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MINNA-MAARI H. KARVONEN [*] Traditional neoclassical production theory analyzes the relationship in a production process between inputs and outputs which have a positive market value for the producer. The externalities [...]

Dear Professors Kemme and Teng: We, Drs. Jordi Sarda Pons and Maria Jose Perez Lacasta, wish to deeply apologize for unwittingly plagiarizing parts of your work. In the February 2003 [...]

JEL A20 Tell me and I'll forget; show me and I may remember; involve me and I'll understand. (Chinese proverb) One must leam by doing the thing, for though you [...]

The paper considers a monetary union composed of two representative countries characterized by different inflation aversions. The model derives Nash equilibria after a country-specific shock in which the countries have a costly option to abandon the common currency. The main results are that the higher the inflation aversion of the country affected by the shock, the lower its exit probability. The higher the inflation aversion in both countries, the lower the probability that the country not directly hit also abandons the monetary union (contagion). Keywords Monetary unions * Contagion * Nash equilibria * Inflation aversion JEL Classification F30 * F31 * F41 * G01, Introduction This is a very short stylized paper focused on assessing the stability of a monetary union. The paper aims to analyze the role played by heterogeneous inflation aversions of [...]

This paper investigates the relationship between carbon dioxide emissions and gross domestic product in the Middle East and North Africa region using World Bank data covering the period 1980 to 2010 on the eve of the Arab Spring. Unlike extant studies using parametric models, the results provide evidence against the postulated inverted-U shaped relationship between pollution and the level of economic development. Using a non-parametric model, new evidence is found against the existence of a carbon Environmental Kuznets Curve in contrast to previous studies on the region. The paper provides a cautionary note against the use of parametric models to draw policy implications about the trade-off (or lack thereof) between environmental quality and the level of economic development. Keywords Carbon emissions * Environmental Kuznets curve * Non-parametric regression JEL Classification C14 * C23 * Q54, Introduction The relationship between pollution levels and economic development has been a contentious issue within the economics literature. The discussion was typically examined using the so-called Environmental Kuznets Curve (EKC) [...]

Abstract This paper analyzes strategic interactions and contagion effects in the peripheral countries of a monetary union. Using game theory and cost-benefit analysis, the paper determines the set of equilibrium [...]

Using an autoregressive distributed lag model, this paper examines the factors that influence the credit risk of the Bulgarian banking system over the decade 2001-2010, as measured by non-performing loans. Recent papers aim to identify the determinants of non-performing loans using a cross-country modelling framework. As the South East European region (SEE) is non-homogeneous, our analysis is country-specific and captures the timeline between the bank privatisation era up to the global financial crisis and the ensuing Greek crisis. The contribution of our paper is twofold: it uses the ARDL modelling framework that is scarcely employed in related studies but also investigates spillover effects from the Greek crisis in view of the material presence of Greek banks in Bulgaria. In accordance with previous studies, the findings suggest that the credit risk determinants of Bulgarian banks should be sought endogenously in macroeconomic variables and industry-specific factors but also in exogenous factors. We evidence a pronounced role of the global financial crisis and the country's bank regulatory framework. The Greek debt crisis appears to play an immaterial role indicating that Greek banks have not been a Trojan horse in the Bulgarian banking system. Keywords Credit risk * Non-performing loans * Bulgarian banking system * Greek crisis JEL Classification C10 * G20 * O57, Introduction Before the global financial crisis, the countries in the SEE region relied to a large extend in foreign funding. The region had seen a stunningly high credit expansion with [...]

The choice-value thesis claims that people always choose what is best for them, given their information on the set of alternatives. This paper attempts to show that this assumption is [...]

DAVID H. EATON (*) This paper uses a balanced panel of taxpayers to examine the price and income elasticities for charitable contributions for nonitemizing taxpayers. One-way and two-way static fixed [...]

