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Melesse, Wondemhunegn Ezezew. "Business cycles in Ethiopia under alternative monetary policy rules." African Journal of Economic and Management Studies 10, no. 3 (September 2, 2019): 299–313. http://dx.doi.org/10.1108/ajems-12-2018-0395.
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Purpose The purpose of this paper is to compare business cycle fluctuations in Ethiopia under interest rate and money growth rules. Design/methodology/approach In order to achieve this objective, the author constructs a medium-scale open economy dynamic stochastic general equilibrium (DSGE) model. The model features several nominal and real distortions including habit formation in consumption, price rigidity, deviation from purchasing power parity and imperfect capital mobility. The paper also distinguishes between liquidity-constrained and Ricardian households. The model parameters are calibrated for the Ethiopian economy based on data covering the period January 2000–April 2015. Findings The main result suggests that: the model economy with money growth rule is substantially less powerful or more muted for the amplification and transmission of exogenous shocks originating from government spending programs, monetary policy, technological progress and exchange rate movements. The responses of output to fiscal policy shocks are relatively stronger under autarky which appears to confirm the findings of Ilzetzki et al. (2013) who suggest bigger multipliers in self-sufficient, closed economies. With regard to positive productivity shock, however, the model with interest rate feedback rule generates a decline in output and an increase in inflation, which are at odds with conventional empirical regularities. Research limitations/implications The major implication is that a central bank regulating some measure of monetary stocks should not expect (fear) as much expansion (contraction) in output following currency devaluation (liquidity withdrawal) as a sister central bank that relies on an interest rate feedback rule. As emphasized by Mishra et al. (2010) the necessary conditions for stronger transmission of interest-rule-based monetary policy shocks are hardly existent in emerging and developing economies targeting monetary aggregates; hence the relatively weaker responses of output and inflation in the model economy with money growth rule. Monetary policy authorities need to be cautious when using DSGE models to analyze business cycle dynamics. Quite often, DSGE models tend to mimic the proverbial “crooked house” built to every man’s advise. Whenever additional modification is made to an existing baseline model, previously established regularities break down. For instance, this paper documented negative response of output to technology shock. Such contradictions are not uncommon. For example, Furlanetto (2006) and Ramayandi (2008) have also found similarly inconsistent responses to fiscal and productivity shocks, respectively. Originality/value Using DSGE models for research and teaching purposes is not common in developing economies. To the best of the author’s knowledge, only one other Ethiopian author did apply DSGE model to study business cycle fluctuation in Ethiopia albeit under the implausible assumption of perfect capital mobility and a central bank following interest rate rule. The contribution of this paper is that it departs from these two unrealistic assumptions by allowing international risk premium as a function of the net foreign asset position of the country and by applying money growth rule which closely mimics the behavior of central banks in low-income economies such as Ethiopia.
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BENK, SZILÁRD, MAX GILLMAN, and MICHAL KEJAK. "Money Velocity in an Endogenous Growth Business Cycle with Credit Shocks." Journal of Money, Credit and Banking 40, no. 6 (September 2008): 1281–93. http://dx.doi.org/10.1111/j.1538-4616.2008.00157.x.
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Al Arif, M. Maulana, and Achmad Tohari. "PERANAN KEBIJAKAN MONETER DALAM MENJAGA STABILITAS PEREKONOMIAN INDONESIA SEBAGAI RESPON TERHADAP FLUKTUASI PEREKONOMIAN DUNIA." Buletin Ekonomi Moneter dan Perbankan 9, no. 2 (February 13, 2007): 145–77. http://dx.doi.org/10.21098/bemp.v9i2.203.
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This paper analyzes the impact of the inflation and the world interest rate on the Indonesian economy and the effectiveness of the Indonesian central bank policy to adopt the domestic macroeconomic fluctuation.Assuming Indonesia as a small-open economy, the Stuctural Vector Autoregressive Model is utilized on the monthly data during the periode of 1999: 1 – 2004: 12 covering the main domestic macroeconomic indicator (output, price, money supply, interest rate and the exchange rate) and the world oil price and world interest rate as the disturbance source.The analysis provides 2 main results, first, the international variables do have impacts on the domestic variables fluctuation, implying the fragility of the domestic economy due to the external shock, second, the monetary policy is effective on supporting the economic growth and stabilizing the price level. However, the Bank Indonesia policy to stabilize the international shock via the exchange rate channel, contributes to a higher impact of the international shock on domestic interest rate.Keywords: monetary policy, business cycle, SVARJEL Classification: E52, E32, C32, F41
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AJIBOLA, Ayodeji. "Capital Market Development and Economic Growth in Nigeria." Scholedge International Journal of Management & Development ISSN 2394-3378 4, no. 10 (March 28, 2018): 99. http://dx.doi.org/10.19085/journal.sijmd041001.
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The paper examined the effect of a well developed capital market on economic growth in Nigeria. We developed a model that is able to investigate how capital market development affects business cycle volatilities, and in the long run economic growth through the use of multi-variable regression analysis. Unit root test was conducted and all our estimating variables were stationary at first difference except the Christiano-Fitzgerald filter which shows that our model interpretation would not be spurious and a true representation of the relationships that exists between the explained and explanatory variables. Error Correction Model was introduced in our estimation in order to have a parsimonious model. Insignificant variables such as Net Export were removed from our model. This can be understood from the reasoning that Nigeria remains a mono-cultural economy (oil dependent) and is seen by the export shocks being negative and significant from our earlier regression result. From our result, all our variables (market capitalization, gross fixed capital, and structural activity) all have a positive but fairly insignificant impact on economic growth. The volatility measure on the other hand had a negative but highly significant impact on economic growth which supports the endogenous growth model that developing countries (Nigeria inclusive) are highly susceptible to macroeconomic shocks such as money supply shocks, export supply shocks, productivity shocks, etc). In addition, Engle-Granger co integration test was done and showed the existence of a long run relationship between capital market development and economic growth in Nigeria. We recommend adopting a policy framework that address the weak linkages between net export and the rest of the Nigerian economy by diversification, creating conducive environment that allows domestic investors to invest in the capital market and removing all impediments to local businesses. Finally, government securities should be channelled to more productive sectors to complement those in the private sector.
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Mustafi, Mahije, and Sulbije Memeti Karemani. "EMPIRICAL STUDIES ANALYZING THE DYNAMIC EFFECTS OF CHANGES IN PUBLIC EXPENDITURE AND TAXATION ON ACTIVITY." Knowledge International Journal 28, no. 5 (December 10, 2018): 1641–46. http://dx.doi.org/10.35120/kij28051641m.
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This paper analyzes the empirical literature that examines the effects of fiscal policy shocks on economic activity. Discussion related to fiscal policy is related to the impacts on economic growth is quite current, because the development of appropriate fiscal instruments can lead to steady and sustainable economic growth in the countries. The role of fiscal policy and the impact on economic activity are among the most controversial issues among academics and policymakers. In the absence of any "active" intervention in government expenses, tax revenues move automatically with the economic cycle. I can also say that government transfers can be considered as help for the unemployed, they grow as the economy slows down and unemployment rises, while labor tax returns, capital and consumption flows are declining. Resistive actions occur when the business cycle improves. In recent years, empirical studies have shown that private consumption and GDP have increased significantly, while government expenses have been severely reduced. Most empirical evidence suggests that fiscal expansion increases production and consumption and worsens the trade balance.The Kenzie and Neoclassical schools have different views on the impact of public spending on economic activity. This study has completed a detailed review of many important, relevant scientific havepapersthat empirically document these impacts. As a conclusion, we can state that although the fiscal policy theory is well developed, until recently has not received much attention from the (applied) economic practice. The first category is aimed at assessing macroeconomic impact from major reductions in the budget deficit, and the second study, in general, analyzes the stabilizing capabilities of fiscal policy variables. According to Blanchard and Perotti, the dynamic effects of the discretionary fiscal policy of macroeconomic variables have recently focused on the omissions of autoregressive vectors (2002). Some empirical studies have found a link between budget deficits, money growth and inflation, both in industrialized economies as well as in growing economies. For industrial economies most of these studies have come to the conclusion that there is little evidence that government debt affects the growth of money and inflation. In developing countries, it is often argued that high inflation is realized when governments face large and ongoing deficits financed by money emission. A change in taxes or public expenses (the so-called “fiscal shocks”) at any time prevents their development.
