Search

As was the case for most other economies in the eurozone, the Dutch economy was severely hit by the corona crisis. Yet, it is also clear that, likely due to its high degree of digitalization and the nature of its knowledge-intensive economic activities, the setback was substantially smaller than for some other economies with a sectoral structure more focused on direct interpersonal interaction, such as tourism. Also, the rather flexible labor market has been conducive in mitigating the economic downfall. Even in the midst of the crisis, unemployment hardly increased compared with the 2019 level, while there was still substantial turnover in the job market. Adding to this the massive government support, the shrinkage of the economy was in fact smaller than at the height of the global financial crisis in 2009. According to CPB (2021b), the decline of GDP in 2020 would have been 0.6 percentage point larger and unemployment would have been 65–180 thousand employees higher had no business support been given.

This paper contributes to the discussion about mandatory participation in collective funded pension schemes. It explores under what circumstances individual participants exercise the option to exit such a scheme if participation is voluntary. We begin by showing how the willingness to participate increases if the period over which the option is valid becomes longer. Then, we demonstrate how the pension fund’s set of policy instruments can be deployed to minimize the likelihood that any cohort exits the pension scheme. The instruments consist of contribution and indexation policies. Recovery of the funding ratio, i.e. The ratio of assets over liabilities, to its regulatory target level may be based on uniform contributions or age-dependent contributions. Specifically, while the value of the exit option deters younger workers from exiting the pension fund, a uniform contribution policy encourages older workers to stay in the pension scheme.

This paper contributes to the discussion about mandatory participation in collective funded pension schemes. It explores under what circumstances individual participants exercise the option to exit such a scheme if participation is voluntary. We begin by showing how the willingness to participate increases if the period over which the option is valid becomes longer. Then, we demonstrate how the pension fund’s set of policy instruments can be deployed to minimize the likelihood that any cohort exits the pension scheme. The instruments consist of contribution and indexation policies. Recovery of the funding ratio, i.e. The ratio of assets over liabilities, to its regulatory target level may be based on uniform contributions or age-dependent contributions. Specifically, while the value of the exit option deters younger workers from exiting the pension fund, a uniform contribution policy encourages older workers to stay in the pension scheme.

Jensen (1994a) finds that loss of monetary discretion leads to lower welfare. However, by extending his model we show that if real base money holdings are relatively low, as is likely to be the case for modern economics, a zero-inflation rule may well be preferable to monetary discretion. If the emphasis on achieving the output and public spending targets falls, a zero-inflation rule is more likely to be preferred. The increased support for binding policy rules thus conforms with a less tolerant attitude towards inflation

Jensen (1994a) finds that loss of monetary discretion leads to lower welfare. However, by extending his model we show that if real base money holdings are relatively low, as is likely to be the case for modern economics, a zero-inflation rule may well be preferable to monetary discretion. If the emphasis on achieving the output and public spending targets falls, a zero-inflation rule is more likely to be preferred. The increased support for binding policy rules thus conforms with a less tolerant attitude towards inflation

The trade-off between inflation and taxation is analysed in a model with heterogeneity in nominal debt holdings. This creates a political conflict among the electorate. As a benchmark we study a "completely representative" democracy, where more inequality leads to higher equilibrium inflation. Extensions include a more realistic two-party nomination system and real money balances in the utility function. Special attention is drawn to the sources of multiple politico-economic equilibria. Finally, an explicit comparison with the capital-levy problem is made., Published in connection with a visit at the IIES.

Macroeconomic stabilisatin and foreign exchange market interventions are investigated within the context of a stochastic small open economy. With money demand shocks a peg is optimal, but with goods demand shocks a nominal income target is best. With supply shocks the optimal degree of monetary accommodation rises with the welfare weight attached to output rather than to price stability. A nominal exchange rate band is not advisable from a stabilisation point of view, albeit that with money demand shocks no welfare losses are incurred. With goods demand shocks, narrowing the band affects the optimal coefficient of intramarginal monetary accommodation. With supply shocks and no intramarginal interventions, it is desirable to have a wider band if there is a relatively large weight on price rather than output stability., Published in connection with a visit at the IIES.

The trade-off between inflation and taxation is analysed in a model with heterogeneity in nominal debt holdings. This creates a political conflict among the electorate. As a benchmark we study a "completely representative" democracy, where more inequality leads to higher equilibrium inflation. Extensions include a more realistic two-party nomination system and real money balances in the utility function. Special attention is drawn to the sources of multiple politico-economic equilibria. Finally, an explicit comparison with the capital-levy problem is made., Published in connection with a visit at the IIES.

Macroeconomic stabilisatin and foreign exchange market interventions are investigated within the context of a stochastic small open economy. With money demand shocks a peg is optimal, but with goods demand shocks a nominal income target is best. With supply shocks the optimal degree of monetary accommodation rises with the welfare weight attached to output rather than to price stability. A nominal exchange rate band is not advisable from a stabilisation point of view, albeit that with money demand shocks no welfare losses are incurred. With goods demand shocks, narrowing the band affects the optimal coefficient of intramarginal monetary accommodation. With supply shocks and no intramarginal interventions, it is desirable to have a wider band if there is a relatively large weight on price rather than output stability., Published in connection with a visit at the IIES.