A structural break was suspected for the Canadian gross domestic product (GDP) time series when the reporting system switched from the Standard Industrial Classification system to the North American Industry Classification System system in 1997, as was previously detected for the United States. Any failure to identify in-sample breaks not only will produce biased parameter estimates but may adversely affect the model's out-of-sample forecasting performance. This study investigated the possibility of poor forecast performance and biased estimation in the presence of the 1997 structural break in Canadian GDP. We confirmed the detected break in Canadian GDP data (1973-2014). All statistics indicated that the coefficients were not stable over time. Three models were employed to provide more accurate forecasts of GDP. The results demonstrate gains in forecasting precision when out-of-sample models accounted for structural breaks. Decision and policy makers might benefit from more precise GDP anticipation if the models were corrected for the 1997 break. Keywords Structural break * Forecast errors * US GDP * Canadian GDP * Lagged dependent variable * Static forecast * Policy making JEL Classification C22*E17, Introduction In a joint attempt to obtain a high level of comparability in collecting business statistics for Canada, Mexico and the United States (U.S.), the Department of Commerce, Bureau of [...]

The healthcare sector is one of the largest industries in most countries. It is also an outstanding case for a multi-tier system of the participating parties' incentives and their conflicting interests. This paper focuses on a few of the multifactorial interrelationships between the different actors in healthcare services. The novel approach of this paper is the assumption of double-information asymmetry between the transacting parties that describes the actors' relationships more realistically than the traditional principal-agent models. It will be shown that any system of incentivization may only apply perverse incentives in this case. Notably, efficient, high-quality healthcare units will be punished while less efficient and lower quality ones will be rewarded for their accomplishment. The theoretical analysis is supported by facts regarding Central and Eastern-European countries. Some symptoms and causes of the current decline can also be found in advanced West European countries and even in the United States. They are closely related to the ill-designed regulatory systems of publicly funded healthcare in these countries. Keywords Asymmetric information in healthcare * Incentive theory * Two-sided information asymmetry JEL C73-D82-I11, Introduction The health care sector has become one of the largest industries in most of the advanced and medium-developed countries. It is also an outstanding case for a complex multi-tier [...]

This paper contributes to nonparametric forecasting techniques by developing three local nonparametric forecasting methods for the nonparametric exclusion-from-core inflation persistence model that are capable of utilizing revised real-time personal consumption expenditure and core personal consumption expenditure for 62 vintages. Local nonparametric forecasting provides forecasters with a way of parsing the data by permitting a low inflation measure to be included in other low inflationary time periods and vice versa. Furthermore, when examining real-time data, policy-makers can use the nonparametric models to help identify outliers and potential abnormal economic events and problems with the data such as an underlying change in volatility. The most efficient nonparametric forecasting method is the third model, which uses the flexibility of nonparametrics by making forecasts conditional on the forecasted value, which can be used for counterfactual analysis. Keywords Inflation persistence * Real-time data * Monetary policy * Nonparametrics * Forecasting JEL Classification E52 * C14 * C53, Introduction Financial data and some economic time series data, such as inflation, tend to be from fat-tailed distributions, which should be taken into account in forecasting. Using the kernel-weighted least [...]

The paper investigates the efficient frontier and capital market line for the Portuguese stock market before and after the Global Financial Crisis. The efficient frontier and capital market line shift to positions that offer investors better opportunities as we move from 2000-2008 to 2009-2015. Keywords Markowitz portfolio theory * Mean-variance theory * Efficient frontier * Capital market line * PSI 20 JEL G10 * C10, Introduction This paper calculates the efficient frontier (EF) (1) and the capital market line (CML), using data from companies listed in PSI 20, considering two different periods: before and after [...]

This paper examines the effect of trade policies on worker welfare. The main contribution of the paper lies in its short run results, which differ from those in earlier studies. [...]

Abstract This paper presents a model of soft budget constraints on firms where refinancing of poor projects is ex post inefficient when viewed in isolation, and analyzes how bank capital [...]

Abstract Thanks to numerous empirical research studies, a general consensus has been reached on the effects of an aging population on the economy, particularly in terms of economic growth and [...]