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Gupta, G. S. "Economic Fluctuations and Stabilization Policies." Vikalpa: The Journal for Decision Makers 28, no. 1 (January 2003): 1–10. http://dx.doi.org/10.1177/0256090920030101.
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Economic fluctuations refer to ups and downs in the levels and/or rates of changes in the economic goal variables like real national income (GOP), inflation rate, and the rate of unemployment. Stabilization policies are the tools in the hands of the policy-makers to counter economic fluctuations and these include fiscal policy, monetary policy, and foreign exchange rate policy. This paper analyses the extent and depth of all major fluctuations (business cycles) across the G-7 countries, India, China, Malaysia, and the world as a whole during the Great Oepression and the last 40 years, identifies the major cause behind each significant departure from the trend, and examines the theoretical limitations as well as the actual application of the various policies to tame those business cycles. This paper finds that: Business cycles are universal. Each of the countries under analysis here has experienced an overall positive growth rate but also a negative growth rate, generally in more than one year, during the period of this study. Further, the standard deviation of the growth rate as a percentage of the growth rate (called the coefficient of variation) is sizeable in all countries as it varies between a low of 41 per cent in Malaysia and a high of 96 per cent in the UK. Business cycles are not always synchronized across countries. During the Great Depression and stagflation periods, most countries suffered from similar maladies but such a synchronization was rarely found in other times. For example, Japan performed relatively better during the 1950s and 1960s, and China and the South-East Asian economies enjoyed that position during the 1980s and 1990s. Further, while every country has experienced a negative growth rate, there is no year in the last 50 years in which the growth rate was negative in all countries. The world as a whole, of course, has always enjoyed a positive growth rate. Business cycles have become milder over time. During the Great Depression, output fell by over two digit rates in many countries japan experienced a two-digit growth rate in most of the years during 1960s, 1980s, and 1990s, but lately, the growth rate in most countries is hovering around 2 to 5 per cent. Business cycles are caused by varying events. While the adverse demand shock caused the Great Depression, the adverse supply shock triggered the stagflation and economic reforms have been responsible for hyperinflation, financial crises, and prosperity. always been applied in the right perspective. During the Great Depression, the nominal money supply should have increased but it fell and the government expenditure rose but only marginally. The simple correlation and multiple regression analysis' results for the three select countries suggest that while the monetary policy was conducted as an anti-cyclical tool in lndia, it was pro-cyclical in the US and China, and quite the opposite was the case with regard to the conduct of fiscal policy. The cycles are bad and it is unfortunate that the stabilization policies do not offer panacea to tame them fully. However, it is heartening to find that economic fluctuations have become milder over time and the credit for this goes to the innovative developments in the macroeconomic theory and to the improvements in the practice of stabilization policies. Though cycles are unlikely to be eradicated, there is now only little fear of severe crises in future like the Great Depression or stagflation.
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Jati, Kumara, and Aziza Rahmaniar Salam. "FUNDAMENTALS OF INTEGRATED COMMERCIAL BANK IN MACROECONOMIC AND SHARIA PERSPECTIVE IN INDONESIA." Journal of Islamic Monetary Economics and Finance 3, no. 2 (March 28, 2018): 349–87. http://dx.doi.org/10.21098/jimf.v3i2.895.
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This research analyses the fundamentals of integrated commercial bank in macroeconomic and sharia perspective in Indonesia. Based on the calculation of Vector Autoregression (VAR), the impact of macroeconomic variables (Jakarta Stock Islamic Index / JKSII, Indonesian Stock Price Composite Index / JKSE, Crude Oil Price, and Exchange Rate) on stock prices of commercial banks vary. These shocks indicate an indirect price transmission through exchange rate channels and economic growth. From the Structrural Time Series Model (STSM), JKSII, JKSE, and commercial bank share price prediction will generally increase at the end of 2017 and 2018. This will generate hope and benefit for policy maker and business actors in the banking, finance and sharia sectors. In general, the ARMA-ARCH/GARCH model with dummy variables found negative impact of “Fasting Period and Eid Al-Fitr” on return of JKSII, JKSE, and commercial bank stock price. This indicates a cycle of stock price decline that occurs when consumers spend more money to purchase goods and services. However, this cycle of stock price declines is only temporary because the recovery of the world economy and the increase in demand for goods and services in the future can be a pull factor for stock prices (demand factor). Policy makers and stakeholders related to the financial system, banking and capital markets, especially the sharia sector need to see the movement of conventional bank stocks and “Fasting Period and Eid Al-Fitr” as they move in the opposite direction for a certain period.
Keywords: Stock Price of Commercial Bank, Macroeconomic and Sharia Perspective, Vector Autoregression (VAR), Structural Time-Series Models (STSM), ARMA-ARCH/GARCH
JEL Classification Codes: F31, F47, G15, G21
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Lu, Chia-Hui. "A NOTE ON BUSINESS-CYCLE PROPERTIES IN FRICTIONAL LABOR MARKETS." Macroeconomic Dynamics 22, no. 5 (January 18, 2018): 1370–89. http://dx.doi.org/10.1017/s1365100516000717.
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This paper builds a standard search model with flexible prices and wages, and extensive and intensive labor adjustments. Money is introduced into the model through a cash-in-advance constraint in which only consumption is cash constrained. The model reproduces labor-market dynamics under a productivity shock and/or a monetary shock. I can replicate the Beveridge and Phillips curves that are observed in the data, and do not need to rely on the New Keynesian model or real wage rigidity. I find that the nonexistence of an extensive margin and different money mechanisms, such as cash constraints on investment and money in the utility function, do not change the above replications. Furthermore, I can still replicate the Beveridge curve even without money or with rigid prices.
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Cooley, Thomas F., and Gary D. Hansen. "Unanticipated Money Growth and the Business Cycle Reconsidered." Journal of Money, Credit and Banking 29, no. 4 (November 1997): 624. http://dx.doi.org/10.2307/2953654.
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Bernanke, Ben S. "Comment on Unanticipated Money Growth and the Business Cycle Reconsidered." Journal of Money, Credit and Banking 29, no. 4 (November 1997): 649. http://dx.doi.org/10.2307/2953655.
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Qoyum, Abdul, M. Miftahussurur, Al-Amin Matae, Muhammad Yousuf, and A. Abdurrahman. "Business Cycle and The Macroeconomics Performance: Evidence of Malaysia and Indonesia." Global Review of Islamic Economics and Business 2, no. 1 (May 5, 2015): 045. http://dx.doi.org/10.14421/grieb.2014.021-04.
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Stable economic growth is the major macroeconomic goal which is all nations seek. Economist and policy makers have been tried to find the ways to sustain and maintain stable economic growth. This paper examines the macroeconomic fluctuations and economic growth in Malaysia and Indonesia and its determinant by using multiple regression models. Five variables were chosen for the model namely variables are Money supply (MS), Industrial production (IP), Interest rate (IR), exchange rate (ER), Consumer price Index (CPI) and stock prices. The study shows that Money supply (MS), Interest rate (IR), exchange rate (ER), and stock prices are among others, the determinant factors of macroeconomic fluctuations in both countries. Specifically, the empirical results reveal that Interest rate (IR), exchange rate (ER), and stock prices has significant contribution to the performance of real GDP in Malaysia while Money supply (MS) and exchange rate (ER) are the main cause of macroeconomic fluctuations in Indonesia. This may be due to the different monetary policies pursued by the two countries. The two countries might have different monetary policy strategies; Malaysia pursues interest rate targeting policy, whereas Indonesia applies inflation rate targeting policy.The study recommends for both countries government policies play an important role in economic performance. Therefore, a careful policy should be the foremost important factor for economic in these nations and the every country in general.
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Iddrisu, Abdul Ganiyu, and Godfred A. Bokpin. "Political business cycles and economic growth in Africa." Journal of Economic Studies 45, no. 4 (September 10, 2018): 760–72. http://dx.doi.org/10.1108/jes-02-2017-0056.
