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Price Shocks (price + shock)
Selected AbstractsHouse Price Shocks and Household Indebtedness in the United KingdomECONOMICA, Issue 307 2010RICHARD DISNEY We use household panel data to explore the link between changes in house prices and household indebtedness (both secured on housing assets and unsecured) in the United Kingdom. We show that households which are borrowing-constrained by a lack of housing equity as collateral make greater use of unsecured debt such as credit cards or personal loans. In response to rising house prices, which relax this constraint, such households are more likely to refinance and to increase their indebtedness relative to unconstrained households. However, for most households, house price movements appear to have little impact on indebtedness. [source] Energy Price Shocks and the Macroeconomy: The Role of Consumer DurablesJOURNAL OF MONEY, CREDIT AND BANKING, Issue 7 2008RAJEEV DHAWAN energy prices; business cycles; durable goods We create a model with a distinction between investment in consumer durables and capital goods, as well as energy use by households and firms, to evaluate the importance of energy price shocks for output fluctuations. Simulation results indicate that this economy has a smaller proportion of output fluctuations attributable to energy price shocks than one without durable goods and household energy use. We show that an energy price hike is absorbed by reducing investment in durables more than in fixed capital. This rebalancing effect cushions the hit to future production. Thus, productivity shocks remain the prime driver for output fluctuations. [source] A Proposed Monetary Regime for Small Commodity Exporters: Peg the Export Price (,PEP')INTERNATIONAL FINANCE, Issue 1 2003Jeffrey Frankel On the one hand, the big selling points of floating exchange rates , monetary independence and accommodation of terms of trade shocks , have not lived up to their promise. On the other hand, proposals for credible institutional monetary commitments to nominal anchors have each run aground on their own peculiar shoals. Rigid pegs to the dollar are dangerous when the dollar appreciates. Money targeting does not work when there is a velocity shock. CPI targeting is not viable when there is a large import price shock. And the gold standard fails when there are large fluctuations in the world gold market. This paper advances a new proposal called PEP: peg the export price. Most applicable for countries that are specialized in the production of a particular mineral or agricultural product, the proposal calls on them to commit to fix the price of that commodity in terms of domestic currency. A series of simulations shows how such a proposal would have worked for oil producers over the period 1970,2000. The paths of real oil prices, exports, and debt are simulated under alternative regimes. An illustrative finding is that countries that suffered a declining world market in oil or other export commodities in the late 1990s would under the PEP proposal have automatically experienced a depreciation and a boost to exports when it was most needed. The argument for PEP is that it simultaneously delivers automatic accommodation to terms of trade shocks, as floating exchange rates are supposed to do, while retaining the credibility-enhancing advantages of a nominal anchor, as dollar pegs are supposed to do. [source] Growth and Poverty Reduction in Uganda, 1999,2000: Panel Data EvidenceDEVELOPMENT POLICY REVIEW, Issue 4 2003Klaus Deininger To explore factors underlying growth and poverty reduction in Africa while overcoming some of the limitations of cross-country analysis, this article uses micro-level survey and panel-data evidence from Uganda spanning 1992,2000. The high elasticity of both income growth and poverty reduction with respect to agricultural output (coffee) prices confirms the benefits from Uganda's decisive liberalisation of output markets. It also suggests the importance of product diversification to protect the poor against price shocks and the potential of cotton-market improvements in tackling persistent poverty in the North. The importance of improving access to basic education and health care emerges more clearly than in cross-country analysis, but benefits depend on complementary investments in electricity and other infrastructure, and reductions in civil strife. [source] Energy Price Shocks and the Macroeconomy: The Role of Consumer DurablesJOURNAL OF MONEY, CREDIT AND BANKING, Issue 7 2008RAJEEV DHAWAN energy prices; business cycles; durable goods We create a model with a distinction between investment in consumer durables and capital goods, as well as energy use by households and firms, to evaluate the importance of energy price shocks for output fluctuations. Simulation results indicate that this economy has a smaller proportion of output fluctuations attributable to energy price shocks than one without durable goods and household energy use. We show that an energy price hike is absorbed by reducing investment in durables more than in fixed capital. This rebalancing effect cushions the hit to future production. Thus, productivity shocks remain the prime driver for output fluctuations. [source] Real Wage Rigidities and the New Keynesian ModelJOURNAL OF MONEY, CREDIT AND BANKING, Issue 2007OLIVIER BLANCHARD oil price shocks; inflation targeting; monetary policy; inflation inertia Most central banks perceive a trade-off between stabilizing inflation and stabilizing the gap between output and desired output. However, the