In this paper, we investigate the extent of monetary independence in a group of ten Asian countries: China, Malaysia, Japan, India, Indonesia, Philippines, Thailand, Korea, Singapore, and Hong Kong. While the traditional investigation has considered only the bivariate relationship between the home interest rate and the base rate, we employ both single-equation and vector autoregressive representations of the bivariate and the trivariate relationship including the desired (or optimal) interest rate. We find in most countries, that the ranking of monetary independence is relatively consistent across the models and methodologies although model specifications produce important differences for some countries such as Japan, Indonesia, and India. Trilemma suggests that a country cannot accomplish all three policy objectives: monetary independence, exchange rate stability, and free capital mobility. To increase monetary independence a country must choose between greater exchange rate flexibility or a lower degree of capital mobility. The fact that China and Malaysia, the two countries that are known to have imposed the strictest capital controls, consistently rank high in various scenarios while Hong Kong, which has maintained nearly the freest regime in capital markets, is lowest in monetary independence, indicates that perhaps capital controls may play a more important role than does exchange rate flexibility in securing independence in monetary policy making. On the other hand, countries that maintain greater exchange rate stability do not necessarily rank low, unless it is combined with greater capital mobility as in the case of Hong Kong. Keywords Trilemma * Monetary independence * Capital controls * Exchange rate flexibility This paper has been written with a generous support from The A P J Kalam India Studies Research Program. We have benefitted from very useful and constructive comments from two referees. JEL Classification F3 F4, Introduction In an open economy, a monetary authority is subject to the trilemma, which states that it is impossible to have all three policy objectives of (a) unrestricted capital movement, [...]

This paper contributes to the sparse literature on inequality convergence by empirically testing convergence across states in the U.S. This sample period encompasses a series of different periods that the existing literature discusses--the Great Depression (1929-1944), the Great Compression (1945-1979), the Great Divergence (1980-present), the Great Moderation (1982-2007), and the Great Recession (2007-2009). This paper implements the relatively new method of panel convergence testing, recommended by Phillips and Sul (2007). This method examines the club convergence hypothesis, which argues that certain countries, states, sectors, or regions belong to a club that moves from disequilibrium positions to their club-specific steady-state positions. We find strong support for convergence through the late 1970s and early 1980s, and then evidence of divergence. The divergence, however, moves the dispersion of inequality measures across states only a fraction of the way back to their levels in the early part of the twentieth century. Keywords Club convergence * Inequality measures * Panel data * U.S. JEL Classification C22 * D63, Introduction Dew-Becker and Gordon (2005) show that from 1966 to 2001, only the top 10% of the income distribution in the U.S. gained real income equal to the growth in [...]

Abstract This article focuses on the New Keynesian multiple-equations small-open-economy macroeconomic model to illustrate deeper relations among model parameters. These relations are more important than the basic values of the [...]

Abstract The aim of this paper is to investigate risky-prices sensitivity to interest rate changes in the Spanish market and to see if sensitivity is lower than public debt. To [...]

Abstract This paper analyzes whether international monetary policy coordination is the best response to economic interdependence. The paper develops a macroeconomic model in which countries show different preferences regarding objectives [...]

Abstract This paper focuses on the possible interaction between foreign direct investment (MI) and the host country's infrastructure base. Its central hypothesis is that the. effect of FDI on per [...]

Abstract The present paper examines the welfare effects of a dynamic Research and Development (R&D) game at the firm level in a two-country, two-firm, intra-industry trade context. Economists do not [...]

This paper estimates educational choice, wage determination, and the rate of return for education in Taiwan using Manpower Utilization Survey data for 1996. As education investment is a self-selection process, [...]

Grand Valley State University-U.S.A. This paper argues that changes in inflationary expectations have no impact on the spot price of gold. It is widely reported in the financial press that [...]

Published online: 20 November 2011 [C] International Atlantic Economic Society 2011 This paper examines how equilibrium sorting takes place in marriages between immigrants in the U.S. from Mexico, Asia, the [...]

DOI 10.1007/s11294-011-9293-4 Published online: 17 April 2011 [C] International Atlantic Economic Society 2011 Abstract This paper addresses two questions. First, how does the quality, rather than the quantity, of education [...]

Abstract This paper refers to 1995-2006 and analyzes the role and sources of within- and between-sectors convergence in the context of the economic catching-up process across the European Union regions. [...]

Furman University--U.S.A. This paper explores the main strands of the early political business cycle (PBC) literature, looks at some of the critics of PBCs, and examines new trends and techniques [...]

Abstract This paper contributes to the current debate moderated by the European Commission on the territorial dimension of the economic and social cohesion, investigating the role of the CAP in [...]