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Purpose The purpose of this paper is to understand both the incidence and the impact of the African political business cycle (PBC) in the light of a literature which has argued that, with major extensions of democracy since the 1990s, the cycle has both become more intense and has made African political systems more fragile. It answers two very important macroeconomic questions crucial to the validity of the opportunistic model. It, first, answers the question of whether election cycles contribute to money growth in the light of government expenditure, and second, whether election cycles have an effect on economic growth in the light of money supply. Design/methodology/approach The study employs data from 39 African countries from 1990 to 2014 to address these important empirical questions using panel regression techniques. Findings The paper found PBC to be present in Africa. It also found that such cycles do not translate to economic performance in African countries. The paper therefore indicates the need for African policy makers to take measures to eliminate or lessen the scale of PBCs. Social implications There are many ways in which today’s political choices affect future well-being. Recently, economists have concluded that we pass on the inflationary (or deflationary) consequences of current policies to the future generation. Originality/value This paper is unique in its approach to investigate the objectives.
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Sahu, Tarak Nath, and Krishna Dayal Pandey. "Money Supply and Equity Price Movements During the Liberalized Period in India." Global Business Review 21, no. 1 (March 22, 2018): 108–23. http://dx.doi.org/10.1177/0972150918761084.
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This study attempts to contribute towards the prevalent understanding and the extant literatures on the effect of changes in money supply as an important monetary policy shock on the stock prices of India by using a time-varying parameter models with vector autoregressive specification during the period 1996 to 2016. The result of Johansen’s cointegration test suggests a significantly positive long-run co-movement between the growth of money supply and stock prices in India but the result of vector error correction model (VECM) does not exhibit any significant relationship in short run. Further, the error correction term of the VECM reveals a long-run unidirectional causality from money supply to stock prices. However, the Granger causality test confirms that the growth rate of money supply does not cause the stock market movement in India in short run. Finally, the variance decomposition analysis reveals that both the Indian stock markets are strongly exogenous in the sense that shocks to money supply explain only a small portion of the forecast variance error of the market indices. Again, the impulse response function analysis indicates that a positive shock in money supply has a small but persistently positive effect on stock prices in India.
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Chu, Kam Hon. "Friedman Meets Hayek on Money and Prices in Canada." Review of Economic Analysis 8, no. 1 (April 7, 2016): 69–96. http://dx.doi.org/10.15353/rea.v8i1.1432.
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Though both classical liberals, Friedman adopted the quantity theory of money and used the general price indexes and aggregate data in empirical analysis, whereas Hayek rejected aggregative analyses as potentially misleading and focused on the impact of money on relative prices in his business cycle theory. This study shows theoretically that when the central bank minimizes the monetary shock to maintain stability in the general price level, it also maintains simultaneously relative price stability, thus narrowing the divergence between Friedman and Hayek. This finding is empirically verified by Canada’s experience with inflation targeting since 1991
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Aidt, Toke, Zareh Asatryan, Lusine Badalyan, and Friedrich Heinemann. "Vote Buying or (Political) Business (Cycles) as Usual?" Review of Economics and Statistics 102, no. 3 (June 2020): 409–25. http://dx.doi.org/10.1162/rest_a_00820.
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We report robust evidence of a new short-run monetary election cycle: the monthly growth rate of the money supply (M1) around elections is higher than in other months in a sample of low- and middle-income countries. We hypothesize this is related to systemic vote buying. Consistent with this, we find no cycle in authoritarian countries and countries with strong political institutions and a pronounced cycle in elections where international election monitors reported vote buying or in close elections. Using survey data on daily consumer expenditures, we show that within-household consumption of food increases in the days before elections.
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Oladunni, Sunday. "External Shocks and Business Cycle Fluctuations in Oil-exporting Small Open Economies: The Case of Nigeria." Central Bank of Nigeria Journal of Applied Statistics, Vol. 10 No. 2 (February 21, 2020): 39–71. http://dx.doi.org/10.33429/cjas.10219.2/6.
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This study employs a sign-restricted Bayesian structural vector autoregressive (BSVAR) model to analyse how global demand, oil price and the US monetary policy shocks impact the Nigerian business cycle. The objective is to uncover the dominant external drivers of the business cycle in Nigeria. Results show that global demand and oil price shocks are the principal foreign drivers of the Nigerian business cycle. The global demand shock elicits the strongest responses from output growth and inflation; while oil price shock impacts the terms-of-trade and interest rate the most. The historical contributions of the global demand and oil price shocks to the evolution of output growth are significant and comparable, while that of oil price shock to inflation and interest rate is dominant. Further sensitivity analysis of pre-crisis period of 2008/09 suggests that macroeconomic risk arising from global demand shock is systematic, owing to the comparable impact on output growth and similar interest rate response in the two estimations. Evidence suggests that the GFC may have contributed to the more volatile inflation response to global demand shock in our full sample estimation. Given the strong and pervasive impact of the global demand shock on output growth, Nigeria can manage its vulnerability by shrinking the size of oil exports in its terms-of-trade, while growing non-oil exports progressively through sustained economic diversification and viable industrialization strategy.
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Kunwar, Keshar Bahadur. "Money supply and economic growth of Nepal: ARDL approach." Contemporary Research: An Interdisciplinary Academic Journal 4, no. 1 (November 6, 2020): 76–94. http://dx.doi.org/10.3126/craiaj.v4i1.32732.
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There are a number of theories illustrating the relationship between money supply and gross domestic product. Money supply can be defined as the total stock of money circulating in the economy. The circulating money involves the currency, printed notes, money in the deposit accounts, and in the form of other liquid assets. Valuation of money supply helps analysts and policy makers to frame the policy or to alter the existing policy of increasing or reducing the supply of money. The valuation is important as it ultimately affects the business cycle and thereby affecting the economy. This study sought to provide answers to the question, what are the effects of money supply on the gross domestic product in Nepal? The study undertook a causal research design using time series data from the period 1974/75 to 2017/18 to critically investigate the relationship between money supply and economic growth by establishing an empirical relationship that exists between them. The study employed the Augmented Diky fuller test and ARDL- VECM model. The results indicate the existence of a significant long-run relationship between money supply and economic growth as measured by GDP. LNBM is significant to LNGDP and LNGDP is also significant to LNBM so there is bi-directional causality. There is unidirectional relationship existing between LNINF to LNGDP and LNINF to LNBM. ECTcoefficient vale are negative and the p-value of above three approaches are also less than 5 percent which is desirable for the ARDL model.
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Griggs, Ryan, and Robert Murphy. "The Inverted Yield Curve, Austrian Business Cycle Theory, and the True Money Supply." Quarterly Journal of Austrian Economics 24, no. 4 (December 15, 2021): 523–41. http://dx.doi.org/10.35297/qjae.010113.
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Ever since Campbell Harvey’s (1986) doctoral dissertation, academic economists have studied the ability of an inverted yield curve to “predict” an impending recession with impressive accuracy given suitable specifications. Many economists (including Campbell) explain the correlation by neoclassical “consumption smoothing,” while others attribute the connection to monetary policy’s ability to affect the business cycle. We agree with Cwik (2004 and 2005) that the Misesian circulation credit theory of the trade cycle, relying on both monetary and “real” (capital structural) elements, is superior to both flavors of mainstream explanation. In this paper, our contribution is to show that the growth rate of the Rothbard-Salerno measure of the “true money supply” tracks movements in Treasury bond spreads remarkably well. This provides additional support for our claim that the Austrian theory of the business cycle explains the “predictive power” of the yield curve better than the mainstream approach.
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Ryczkowski, Maciej. "MONEY, CREDIT, HOUSE PRICES AND QUANTITATIVE EASING – THE WAVELET PERSPECTIVE FROM 1970 TO 2016." Journal of Business Economics and Management 20, no. 3 (May 2, 2019): 546–72. http://dx.doi.org/10.3846/jbem.2019.9859.