standard new Keynesian framework implies no such trade-off. In that framework, stabilizing inflation is equivalent to stabilizing the welfare-relevant output gap. In this paper, we argue that this property of the new Keynesian framework, which we call the divine coincidence, is due to a special feature of the model: the absence of nontrivial real imperfections. We focus on one such real imperfection, namely, real wage rigidities. When the baseline new Keynesian model is extended to allow for real wage rigidities, the divine coincidence disappears, and central banks indeed face a trade-off between stabilizing inflation and stabilizing the welfare-relevant output gap. We show that not only does the extended model have more realistic normative implications, but it also has appealing positive properties. In particular, it provides a natural interpretation for the dynamic inflation,unemployment relation found in the data. [source] Oil price movements and globalisation: is there a Connection?OPEC ENERGY REVIEW, Issue 3 2002Robert Looney There has been considerable speculation over the years concerning the cost of large oil price movements ("shocks") to consuming countries. For the advanced industrial countries, the conventional wisdom appears to be that, because these economies are becoming more service,oriented, less energy is needed per unit of gross domestic product (GDP) and hence a lessening of the economic costs associated with increased oil prices. On the other hand, because many newly industrialised or catching,up countries are entering a phase of energy,intensive industrialisation, the same oil shocks are placing an increasing burden on these economies. One can easily argue, however, that industrialisation is only one facet of economic change taking place in the world economy. Conceivably, the rapid pace of increased globalisation may significantly modify these patterns. To test this proposition, an operational definition of globalisation is developed and shown to be positively associated with the strength of oil price shocks. The main finding of the study is that increased globalisation appears to be strengthening the impact of oil price shocks in the advanced industrial countries, but to a much lesser extent in the newly industrialising countries. [source] Leaning into the Wind: A Structural VAR Investigation of UK Monetary Policy,OXFORD BULLETIN OF ECONOMICS & STATISTICS, Issue 5 2005Andrew Mountford Abstract This paper adapts Uhlig's [Journal of Monetary Economics (2005) forthcoming] sign restriction identification methodology to investigate the effects of UK monetary policy using a structural vector autoregression (VAR). It shows that shocks which can reasonably be described as monetary policy shocks have played only a small role in the total variation of UK monetary and macroeconomic variables. Most of the variation in UK monetary variables has been due to their systematic reaction to other macroeconomic shocks, namely non-monetary aggregate demand, aggregate supply, and oil price shocks. We also find, without imposing any long run identifying restrictions, that aggregate supply shocks have permanent effects on output. [source] The Emergence of Structural Faults on the Supply Side in Deregulated ,Energy Only' Electricity MarketsTHE AUSTRALIAN ECONOMIC REVIEW, Issue 2 2006Paul Simshauser This article examines the effect of plant entry and exit in a deregulated ,energy only' electricity market. A partial equilibrium framework is presented that determines the optimal portfolio of base, intermediate and peaking plant for a given electricity load curve. An optimal result for Queensland is compared against the actual plant stock. Analysis of the portfolio indicates that deregulation is failing a key objective, namely enhancing dynamic efficiency, because too much base plant has been delivered. The research presents scenarios of structural corrections, using the theory of the generalised war of attrition to develop the cases. Results from simulation experiments are clear,consumers will secure lower electricity prices in the short run. But oversupply of base plant may suppress prices to such an extent that they fail to signal timely entry of peaking plant,the consequence of this failure being eventual price shocks and, potentially, load shedding. [source] Nominal Wage Flexibility and Economic Performance: Evidence and Implications Across Industrial CountriesBULLETIN OF ECONOMIC RESEARCH, Issue 1 2006Magda Kandil Abstract By considering the theoretical connection between labour and product markets, the paper evaluates the economic relationship of these markets within the contractual wage rigidity New Keynesian explanation of business cycles. The empirical analysis focuses on the short-run cyclical behaviour of real output, prices and wages for 19 industrial countries. Time-series and cross-sectional regressions are estimated. Cross-sectional cyclical correlations in the labour and goods markets are also evaluated across countries. Consistent with the theoretical predictions, aggregate uncertainty is an important factor in increasing the flexibility of the nominal wage in response to aggregate demand shocks. Wage flexibility accelerates price inflation and moderates the response of real output growth to aggregate demand shocks. Wage flexibility does not appear to be an important factor in differentiating the real and inflationary effects of energy price shocks across countries. Finally, aggregate uncertainty increases the responsiveness of output and price to productivity shocks. [source] | ||||||||||