Showing papers in "PSL Quarterly Review in 2020"
TL;DR: In this article, the effects of manufacturing and of the real exchange rate (RER) on real per capita income growth were investigated for a diversified sample of countries from 1990 to 2011.
Abstract: This paper investigates the effects of manufacturing and of the real exchange rate (RER) on real per capita income growth. We use dynamic panel models and the calculation of output and employment multipliers for a diversified sample of countries from 1990 to 2011. Three important results can be highlighted. First, we provide new evidence that manufacturing is the most important tradable sector for achieving greater real per capita income growth for developing countries. Second, the greater a country’s gap in relation to the technological frontier, the greater the positive effect of an undervalued RER on the real per capita income growth rate. Finally, the manufacturing industry’s output multipliers and employment multipliers in the developing countries are higher than those in in developed ones, in all years analyzed. JEL codes : F43, L16, R15
10 citations
TL;DR: In this paper, the effects of monetary policy in the case of Sierra Leone, assuming that information for rule-based monetary policy is insufficient and imprecise, were investigated, and the authors used the Bayesian model to evaluate primitive (priors), posterior enhancements and responses of key variables to exogenous perturbations based on information from 2007 to 2018.
Abstract: While autonomous central banks in large open economies are usually predisposed to use monetary rules to target inflation, output, and long-term interest rates, central banks in small open economies face peculiar challenges in their attempts to attain and maintain liquidity, stable prices and full employment. This paper investigates the effects of monetary policy in the case of Sierra Leone, assuming that information for rule-based monetary policy is insufficient and imprecise. We use the Bayesian model to evaluate primitive (priors), posterior enhancements and responses of key variables to exogenous perturbations based on information from 2007 to 2018. We find that the effects of disturbances that are associated with crude oil prices have a more persistent effect on national output than the dominant monetary instrument (T-Bills). The response of monetary policy to exogenous perturbations is generally weak and less persistent. Granger-causality tests reveal that internal conditions make it less likely for the central bank to robustly react to external shocks. JEL codes : E42, E 47, E50, E52
8 citations
TL;DR: In this article, the authors analyze the determinants of the deindustrialization of the Brazilian economy in the period between 1998 and 2017 and show that the major reason for the fall in the manufacturing share has not been the increase in per-capita income but rather real exchange rate overvaluation.
Abstract: We analyze the determinants of the deindustrialization of the Brazilian economy in the period between 1998 and 2017. This is a typical example of ‘premature deindustrialization’ in the sense that the major reason for the fall in the manufacturing share has not been the increase in per-capita income but rather real exchange rate overvaluation. In the Brazilian case, real exchange rate overvaluation results both from an appreciation of the real effective exchange rate, and an increase in the equilibrium value of the real exchange rate, the “industrial equilibrium exchange rate” of the new developmentalist literature. The elimination of the real exchange rate overvaluation requires not only the adoption of a macroeconomic policy regime in which some kind of real exchange rate targeting is adopted, but also industrial policies designed for increasing the economic complexity of the Brazilian economy and, hence, to reduce the equilibrium value of the real exchange rate. JEL codes : O11, O14, O24
5 citations
TL;DR: In this article, the authors studied the employment impact of business network agreements, an innovative policy instrument introduced in Italy in 2010 to stimulate interfirm cooperation, with the aim of increasing innovative capacity and market competitiveness.
Abstract: This paper studies the employment impact of business network agreements, an innovative policy instrument introduced in Italy in 2010 to stimulate interfirm cooperation, with the aim of increasing innovative capacity and market competitiveness. We estimate the impact of these networks on employment for a panel of Italian firms using a system generalized method of moments and considering the literature on the employment impact of innovation. We find that networks, which can be interpreted as a form of open innovation, have a positive impact on employment; moreover, this impact appears positively influenced by sectoral and regional heterogeneity of firms and the region’s innovation capacities. Overall, the results suggest that participation in networks where firms share industrial, commercial, and technical knowledge improves firm performance, creating synergies that help firms, especially small and medium-sized enterprises, to manage the growing complexity of knowledge and the fierce competition arising from increasingly globalized markets. JEL codes : D85, J2, O36
4 citations
TL;DR: In this article, the authors investigated the impact of investments in power, transportation and telecommunication sectors on the manufacturing industry for a sample of 48 Sub-Saharan African countries over the 1980-2012 period.
Abstract: The provisioning of adequate infrastructure may be seen as a key contributing factor in the industrialization process as well as economic development across the globe. While there is a vast empirical literature assessing the impact of infrastructure on economic growth, productivity and income inequality, estimates of the effect on infrastructure on manufacturing sector, in particular, are rather scant. Using dynamic panel data models, we empirically investigate the impact of investments in power, transportation and telecommunication sectors on the manufacturing industry for a sample of 48 Sub-Saharan African countries over the 1980-2012 period. Our findings suggest a positive effect of infrastructure provisioning on industrialization in the region. JEL codes : H54, O14, O55
4 citations
TL;DR: In this paper, the authors provide a critical review of the traditional theoretical foundations of optimal currency areas and their subsequent amendments, in light of the problems that emerged in the most relevant monetary unions.
Abstract: Recent developments in the monetary situation in West Africa, in particular the transformation for the CFA franc area and the project to build a single currency for the CEDEAO/ECOWAS, require a systematic review of the assumptions underlying the formation of monetary unions. The article provides a critical review of the traditional theoretical foundations of optimal currency areas (OCAs) and their subsequent amendments, in light of the problems that emerged in the most relevant monetary unions. On specific points, a comparison is made between the eurozone and the CFA zone. The article then investigates the specific characteristics of the monetary area affected by the reform project, and finally it indicates the main lines along which the project of a common currency to all the states that currently make up the CEDEAO/ECOWAS could evolve, identifying four possible alternative roadmaps. JEL codes : F33, F53, F45
4 citations
TL;DR: In this paper, the authors investigated the possible Granger-causal relations between stock price volatility and dividend dynamics on the one hand, and speculation and unemployment on the other, and found that there is an inverse causal relationship ranging from stock prices to unemployment, while there is no causal relationship between dividends and unemployment.
