Modeling oil price fluctuations and international stockpile coordination

Major interruptions in the supply of crude oil in the Middlle East have caused significant economic damage in terms of lost output and incresed inflation in the industrial countries. To the extent that the macroeconomic costs of shocks are a function of the magnitude of the oil price increases, domestic or internationally coordinated policies to restrain oil price increases during disruptions can be beneficial. One such policy initiative is the release of oil held in public stockpiles. We address the motivations for private and public stockpilling in an intertemporal optimizing model. As a special case of our general model, we develop and simulate a model of the world oil market to examine the benefits (in terms of lower world oil prices) of releasing oil from the U.S. Strategic Petroleum Reserve.     

Insurance supply with capacity constraints and endogenous insolvency risk

Negative shocks to industry capital and significant capital adjustment costs have been offered as an explanation of periodic “crises” in the property-liability insurance market. According to these capacity constraint models, in which post-shock production must meet a solvency constraint, increases in price can cause some or perhaps all of the cost of a negative shock to capital to be shifted to policyholders. This article develops a model of insurance supply with capacity constraints and endogenous insolvency risk that incorporates limited liability and potential loss of insurer intangible capital. If industry demand is inelastic with respect to price and capital, the model predicts that price will increase following a negative shock to capital, but by less than the amount needed to fully offset the shock. Equity value and the expected recovery by policyholders for post-shock production are predicted to decline. Elastic demand mitigates shock-induced price increases.     

Interest rate policies and inflation in interdependent economies: Recent policy dilemmas

This paper examines Federal Reserve Board policies that are premised on a negative short-run association of interest rate movements and the rate of inflation. In particular, econometric evidence is provided, supporting the view that tighter monetary policy appears to raise inflation rates in the short run. Conversely, it is demonstrated that easier monetary policy does not necessarily raise inflation rates in the short run. In the case of uncoordinated monetary restrictiveness, interest rate competition among major countries can produce higher inflation and lower growth than was originally intended.     

Macroeconomic imbalances in Europe: How to overcome the fallacy of unit labour costs

Policy recommendations based on unit labour costs (ULC) indices can lead to undesirable and counterproductive policies, because they do not reveal possible distortions in the base year. In this paper, we discuss the problems with the ULC-current account relation and provide an alternative measure for relative wage costs called Wage Competitive index (WCI) based on the assumption of convergence of the returns on capital. We show how to calculate it and that it is more efficient than traditional ULC and REER indicators. The implication is that policymakers should not focus on nominal wage setting only, but also more broadly on all factors which affect the return on capital. This implies that the well-known Rehn–Meidner rule, which underlies the Macroeconomic Dialogue should be modified.     

工资上涨能提升劳动报酬份额吗?——基于要素替代弹性的解释

基于要素替代理论研究工资上涨与劳动报酬份额上升的关系,发现在不同经济状态和发展时期,提升劳动报酬份额不应单纯依赖增加工资.工资水平的上升会导致劳动相对资本要素价格提升,而生产要素相对价格的变动与劳动报酬份额的关系依赖于要素替代弹性水平.从实证角度出发,首先使用上市企业数据测算得到要素替代弹性的数值,检验了要素替代弹性对资本相对价格与劳动报酬份额关系的中介作用.在此基础上,从Hicks提出的要素替代弹性概念内涵中发掘了理论模型,结合中国实证数据分析了要素替代弹性的影响因素.研究发现,2001年至今中国要素替代弹性整体小于1且呈增长趋势,但部分行业存在要素替代弹性大于1的情形,在此状况下提高工资水平会导致劳动报酬份额下降.因此工资上涨并不一定带动劳动报酬份额提升,只有在劳动要素以技能工人为中心、产业结构以非资本密集型为核心的情况下,工资上涨才能拉动劳动报酬份额持续上升.     

The impact of higher energy prices on growth and inflation in an industrializing economy: the Korean experience

The first serious problem faced by the Korean economy in recent years is the stagflation caused by the increasing energy cost of imported oil. How much does the oil crisis contribute to Korean inflation and unemployment? To answer the question, a variable input-output model is introduced. It differs from conventional models in one important respect: it allows the industrial structure to change in response to changing input costs. Under the model, the technical coefficient becomes an endogenous variable, a property that conventional input-output models fail to share.     

Single-year and multi-year insurance policies in a competitive market

This paper examines the demand and supply of annual and multi-year insurance contracts with respect to protection against a catastrophic risk in a competitive market. Insurers who offer annual policies can cancel policies at the end of each year and change the premium in the following year. Multi-year insurance has a fixed annual price for each year and no cancellations are permitted at the end of any given year. Homeowners are identical with respect to their exposure to the hazard. Each homeowner determines whether or not to purchase an annual or multi-year contract so as to maximize her expected utility. The competitive equilibrium consists of a set of prices where homeowners who are not very risk averse decide to be uninsured. Other individuals demand either single-year or multi-year policies depending on their degree of risk aversion and the premiums charged by insurers for each type of policy.     