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This paper investigates the relationship between money/credit growth and house price inflation for a sample of twelve developed countries. The novel application of the continuous wavelet transform showed significant but time-varying linkages between these two variables. During quantitative easing in the United States and the United Kingdom, growth of respectively broad money and bank credit was leading house price inflation for the 2-8 years cycle. In contrast to this, the Bank of Japan and the European Central Bank either did not assign a separate role to house prices in their reaction functions or the two central banks were not capable to significantly increase house prices by extending money/credit during the business cycle. The significant co-movements of financial variables and house prices around booming episodes warn us that a new asset price boom might appear within the length of a business cycle as a consequence of overly expansionary monetary policy. In the euro area, the significant, long run, and close to a one-for-one link between growth of M3 and house price inflation is an argument for the monetary pillar of the European Central Bank. The present study contributes significantly to the literature by introducing a novel application of a continuous wavelet transform to study the housing prices in relation to money, credit and quantitative easing. The article uses a long-term dataset covering a period of almost half a century to analyse their varying relationship in the short-run to the long-run and from the historical perspective.
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Proškutė, Aurelija. "CAUSES AND CHARACTERISTICS OF BUSINESS CYCLE IN LITHUANIA: A STRUCTURAL VARAPPROACH." Ekonomika 91, no. 1 (January 1, 2012): 41–58. http://dx.doi.org/10.15388/ekon.2012.0.908.
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We investigate the structural disturbances underlying the business cycle in Lithuania in the bivariate time series framework. In the structural VAR model constructed productivity, hours of work and output fluctuations over the business cycle are composed of technology and non-technology shocks. We find that a technology shock has a persistent positive effect on all three variables. Non-technology disturbance has a long-term impact on working hours and output, but it has a negligible short-run effect on productivity.Differently from Gali (1999), the study has revealed no significant correlation between productivity and working hours under the effects of technology shocks on Lithuanian data. In contrast with the results of developed countries, non-technology shocks result in a significant negative correlation between the working hours and labour productivity in Lithuania.Historical decomposition of output, productivity and working hours series allows distinguishing four different episodes of Lithuanian economy during the analysed timeline. In 1999, negative technology shocks played the biggest role in pushing the output down. During the period 2001–2004, the real GDP growth was supported by productivity increase due to technology shocks; in 2005–2008, non-technology shocks and the higher working hours were fuelling output growth together with a positive impact of the technology shock on productivity growth. Finally, 2008–2011 is the period of negative technology and non-technology shocks.
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Hendrickson, Joshua R. "REDUNDANCY OR MISMEASUREMENT? A REAPPRAISAL OF MONEY." Macroeconomic Dynamics 18, no. 7 (June 13, 2013): 1437–65. http://dx.doi.org/10.1017/s1365100512001034.
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The emerging consensus in monetary policy and business cycle analysis is that money aggregates are not useful as an intermediate target for monetary policy or as an information variable. The uselessness of money as an intermediate target is driven, at least in part, by empirical research that suggests that money demand is unstable. In addition, the informational quality of money has been called into question by empirical research that fails to identify a relationship between money growth and inflation, nominal income growth, and the output gap. Nevertheless, this research is potentially flawed by the use of simple sum money aggregates, which are not consistent with economic, aggregation, or index number theory. This paper therefore reexamines previous empirical evidence on money demand and the role of money as an information variable, using Divisia monetary aggregates. These aggregates have the advantage of being derived from microtheoretic foundations, as well as being consistent with aggregation and index number theory. The results of the reevaluation suggest that previous empirical work might be driven by mismeasurement.
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Park, Jaesung James, Joonkyo Hong, and Sumi Na. "Decomposition of the Business Cycle Shock and the Default Rate of SMEs in Korea." Journal of Derivatives and Quantitative Studies 27, no. 4 (November 30, 2019): 401–23. http://dx.doi.org/10.1108/jdqs-04-2019-b0002.
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This paper, through a structural VAR identified by a long-run restriction which is imposed by a neoclassical growth model, decomposes the real price index of capital accumulation (= deflator for fixed capital accumulations/consumption expenditure deflator), labor productivity (= real GDP/total employee hours), and total employee hours into three business cycle shocks: (i) investment-specific technology shock, (ii) neutral technology shock, and (iii) non-technology shock, and explores which shock has played a significant role in contributing to decreases in the default rate of SMEs. Empirical results drawn from Korean data spanning from 2000:Q1 to 2016:Q2 indicate that when the two technology shocks arise by 1%p, the default rate decreases by 0.03%p to 0.05%p permanently. In contrast, the impact of the non-technology shock on the default rate is highly transitory : the default rate decreases by 0.02%p in response to the 1%p increment in non-technology shock but turns back to its initial level after about three quarters. These imply the technology shocks could account for the most of variations in the default rate of SMEs. Our empirical results, therefore, deliver the policy implication that SME financing should focus on innovative firms with aggressive funding.
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Nuru, Naser Yenus. "Government spending multipliers over business cycle." African Journal of Economic and Management Studies 11, no. 1 (October 4, 2019): 18–29. http://dx.doi.org/10.1108/ajems-05-2019-0187.
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Purpose The purpose of this paper is to show the asymmetric effects of government spending shocks for South Africa over the period 1960Q1–2014Q2. Design/methodology/approach A threshold vector autoregressive model that allows parameters to switch according to whether a threshold variable crosses an estimated threshold is employed to address the objective of this paper. The threshold value is determined endogenously using Hansen (1996) test. Generalized impulse responses introduced by Koop et al. (1996) are used to study the effects of government spending shocks on growth depending on their size, sign and timing with respect to the economic cycle. The author also uses a Cholesky decomposition identification scheme in order to identify discretionary government spending shocks in the non-linear model. Findings The empirical findings support the state-dependent effects of fiscal policy. In particular, the effects of 1 or 2 standard deviations expansionary or contractionary government spending shock on output are very small both on impact and in the long run; and a bit larger in downturns but has only a very limited effect or no effect in times of expansion. This result gives support to the evidence in the recent literature that fiscal policy in developing countries is overwhelmingly procyclical. Originality/value It adds to the scarce empirical fiscal literature of the South African economy in particular and developing economies in general by allowing non-linearities to estimate the effect of government spending shocks over economic cycle.
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Muchaonyerwa, Forward, and Ireen Ireen. "Business cycles and stock market performance in South Africa." Corporate Ownership and Control 12, no. 3 (2015): 84–93. http://dx.doi.org/10.22495/cocv12i3p8.
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The stock market is an important indicator of an economy’s financial health. It checks the mood of investors in a country. Stock market performance is a vital component of business cycle growth. Thus, this study investigates the relationship between stock market performance and business cycles in South Africa for the period 2002-2009 using monthly data. This is done by constructing a Vector Error Correction Model (VECM). The study specifies a business cycle model with the business cycle coincident indicator of South Africa being the independent variable explained by the All Share Price index (ALSI), Real Effective Exchange Rate (REER), Money Supply (M1), Inflation (CPIX) and the Prime Overdraft Rate (POR). The ALSI represents stock market performance whilst the rest of the variables are to enhance model specification. The study found a positive association between stock market performance and business cycles and this match with most of the results from the empirical literature provided
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Fout, Hamilton B., and Neville R. Francis. "IMPERFECT TRANSMISSION OF TECHNOLOGY SHOCKS AND THE BUSINESS CYCLE CONSEQUENCES." Macroeconomic Dynamics 18, no. 2 (December 14, 2012): 418–37. http://dx.doi.org/10.1017/s1365100512000454.
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We investigate the business cycle effects of imperfect transmission of technology shocks within a basic real business cycle (RBC) model along two dimensions. First, we assume that agents cannot distinguish a temporary increase in productivity growth from a sustained increase in the underlying growth rate of productivity and instead must conduct signal extraction exercises and update beliefs about the source of aggregated shocks. Second, we propose a technology adjustment cost resulting in the slow diffusion of technological innovations into the production process. Both of these impediments to the transmission of technology result in a large initial wealth effect, increasing investment and hours less, relative to the usual RBC model without these frictions. Furthermore, each of these features is capable of producing a decline in hours on impact of the technology shock matching the negative response in hours found in the data by such works as Gali [American Economic Review89(1), 249–271 (1999)].
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Beaudry, Paul, and Franck Portier. "Stock Prices, News, and Economic Fluctuations." American Economic Review 96, no. 4 (August 1, 2006): 1293–307. http://dx.doi.org/10.1257/aer.96.4.1293.
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We show that the joint behavior of stock prices and TFP favors a view of business cycles driven largely by a shock that does not affect productivity in the short run – and therefore does not look like a standard technology shock – but affects productivity with substantial delay – and therefore does not look like a monetary shock. One structural interpretation for this shock is that it represents news about future technological opportunities which is first captured in stock prices. This shock causes a boom in consumption, investment, and hours worked that precedes productivity growth by a few years, and explains about 50 percent of business cycle fluctuations.
