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- Monetary policy implications for an oil-exporting economy of lower long-run international oil prices
by Christian Zimmermann in NEP-DGE blog, 2015-03-29 19:52:50 UTC
By Franz Hamann, Jes�s Bejarano and Diego Rodriguez
The sudden collapse of oil prices poses a challenge to inflation targeting central banks in oil exporting economies. This paper illustrates that challenge and conducts a quantitative assessment of the impact of permanent changes in oil prices in a small and open economy, in which oil represents an important fraction of its exports. We calibrate and estimate a variety of real and monetary dynamic stochastic general equilibrium models using Colombian historical data. We find that, in these artif [...]
- Performance pay for teachers
by nawmsayn in ZeeConomics, 2015-03-29 16:59:04 UTC
Making teacher salaries contingent on teacher performance can theoretically lead to better student outcomes. On the other hand, it can incentivize cheating (by the teachers) and teaching to the test. Interestingly, no long-term study of teachers’ pay-for-performance schemes has been conducted until quite recently.
In this post, I’ll look into the first study that investigated the effect of merit-based teacher pay not only on student performance in high school, but also on post-secondary and labor market outcomes.
Lavy (2015) ( ungated ) conducted an experiment in 2001-2002 with 49 Israeli sch [...]
- Competition & working conditions
by chris in Stumbling and Mumbling, 2015-03-29 12:25:34 UTC
Tyler Cowen argues against (pdf) Elizabeth Anderson's view (pdf) that capitalist bosses exert oppressive power over workers and, implicitly, against my view that capitalist work is alienating . This, I suspect , is one of the many issues in the social sciences where both sides are right to some extent.
Tyler is right that competition for workers can drive up working conditions, and it is surely true that those conditions are vastly better in the west now than they were in the early days of the industrial revolution.
Nevertheless, I fear that Tyler might be claiming too much.
First, though, so [...]
- The bond-stock conundrum
by JP Koning in Moneyness, 2015-03-28 20:54:00 UTC
Here's a conundrum. Many commentators have been trying to puzzle out why stocks have been continually hitting new highs at the same time that bond yields have been hitting new lows. See here , here , here , and here . On the surface, equity markets and bond markets seem to be saying two different things about the future. Stronger equities indicate a bright future while rising bond prices (and falling yields) portend a bleak one. Since these two predictions can't both be right, either the bond market or the stock market is terribly wrong. It's the I'm with stupid theory of the bond and equity b [...]
- Politicians or Technocrats: Who Splits the Cake?
by firstname.lastname@example.org (Carola) in Quantitative Ease, 2015-03-28 16:11:00 UTC
In most countries, non-elected central bankers conduct monetary policy, while fiscal policy is chosen by elected representatives. It is not obvious that this arrangement is appropriate. In 1997, Alan Blinder �suggested that Americans leave "too many policy decisions in the realm of politics and too few in the realm of technocracy," and that tax policy might be better left to technocrats. The bigger issue these days is whether an independent, non-elected Federal Reserve can truly be " accountable " to the public, and whether� Congress should have more control over monetary policy. The standard [...]
- Drivers of Industrial and Non-Industrial Greenhouse Gas Emissions
by email@example.com (David Stern) in Stochastic Trend, 2015-03-28 07:52:00 UTC
Another new working paper this time coauthored with my masters student Luis Sanchez. We use the new approach to modeling the income-emissions relationship pioneered by Anjum et al but using total greenhouse gas emission rather than just CO2 emissions from fossil fuel combustion and cement production. This is closer to the discussion I wrote in Chapter 5 of the Working Group III IPCC Report . Anjum et al . used the more limited emissions variable because the IPCC wouldn't allow us to use the data assembled for the report in other research and it took a lot of effort on Luis' part to put the dat [...]
- What we don’t know doesn’t hurt us: rational inattention and the permanent income hypothesis in general equilibrium
by Christian Zimmermann in NEP-DGE blog, 2015-03-26 23:59:15 UTC
By Jun Nie, Yulei Luo, Gaowang Wang and Eric Young
This paper derives the general equilibrium effects of rational inattention (or RI; Sims 2003,2010) in a model of incomplete income insurance (Huggett 1993, Wang 2003). We show that,under the assumption of CARA utility with Gaussian shocks, the permanent income hypothesis (PIH) arises in steady state equilibrium due to a balancing of precautionary savings and impatience. We then explore how RI affects the equilibrium joint dynamics of consumption, income and wealth, and find that elastic at [...]