Abstract: This study investigates the possible Granger-causal relations between stock price volatility and dividend dynamics on the one hand, and speculation and unemployment on the other. The analysis is carried out for the US over the period 1982-2018. Stock price volatility is calculated in terms of “conditional” volatility and in terms of the so-called “Shiller ratio”, while speculative trading is expressed as “scalping” activities. We find that there is a causal positive relation from speculation to stock price volatility. Furthermore, we show that there is an inverse causal relationship ranging from stock prices to unemployment, while there is no causal relationship between dividends and unemployment. These results corroborate the empirical analyses by Shiller and other authors which deny the traditional Present Value Model (PVM), provide new elements on the possible determinants of stock price volatility, and offer new interpretations of the potential links between the stock market and macroeconomic dynamics . JEL codes : C10; E39; G15
4 citations
TL;DR: In this article, the authors empirically modeled the relationship between the short-term interest rate and long-term government securities yields in Canada, after controlling for other important financial variables.
Abstract: Keynes argued that the short-term interest rate is the main driver of the long-term interest rate on government bonds. This paper empirically models the relationship between the short-term interest rate and long-term government securities yields in Canada, after controlling for other important financial variables. The statistical analysis uses high-frequency daily data from 1990 to 2018 to examine the behavioral dynamics of the long-term interest rate. The empirical results show that the actions of the Bank of Canada are key drivers of Canadian government securities yields in the long run, which supports the Keynesian perspective. There is a positive association between long-term bond yields and the Canadian federal government’s net debt to GDP ratio, but the effect is fairly modest. An important implication of these findings is that the Bank of Canada’s actions can have a decisive effect on the long-term interest rate over the long horizon. JEL codes : E43, E50, E60, G10, G12
3 citations
TL;DR: In this article, the empirical basis of the so-called IMF "mea culpa" regarding the underestimation of Keynesian multipliers during the euro area crisis is tested and refuted.
Abstract: The tests carried out by Blanchard and Leigh (2013; IMF, 2012) and Fatas and Summers (2018) are extended here into a panel framework in order to assess the empirical basis of the so-called IMF “mea culpa” regarding the underestimation of Keynesian multipliers during the euro area crisis. The objections put forward by the European Central Bank, the European Commission and other authors against the “underestimation” thesis are tested and refuted. The results support the “mea culpa” and highlight that the underestimation of multipliers can concern both the short and the long term. JEL codes :E23, E27, E62
2 citations
TL;DR: In this article, the authors discuss Italy's delays in innovation and education, discuss their interrelation with the structure of the productive system and argue that achieving higher growth rates require a technological and cultural transformation.
Abstract: The COVID-19 crisis has hit Italy severely: by mid-2020, GDP had returned to the level observed in 1993. This is the result not only of its sharp collapse in the first half of 2020, but also of its weak growth since the 1990s. Addressing the problems that have restrained the economy for 30 years is, therefore, as important as tackling those created by the pandemic. In Italy, to return to a path of sustainable growth, implementing reforms aimed at creating a business-friendly environment is necessary but not sufficient. When a country approaches the technological frontier, growth depends on the capacity to incorporate and foster innovation and on the quantity and quality of investment in education. and knowledge. After documenting Italy’s delays in innovation and education, we discuss their interrelation with the structure of the productive system and argue that achieving higher growth rates require a technological and cultural transformation . JEL codes : E00, O30, I20
1 citations
TL;DR: In this article, the authors provide a diagnosis of the reasons of economic malaise in France and predict a continuation of the status quo matched by growth of the radical right in France.
Abstract: The author comments on the months of protest by the “yellow jackets” movement, to provide a diagnosis of the reasons of economic malaise in France. It is claimed that France only really started loosing ground relative to Germany since adhering to the Economic and Monetary Union (EMU). A reform of the EMU would be needed for the country to recover lost ground, but the current political conditions at the European level do make such a reform likely. The author concludes by predicting a continuation of the status quo, matched by growth of the radical right in France and other EMU countries. JEL codes : O11, O23, N14
TL;DR: In this article, the effectiveness of monetary policy in Brazil since the adoption of the inflation targeting regime was analyzed from the New Macroeconomic Consensus perspective, emphasizing the implications of the global financial cycle (GFC).
Abstract: In light of the global financial cycle (GFC), this paper investigates the effectiveness of monetary policy in Brazil since the adoption of the inflation targeting regime. The theoretical section analyses monetary policy from the New Macroeconomic Consensus perspective, emphasizing the implications of the GFC. It also contrasts central bank theory with the post-Keynesian critique. For the empirical investigation, a Markov-switching vector autoregressive model is estimated from January 2000 to December 2017, combining the common variables from the empirical literature with the proxy for the GFC. The main results suggest that greater financial instability has a direct effect on domestic inflation . JEL codes : C14, E12, E42
TL;DR: A friend of the authors and this Review, Julio contributed widely to the literature on the development of Latin American countries, to Kaleckian models, and to structuralism.
Abstract: This obituary recalls the personal and intellectual trajectory of Julio Lopez Gallardo, who recently passed away. A friend of the authors and this Review, Julio contributed widely to the literature on the development of Latin American countries, to Kaleckian models, and to structuralism. His main contributions concern the effective demand in the semi-industrialized economies, the different roles of fiscal and trade deficits in economic growth, and the structural role of the distribution of income on the development process. JEL codes: B32, E11, O11