Does the twin deficit hypothesis hold in the OECD countries under different real interest rate regimes?

This paper explores the validity of the twin deficit hypothesis in selected 25 OECD countries with annual data for 2005–2016 by considering different real interest rate regimes. A non-dynamic panel threshold model, introduced by Hansen (1999), is employed. The novelty of the empirical findings from the present study is that there exists a non-linear relationship between the budget deficit and the trade balance, which is driven by a critical threshold level in the real interest rates. The findings suggest that twin deficit hypothesis holds only under the low real interest rate regime, that is, rises in budget deficits lead to deteriorations in the trade balance when the real interest rate is below the threshold level. When the high real interest rate (i.e. above-the-threshold) regime is concerned, increasing budget deficits give rise to improvements in the trade balance, a finding consistent with the twin divergence hypothesis. Thus, the effect on the trade balance of an expansionary fiscal policy that worsens the budget balance reverses substantially depending on the threshold level of the real interest rates. The major policy implication of this paper is that the policy makers in the selected OECD countries should pay a greater attention to fiscal discipline in order to prevent the trade balance from worsening, because the majority of the countries fall into the low real interest rate regime over the recent years of the sample period (i.e. between 2010 and 2016).     

Sustainability of fiscal deficits, monetary policy, and inflation stabilization: The case of Turkey

There is a widespread consensus among economists that the goal of monetary policy, above all else, should be price stability. This study, by analyzing the Turkish experience in the last 15 years, emphasizes the importance of coordination of fiscal and monetary policies in achieving this aim. It is shown that, despite the rapidly changing financial environment, there are stationary long-run money-income relationships. Moreover, the growth rates of various monetary aggregates have predictive power for future movements in the consumer price index. However, as the Turkish experience made clear, in an economy where there are persistent budget deficits, these properties are not sufficient to conduct a successful monetary policy. The sustainability of fiscal policy is analyzed and rejected. Next, in a medium-term perspective, the levels of sustainable budget deficits compatible with a declining inflation path are calculated by making use of a small macroeconometric model.     

Understanding the economic fallacies of the intergenerational debate

This paper demonstrates that Federal spending is not inherently financially constrained and does not have to be facilitated via prior taxation or debt‐issuance. It also refutes the claim that budget deficits result in higher interest rates in the future, with lower levels of capital formation and economic growth as a consequence. These misconceptions together lead to the nonsensical claim that by running surpluses now the Government will be better able (because it has ‘more funds stored away‘) to cope with future spending demands. The paper thus challenges the conventional view, such as that espoused in the 2002 Australian Treasury Intergenerational Report, that the ageing population will place unsustainable demands on the Federal budget.     

Inflation dynamics and monetary policy strategy: some prospects for the Turkish economy

This paper analyzes the dynamics of inflation in the Turkish economy, which has experienced increasingly high levels of inflation over the last 30 years. By conducting a Vector Autoregression (VAR) analysis, the variance decomposition (VDC) and the impulse response functions (IRF) show that the relatively high and inertial nature of inflation mainly stems from the increases in public sector prices and the depreciation of the Turkish lira. On the other hand, the Granger causality tests as well as the VDC and IRF demonstrate that high prices have not been as a result of an expansionary monetary policy. These results together with the previous results show that inertial inflation is not a monetary phenomenon in Turkey, but rather an outcome of a political misconduct, which therefore shows the fiscal dominance.     

Are government deficits the prime cause of inflation?

We argue in this article that if government bonds are counted as part of private wealth, government budget deficits are a major cause of inflation, and the method chosen to finance the deficits (e.g., borrowing or monetary expansion) is of secondary importance. To illustrate this point we use a simple portfolio model that is then incorporated into a model of the Australian economy. The full model is specified in continuous time, and it is estimated by the full information maximum likelihood method (FIML) it is then used to simulate a number of fiscal shocks.     

The determinants of the benchmark interest rates in China

This paper empirically investigates the determinants of the two key benchmark interest rates in China using an array of constrained ordered probit models for quarterly frequency data from 1987 to 2013. Specifically, we estimate the behavioral equation of the People's Bank of China that models its decision-making process for revisions of the benchmark deposit rate and the lending rate. Our findings imply that the PBC's policy decisions are better understood as responses to changes in inflation and money growth, while output gaps and the exchange rate play negligible roles. We also implement in-sample fit analyses and out-of-sample forecast exercises. Our empirical findings show robust and reasonably good performances of our models in understanding dynamics of these benchmark interest rates.     

