii the evidence is stronger than in earlier research utilizing nonparametric techniques because certain nonparametric techniques have low statistical power against the type of duration dependence found in this paper evidence is also presented suggesting that expansions became longer on average after world war ii while contractions became shorter copyright 1991 by mit press

business cycle duration dependence reconsidered sichel estimated a weibull hazard model using the national bureau of economic research business cycle chronology and found evidence of duration dependence only for prewar expansions and postwar contractions the article updates the postwar sample through the end of the most recent expansion and uses a generalized weibull model that provides much greater flexibility at the expense of one additional parameter this model finds evidence of duration dependence for all samples and is statistically superior to the conventional weibull model for all samples except postwar contractions

processed food trade and developing countries protection and trade liberalization abstract exports of processed foods from developing countries have expanded rapidly in recent times contributing to their economic development recent published research has shown that the export policies and agricultural resource endowment of the developing country offer significant explanations for this export growth but what if developing countries further lowered their tariff barriers against imports what impact would such policy changes have on processed food exports from developing countries alternatively what if processed food trade barriers are lowered in developed countries and if trade in manufactured goods were to be further liberalised what might be the impacts on the processed food sectors of developing countries an applied general equilibrium model is used to shed light on these questions through simulations of trade policy alternatives most developing regions examined had a positive effective protection rate for processed foods in the base year this effective protection was lowered when such countries reduced their agricultural tariffs when tariff cuts were extended to manufactured goods effective protection of food processing in most developing regions increased somewhat but was still less than base period protection for the developing countries it would appear that comprehensive trade policy reforms taken by themselves are about as significant as those of the developed world in terms of contributing to growth in processed food exports from developing countries such reforms allow those developing countries with a comparative advantage in food production to expand exports and to take advantage of increased access to other developing countries with a less favourable agricultural resource endowment as well as to developed country markets

booms busts and normal times in the housing market we assess the existence of duration dependence in the likelihood of an end in housing booms busts and normal times using data for 20 industrial countries and a continuous time weibull duration model we find evidence of positive duration dependence suggesting that housing market cycles have become longer over the last decades then we extend the baseline weibull model and allow for the presence of a change point in the duration dependence parameter we show that positive duration dependence is present in booms and busts that last less than 26 quarters but that does not seem to be the case for longer phases of the housing market cycle for normal times no evidence of change points is found finally the empirical findings uncover positive duration dependence in housing market booms of european and non european countries and housing busts of european countries in addition they reveal that while housing booms have similar length in european and non european countries housing busts are typically shor

on generalizing the economic analysis of international migration a note the author critically examines an article by kar yui wong concerning two important well known propositions on international factor movements namely first finite international factor movements are beneficial to the nationals of the destination country but detrimental to those who are left behind in the source country and second marginal movements do not have such welfare implications the present paper by utilizing the indirect trade utility function derives results in a manner that is both direct and at once intuitively transparent

fiscal policy in good times and bad in the 1980s several countries with large government debt or deficit implemented substantial and in some cases drastic deficit cuts contrary to widespread expectations in many cases private consumption boomed rather than contracted this paper shows that in times of fiscal stress shocks to government revenues and especially expenditure have very different effects on private consumption than in normal times

international migration non traded goods and economic welfare in the source country a comment abstract labor emigration redistributes income in a two factor two good economy where one good is internationally non traded labor s nominal wage rises as nominal capital payments fall recent research has shown that the prices of non traded goods rise causing society s welfare to decline here the induced change in the real income of each factor is considered separately there is an ambiguity with regard to the real income of non emigrating labor if labor spends a relatively small fraction of income on the non traded good its real income may rise even though society suffers the loss of welfare

fiscal consolidation and financial reforms we use a rare events logistic regression model as well as traditional probit and logit models to investigate the impact of fiscal consolidation on the likelihood of financial reforms for a panel of 17 countries over the period 1980 2005 we show that large austerity plans mainly implemented through spending cuts rather than tax hikes promote financial reforms by considering reforms affecting specific areas of the financial sector we find that the banking sector reforms and domestic finance reforms are more likely to occur when fiscal adjustments are put in place interestingly while banking sector reforms are mainly prompted during periods of tax driven consolidations spending cuts driven consolidation packages seem to propel the implementation of domestic finance reforms finally we show that higher inflation lower degree of trade openness a deterioration of financial conditions and to some extent a fall in the degree of competitiveness enhance the probability of financial reforms

global factors uncertainty weather conditions and energy prices on the drivers of the duration of commodity price cycle phases abstract we investigate the role of global factors in explaining the length of commodity price cycle phases using a continuous time weibull duration model and data for a panel of 33 countries over the period 1980q1 2015q4 we find evidence of increasing constant positive duration dependence for commodity price booms and busts normal time spells global macroeconomic conditions in particular inflation economic policy uncertainty and monetary policy actions significantly affect the duration of all commodity price cycle phases global environmental conditions also impact the duration of commodity price booms with a rise in average temperature rainfall increasing reducing their length a rise in the number of military conflicts around the globe is associated with shorter booms and busts finally we find that a rise in oil prices is linked with longer booms and shorter busts

the economic analysis of international migration a generalization this note examines and extends the following two propositions that finite international factor movements are beneficial to the nationals of the destination country but detrimental to those left behind in the source country and that marginal movements do not have such welfare effects using some newly developed techniques the propositions are found to be valid irrespective of the number of goods and factors if the economy starts from the autarky position when only one factor can flow the gain of the nationals loss of those left behind will be positively dependent upon the amount of inflow outflow however if goods trade and or factor flow are initially present the propositions are in general not true summary in fre excerpt

budgetary risks from real estate and stock markets fiscal revenues and government expenditures are affected by asset price changes in ways that are not accounted for by standard cyclical adjustment methods revenues are influenced by capital gains and turnover taxation as well as by output changes determined by the effect of wealth changes on consumption and investment and outlays may also be affected if collapsing asset prices prompt fiscal authorities to bail out private sector balance sheet problems we point out that these effects can be asymmetric resulting in deficit and debt biases and we find support for this phenomenon in panel estimates for a sample of 20 industrialized countries over 1982 2002 the estimated coefficients indicate that 30 40 of the dramatic early 1990s fiscal balance deteriorations in the uk and sweden was due to asset price effects with a particularly relevant role for real estate price changes if financial markets experience boom bust cycles prudent management of fiscal windfalls in boom phases is needed to ensure fiscal and financial sustainability in bust phases and budgetary rules may need to account explicitly for a separate role of asset price related effects felix eschenbach and ludger schuknecht

international migration non traded goods and economic welfare in a two class economy a reply abstract this paper sketches a formal model of an economy producing traded and non traded goods in which two classes of individuals are differentiated each owning different endowments of capital and labor and allocating different proportions of their income to the consumption of each commudity the effects of emigration on prices income distribution and the real income of each class is then examined