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Macroeconomic Shocks (macroeconomic + shock)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Labour-market Institutions and Macroeconomic Shocks

LABOUR, Issue 2 2003
Yu-Fu Chen
The effect of shocks depends on the nature of these institutions and the effect of institutional change depends on the macroeconomic environment. It follows that a given set of institutions may be appropriate in one epoch and not in another. We derive a dynamic model of labour demand in which the effect of firing costs on labour demand depends on the macroeconomic environment: when the level of macroeconomic activity is expected to drop and/or the trend rate of productivity growth is small, a rise in firing costs affects mainly (and adversely) the hiring decision and not the layoff decision. This makes firing costs harmful to employment when it may appear most appropriate. In contrast, firing costs can raise employment during periods of high growth and positive shocks. Our hypothesis is supported by empirical results using OECD data. [source]

Investor Attention and Time-varying Comovements

EUROPEAN FINANCIAL MANAGEMENT, Issue 3 2007
Lin Peng
G14 Abstract This paper analyses the effect of an increase in market-wide uncertainty on information flow and asset price comovements. We use the daily realised volatility of the 30-year treasury bond futures to assess macroeconomic shocks that affect market-wide uncertainty. We use the ratio of a stock's idiosyncratic realised volatility with respect to the S&P500 futures relative to its total realised volatility to capture the asset price comovement with the market. We find that market volatility and the comovement of individual stocks with the market increase contemporaneously with the arrival of market-wide macroeconomic shocks, but decrease significantly in the following five trading days. This pattern supports the hypothesis that investors shift their (limited) attention to processing market-level information following an increase in market-wide uncertainty and then subsequently divert their attention back to asset-specific information. [source]

Monetary and Fiscal Policy Rules in the EMU

GERMAN ECONOMIC REVIEW, Issue 4 2004
Bas Van Aarle
EMU; fiscal policy; monetary policy Abstract. This paper studies the design and effects of monetary and fiscal policy in the euro area. To do so, a stylized two-region model of monetary and fiscal policy rules in the EMU is built. We analyse how monetary and fiscal rules affect the adjustment dynamics in the model. Both the effects on the individual countries and on the EMU aggregate economy are studied. Three aspects play an important role in the analysis: (i) the consequences of alternative monetary and fiscal policy rules, (ii) the consequences of asymmetries between EMU countries (asymmetries in macroeconomic shocks and macroeconomic structures), and (iii) the role of alternative degrees of backward- and forward-looking behaviour in consumer decisions and inflation expectations. [source]

Estimating structural macroeconomic shocks through long-run recursive restrictions on vector autoregressive models: the problem of identification

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 3 2004
Mark P. Taylor
Abstract We demonstrate that a popular method of estimating underlying structural macroeconomic shocks and their impulse,response functions through recursive long-run structural restrictions on a vector autoregressive representation is not uniquely identified. We show, however, that it may be possible to infer additional qualitative restrictions to achieve identification. We illustrate with two applied examples, corresponding to a simple aggregate supply,aggregate demand framework for the USA and to a stochastic Mundell,Fleming,Dornbusch framework for the USA and Japan. The second example also illustrates how over-identifying restrictions of the underlying framework may be examined informally. Copyright © 2004 John Wiley & Sons, Ltd. [source]

New Keynesian Macroeconomics and the Term Structure

JOURNAL OF MONEY, CREDIT AND BANKING, Issue 1 2010
GEERT BEKAERT
monetary policy; inflation target; term structure of interest rates; Phillips curve This article complements the structural New Keynesian macro framework with a no-arbitrage affine term structure model. Whereas our methodology is general, we focus on an extended macro model with unobservable processes for the inflation target and the natural rate of output that are filtered from macro and term structure data. We find that term structure information helps generate large and significant parameters governing the monetary policy transmission mechanism. Our model also delivers strong contemporaneous responses of the entire term structure to various macroeconomic shocks. The inflation target shock dominates the variation in the "level factor" whereas monetary policy shocks dominate the variation in the "slope and curvature factors." [source]

The responsiveness of remittances to price of oil: the case of the GCC

OPEC ENERGY REVIEW, Issue 3-4 2009
George S. Naufal
We investigate the responsiveness of remittances from the Gulf Cooperation Council (GCC) countries to the changes in the price of crude oil. Most of the GCC countries rank in the top 20 remitting countries in the world. We find that oil price elasticity of remittances is around 0.4. While most studies have examined the impact of remittances on the real economic activities in the receiving countries, this study emphasises the impact of remittances on the remitting countries. We examine various policy implications with regard to macroeconomic shocks, monetary policy and fiscal policy of the GCC countries. [source]

Leaning into the Wind: A Structural VAR Investigation of UK Monetary Policy,

OXFORD BULLETIN OF ECONOMICS & STATISTICS, Issue 5 2005
Andrew 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]

A MODEL OF BANK CAPITAL, LENDING AND THE MACROECONOMY: BASEL I VERSUS BASEL II,

THE MANCHESTER SCHOOL, Issue 2006
LEA ZICCHINO
The revised framework for capital regulation of internationally active banks (known as Basel II) introduces risk-based capital requirements. This paper analyses the relationship between bank capital, lending and macroeconomic activity under the new capital adequacy regime. It extends a model of the bank capital channel of monetary policy,developed by Chami and Cosimano,by introducing capital constraints à la Basel II. The results suggest that bank capital is likely to be less variable under the new capital adequacy regime than under the current one, which is characterized by invariant asset risk-weights. However, bank lending is likely to be more responsive to macroeconomic shocks. [source]