Monetary policy,trade-offs and the transmission of UK Monetary Policy

We provide a new method to model changes in monetary policy of the Bank of England (BoE) as well as the impact of these changes on UK economy. This is important as central bankers have widened the range of instruments in their monetary policy toolbox. Specifically, we estimate a proxy for the monetary policy stance and then analyse a time-varying parameter vector autoregressive with stochastic volatility model to explain the BoE’s trade-offs when making policy decisions and as well as to demonstrate dynamic impacts of monetary policy on inflation and economic growth. The empirical results show that our estimated monetary policy proxy is better at capturing the BoE’s policy when the interest rate lower bound becomes binding.     

Euro area inflation as a predictor of national inflation rates

The stability of inflation differentials is an important condition for the smooth working of a currency area, such as the European Economic and Monetary Union. In the presence of stability, changes in national inflation rates, while holding Euro area inflation fixed contemporaneously, should be only transitory. If this is the case, the rate of inflation of the whole area can also be interpreted as a predictor, at least in the long-run, of the different national inflation rates. However, in this paper we show that this condition is satisfied only for a small number of countries, including France and Italy. Better convergence results for inflation differentials are, instead, found for the USA. Some policy implications are drawn for the Eurozone.     

Preferences of the Central Bank of Brazil under the inflation targeting regime: Estimation using a DSGE model for a small open economy

The main objective of this paper is to estimate the preferences of the Central Bank of Brazil after the inflation targeting regime (January 2000 to December 2013), using a DSGE model with microeconomic foundations for a small open economy, based especially on the work of Kam et al. (2009). The model used in this study considers that the Central Bank minimizes a loss function, taking into account the deviation of inflation from its target, output stabilization, the interest rate smoothing and, unlike the previous works, the exchange rate. The results show that the major concern of the monetary authority in the period was the stabilization of inflation, followed by interest rate smoothing, exchange stabilization and, finally, output stabilization. The large value for the exchange rate smoothing parameter suggests the presence of fear of floating in the Brazilian case. An improved inflation targeting strategy should allow for less Central Bank intervention in the exchange rate market.     

The economic impact of prolonged political instability: a case study of Fiji

It has been long believed that prolonged political instability harms economic growth and development. This paper contributes to this growing empirical literature by studying the case in Fiji, which has faced a long period of political instability caused by a series of coups, military administrations and frequent changes in government since 1987. The impact of political instability on growth is hard to identify empirically because the counterfactual is unobserved and it is difficult to find valid comparisons. To solve this problem, we use the recently developed Synthetic Control Method to construct a counterfactual (or synthetic Fiji) that predicts the growth of a politically stable Fiji. The difference in per capita growth trajectories of the synthetic and the actual Fiji can thus be attributed as the impacts of political instability. Our findings show that the political instability caused by a series of coups since 1987 has indeed led Fiji onto a lower growth path, and that the accumulated effect is getting larger.     

“新代理人”:项目进村中的村治主体研究

在项目进村过程中,"新代理人"成为描述当前村治主体角色性质的核心概念。契合当前项目进村要求,进而满足村庄社会项目诉求是"新代理人"形成的权威基础。在基层政府"悬浮"的背景下,村治主体的谋利冲动与村庄社会的项目诉求相互交织,村庄中交际能力强、关系网络广且关系重心和利益空间在村庄之外的部分村民登上村庄政治舞台。"新代理人"的治理实践表现出一种利益治理的逻辑,这实质上是后税费时代基层治理困境的延续。在村庄社会增量逻辑的主导下,以"新代理人"为核心要素的村庄权力结构呈现固化态势。"新代理人"与传统代理人在权威来源、精英替代逻辑、治理机制和治理绩效等方面存在显著不同,这也凸显出"新代理人"概念所蕴含的学术价值和现实意义。"新代理人"脱离于国家和乡村社会的双重规制,是基层治理研究的一个新议题。     

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.     

Turkey and the European Union: Modernizing a Traditional State?

This paper discusses the difficulties encountered when reforms are attempted to the administration of public policy in Turkey. This discussion is timely, since Turkey has recently stepped up its modernization agenda in its drive to gain membership of the European Union. The paper briefly examines the political and administrative structure of Turkey before discussing the influence of the EU on the country's modernization agenda.     

Women and Government Budgets

In recognition of the significant, but often unknown, impact of government budgets on the role and status of women, both Federal and State Labor government administrations have introduced ‘women's budget’ statements. It is important to recognise that the political motivation of governments in establishing women's budgets has been primarily political self interest. To some extent, however, the move also reflects the growing economic focus, and power, of the women's movement. This paper examines the content and limitations of women's budget programs.     

Monetary transmission: Are emerging market and low-income countries different?