Must high commodity prices depress the world economy? An application of a world model system

The impact of higher primary commodity prices on the world economy is central to the North-South dialogue. The less developed countries are seeking a way to obtain a larger share of world income. In the context of current discussions of commodity price stabilization, UNCTAD's “integrated programme” for example, this is likely to mean higher commodity prices. A critical question is then, “Must higher prices for primary commodities depress the industrial economies?”The cyclical swing of 1973–1975 would seem to support the thesis that high primary commodity prices lead to recession in the industrial countries. Yet this experience is not conclusive evidence. Many complex forces, some natural and others policy induced, accounted for the recession. The impact of primary commodity prices must be considered in a full system, recognizing not only the direct costs, but also the resulting demand feedback. Under different circumstances, higher payments to the commodity producing LDCs may well increase demand for manufactures and stimulate exports and industrial activity in the developed countries.This paper uses a version of the LINK world model system to examine the linkages between commodity prices and world economic activity. In the first part we examine the demand feedback in a simple theoretical model of the interrelationships between commodity consumer countries and the commodity producers. In the second part we use an empirical system, COMLINK, the version of the LINK system that incorporates commodity models and commodity price linkages, to simulate various types of commodity price impacts.     

农民工的就业与工资决定：教育与培训的重要性

在城市劳动力市场上,农村劳动力根据个人的人力资本积累状况和当地的劳动力市场条件,在成为自我经营者和工资收入者之间进行就业选择。简单的Mincer工资方程回归结果显示,工资收入者比自我经营者的教育回报率高出2个百分点左右。在矫正了样本选择偏差之后,拓展的Mincer工资方程对工资收入者的教育回报率估计结果在5.3%-6.8%之间。从培训角度看,简单培训、短期培训和正规培训对农民工再流动都有显著作用,但简单培训对农民工的工资收入作用不显著,而短期培训和正规培训则对其工资收入有着重要的决定作用。此外,工资拖欠等权益保护问题也对农村劳动力再流动有重要影响。在处理农民工的个人异质性和教育内生性问题时,本文还发现父母受教育年限不是一个理想工具变量。     

Trend inflation,the labor market wedge,and the non-vertical Phillips curve

Recent developments in macroeconomics resurrect the view that welfare costs of inflation arise because the latter acts as a tax on money balances. Empirical contributions show that wage re-negotiations take place while expiring contracts are still in place. Bringing these seemingly unrelated aspects together in a stylized general equilibrium model, we find a disciplining effect of a positive inflation target on the wage markup and identify a long-term trade-off between inflation and output. This has important policy implications, ranging from the opportunity of revising the target in response to shocks, to the possibility of exploiting inflation as a tool to increase tax revenues via its employment-enhancing effect.     

Stabilization policies in the Greek economy: Will they work?

This paper develops and estimates a short-run model for the interaction between money, output, prices, international reserves, and the exchange rate in a managed floating system in Greece. The framework presented, which is in the spirit of the monetary approach modified to allow for adjustment lags in output and prices incorporates a policy reaction function for domestic credit. The role of inflationary expectations is taken into account. The policy question addressed in the paper by means of the model is whether current economic policies are sustainable and whether stabilization measures leading to lower inflation and smaller fiscal deficits should be pursued.     

The impact of a Tax-Based Incomes Policy on U.S. macroeconomic performance: An optimal control study

This study attempts to estimate the potential impact of a Tax-Based Incomes Policy (TIP) on macroeconomic performance by applying an optimal control algorithm to the Wharton Quarterly Econometric Model. A TIP is any tax incentive that would induce firms and/or workers to reduce wage increases. Our study is applicable to any version of TIP. To isolate TIP's potential impact, we compare the optimal path of the economy without TIP to the optimal path of the economy with TIP. Our conclusion is that a TIP may be able to significantly improve the path of inflation, unemployment, and real GNP simultaneously.     

A model of price and quantity adjustments in primary commodity markets

This paper presents a dynamic, simultaneous model of price and quantity adjustments in world primary commodity markets. The model is formulated in a disequilibrium framework, emphasizing particularly the role of price adjustment. In addition to the price equation, commodity consumption and production equations are also specified. The empirical analysis of the model is carried out with the annual data of six primary commodities: coffee, cocoa, rubber, copper, tin, and sugar. This includes the estimation of price, consumption, production equations, the simulation tests of complete structural models for these six commodities, and the derivation of dynamic responses (measured by elasticities) of commodity prices to changes in world income, world inflation, and commodity outputs. Dynamic simulations strongly confirm the commonly observed self-generating and recurring boom-and-bust cycles of primary commodity prices. This finding lends credibility to the models constructed.     