- Bernanke Says “The Fed Has a Rule.” But It’s Only Constrained Discretion and It Hasn’t Worked
by John Taylor in Economics One, 2015-03-26 04:25:34 UTC
In response to a question about the policy rules bill at Brookings recently, Ben Bernanke remarked that the “The Fed has a rule.” His claim surprised quite a few people, especially given the Fed’s resistance to the policy rules bill, so he then went on to explain : “The Fed’s rule is that we will go for a two percent inflation rate. We will go for the natural rate of unemployment. We will put equal weight on those two things. We will give you information about our projection, our interest rates. That is a rule.” But the rule that Bernanke has in mind is not a rule for the inst [...]
- Zero UK Inflation
by Mainly Macro in Mainly Macro, 2015-03-24 16:22:00 UTC
Today it was announced that UK consumer price inflation hit zero in February. The ONS estimate that we have to go back to the 1960s for the last time this happened. More importantly, core inflation fell back 0.2% to 1.2%, after 0.1% increases in the previous two months. As Geoff Tily points out , if you take out the 0.2% contribution from the decision to raise student fees (which are hardly an indicator of excess demand), then the Governor could be writing a letter to the Chancellor based on core inflation, and not just the actual inflation rate. The Chancellor is in election mode and so does [...]
- Contract Farming and Food Security: Slides of my Presentation at the CSAE Conference
by Marc F. Bellemare in Marc F. Bellemare, 2015-03-24 09:00:20 UTC
This past Sunday I was presenting at the annual conference of the Centre for the Study of African Economies at Oxford. The topic of my talk was “Smallholder Participation in Contract Farming and Food Security,” a paper in which my coauthor Lindsey Novak and I look at the relationship between smallholder participation in agricultural value chains and the duration of the hungry season–how many monthsÂ those households wentÂ without eating three meals a day over the last year–experienced by those smallholder households in Madagascar.
In our paper, we find that
Participation in contract farming i [...]
- Should the UK stay or go? The economic consequences of Britain leaving the EU
by Blog Admin in EUROPP European Politics and Policy, 2015-03-24 07:30:49 UTC
How would a British exit from the EU affect the UK’s economy? Swati Dhingra , Gianmarco Ottaviano and Thomas Sampson outline the economic consequences of a Brexit, writing that reduced integration with EU countries is likely to cost the UK economy far more than is gained from lower contributions to the EU budget.
The direction of UK trade policy with its biggest trade partner – the EU – will be decided in the upcoming general election. The Conservatives are committed to holding an ‘in-or-out’ referendum on membership by 2017 while Labour and the Liberal Democrats have opposed th [...]
- Four concerns about schools at the top of the election agenda
by Sandra McNally, Professor in the School of Economics at University of Surrey in The Conversation, 2015-03-24 06:23:12 UTC
Counting up the costs ahead of the election. Hopscotch via Joanna Stankiewicz-Witek/www.shutterstock.com With education policy set to play an important part in the May general election campaign, debates around the future direction of the school system will take place against the backdrop of fast-paced reforms made during the coalition’s time in office.
These four key issues are likely to face scrutiny when it comes to schools policy.
1. How the UK measures up
Comparisons with Finland, Singapore and Korea abound. The UK continues to perform at about the OECD average in international ranki [...]
- Should we stay or should we go? The economic consequences of leaving the EU
by Joel Suss in British Politics and Policy at LSE, 2015-03-23 14:00:04 UTC
How will a British exit from the EU affect the UK’s economy? In this article, Swati Dhingra , Gianmarco Ottaviano andÂ Thomas Sampson Â outline the economic consequences of a Brexit, writing that reduced integration with EU countries is likely to cost the UK economy far more than is gained from lower contributions to the EU budget.
The direction of UK trade policy with its biggest trade partner â the EU âÂ will be decided in this upcoming general election. The Conservatives are committed to holding an âin-or-outâ referendum on membership by 2017 while Labour and the Liberal Democrats [...]