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Frömmel, Tomáš. "Negative Inflation Targeting: A Proposal of a Non-Distortionary Monetary Policy." Quarterly Journal of Austrian Economics 22, no. 3 (December 31, 2019): 336–56. http://dx.doi.org/10.35297/qjae.010025.
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This paper aims to propose a non-distortionary monetary policy objective consistent with the Austrian business cycle theory. Since the price level should fall in the growing economy in the Hayekian framework, introduction of a negative inflation target combined with the Taylor rule is suggested as a non-distortionary monetary policy. To keep the money stream stable, the optimal inflation target would be equal to the opposite of the growth rate of the economy. Such policy should lead to the smoothing of the business cycle path since monetary policy could be less activist compared to the current state of the positive inflation target. Possible criticisms of this suggestion are anticipated and addressed in this paper.
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BOGDAN, Tetiana. "DEBT-CREATING CAPITAL FLOWS AND SHOCK SPILLOVERS IN AN EMERGING ECONOMY (UKRAINE’S EXAMPLE)." Vol 19, No 1 (2020), Vol 19, No 1 (2020) (March 2020): 114–39. http://dx.doi.org/10.35774/jee2020.01.114.
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This paper investigates the financial channels of shocks transmission and crises diffusion in an emerging market economy and highlights the role of debtcreating capital flows. Analysing the determinants of capital flows, author decomposes them into the contribution of global «push» factors and country-specific «pull» factors and estimates their significance on Ukraine’s example. Author argues, that «push» factors play a major role in driving capital flows as long as a business cycle in emerging economy is synchronized with a global business cycle; however, being affected by local or regional crisis, emerging economy is getting decoupled from the global developments and «pull» factors are gaining the dominant role. Author also considers the macroeconomic implications of debtcreating capital flows and external debt in emerging market economies and provides empirical estimates of economic growth effect in Ukraine. JEL: F34, F62, F37.
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Ji Eun, Chung, and Jung Kwang Ho. "Political Business Cycles and Their Policy Implications: An Extension of Alesina`s Model." Korean Journal of Policy Studies 24, no. 1 (August 31, 2009): 127–47. http://dx.doi.org/10.52372/kjps24106.
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This paper reviews and empirically tests the most recent theoretical and empirical work on political business cycles in the United States. It focuses on the rational partisan theory of Alesina et al. (1997) and extends their data from 1994 to 2005. We tested three different political business cycle modles-the opportunistic, traditional partisan, and rational partisan models-to observe whether they remain valid. Overall, our results show that the rational partisan model outperforms both the opportunistic model and the traditional partisan modls in explaining the variations of monetary and fiscal policy outcomes, which are consistent with Alesina et al.'s work (1997). More specifically, we found a significant partisan effect on money growth, a weak partisan effect on the federal funds rate, and no partisan effect on other interest rates including the discount rate, three-month Treasury bill, and ten-year Treasury note. Our finding on the partisan effects of money growth resemble those of Alesina (1988), but our results on interest rates differ. In addition, we found a strong partisan effect on the budget deficit (higher during republican administrations) and no partisan effect on the level of government transfers. Both findings are consistent with Alesina's work (1988). Future research is required to identify how partisan effects vary across both developed and developing countries and how stock market performance and the role of the central bank during presidential elections are related.
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Rozmahel, Petr, and Nikola Najman. "The Concordance Index of the Business Cycles in the Czech Republic and other selected Central and Eastern Europen Countries and the Eurozone." Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis 58, no. 6 (2010): 407–14. http://dx.doi.org/10.11118/actaun201058060407.
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The paper deals with the evaluation of the preparedness of the Czech Republic and other candidate countries to join the Eurozone. The main goal is to asses the level of business cycle similarity in the selected Eurozone member and candidate countries using the Concordance index. Business cycle similarity belongs among the criteria defined within the theory of optimum currency areas. The first order differencing procedure, Hodrick-Prescott filter and Christiano-Fitzgerald band pass filter were used to identify the classical and growth GDP cycles. The results show that the Czech Republic belongs among the states with relatively high level of concordance comparing to the other Eurozone member and candidate countries. Accordingly, the measure of business cycle concordance should not serve as an argument for slowing down of the monetary integration process in the Czech Republic. The resultant concordance measures also give an evidence of relatively low level of the business cycle similarity of Slovak economy and the Eurozone, which might imply a possibly higher risk of the asymmetric shock occurrence in Slovakia.
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Drobyshevsky, Sergey, Georgy Idrisov, Andrey Kaukin, Pavel Pavlov, and Sergey Sinelnikov-Murylev. "Decomposition of growth rates for the Russian economy." Russian Journal of Economics 4, no. 4 (December 31, 2018): 305–27. http://dx.doi.org/10.3897/j.ruje.4.33617.
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In this paper, we present a methodology of GDP growth rate decomposition adapted for the Russian economy. We calculated the indicators for structural unemployment (NAWRU) and total factor productivity in Russia. We estimated the structural, foreign trade and cyclical components of GDP growth rates under various macroeconomic scenarios for the period from 2018 through 2024. The study shows that a significant contribution to growth rates for the period 2018 through 2024 will be made by the sum of the business cycle and random shock component, which, combined with the revitalization of investments in 2017, may indicate the beginning of a new cycle of economic growth in Russia. In the scenarios reviewed, the contribution from the foreign trade component will be negative from 2018 to 2024. The calculations indicate further stagnation of structural growth rates in the Russian economy from 2018 to 2024 at the level of approximately 1.5 p.p. in all of the basic macroeconomic scenarios reviewed. This points to the inexpediency in postponing structural reforms to create conditions for Russia’s economy to achieve growth rates that exceed world averages.
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Caldara, Dario, Chiara Scotti, and Molin Zhong. "Macroeconomic and Financial Risks: A Tale of Mean and Volatility." International Finance Discussion Paper 2021, no. 1326 (August 19, 2021): 1–56. http://dx.doi.org/10.17016/ifdp.2021.1326.
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We study the joint conditional distribution of GDP growth and corporate credit spreads using a stochastic volatility VAR. Our estimates display significant cyclical co-movement in uncertainty (the volatility implied by the conditional distributions), and risk (the probability of tail events) between the two variables. We also find that the interaction between two shocks--a main business cycle shock as in Angeletos et al. (2020) and a main financial shock--is crucial to account for the variation in uncertainty and risk, especially around crises. Our results highlight the importance of using multivariate nonlinear models to understand the determinants of uncertainty and risk.
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Akinsola, Foluso Abioye, and Sylvanus Ikhide. "Is commercial bank lending in South Africa procyclical?" Journal of Financial Regulation and Compliance 26, no. 2 (May 14, 2018): 203–26. http://dx.doi.org/10.1108/jfrc-09-2016-0073.
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PurposeThis paper aims to examine the relationship between commercial bank lending and business cycle in South Africa. This paper attempts to know whether commercial bank lending in South Africa is procyclical.Design/methodology/approachThe model assumed that the lending behaviour is related to the business cycle. In this study, vector error correction model (VECM) is used to capture the relationship between bank lending and business cycle to accurately elicit the macroeconomic long-run relationship between business cycle and bank lending, as some banks might slow down bank lending due to some idiosyncratic factors that are not related to the downturn in the economy. This paper uses data from South African Reserve Bank for the period of 1990-2015 using VECM to understand the extent to which business cycle fluctuation can affect credit crunch in the financial system. The Johansen cointegration approach is used to ascertain whether there is indeed a long-run co-movement between credit growth and business cycle.FindingsResults from the VECM show that there are significant linkages among the variables, especially between credit to gross domestic product (GDP) and business cycle. The influence of business cycle is seen vividly after a period of four to five years, where business cycle explains 20 per cent of the variation in the credit to GDP. South African banks tend to change their lending behaviour during upturns and downturns. This result further confirms the assertion in theory that credit follows business cycle and can amplify credit crunch. The result shows that in the long run, fluctuations in the business cycle can influence the credit growth in South Africa.Research limitations/implicationsThe impulse analysis result shows that the impact of business cycle shock is very persistent and lasting. This also demonstrates that the shocks to the business cycle result have a persistent and long-lasting impact on credit. This study finds that commercial bank lending in South Africa is procyclical. It is suggested that the South African economy needs forward-looking policies that will mitigate the flow of credit to the real sector and at the same time ensure financial stability.Originality/valueMost research papers rarely distinguish between the demand side and supply side of credit procyclicality. This report is presented to develop an econometric model that will examine demand side procyclicality. This study adopts more realistic and novel methods that will help in explaining the relationship between bank lending and business cycle in South Africa, especially after the global financial crisis. This report is presented with a concise and detailed analysis and interpretation.