Abstract Several studies have established the predictive power of the yield curve for the U.S. and various European countries. In this paper we use data from the European Union (EU15), [...]

Abstract This paper presents a methodology for estimating the Brazilian GDP quarterly series in the period between 1960-1996. Firstly, an Engle-Granger's static equation is estimated using GDP yearly data and [...]

The rapid growth in China's domestic investment in recent decades has generated a large appetite for global goods, including from sub-Saharan Africa (SSA). This paper estimates the impact of changes in China's investment growth on SSA's exports. Although rising trading links with China have allowed African countries to diversify their export base across countries away from advanced economies, they have also led SSA countries to become more susceptible to spillovers from China. Based on panel data analysis, a one percentage point increase (decline) in China's domestic investment growth is associated with an average 0.6 percentage point increase (decline) in SSA countries' export growth. This impact is larger for resource-rich countries, especially oil exporters. These effects could be mitigated, however, to the extent that countries can reorient their exports. Keywords China * Sub-Saharan Africa * Investment * Trade * Spillover * Panel data * Econometrics JEL Classification F01 F15 053, Introduction China has become a major development partner of sub-Saharan Africa (SSA), as its trade, investment, and aid ties with the region have increased remarkably in recent years. (1) China's [...]

In the aftermath of the 2008 financial and economic crisis, governments developed plans to steer fiscal policies back to a sustainable path. Austria is no exception, since the latest 2012 consolidation package aimed to balance the budget by 2016. For the success of consolidation policies, however, it is of great importance which fiscal policy strategies are pursued. For instance, should the deficit be reduced by reducing expenditure, by increasing revenue, or by a mixed coordinated policy? Empirical evidence from the mid-1990s indicated that Austria's policy makers followed a path according to the spend-tax hypothesis, deciding on expenditure and then caring about the funding of public tasks. Since 1995, the year of Austria's accession to the European Union, fiscal policy frameworks have changed (e.g., Maastricht Treaty, Fiscal Pact), and thus budgetary policies might have changed as well. The current paper provides new econometric evidence for a stable spend-tax fiscal policy decision process in Austria for the last 60 years. Therefore, it seems that the importance of reducing expenditure (about 72 % of the total consolidation volume in the current package) accounts for this principal approach in Austrian fiscal policy making. However, left open is whether the envisioned increase in revenues (about 28 % of the total consolidation volume) might be counterproductive for sustainably balancing the budget. Keywords Public debt * Public revenue/expenditure * Tax-spend debate (revenue-expenditure nexus) * Budgetary policies JEL Classification H6 * E6, Introduction The latest macroeconomic developments significantly influenced Austrian budgetary policies. The last five years of recessions and austerity packages also left their marks on Austrian public debt. The Austrian Ministry [...]

Abstract This paper builds on three strands of literature--Early Warning Systems (EWS), parallel exchange rates, and collapsing exchange rate regimes--by addressing the issue of credibility in the context of unification [...]

This paper discusses the determinants of a Non-Fiat Anonymous Digital Payment Method's (N-FAD) value and illustrates a relationship between N-FAD transactions, economic growth, and inflation. The relationship raises a heretofore unmentioned issue concerning the ability of monetary authorities to operate effectively, which justifies regulatory concerns over bitcoin and other N-FADs. Our method of analysis allows for empirical estimates that characterize the magnitude of the concern, as it relates to the use of bitcoin. Finally, we are able to identify the stylized features of bitcoin that complicate monetary policy, comment on how they relate to the value of N-FADs more generally, and provide suggestions for future research. Keywords Crypto currency * Bitcoin * Quantity equation, Introduction In economics, the value of an item is defined by its opportunity cost - the next best alternative forgone. To facilitate comparisons of value, it is standard practice to [...]