- A Simple Guide to "Secular Stagnation"
by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets, 2015-03-23 13:00:33 UTC
Since its cyclical peak in 2007 – just prior to the financial crisis – the U.S. economy has grown by only 1.2% at an annual rate. This is down sharply from the 3.0% pace that had prevailed since 1990. The resulting cumulative shortfall now exceeds $2 trillion, or more than $6,500 per capita. Naturally, we all want to know why. And what, if anything, to do about it. The conventional textbook explanation is that the trend of potential output has slowed sharply. Potential output is a supply concept: In the long run, when all prices (including wages and interest rates) have adjusted, aggregate [...]
- Will Fed Tightening Choke Emerging Markets?
by Jeffrey Frankel in Project Syndicate, 2015-03-23 12:00:18 UTC
CAMBRIDGE – As the Federal Reserve moves closer to initiating one of the most long-awaited and widely predicted periods of rising short-term interest rates in the United States, many are asking how emerging markets will be affected. Indeed, the question has been asked at least since May 2013, when then-Fed Chairman Ben Bernanke famously announced that quantitative easing would be “tapered” later that year, causing long-term US interest rates to rise and prompting a reversal of capital flows to emerging markets.
The fear, as IMF Managing Director Christine Lagarde has reminded us , is of [...]
- Group, then Threaten: How Bad Ideas Move Millions by Mark Harrison
by Mark Harrison in Mark Harrison's blog, 2015-03-23 08:00:23 UTC
Writing about web page http://dx.doi.org/10.1098/rsif.2014.0719
I've been thinking: What is it that enables a bad idea suddenly to spread across millions of people? Here are some of the things I have in mind:
In France the National Front is reported as leading all other parties in current opinion polls, having won barely 10 percent of the vote in the 2007 presidential election.
In January's general election, nearly 40 percent of Greek voters supported Syriza, compared wtih fewer than 5 percent as recently as 2009.
Since narrowly rejecting indendence in last year's referendum, Scotland [...]
- Debt Constraints and Unemployment
by Christian Zimmermann in NEP-DGE blog, 2015-03-23 04:29:05 UTC
By Patrick Kehoe, Virgiliu Midrigan and Elena Pastorino
In the Great Contraction, regions of the United States that experienced the largest change in household debt to income ratios also experienced the largest drops in output and employment. Such output drops not only occurred for firms that sell primarily to a local region but also for regional establishments of nation-wide firms that sell highly traded goods to both the rest of the United States and abroad. These patterns are difficult to reconcile with standard models of financial friction [...]
- Key environment policy still unknown in the NSW election
by Neil Perry, Research Lecturer at University of Western Sydney in The Conversation, 2015-03-23 02:34:02 UTC
NSW Labor has promised a Great Koala National Park to protect koalas, but what about more insidious threats to the environment? Nicki Mannix/Flickr , CC BY With less than a week to go until the New South Wales state election, there are still major concerns about what the election holds for the state’s wildlife and ecosystems.
NSW has nearly 300 threatened animal species – including koalas, pygmy-possums , and a number of lesser known species such as Corroborree Frogs and Regent Honeyeaters – and more than 600 species of threatened plants.
Both major parties have made promises to save [...]
- Does education pay off for criminals?
by nawmsayn in ZeeConomics, 2015-03-22 18:56:18 UTC
Returns to education on the labor market are sizable and have been growing. But is this the case for illegitimate activities as well? Do criminals have positive returns to education? On the one hand, less educated individuals are more likely to become criminals. But this doesn’t preclude the possibility that more educated criminals be more successful.
Of course, crime is a rather loose definition that includes a variety of activities. One could expect that there is no returns to education in certain criminal activities. But what about organized crime? Setting up rackets is like extracting opti [...]
- A Quick Point on Models
by JW Mason in The Slack Wire, 2015-03-21 14:18:00 UTC
According to Keynes the purpose of economics is "to provide ourselves with an organised and orderly method of thinking out particular problems"; it is "a way of thinking ... in terms of models joined to the art of choosing models which are relevant to the contemporary world." (Quoted here .) I want to amplify on that just a bit. The test of a good model is not whether it corresponds to the true underlying structure of the world, but whether it usefully captures some of the regularities in the concrete phenomena we observe. There are lots of different regularities, more or less bounded in time, [...]