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Singh Amin, Shivdasini, Rakesh Atre, Ankur Vardia, and Boby Sebastian. "Lean machine manufacturing at Munjal Showa limited." International Journal of Productivity and Performance Management 63, no. 5 (June 3, 2014): 644–64. http://dx.doi.org/10.1108/ijppm-06-2013-0120.
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Purpose – The global manufacturing industry is becoming more competitive. Munjal Showa, a shock absorber manufacturer in India, is using indigenous development of lean machines by incorporating concepts of lean manufacturing and low-cost automation techniques to increase their competitiveness. This new approach has helped the company to reduce cost of manufacturing and to increase productivity by reducing cycle time and down time. The purpose of this paper is to offer an in depth study of how at Munjal Showa Ltd lean machines are being developed and manufactured. This paper explores how a cumbersome machine was transformed into a lean machine. Design/methodology/approach – This paper explores how a cumbersome machine was transformed into a lean machine. Findings – This new approach has helped the company to reduce cost of manufacturing and to increase productivity by reducing cycle time and down time. Research limitations/implications – The paper discusses the process of converting one cumbersome machine to a lean machine. Practical implications – Creativity before capital. In lean, team brainstorming of ideas and solutions is emphasized instead of spending large sums of money on capital expenditures Social implications – The cockpit model eases pressure of incumbents on the shop floor. Originality/value – The concepts espoused in the paper has increased productivity by 3.45 times and reduced costs.
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Sitepu, Novi Indriyani. "PERAN BANK SYARIAH DALAM PENGENDALIAN HARGA (Studi Analisis Terhadap Perbankan Syariah di Indonesia)." JURNAL PERSPEKTIF EKONOMI DARUSSALAM 1, no. 1 (March 2, 2017): 55–74. http://dx.doi.org/10.24815/jped.v1i1.6520.
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The role of Islamic banking is very important ricently. generally Islamic banking function similar with conventional banking as intermediary financial sector and real sector.The banking sector plays a role in the stability and the growth rate of money supply in the economy.Banking capabilities in managing public funds and creating a healthy business cycle will encourage the stability of the financial system.Islamic banking businesses experienced growth be viewed from the number of banks and Islamic banks are continueing increase. However, the growth rate of assets, acceleration of the increase in the share of banking more sloping back even declined. Hence the ability of banks to manage public funds and creating a healthy business cycle will encourage the stability of the financial system.Peran perbankan syariah sangat penting bagi perekonomian saat ini. Secara umum fungsi perbankan syariah sama dengan perbankan konvensional yaitu sebagai sektor keuangan perantara dan sektor riil. Sektor perbankan berperan dalam stabilitas dan tingkat pertumbuhan uang beredar dalam perekonomian. Kemampuan perbankan dalam mengelola dana publik dan menciptakan siklus bisnis yang sehat akan mendorong stabilitas sistem keuangan. Bisnis perbankan syariah mengalami pertumbuhan dilihat dari jumlah bank dan bank syariah yang terus meningkat. Namun, menurunnya laju pertumbuhan aset, akselerasi peningkatan pangsa perbankan syariah akan semakin melandai, bahkan kembali menurun. Maka kemampuan bank untuk mengelola dana masyarakat dan menciptakan siklus bisnis yang sehat akan mendorong stabilitas sistem keuangan.
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Karim, Firdos, Sudipa Chauhan, Sumit Kaur Bhatia, and Joydip Dhar. "Hopf Bifurcation in an Augmented IS-LM Linear Business Cycle Model with Two Time Delays." International Journal of Mathematical, Engineering and Management Sciences 5, no. 3 (June 1, 2020): 518–28. http://dx.doi.org/10.33889/ijmems.2020.5.3.043.
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This paper deals with the amalgamated basic IS-LM business cycle model with Kaldor’s growth model to form an augmented model. Pertaining to substantial evidence, IS-LM model in paradigm with a specific economic extension (Kaldor-Kalecki Business cycle model in our case) provides an adept explanation of a developing but strong economy like that of our country. Occurring in the equation of capital accumulation, the two time delays are a result of the assumption in the investment function being both income and capital stock dependent in past period and maturity period. Investigating a model combined with capital accumulation is both interesting and important. From economist point of view, production without capital is impossible to even imagine. Moreover capital accumulation is impeccable to large-scale production, specialisation and creation of employment opportunities. In our model ‘I’ the investment function, ‘S’ the savings function and ‘L’ the demand for money are depending linearly on their arguments. We adhere to a linear model, contrary to the popular belief of non- linear models being the undisputed style for modern economics. The model is first shown to be mathematically and economically poised. The local stability of boundary and interior equilibrium points has been investigated. Three cases arise, pertaining to two time delays. System dynamics exhibits mutation under the influence of time delays and may clinch or discharge its local stability when subjected to the latter. Hopf bifurcation occurs when the delay parameter crosses a critical value.
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Olamide, Ebenezer Gbenga, and Andrew Maredza. "A dynamic regression panel approach to the determinants of monetary policy and economic growth." African Journal of Economic and Management Studies 10, no. 3 (September 2, 2019): 385–99. http://dx.doi.org/10.1108/ajems-10-2018-0302.
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Purpose Empirically, the purpose of this paper is to investigate policy variables that determine monetary policy and economic growth of some selected countries within the economic bloc of Southern Africa Development Community (SADC). The selected countries are Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mozambique, Namibia, South Africa, Swaziland, Zambia and Zimbabwe. Design/methodology/approach Annual time series data for a panel of 11 Southern African countries spanning 1980–2015 were employed in the study. The major instrument of estimation is the dynamic regression panel model. In order to conform to econometric principles, robustness checks were carried out on the variables of interest so as to avoid spurious results. An estimation of impulse response and variance decomposition analyses were to complement the approach to the study. Findings The result of the long-run dynamic panel regression reveals that GDP growth rate, inflation rate, exchange rate, money supply and oil and commodity prices do have profound impact on monetary policy within SADC. It was further revealed from the study that commodity price shock is the major exogenous determinant of monetary policy dynamics and the effect is transmitted via exchange rate channel to macroeconomics of the region; with inflation rate and money supply playing a major role in the transmission mechanism as it affects the economies of the countries in this region. Practical implications The policy implication is that inflation is seen as a major challenge to the countries under review. Among other things, a hybrid of inflation and monetary targeting should be adopted to complement each other as policy combination within the region. Originality/value The study accounts for the determinants of monetary policy vis-à-vis growth potentials of some selected countries in SADC, using a combination of dynamic regression panel approach and SVAR elements.
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Attfield, C. L. F., and Nigel W. Duck. "Distinguishing between rational expectations and ‘Keynesian’ models of the business cycle in the presence of a structural break in the money growth process." Economics Letters 22, no. 2-3 (January 1986): 133–35. http://dx.doi.org/10.1016/0165-1765(86)90219-3.
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Heer, Burkhard, and Alfred Maußner. "THE BURDEN OF UNANTICIPATED INFLATION: ANALYSIS OF AN OVERLAPPING-GENERATIONS MODEL WITH PROGRESSIVE INCOME TAXATION AND STAGGERED PRICES." Macroeconomic Dynamics 16, no. 2 (December 30, 2011): 278–308. http://dx.doi.org/10.1017/s1365100510000490.
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Inflation is often associated with a loss for the poor in the medium and long term. We study the short-run redistributive effects of unanticipated inflation in a dynamic optimizing sticky price model of the business cycle. Agents are heterogeneous with regard to their age and their productivity. We emphasize three channels of the effect of inflation on income distribution: (1) factor prices, (2) “bracket creep,” and (3) sticky pensions. Unanticipated inflation that is caused by monetary expansion is found to reduce income inequality. In particular, an increase of the money growth rate by one standard deviation results in a 1% drop of the Gini coefficient of disposable income if extra tax revenues are transferred lump-sum to the households.