Standard Phillips curve models of price inflation suggest that the United States should have experienced an episode of deflation during the Great Recession and the subsequent sluggish recovery. Although inflation reached very low levels, prices continued to rise rather than fall. More recently, many observers have argued that inflation should have increased as the unemployment rate declined and labor markets tightened, but inflation has remained below the Federal Reserve's policy target. This paper confirms that the slope of the Phillips curve has declined over the past 50 years and is very close to zero today. The Phillips curve was modified to allow its slope to vary over time consistent with theories of price-setting behavior by firms when prices are costly to adjust and when information is costly to obtain or process. Adapting the Phillips curve to allow for time-variation in its slope helps explain the pattern of inflation, not only during and after the Great Recession, but also over the previous four decades. Keywords Inflation * Phillips curve * Great recession JEL E30-E31, Introduction Standard models relating price inflation to measures of slack in the economy suggest that the United States should have experienced an episode of deflation during the Great Recession of [...]

This paper examines the link between changes in the sentiment tone with respect to the European Central Bank's (ECB) announcements and stock returns. The analysis constructs a new index that describes the tone of the sentiment derived from these announcements, spanning the period January 2002 to June 2016. The novelty of this work relies on the development of a unique sentiment index associated with the messages conveyed by the ECB's activities and the effect of this index on both the mean and the volatility of certain major international stock markets. In this context, the sentiment index is present in both the conditional mean and the volatility equations. The findings indicate a significant impact on both the mean and the volatility of returns, whereas the news sentiment/stock returns association increases in strength during the crisis period. The findings survive a robustness check based on the characteristics of the ECB governor's personality. Keywords Changes in the tone of sentiment wire news * ECB announcements * Stock prices * International stock markets JEL Classification G01*E58, Introduction Public news provides early warnings of the current situation of the stock market, whereas media reports influence the beliefs of market participants and induce investors either to enter or [...]

The forest transition describes a reversal or turnaround in long-run land-use trends for a country or region from a period of net forest area loss to net gain. Following North, this paper constructs a model to show that effective institutions may impose additional costs on a representative economic agent converting forests to agriculture in a tropical developing country. The main outcome to emerge from the model is that an improvement in institutions accelerates the onset of a forest transition. This hypothesis is tested by examining the probability of a forest transition occurring for 101 tropical developing countries over 1990 to 2015. The empirical results suggest that the hypothesis cannot be fully rejected. However, not all the institutional indicators analyzed affect the likelihood of the forest transition, and one economy-wide indicator appears to delay the transition. Nevertheless, the results illustrate the importance of understanding how institutional indicators affect the decisions of economic agents concerning land clearing as well as forest management practices and policies. Keywords Developing countries * Forestpolicy * Forest transition * Tropical deforestation JEL Classification Q23 * Q24 * O13, Introduction The forest transition describes a reversal or turnaround in long-run land use trends for a country or region from a period of net forest area loss to net gain [...]

Abstract This paper examines the relationship between long-run growth and business cycles in the Organization for Economic Co-operation and Development (OECD). The model in the paper specifically assumes that the [...]

This paper aims at a comparative analysis of Estonian and Polish banking systems. The DuPont financial ratio analysis method and the matrix approach method are mainly used for this comparison. [...]

Although China, now the world's second largest economy and largest goods trading nation, has rolled out the ambitious currency internationalization protocol while maintaining strict capital controls for nearly a decade, the implications of this unique reform path on the international economy still present uncertainties. In this paper, we fill in this gap by developing a two country, two-goods model to investigate the impacts of currency internationalization on the international price system, which consists of goods market and factor market interactions. We propose a critical condition of sustainable currency internationalization and reveal high international price sensitivity to exchange rate adjustments. Keywords Currency internationalization * Currency intervention * RMB JEL E3 * E5 * F3 * F4 * F6, Introduction After the devastating 2008-09 global financial crisis, many monetary economists urged diversification of the international monetary system to reduce its over-reliance on single currencies, especially U.S. dollar (e.g., Zhou [...]

While Joseph A. Schumpeter is classified as a pioneer of evolutionary economics in a wide sense and of entrepreneurship and innovation management in a narrower sense, Schumpeter is less known for his contributions in the area of scientific methodology and history of science. The paper deals with methodological premises in Schumpeter's scientific positioning. In 1908, in his Das Wesen und der Hauptinhalt der theoretischen Nationalokonomie, Schumpeter developed and pioneered his methodological individualism which is very much acknowledged. However, comparing these early positions with methodological writings in his History of Economic Analysis (1954) shows that he has not really shifted from methodological individualism to an institutional perspective that addresses the academic interplay and sees economic action rooted in historical predispositions, paths and social constraints. Keywords Methodological individualism * Institutional economics * Joseph A. Schumpeter * Economic methodology JEL B25 * B30 * B41 * F14 * F01 * F20 * O10, Introduction The paper deals with Joseph A. Schumpeter and his efforts to treat economics methodologically. Some authors argue that Schumpeter maintained his principal scientific positions over the course of his [...]

