Macroeconomic Policymaking Research Articles

Land Institutions and Chinese Political Economy

This article critically examines the origins and evolution of China’s unique land institutions and situates land policy in the larger context of China’s reforms and pursuit of economic growth. It argues that the Chinese Communist Party (CCP) has strengthened the institutions that permit land expropriation—namely, urban/rural dualism, decentralized land ownership, and hierarchical land management—in order to use land as a key instrument of macroeconomic regulation, helping the CCP respond to domestic and international economic trends and manage expansion and contraction. Key episodes of macroeconomic policymaking are analyzed, with the use of local and central documents, to show how the CCP relied on the manipulation and distribution of the national land supply either to stimulate economic growth or to rein in an overheating economy. China’s land institutions, therefore, share “complementarities” with fiscal and financial institutions and benefit powerful political actors while imposing costs on marginal ones.

L’Argentine après le défaut : conditions d’accès aux marchés internationaux de capitaux et choix de politiques économiques « non conventionnelles »

Le défaut sur la dette souveraine en 2001 a ouvert pour l’Argentine une période de relations financières complexes avec le reste du monde et riche en changements de politique économique. Raisonnant en termes des déterminants d’offre et de demande de financement externe, cet article montre que l’accès du pays aux marchés internationaux de capitaux a été abordable dans certaines périodes, notamment après la restructuration de la dette en 2005. D’ailleurs certains épisodes de diminution des flux de capitaux entrants nets n’ont pas été dus à des restrictions d’offre mais à une volonté ferme de désendettement des autorités argentines, couplée à la levée de barrières réglementaires. Le renforcement à partir de 2011 de certaines politiques « non conventionnelles », comme la monétisation du déficit et le contrôle des changes, découle certainement de cette pénurie de financement en devises. Or d’autres facteurs plus « structurels » le sous-tendent également : une quête continue d’autonomie dans la politique économique via l’autarcie financière et la « peur » séculaire de dévaluer le peso et de le laisser flotter, de crainte qu’il alimente les anticipations d’inflation. Classification JEL : E58, F30, F32, G01, O54.

Stuck! The Law and Economics of Residential Stability

America has become a nation of homebodies. Rates of inter-state mobility, by most estimates, have been falling for decades. Even research that does not find a general decline finds that inter-state mobility rates are low among disadvantaged groups and are not increasing despite a growing connection between moving and economic opportunity. Perhaps more important than changes in overall mobility rates are declines in mobility in situations and places where it is particularly important. People are not leaving areas hit by economic crises, with unemployment rates and low wages lingering in these areas for decades. And people are not moving to rich regions where the highest wages are available. This Article advances two central claims. First, declining inter-state mobility rates create problems for federal macroeconomic policy-making. Low rates of inter-state mobility make it harder for the Federal Reserve to meet both sides of its “dual mandate” of stable prices and maximum employment; impair the efficacy and affordability of federal safety net programs that rely on state and local participation; and reduce both levels of wealth and rates of growth by inhibiting agglomeration economies. While determining an optimal rate of inter-state mobility is difficult, policies that unnaturally inhibit inter-state moves worsen national economic problems.Second, the Article argues that governments, mostly at the state and local levels, have created a huge number of legal barriers to inter-state mobility. Land-use laws and occupational licensing regimes limit entry into local and state labor markets; differing eligibility standards for public benefits, public employee pension policies, homeownership subsidies, state and local tax regimes, and even basic property law rules reduce exit from states and cities with less opportunity; and building codes, mobile home bans, federal location-based subsidies, legal constraints on knocking down houses and the problematic structure of Chapter 9 municipal bankruptcy all limit the capacity of failing cities to “shrink” gracefully, directly reducing exit among some populations and increasing the economic and social costs of entry limits elsewhere. Put together, the Article shows that big questions of macroeconomic policy and performance turn on the content of state and local policies usually analyzed using microeconomic tools. Many of the legal barriers to inter-state mobility emerged or became stricter during the period in which inter-state mobility declined. While assigning causality is difficult, public policies developed by state and local governments more interested in local population stability than in ensuring successful macroeconomic conditions either generated or did not push back against falling mobility rates. The Article concludes by suggesting ways the federal government could address falling mobility rates.

Prevention of suicide

Suicide is a major public health problem in India, probably even bigger than in the West. Suicidal behavior is the best conceptualized as a multifaceted complex problem involving social factors and mental illnesses. Broadly, there are two approaches to suicide prevention; population preventive strategies and high-risk preventive strategies. Population preventive strategies include reducing availability of means for suicide, education of primary care physicians, influencing media portrayal of suicidal behavior, education of the public, telephone helplines, and addressing economic issues associated with suicidal behavior. High-risk preventive strategy includes identifying individuals with high risk of committing suicide, intensively treating mental illness if present, and providing psychosocial support. Thus, prevention requires a multipronged effort with collaboration from various sectors including mental health professionals, social justice department, and macroeconomic policy makers.