The trade-off between inflation and taxation is analysed in a model with heterogeneity in nominal debt holdings. This creates a political conflict among the electorate. As a benchmark we study a "completely representative" democracy, where more inequality leads to higher equilibrium inflation. Extensions include a more realistic two-party nomination system and real money balances in the utility function. Special attention is drawn to the sources of multiple politico-economic equilibria. Finally, an explicit comparison with the capital-levy problem is made., Published in connection with a visit at the IIES.

Macroeconomic stabilisatin and foreign exchange market interventions are investigated within the context of a stochastic small open economy. With money demand shocks a peg is optimal, but with goods demand shocks a nominal income target is best. With supply shocks the optimal degree of monetary accommodation rises with the welfare weight attached to output rather than to price stability. A nominal exchange rate band is not advisable from a stabilisation point of view, albeit that with money demand shocks no welfare losses are incurred. With goods demand shocks, narrowing the band affects the optimal coefficient of intramarginal monetary accommodation. With supply shocks and no intramarginal interventions, it is desirable to have a wider band if there is a relatively large weight on price rather than output stability., Published in connection with a visit at the IIES.

The trade-off between inflation and taxation is analysed in a model with heterogeneity in nominal debt holdings. This creates a political conflict among the electorate. As a benchmark we study a "completely representative" democracy, where more inequality leads to higher equilibrium inflation. Extensions include a more realistic two-party nomination system and real money balances in the utility function. Special attention is drawn to the sources of multiple politico-economic equilibria. Finally, an explicit comparison with the capital-levy problem is made., Published in connection with a visit at the IIES.

Macroeconomic stabilisatin and foreign exchange market interventions are investigated within the context of a stochastic small open economy. With money demand shocks a peg is optimal, but with goods demand shocks a nominal income target is best. With supply shocks the optimal degree of monetary accommodation rises with the welfare weight attached to output rather than to price stability. A nominal exchange rate band is not advisable from a stabilisation point of view, albeit that with money demand shocks no welfare losses are incurred. With goods demand shocks, narrowing the band affects the optimal coefficient of intramarginal monetary accommodation. With supply shocks and no intramarginal interventions, it is desirable to have a wider band if there is a relatively large weight on price rather than output stability., Published in connection with a visit at the IIES.

The trade-off between inflation and taxation is analysed in a model with heterogeneity in nominal debt holdings. This creates a political conflict among the electorate. As a benchmark we study a "completely representative" democracy, where more inequality leads to higher equilibrium inflation. Extensions include a more realistic two-party nomination system and real money balances in the utility function. Special attention is drawn to the sources of multiple politico-economic equilibria. Finally, an explicit comparison with the capital-levy problem is made., Published in connection with a visit at the IIES.

Macroeconomic stabilisatin and foreign exchange market interventions are investigated within the context of a stochastic small open economy. With money demand shocks a peg is optimal, but with goods demand shocks a nominal income target is best. With supply shocks the optimal degree of monetary accommodation rises with the welfare weight attached to output rather than to price stability. A nominal exchange rate band is not advisable from a stabilisation point of view, albeit that with money demand shocks no welfare losses are incurred. With goods demand shocks, narrowing the band affects the optimal coefficient of intramarginal monetary accommodation. With supply shocks and no intramarginal interventions, it is desirable to have a wider band if there is a relatively large weight on price rather than output stability., Published in connection with a visit at the IIES.

Macroeconomic stabilisatin and foreign exchange market interventions are investigated within the context of a stochastic small open economy. With money demand shocks a peg is optimal, but with goods demand shocks a nominal income target is best. With supply shocks the optimal degree of monetary accommodation rises with the welfare weight attached to output rather than to price stability. A nominal exchange rate band is not advisable from a stabilisation point of view, albeit that with money demand shocks no welfare losses are incurred. With goods demand shocks, narrowing the band affects the optimal coefficient of intramarginal monetary accommodation. With supply shocks and no intramarginal interventions, it is desirable to have a wider band if there is a relatively large weight on price rather than output stability., Published in connection with a visit at the IIES.

The trade-off between inflation and taxation is analysed in a model with heterogeneity in nominal debt holdings. This creates a political conflict among the electorate. As a benchmark we study a "completely representative" democracy, where more inequality leads to higher equilibrium inflation. Extensions include a more realistic two-party nomination system and real money balances in the utility function. Special attention is drawn to the sources of multiple politico-economic equilibria. Finally, an explicit comparison with the capital-levy problem is made., Published in connection with a visit at the IIES.

Macroeconomic stabilisatin and foreign exchange market interventions are investigated within the context of a stochastic small open economy. With money demand shocks a peg is optimal, but with goods demand shocks a nominal income target is best. With supply shocks the optimal degree of monetary accommodation rises with the welfare weight attached to output rather than to price stability. A nominal exchange rate band is not advisable from a stabilisation point of view, albeit that with money demand shocks no welfare losses are incurred. With goods demand shocks, narrowing the band affects the optimal coefficient of intramarginal monetary accommodation. With supply shocks and no intramarginal interventions, it is desirable to have a wider band if there is a relatively large weight on price rather than output stability., Published in connection with a visit at the IIES.

The trade-off between inflation and taxation is analysed in a model with heterogeneity in nominal debt holdings. This creates a political conflict among the electorate. As a benchmark we study a "completely representative" democracy, where more inequality leads to higher equilibrium inflation. Extensions include a more realistic two-party nomination system and real money balances in the utility function. Special attention is drawn to the sources of multiple politico-economic equilibria. Finally, an explicit comparison with the capital-levy problem is made., Published in connection with a visit at the IIES.