Agricultural policy modelling under imperfect competition

This study evaluates the role of imperfect competition in determining the agri-food policies impact assessment outcomes. In most impact studies, the supply chain between agricultural production and final consumption is modelled in a perfectly competitive framework. However, there is a growing attention of stakeholders for the presence of imperfectly competitive markets, with the retail sector often being under investigation. This issue is empirically analysed with an application to the dairy industry. First, the degree of market power is estimated using a multi-output demand and price transmission equation system. Then, this model is used for policy simulation with the perfect competition outcome taken as a benchmark to evaluate the impact of imperfect competition. Results show a significant degree of market power in the dairy industry with implications on the projected policy scenarios. Moreover, the imperfect competition model alters the price transmission mechanisms, generating more flexible price trends.     

A general equilibrium model of domestic commerce in Mexico

In this paper we develop a general equilibrium model of the Mexican economy that focuses on the commercial sector, particularly retailing. Consumers purchase goods in different retail establishments, that sell differentiated goods at different prices. Where each consumer decides to make purchases depends on various price and locational considerations. The model has been calibrated to replicate the Mexican economy in 1977, the latest year for which a complete data set is available. We use it to analyze both the impact of the 1980 fiscal reform, a major policy charge for the economy as a whole, and that of a hypothetical development project aimed specifically at the commercial sector. Although our model was conceived and developed well prior to the current period of highly inflationary policies of the debt crisis, the latter was taken into consideration during both the simulations and their policy evaluation.     

The impact of population aging in rich countries: What’s the future?

The paper examines the impact of population ageing on macroeconomic outcomes, inflation and labour force participation employing a sample of 23 OECD developed countries from 1960 to 2014 and accounting for the institutional context. Controlling for collective bargaining coordination the results show that a larger elderly share of population would lead to lower real GDP growth, albeit mostly in countries with low population growth rates. Ageing puts substantial downward pressure on inflation due to subdued aggregate demand. Also, results demonstrate that the ageing of the workforce tends to reduce labour supply. To mitigate any adverse effects of population ageing, a combination of labour market policies, pension reforms, greater investment in human capital and technological innovation should be prioritized in policy making.     

Social Policies for the Elderly in the Republic of Korea and Japan: A Comparative Perspective*

The Republic of Korea (South Korea) and Japan are highly industrialized and modern nations which are both influenced by the Confucian tradition of respect for the elderly and family responsibility for the care of aging parents. In both countries the proportion of the elderly population is increasing. Japan, since the end of World War II, has utilized its government bureaucracy to help develop the social welfare system and to formulate social policies and programs for the elderly. Japan's tradition of samurai Confucianism is congruent with the commitment of the Japanese government to such social development as a matter of national policy. The Republic of Korea has not assigned a comprehensive planning role to its government bureaucracy. Lacking the mix of industrial/post-industrial infrastructure of Japan and not yet faced with the immediacy of a very large elderly population, the Republic of Korea's government has developed its social policies for the elderly in a more incremental manner, usually emphasizing small scale and piecemeal initiatives. With respect to social support, it has emphasized voluntary family efforts as congruent with the Korean (and Chinese) variant of Confucianism. This paper will compare and contrast these different approaches.     

中国高学历劳动者的教育匹配与收入回报

近十多年来,鉴于中国高等教育扩张对劳动力市场的影响,一些学者开始用经验数据研究劳动者与工作之间的教育匹配(尤其是过度教育)对收入回报的影响。但是,已有文献较少考虑过度教育的选择性问题,也很少对高学历劳动者进行专门研究。本文使用倾向值匹配的方法分析高学历劳动者的教育匹配与收入回报。研究发现,即使是在考虑了选择性之后,过度教育者的收入仍然显著低于适度教育者。同时,对家庭背景、学校出身、人力资本和劳动力市场四大影响因素的考察还发现,过度教育确实具有负向选择的特点,那些拥有较低人力资本和较差出身背景的人更容易发生过度教育。     

Commodities and monetary policy: Implications for inflation and price level targeting

We examine the relative ability of inflation targeting and price level targeting monetary policy rules to minimize inflation variability and business cycle fluctuations in a commodity-exporting country for supply and demand shocks to global commodity markets. The macroeconomic consequences of oil and non-oil primary commodities differ and affect the relative merits of the alternative monetary policy frameworks. Particularly, the consumption of refined oil products and demand-driven commodity price movements induce highly persistent inflation pressures resulting in a significant deterioration of the inflation-output gap trade-off available to central banks. When such terms-of-trade shocks are prevalent, price level targeting is inferior to inflation targeting.     

The economic consequences of the welfare state

What are the economic and employment consequences of larger social insurance programmes? Are larger welfare states diverting resources from economic activity and distorting the investment decisions of firms? I examine theoretical and empirical research on the economic consequences of the welfare state. This review shows that the predictions of a negative relationship between higher levels of social protection and growth have not been borne out in the data. Both insurance programmes and other policies that increase investment in human capital or the overall productivity of workers generate important economic externalities that outweigh the potentially distortionary effects of higher taxes. Empirical studies also fail to uncover a consistent negative relationship between larger welfare states and the level of employment. The employment consequences of the welfare state are mediated by existing institutions and policies—such as the level of centralization of the wage bargaining system—which affect the redistribution of the costs of higher taxes among workers and firms. As a result, the employment consequences of larger welfare states are non-linear.