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Dajčman, Silvo, Alenka Kavkler, Peter Mikek, and Dejan Romih. "Transmission of Financial Stress Shocks between the USA and the Euro Area During Different Business Cycle Phases." E+M Ekonomie a Management 23, no. 4 (December 1, 2020): 152–65. http://dx.doi.org/10.15240/tul/001/2020-4-010.
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This paper examines the transmission of financial stress shocks between the USA and the euro area for recessionary and non-recessionary regimes in the shock-recipient economy. The investigated period is 1999M1–2017M11, which includes several episodes of recessionary and non-recessionary regimes, endogenously determined by the model, as well as several financial stress episodes. After testing for non-linearity, we employ a five-variable Bayesian threshold vector autoregression model using internationally compatible data for financial stress indices. Our results show significant non-linearities in the financial stress-business cycle interactions for the euro area. In comparison to the non-recessionary regime, the US financial stress shocks are more detrimental to the stability of the European financial system, output growth, and inflation in recessions. US financial stress shocks negatively affect euro area unemployment rate, but the effect is independent of the euro area industrial production growth regime. In contrast, the stability of the US financial system is not susceptible to the euro area’s financial stress shocks. However, due to trade ties, the financial stress in the euro area does lead to output contraction, while not affecting inflation and unemployment in the US. We also found that US industrial production growth and unemployment rate are susceptible to domestic financial stress shocks, more in the recessionary than non-recessionary episodes of the US economy. The results suggest a need for a careful domestic and foreign financial stress monitoring and coordination of monetary authorities. While this may profit both economic areas, this is relevant more for the European Central Bank than its US counterpart.
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Endrejat, Vanessa, and Matthias Thiemann. "When Brussels meets shadow banking – Technical complexity, regulatory agency and the reconstruction of the shadow banking chain." Competition & Change 24, no. 3-4 (March 12, 2020): 225–47. http://dx.doi.org/10.1177/1024529420911171.
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At the heart of the last financial crisis stood the shadow banking system, a mesh of financial activities and entities that grew outside of bank balance sheets but with the support of the banking sector. These activities were not regulated or supervised like banks, and they were characterized by high maturity mismatches and leverage. Two prime elements were Money Market Mutual Funds and Asset-Backed Commercial Papers, which jointly performed bank-like functions. This paper sheds light on the fate of these entities post-crisis and the regulatory dynamics at play as policymakers shifted their focus from constraining their activities to drafting a European regulatory infrastructure that delivers both stability and growth. Based on expert interviews and document analysis, we show how European policymakers opened up to private experts during this shift to learn about the technical complexity of Money Market Mutual Funds and Asset-Backed Commercial Papers, but in the end were restricted in their efforts to craft such regulation due to competing national factions and the legislative time pressure at the European level. We argue that the process was heavily influenced by, first, nationally held visions about the future role of financial markets that came to the fore at pivotal moments during the negotiations, and, second, the specific European institutional set-up and its electoral cycle.
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Barrie, Mohamed Samba, and Emerson Abraham Jackson. "Impact of Technological Shock on the Sierra Leone Economy: A Dynamic Stochastic General Equilibrium (DSGE) Approach." Economic Insights – Trends and Challenges 2022, no. 2 (2022): 1–19. http://dx.doi.org/10.51865/eitc.2022.02.01.
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The neoclassical growth model has emphasised the importance of technology shocks, which supposedly affect macroeconomic variables’ heterogeneously in a small open economy like Sierra Leone. Using a Bayesian DSGE methodology for a non-linear model, we found that investment-specific technological shock partly explains business cycle fluctuations in Sierra Leone. Moreover, the analysis indicates that technology shock on output, capital, and consumption is more persistent than that of interest rate. The key implication is that technological innovation is crucial for long-term steady-state growth in Sierra Leone. The results also partly confirm the neoclassical growth model prediction – that is, in the long run, productivity growth is driven only by technological progress. The model specified for this research is largely inward-looking, with a minimal role for the Bank of Sierra Leone to influence investment in technology-related investment directly. Despite this limitation and more so given the fact that the DSGE modelling concept is quite a new venture at the BSL, thoughts have been given to enhance the model’s future capabilities to incorporate both the monetary bloc and external blocs to fully assess the impact of technological shock’s transmission in the entire economy in future research.
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Özgöde, Onur. "Institutionalism in Action: Balancing the Substantive Imbalances of “the Economy” through the Veil of Money." History of Political Economy 52, no. 2 (April 1, 2020): 307–39. http://dx.doi.org/10.1215/00182702-8173384.
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Scholars working on the history of economics and economic governance assume national income accounting emerged naturally out of Keynesian concerns with economic growth and wartime needs. This paper provides an alternative and more complex genealogy, arguing instead that income accounting was born out of a governmental project, implemented by institutionalist economists at the National Bureau of Economic Research (NBER) during the interwar period, to manage “the business cycle.” Bridging the literatures on the history of economic policymaking of the interwar period and the postwar triumph of “American Keynesianism,” it shows that institutionalists developed income accounting as a knowledge infrastructure to monitor inter-sectoral imbalances that generated cyclical fluctuations. Called the National Income and Product Accounts (NIPA) System, this infrastructure constructed “the economy” as a composite statistical object, composed of many disparate, nonfungible substantive elements that could not have been otherwise patched into a coherent whole. Wrapping these elements into the veil of money, the NIPA System became the interface through which policymakers intervened in intersectoral imbalances at the level of monetary flows with fiscal tools.
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Queralto, Albert. "Monetary Policy in a Model of Growth." International Finance Discussion Paper 2022, no. 1339 (April 1, 2022): 1–39. http://dx.doi.org/10.17016/ifdp.2022.1340.
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Empirical evidence suggests that recessions have long-run effects on the economy's productive capacity. Recent literature embeds endogenous growth mechanisms within business cycle models to account for these "scarring" effects. The optimal conduct of monetary policy in these settings, however, remains largely unexplored. This paper augments the standard sticky-price New Keynesian (NK) to allow for endogenous dynamics in aggregate productivity. The model has a representation similar to the two-equation NK model, with an additional condition linking productivity growth to current and expected future output gaps. Absent state contingency in the subsidies that correct the externalities associated with productivity growth, optimal monetary policy sets inflation above target whenever the subsidies fall short of the externalities. In the recovery from a spell at the ZLB, the optimal discretionary policy sets inflation temporarily above target, helping mitigate the long-run damage. Following a cost-push shock that creates inflationary pressure, the central bank tolerates a larger rise in inflation than in a model with exogenous productivity. The gains from commitment include the central bank's ability to make credible promises about future output gaps in a way that allows it to manipulate current productivity growth.
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Hossain, Nazmul, and Raju Mohammad Kamrul Alam. "Innovative Approaches for Growth & Development of Small Businesses & Improve the Poverty Condition in Bangladesh." Review of European Studies 9, no. 4 (November 22, 2017): 130. http://dx.doi.org/10.5539/res.v9n4p130.
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The research focuses on the assessment of small business & its impacts on socio-economic spheres; it focuses on effective ways for sustainable growth & development of small businesses in Bangladesh. Bangladesh is one of the poorest countries in the world with low GDP/capita and minimum purchasing power. There are 3 fundamental reasons which are accountable for permanent economic downturn and tremendous poverty in Bangladesh: (1) the poor people don’t have permanent regular jobs to earn enough money to support their families, (2) they don’t have sufficient investment capital to introduce their own businesses or other income generation activities to change their financial status, and (3) they don’t have proper entrepreneurial and managerial knowledge & experience to introduce &operate their own businesses perfectively. These factors confine them into vicious cycle of poverty from generation to generation and impose tremendous pressure on national economic, infrastructural and economic growth plan & potentiality. The aim of the paper is to analyze the effect of collective effort and co-operative investment policy to introduce micro joint venture and its impacts on socio-economic development. The study is to aggregate impoverished individuals’ micro saving, limited capability, little working skills & experiences to create them depositors, investors, successful entrepreneurs & skills workforce to accelerate economic growth and improve the poverty condition. The practical tasks of the research is to identify and apply the most effective ways for sustainable growth and development of small business & employment opportunities through proposed “Co-operative Society Micro-saving Bank” & “Innovative Small Business Model”.