We use the Christensen, Diebold, and Rudebusch (2011) representation of the yield curve to test the functioning of the interest rate transmission mechanism along the yield curve based on government paper in advanced, emerging market, and low-income countries. We find a robust link from the policy and short-term interbank rates to the longer-term bond yields in all countries. Two policy implications emerge. First, the presence of well-developed secondary markets does not seem to affect transmission of short term rates along the yield curve. Second, the strength of the transmission mechanism seems to be affected by the choice of the monetary regime and the level of development: advanced countries with a credible inflation targeting regime seem to have better-behaved yield curves than the countries with other monetary regimes.     

Trust,distrust, and the end of politics-as-we-knew-it: the mood of the nation prior to election 2017

ABSTRACT

New Zealand’s party-political system has, in the past, undergone significant transformations. And recent political events around the world have been marked by anti-establishment distrust, electoral disruption and the rise of populist parties. So the present article asks if this country could be on the verge of similar disruption, and whether there is a mood among the public that could precipitate a phase of populism. An online survey run in May 2017 by Stuff.co.nz and Massey University (supported by comparable opinion polls) is used to investigate this. In spite of significant levels of dissatisfaction and desire for changes, the survey did not reveal a mood for disruptive or systemic political change in the short term. Nonetheless, political fragmentation of the kind seen in proportional systems in Europe could occur in New Zealand in the long term.     

Money, real output, and deficit effects of coffee booms in Colombia

This paper develops a Vector Error Correction (VEC) model and uses the recently developed technique of ‘generalized’ impulse response analysis to test the empirical relationships in the Colombian economy between coffee revenues and a set of macro variables. We find that coffee price (revenue) shocks have exerted an important influence on money growth, inflation, and real exchange rates, and the direction of these effects are in line with some of the predictions of traditional Dutch Disease type models. The major difference between our results and the results of Dutch Disease type models arise in the effects of coffee booms on real output. We find that in the time horizon of 5 years after the boom, real output has increased in response to the effects of the coffee boom. The finding that coffee booms can result in positive long-run output effects is an important finding since it contradicts the traditional conclusion of Dutch Disease type models which envision an adverse long-run effect on output. We also find that the long-run effect of coffee booms is to reduce both current account and government deficits. These results illustrate strikingly that the term “Dutch Disease” is an unfortunately pejorative term that obscures the fact that coffee booms need not be viewed as a “disease” but as an extraordinary opportunity to strengthen internal and external balances.     

Does the unification of health financing affect the distribution pattern of out‐of‐pocket health expenses in Turkey?

Turkey has implemented health reforms for over a decade and has taken significant steps toward unifying health financing. This study investigated the financial burden associated with out‐of‐pocket (OOP) expenditures under universal health coverage, using national 2003–2015 household budget data from the Turkish Statistical Institute. Progress was evaluated using Kakwani–Suits indices and Lorenz concentration curves. The results indicate that overall, more than a decade after its unification, redistribution of wealth in the Turkish health financing system has benefitted the wealthy but not the poor. Both curve and index approaches (Kakwani index 2003 = ?0.50; 2015 = ?0.44) reveal an increasingly regressive pattern of OOP health expenditures. The effective use of fiscal space and good political leadership are essential for the successful continuation of reforms to combat poverty in Turkey.     

Unmaking the Middle Eastern working classes: labour and the politics of historiography

This article surveys recent developments in academic approaches to the history of the working classes in the modern Middle East and argues that the decline of scholarly interest in Middle Eastern labour history is a product of the confluence of political, cultural and disciplinary transformations. Labour history thrived among historians of the Middle East in the late 1970s and 1980s but produced only a small handful of important texts in the following two decades. The marginalization of organized labour by post-populist authoritarian regimes in the Middle East, the sudden rise of political Islam as the dominant paradigm of political opposition to the state, and the general abandonment of class analysis by historians in the wake of the ‘cultural turn’ have all contributed to this decline of academic interest in the lives of Middle Eastern workers. These problems have been exacerbated by the political instability of the region and the corresponding difficulty of accessing state archives. The political spark provided by labour activism and agitation in the years preceding and following the ‘Arab Spring’, however, is once again bringing questions of labour and class to the attention of historians.     

Latin America's recovery from debt problems: An assessment of model-based projections

This paper examines economic assumptions used in assessing prospective economic adjustment of Latin America in response to its debt problems. The analysis compares forecasts obtained by combining parameter estimates from different researchers' trade models with the authors' macroeconomic models for Brazil. Chile, and Mexico. The influence of econometric procedure on simulation results is discussed. Then, by simulation analysis, the following issues are addressed: (1) likelihood of high domestic growth rates for Latin America in the late 1980s; (2) whether OECD growth or interest rates have a larger impact on developing-country economies; (3) effects of dollar depreciation and high interest rates on Latin America's debt problems.