Economic history, particularly the history of the Eurozone, is full of cases of countries experiencing severe economic crises. These crises may have different causes and effects and may be transmitted differently among the affected countries. However, the type of crisis that has the most widely spread political, economic, and social impact is the recession crisis. As a rule of thumb, a recession crisis is the result of a separate crisis, such as a country's debt crisis (e.g. Greece, Portugal and Spain), a financial and banking crisis, or a crisis due to various bubbles (e.g. the real estate crisis in the United States). The main purpose of this paper is to study the course of a series of countries, which were or currently are in a crisis and a supervised adjustment program, in terms of managing the exit from the crisis, the implementation of macroeconomic and reform policies, the policy applied for attracting foreign direct investments, and the impact of such policy on the countries that were affected by the crisis. Keywords Economic crisis * Economic growth * Foreign direct investments * Eurozone JEL Classification F30 * G15 O10, Introduction The recent economic crisis in the Eurozone and similar economic events since the early twentieth century can be shown, despite their differing causes and characteristics, to have direct and [...]

The paper focuses on tax expenditures of individuals, which are one of the fiscal tools of the state. In the Czech Republic they are primarily aimed at housing policy, pension policy, and philanthropy, and the question is the extent to which tax expenditures can influence the preferences of tax payers. The aim of this paper is to evaluate the effect of tax expenditures of individuals in the form of tax deductions for social policy, housing support and retirement savings. We also evaluate whether these tax deductions fulfill the fiscal functions for which they were introduced and the extent to which taxpayers use them. Methodically, the research is based on the analysis of secondary statistical data of the Financial Administration of the Czech Republic and results from aggregated tax returns filed for the period 2005-2015. The effect of tax deductions was decreased by abolition of the progressive rate of personal income taxes and by introduction of a uniform tax rate of 15%. Tax deductions for retirement savings do not have a sufficiently strong motivational impact and do not affect taxpayers in the context of public policy. Deductions for mortgage interest can be regarded as a form of major housing support, but are related to taxpayer income and favor those with higher incomes. Keywords Tax policy * Tax deductions * Individuals * Mortgage interest * Life insurance * Retirement contributions JEL Classification H2 * D14 * E62, Introduction Tax expenditures are one of the state's primary fiscal tools for allocating private funds to preferred areas. The principle of tax incentives concerns the extent to which expenditures are [...]

This paper examines a remittance multiplier based on the short-run Keynesian equilibrium approach and shows how income may be affected by remittance inflows. We explore this through the equilibrium in the goods and money markets, where remittances can affect both consumption and the demand for real money balances. We present this simple theoretical model utilizing a standard Keynesian framework. The short-run Keynesian equilibrium approach provides insight into how remittances affect output and income, and its potential multiplier effects. The model used is indicative of a positive relationship between the marginal propensity to consume out of remittances and the multiplier. The framework also shows that remittances will have a greater impact if its marginal propensity to consume is greater than that for standard disposable income. Keywords Remittances * IS-LM model * Keynesian equilibrium * National income JEL Classification E00 * E20 * F20 * O10, Introduction The inflow of remittances to developing countries is an area of growing interest as we see an increase in globalization and development financing. Remittances to low- and middle-income countries [...]

This paper will discuss the operation of the currency board arrangement in Estonia and some future prospects. The main objectives of this paper are to: 1) discuss advantages and disadvantages [...]

This paper presents and analyzes the main results of the special interview survey of Estonian manufacturing firms undertaken in 1998. The main objectives of the paper were: 1) to describe [...]

Some important issues in developing the legal and institutional environment in a small transition economy, such as Estonia, are discussed in this paper. The main objective of this paper is [...]

The objective of this paper is to investigate the relationship between net exports and wage differentials in the U.S. in the bivariate and trivariate test settings. Short- and long-run analyses [...]