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Umar Bala, Chin Lee, and Rabiu Maijama’a. "Asymmetric Pass-Through Effects of Oil Price on Economic Growth in Malaysia." International Journal of Business and Society 22, no. 2 (August 12, 2021): 753–64. http://dx.doi.org/10.33736/ijbs.3755.2021.
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This empirical analysis intends to examine the asymmetric response of economic growth when the oil price changes in Malaysia by applying threshold autoregressive (TAR) and momentum threshold autoregressive (MTAR) cointegration and asymmetric adjustment models. The results revealed that the oil price has an asymmetric impact on Malaysian economic growth. We found that when oil price increases this accelerates economic growth; however, the speeds of adjustment back to the steady position were insignificant. When the oil price dropped, oil price significantly and negatively affects economic growth for a period of time and then returns back to its normal position. The results revealed that Malaysian economic growth constantly benefits when the oil price increases and is temporarily negatively affected when oil prices drop. The results have important policy implications. This suggests that it is essential to the policy makers to consider different policy responses for hikes and drops in oil prices. The result implies that negative oil price shock would lower economic growth, however it is temporary. Therefore, policy makers might response by implementing expansionary monetary policy to stimulate economic growth. The explanation is intuitive. For example, an increase in the money supply would normally pull down the interest rate which would further encourage consumption and investment, stimulate economic growth, which would increase oil demand and push up its price.
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Wasserfallen, W. "Trends, Random Walks and the Expectations-Augmented Phillips-Curve- A Summary." Recherches économiques de Louvain 51, no. 3-4 (December 1985): 387–88. http://dx.doi.org/10.1017/s0770451800082695.
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In most macroeconomic models, variations in nominal variables, such as inflation or money growth, are considered to be important determinants of cyclical fluctuations in real activity. The major hypothesis in that respect is the so-called Phillips-curve. In its modern interpretation, it maintains that only unexpected changes in nominal magnitudes produce real effects. Reliable empirical evidence on these effects is therefore crucial for the building of macroeconomic models and the conduct of monetary policy.Time series of output, industrial production or employment however contain growth and seasonal components in addition to cyclical elements. The empirical implementation of business cycle models therefore requires assumptions with respect to growth and seasonal parts as well, in order to isolate cyclical movements and to avoid misspecified equations. It has become general practice to assume that economic growth can be reasonably well approximated by a deterministic linear time trend. Seasonality is either captured through the explicit introduction of dummy variables or the use of seasonally adjusted data. Again, these procedures assume a deterministic seasonal structure. It is generally concluded in this literature, that unanticipated and possibly also expected changes in nominal magnitudes have non-negligible real effects.
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Savenko, V. I., I. S. Nesterenko, S. S. Savenko, and Yu V. Orlik. "Evaluation of business activity of a construction firm." Ways to Improve Construction Efficiency, no. 46 (October 16, 2020): 163–75. http://dx.doi.org/10.32347/2707-501x.2020.46.163-175.
Full textAbstract:
The assessment of current production activities is carried out on the example of specialized construction and installation management with the help of turnover indicators as well as the level of efficiency of use of own and borrowed funds by the enterprise was determined.
Indicators of this group characterize the results and efficiency of the current main activity of the enterprise, such analysis can be carried out both at the qualitative level and with the help of quantitative criteria.
The main ones are production indicators, return on assets and turnover indicators. These indicators are of great importance for assessing the financial condition of the enterprise, because the speed of turnover, i.e. the speed of their conversion into cash, directly affects the solvency. The results of the calculation of the rate of return indicate that this fact (decrease in the turnover of fixed assets) may be associated with aging and wear of production equipment, i.e. we can say that the technical level of fixed assets of the object is low.
The coefficient of sustainability of economic growth shows the average rate at which the company can develop further, without changing the already established relationship between different sources of funding. Summarizing the comparative data, we can say that if the management of the enterprise intends to increase its production capacity in order to increase production, it is necessary to change the financial policy. The results of calculations allow to show that at the analyzed enterprise there was a significant increase in the full production cycle and turnover as a whole. The duration of the operating cycle increased by more than 1.2 times and the duration of the financial cycle by almost 2 times. This was negatively affected by the factor of a significant slowdown in the turnover of inventories. Increasing the full production cycle in the future may cause negative trends in the enterprise as a whole, because this factor will primarily affect the amount of profit, which will affect the efficiency of production. The company activities to reduce the amount of net profit was influenced primarily by the acquisition of inventories, low-value perishable items and fixed assets, as well as repayment of accounts payable and payment of penalties.
The period of turnover of the most liquid assets during the year varied from 0.04 to 17.5 days. The average chronological value in the period of saving money in the accounts of the enterprise was 7.5 days. This fact indicates that the company, despite the apparent well-being, is experiencing a serious shortage of funds. They were enough for a little over a week. Thus, with the help of analysis of economic indicators, you can describe the general condition of the company and the possibilities of its operation and development
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Hahn, Jonas, Verena Keil, Thomas Wiegelmann, and Sven Bienert. "Office properties through the interest cycle." Journal of Property Investment & Finance 34, no. 5 (August 1, 2016): 432–56. http://dx.doi.org/10.1108/jpif-01-2016-0006.
Full textAbstract:
Purpose – The purpose of this paper is to estimate the impact of changes in macro-economic conditions going forward, focusing on a change in interest policy, with regard to office letting and investment markets. Design/methodology/approach – For this analysis, the authors constructed two vector-autoregressive models, measuring the response of office rents and capital values in Germany to economic impulses. The authors isolated effects of unique exogenous positive shocks (such as economic growth or interest leaps) on the basis of impulse-response functions in order to understand the complex dynamic interdependence between several economic factors and office performance changes. Findings – The authors initially find a moderately positive development of both office performance components even although supposing an increase in interest level. In terms of capital values, the authors find that they do not drop before 1.5 years after the interest impulse and the negative effect peaks after approximately nine quarters. Furthermore, the reaction to a change in GDP is significantly lower than a reaction to the interest rate, but impulses in other macro-economic factors provoke stronger reactions. Finally, the authors find that a positive interest shock leads to a comparably robust development and economic sustainability in office rents throughout a consideration horizon of 24 quarters. Research limitations/implications – Estimations are based on observations from a time period containing two rather extraordinary market phases. As they included bubble growth and the low-interest environment, the authors find that certain patterns in both phases neutralize each other when looking at the total time frame. The authors constructed sub-samples to compensate for this. However, the research does not provide to what extent the measured impulse-responses stay forecast-proof, if the market moves into a phase of short-term normalization. Practical implications – This paper provides insights into estimated impulse-response patterns on a hypothetical sudden increase of several macro-economic determinants. On this basis, the probable reaction to an increase in, for example, the interest rate level can be approximated. Also, the paper provides a fundamental understanding of the economic sustainability of German office properties in terms of their value and rent performance in the case of exogenous shocks. Originality/value – This paper contains the first vector-autoregressive, impulse-response analysis of office markets in Germany in the context of several macro-economic drivers, including the interest level. It delivers insights into market reaction patterns on the basis of simulated one standard deviation shocks in all included variables.
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Aragón, Edilean Kleber da Silva Bejarano, and Marcelo Savino Portugal. "Asymmetric effects of monetary policy in Brazil." Estudos Econômicos (São Paulo) 39, no. 2 (June 2009): 277–300. http://dx.doi.org/10.1590/s0101-41612009000200002.
Full textAbstract:
In this paper, we check whether the effects of monetary policy actions on output in Brazil are asymmetric. Therefore, we estimate Markov-switching models that allow positive and negative shocks to affect the growth rate of output in an asymmetric fashion in expansion and recession states. In general, results show that: i) the real effects of negative monetary shocks are larger than those of positive shocks in an expansion; ii) in a recession, the real effects of positive and negative shocks are the same; iii) there is no evidence of asymmetry between the effects of countercyclical monetary policies; and iv) it is not possible to assert that the effects of a positive (or negative) shock are dependent upon the phase of the business cycle.