- No One Expects the Spanish Inquisition: More on D.K. Levine and J.M Keynes
by Stephen Williamson in Stephen Williamson: New Monetarist Economics, 2015-03-20 20:54:00 UTC
I guess I shouldn't be surprised. David Levine's piece on Keynesian economics appears to have generated plenty of heat. See for example the comments section in my post linking to Levine. I'm imagining an angry mob dressed like the Pythons, as in the photo above, running through the streets of Florence looking for Levine. Each has a copy of the General Theory, and they're aiming to inflict torture by taking turns reciting it to David, until he renounces his heretical writings. What drew my attention to Levine's piece initially were blog posts by Brad DeLong and Nick Rowe. If Levine's piece were [...]
- Help-to-Buy ISAs will end up feathering nests of the wealthy – here's how
by Christian Hilber, Associate Professor of Economic Geography (Reader), Director of MSc in Real Estate Economics and Finance at London School of Economics and Political Science in The Conversation, 2015-03-19 14:23:26 UTC
Feeding the beast? Diana Parkhouse , CC BY George Osborne’s bid to boost home ownership in Britain might look like an effort to give young people a leg-up onto the housing ladder, but the evidence suggests they will be sorely disappointed. The Chancellor of the Exchequer’s budget unveiled a new “Help-to-Buy ISA” savings account which will subsidise deposits for first-time buyers while leaving untouched the fundamental flaws at the heart of our growing housing crisis.
The new ISA savings accounts will be available through banks and building societies from this autumn. In a nutshell, th [...]
- Euro area “lowflation” becomes “deflation”
by ? in FRED blog, 2015-03-19 13:00:39 UTC
Inflation in the euro area is measured by the Harmonized Index of Consumer Prices (HICP).Â “ Price stability is defined as a year-on-year increase in the Harmonised Index of Consumer Prices for the euro area of below 2%” (the red horizontal line). The Governing Council of the ECB clarified that this target should be interpreted as “below, but close to, 2% over the medium term.” In the euro area, as in several other advanced economies, inflation was below target but above zero for about two years (see Contessi, De Pace, Li, 2014 ). The IMF recently defined this environment as “ lowflation .”
- Smallholder Farmers and Agricultural Value Chains: What Is the Policy Relevance?
by Marc F. Bellemare in Marc F. Bellemare, 2015-03-19 09:00:21 UTC
A new article Â (ungated version here ) in World Development crystallized a few of the thoughts I have been mulling over regarding contract farming and the participation of smallholders in agricultural value chains in developing countries–an area where I have done a bunch of work, and wherein I am still doing work.
First, the abstract of the article:
Considerable empirical work relates participation in contract farming with farm profitability. However causation is far from settled as few studies control for endogeneity of participation. Moreover the link between contract farming and equity is [...]
- Capitalism - What Comes Next?
by Vikas Shah in Thought Economics, 2015-03-19 08:00:00 UTC
In this exclusive interview series, we speak to Nobel Prize Winning Economist, Edmund Phelps ( Director of the Columbia University Center on Capitalism & Society and the McVickar Professor of Political Economy at Columbia University ) and Professor Lawrence ‘Larry’ Summers ( Charles W. Eliot University Professor and President Emeritus at Harvard University. He served as the 71st Secretary of the Treasury for President Clinton and the Director of the National Economic Council for President Obama ). We look at the story of modern capitalism, the benefits it has brought, and the challenges [...]
- Back to Research
by Matthew Kahn in Environmental and Urban Economics, 2015-03-17 21:37:00 UTC
Over the last 5 weeks, I have been teaching four times a week as I taught on Mondays, Wednesdays and Fridays and on Saturdays (for 7 hours each time!). �I'm on the verge of being done. � I report to work at USC in mid-August. � What will I do for next 5 months? I expect to meet the following performance targets; 1. Siqi Zheng and I will publish our book about Pollution in China 2. Siqi and I will finish two of our new China Industrial Parks papers 3. I will revise my book review of Jeff Sachs' new book for the Journal of Economic Literature 4. I will finish my co-authored paper on the urban ec [...]