Gender Disparity in Functionality and Consequence of Microfinance: Does it Function Currently?

This study has been designed to represent gender disparity in different issues like adequacy of loan amount, rate of interest, formalities to take loan and consequence of microfinance in poverty alleviation. Both descriptive and inferential statistical tools have been used to test our research hypothesis. This study reveals that there is a significant perceptional difference between male and female respondents regarding adequacy of loan amount, rate of interest, formalities to take loan. Although female respondents have more positive attitude regarding adequacy of loan amount, rate of interest, formalities to take loan than that of men, they are less positive relating to poverty alleviation as a consequence of microfinance than that of male respondents. The findings of this study urge that if the macro-economic policymakers don’t upgrade existing development policies, the socio-economic barriers of the women keep them behind in accruing and using microfinance to reduce their poverty.

Greece’s Three-Act Tragedy: A Simple Model of Grexit vs. Staying Afloat inside the Single Currency Area

Against the backdrop of the Greek three-act tragedy, we present a theoretical framework for studying Greece’s recent debt and currency crisis. The model is built on two essential blocks: first, erratic macroeconomic policymaking in Greece is described using a stochastic regime-switching model; second, the euro area governments’ responses to uncertain macroeconomic policies in Greece are considered. The model’s mechanism and assumptions allow either for a Grexit from the euro area or, conversely, the avoidance of Greece’s default against its creditors. The model also offers useful guidance to understand key drivers of the long-winded negotiations between the Greek government and the “institutions”.

Going Public: Key Factors to Consider by IPO Candidates on Emerging Markets of Poland and the Czech Republic

Increasing globalization contributes to the growing role primary capital markets play for raising external equity capital. This phenomenon is becoming more significant in both developed and emerging markets and influences the effectiveness of national economy. Therefore, the identification of going public motivations can be a source of knowledge for enterprises, stock exchanges, investment banks and national macroeconomic policy makers. In this paper, we aim to document the sentiments toward going public expressed by 45 CFOs of not public and not financial companies – IPO candidates - from the Czech Republic and Poland in the period between 2012 and 2014. These markets belong to the most important among the Central and Eastern European countries. In the statistical analysis descriptive methods, contingency tables and chi-square test were applied. Results are compared with academic literature and empirical evidence for developed US and EU capital markets. The survey results can be summarised as follows. First, a considerably larger number of CFOs (IPO candidates) is motivated by raising external equity capital. Surveyed companies tend to conduct an IPO in the expansion stage of their life cycle, which is perceived as a positive signal, especially for the investors. Second, our assumption a company listing on the capital market will have a positive effect on its image and publicity could be confirmed by empirical evidence. Next, analysing conditional variables revealed some other insights into the strategy of corporate financing. Polish companies are more likely to conduct an IPO than their Czech counterparts and at the same time raising external equity capital is the prevailing reason for conducting an IPO in Poland while this motive is significantly less important for Czech CFOs. Furthermore, there is no evidence that older firms might have a greater tendency to go public. However, more mature companies prefer using the funds raised by IPO to pay down debt, which corresponds to the results of previous studies conducted in continental Europe. The motive of lowering the cost of capital prevails in small companies as well as another non-financial IPO driver, publicity and image enhancement.DOI: http://dx.doi.org/10.5755/j01.ee.27.4.14755

Managing and communicating risk and uncertainty in macroeconomic policymaking

In policymaking, as in life, we often must make decisions without knowing how the future will play out. Taking uncertainty into account when making macroeconomic policy allows policymakers to help improve economic outcomes. This article considers three aspects of improving outcomes for fiscal and monetary policymaking: considering risk and uncertainty in decision-making; communicating risk and uncertainty; and designing better tools to communicate risk.

Chinese leadership of macroeconomic policymaking in a multipolar world

This paper discusses the kind of leadership in global macroeconomic policymaking that China might provide. The paper describes a form of leadership, which I call ‘concerted unilateralism’, that enables countries to pursue their own objectives, in a way which they would not have been able to do if they were acting on their own, and enables them to achieve a higher level of welfare. I contrast such leadership this with a form of authoritarian leadership in which the leader imposes obligations on other countries which are to the disadvantage of those countries. I argue that China could provide leadership of the first kind, by making use of the G20 Mutual Assessment Process, or G20MAP. In the short term, China might do this by consolidating the ‘2-in-5’ action plan, which Australia instituted within the G20MAP when it was Australia was President of the G20. In the longer term, China might do this by ensuring that there is convergence between the G20MAP and China's own One-Belt-One-Road strategy for international engagement in trade and finance.

Does Chinese Outward Direct Investment (ODI) to Africa stimulate The Sino-African Trade Co-operation?

The Chinese Outward Direct Investment has expanded exponentially over the past years affecting the intensity of trade ties and the presence of China's contracted projects with high level of significance in volume and diversity across the African Continent. The purpose of this study is to assess and examine 24 Countries in Sub-Sahara Africa during the period 2003 to 2013(10 years) to investigate whether or not the Chinese Outward Direct Investment to Africa stimulate the Sino-African Trade cooperation with a clarity showing the rigidity which both parties have to balance to enforce the win-win benefit. For data analyses, the study adopts a panel data to analyze Chinese ODI exports to Africa, and a time series data to investigate the effect of its imports from Africa. The study reveals that Chinese Outward Direct Investment to Africa has contributed significantly and paying off as it has plays a vital role in increasing Chinese exports to Africa as well as imports from Africa especially in the oil and other raw materials imports and manufactured goods. The research found also that per capita income and annual percentage growth of domestic product of China have a positive effect on its import. Macroeconomic Policy makers and regulators would use the research finding recommendations as a proxy for sound Policy implementation that strengthen and enhance China's Outward Direct Investment and trade cooperation with SSA for a win-win benefit to attain a sustainable growth and development.

Monetary and Fiscal Policies and the Dynamics of the Yield Curve in Morocco

We estimate the latent factors that underlie the dynamics of the sovereign bond yield curve in Morocco during 2004–14 based on the Dynamic Nelson-Siegel model. On this basis, we explore the interaction between macroeconomic variables and the yield curve, which is of direct relevance to macroeconomic policy-making. In Morocco’s context, we find that tighter monetary policy increases short-end maturities, and that the impact is small and short-lived. Economic activity is also briefly but significantly impacted, suggesting that even under a pegged exchange rate, monetary policy autonomy and effectiveness can be increased through greater central bank independence. Fiscal improvements significantly lower yield levels. Policy conclusions are that improvement in the fiscal and monetary policy frameworks, as well as greater financial sector development and inclusion, could benefit Morocco and strengthen the transmission mechanisms and effectiveness of macroeconomic policies.

Monetary and Fiscal Policies and the Dynamics of the Yield Curve in Morocco

We estimate the latent factors that underlie the dynamics of the sovereign bond yield curve in Morocco during 2004–14 based on the Dynamic Nelson-Siegel model. On this basis, we explore the interaction between macroeconomic variables and the yield curve, which is of direct relevance to macroeconomic policy-making. In Morocco’s context, we find that tighter monetary policy increases short-end maturities, and that the impact is small and short-lived. Economic activity is also briefly but significantly impacted, suggesting that even under a pegged exchange rate, monetary policy autonomy and effectiveness can be increased through greater central bank independence. Fiscal improvements significantly lower yield levels. Policy conclusions are that improvement in the fiscal and monetary policy frameworks, as well as greater financial sector development and inclusion, could benefit Morocco and strengthen the transmission mechanisms and effectiveness of macroeconomic policies.

An error-correction modeling of US consumer spending: are there asymmetries?

Purpose – The purpose of this paper is to investigate four possible asymmetries in US aggregate consumption and its major components (durables, non-durables, and services) for the period 1990-2013. Understanding the asymmetric behavior of the components is important since the impact of monetary policy on separate consumer spending categories may differ substantially. Design/methodology/approach – The authors first employ stationarity and cointegration tests to specify and estimate the long-run equilibrium relationship between consumer spending and such variables as disposable income, consumer sentiment, and the expected real interest rate. The authors then specify a structural error-correction model for each spending category to simultaneously investigate such possible asymmetries due to the ratchet effect, psychological negativity bias, interest rate effect, and varying degree of adjustment in eliminating disequilibrium defined as the gap between actual and desired spending. Findings – First, consumption and its major components all display asymmetric behavior consistent with psychological negativity bias. Second, consumer spending on durable goods also displays asymmetries consistent with both the ratchet effect and the interest rate effect. Third, non-durables respond asymmetrically to disequilibrium; consumers adjust (increase) spending on non-durables only when actual spending is below desired spending on non-durable goods. Fourth, services also respond asymmetrically to disequilibrium; consumers adjust (reduce) spending on services only when actual spending is above desired spending on services. Originality/value – This study provides new insight on the asymmetric behavior of consumer spending. The authors believe that the findings should help with macroeconomic policymaking when such indicators as income, consumer sentiment, and expected real interest rates display significant variations.

Fiscal Stimulus in Economic Unions: What Role for States?

Executive SummaryThe Great Recession and the subsequent passage of the American Recovery and Reinvestment Act returned fiscal policy and, particularly, the importance of state and local governments to the center stage of macroeconomic policymaking. This paper addresses three questions for the design of intergovernmental macroeconomic fiscal policies. First, are such policies necessary? Analysis of US state fiscal policies shows state deficits (in particular from tax cuts) can stimulate state economies in the short run, but that there are significant job spillovers to neighboring states. Central government fiscal policies can best internalize these spillovers. Second, what central government fiscal policies are most effective for stimulating income and job growth? A structural vector autoregression (SVAR) analysis for the US aggregate economy from 1960 to 2010 shows federal tax cuts and transfers to households and firms and intergovernmental transfers to states for lower-income assistance both are effectiv...

Explaining the Striking Similarity in Macroeconomic Policy Responses to the Great Recession

This article offers an institutional explanation for the strikingly similar configuration of macroeconomic policy responses of advanced capitalist economies to the Great Recession. In recent decades, advanced economies have adopted a common structure of macroeconomic governance, which organizes macroeconomic policymaking around monetary policy operated by autonomous central banks and sets limits on politicians’ policymaking discretion. During the Great Recession, this macroeconomic governance allowed central banks to enact unconstrained monetary expansion and governments to enact constrained fiscal expansion. The argument here is empirically substantiated by focusing at how macroeconomic policies in response to the Great Recession have evolved in Australia and Sweden, as well as by looking at parallel developments in the United Kingdom and the United States.

A preliminary study of cryosphere service function and value evaluation

Cryosphere science research and development (R&D) has been strongly committed to public service, integrating natural sciences with socioeconomic impacts. Owing to the current shift from purely natural cryosphere scientific research to linking cryosphere science with socioeconomic and cultural science, cross-disciplinary research in this field is emerging, which advocates future cryosphere science research in this field. Utilizing the cryosphere service function (CSF), this study establishes CSF and its value evaluation system. Cryosphere service valuation can benefit the decisionmakers' and public's awareness of environmental protection. Implementing sustainable CSF utilization strategies and macroeconomic policymaking for global environmental protection will have profound and practical significance as well as avoid environmental degradation while pursuing short-term economic profits and achieving rapid economic development.

Determinants of Inflation: Evidence from Pakistan using Autoregressive Distributed Lagged Approach

Controlling inflation is one of the biggest challenges faced by the macroeconomic policymakers in Pakistan. This research article is aimed at highlighting the main sources of inflation in the economy of Pakistan using an autoregressive distributed lag model for the period from 1980 to 2012. Findings of this study reveal that the one percent rise in the long run money supply, exchange rate, total reserve, and the gross national expenditure change inflation by 0.16, 2.12, 0.36, and 1.78 percent points respectively. The Error Correction model with negative sign remains statistically significant with approximate 81% speed of adjustment to restore the equilibrium in the long run, which shows the quick convergence.

Lending Convergence in the Romanian Banking Sector

Abstract Lending convergence is to be expected in developed banking sectors but has the potential to enhance cyclicality. We study lending variations in Romania from 2007 to 2013 and find that the onset of the financial crisis was accompanied by lending stagnation and an increase in banking convergence. We argue that lending variations depend on sectorial developments, which in turn depend on economic growth. Results from econometrical convergence models confirm a sudden increase in banking convergence during the financial crisis, followed by a relative moderation after 2012. Lending convergence is important for macroeconomic policy makers, while also allowing for macro prudential adjustments.

Greece's Three-Act Tragedy: A Simple Model of Grexit vs. Staying Afloat Inside the Single Currency Area

Against the backdrop of the Greek three-act tragedy, we present a theoretical framework for studying Greece’s recent debt and currency crisis. The model is built on two essential blocks: first, erratic macroeconomic policymaking in Greece is described using a stochastic regime-switching model; second, the euro area governments’ responses to uncertain macroeconomic policies in Greece are considered. The model’s mechanism and assumptions allow either for a Grexit from the euro area or, conversely, the avoidance of Greece’s default against its creditors. The model also offers useful guidance to understand key drivers of the long-winded negotiations between the Syiza government and the euro area governments.

Not Dead Yet: Biblical Perspective on Macroeconomic Policymaking for the Long Run

In the wake of the Great Recession, mainstream macroeconomic perspectives in the developed world have been increasingly called into question. What, if anything, does the Bible have to say about such things? In this essay, I examine general macroeconomic principles laid out in Scripture, as well as specific biblical “case studies” that illustrate those principles in action. Moreover, I assess several modern economic schools both from a biblical vantage point and in light of recent history. I find that the Bible offers practical economic guidelines that in certain respects accord well with the heterodox views of the Post-Keynesian school, particularly with regard to policies surrounding debt and financial instability on the one hand and poverty, unemployment, and inequality on the other. I also argue that the application of biblical principles to macroeconomic problems in developed economies may entail dramatic changes to current policy stances — and that it is incumbent upon the evangelical Church to take part in the ongoing policy debate.