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Abstract:
Labor market performance has differed considerably between OECD countries over the last two decades. The focus of the literature so far has been to ask whether these differences can be explained by varying degrees of labor market rigidities and generosity of welfare states. This paper takes a different perspective and analyzes whether differences in venture capital investments have explanatory power with respect to labor market performance across countries and over time. In particular, the Anglo-Saxon countries have been relatively successful over the last two decades in producing employment growth and in reducing unemployment compared to most continental European OECD countries. As a rule they have also been and are still ahead in developing thriving venture capital markets that are often deemed crucial for the creation of new firms and for successfully managing the ongoing radical structural change away from traditional industrial production toward the so-called "new economy".

Labor Markets, Venture Capital, Unemployment, New Economy, Panel Analysis

Abstract:
Anglo-Saxon countries have been successful in the 1990s concerning labor market performance compared to the former role models Germany and Japan. This reversal in relative economic performance might be related to idiosyncrasies in financial markets, with bank-based financial markets as in Germany and Japan being possibly inferior to stockmarket-based financial markets in turbulent times and when approaching the economic frontier. A cleavage is related to venture capital markets which are flourishing on Anglo-Saxon but not on German type financial markets. Venture capital is crucial for financing structural change, new firms and innovations and therefore possibly also nowadays for employment growth.

Labor Markets, Venture Capital, Unemployment, New Economy, Panel Data Analysis

Abstract:
The issues of privatization (and sometimes deregulation) have been reviewed in a large body of literature on the various aspects of privatization, which has emphasized the potential efficiency gains. Hence, the goal of this paper is two-fold: First to provide some theoretical reasoning as to why privatization is both useful as well as profitable for an economy and, second, to empirically present the extent of privatization in Austria and other European Union countries. Therefore, the reasons that make privatization necessary are elaborated. Then the specific pattern of privatization proceeds for Austria relative to other EU and OECD countries is presented. Moreover, some important idiosyncratic extensions for the Austrian case are elaborated. We argue that in the Austrian case, any discussion of privatization cannot be reduced to observing cash flows, the employment performance and the stock-exchange ratings of the privatized formerly state-owned enterprises. Since polito-economic aspects relating to income distribution and ideology play an important role in explaining the way, the extent, the speed and the economic effects of privatization, they have to be considered as well.

Austria, partisan approach, privatization, state-owned enterprises, public choice.

Abstract:
This paper analyzes whether differences in institutional structures on capital markets contribute to explaining why some OECD-countries, in particular the Anglo-Saxon countries, have been much more successful over the last two decades in producing employment growth and in reducing unemployment than most continental-European OECD-countries. It is argued that the often-blamed labor market rigidities alone, while important, do not provide a satisfactory explanation for these differences across countries and over time. Financial constraints are potentially important obstacles against creating new firms and jobs and thus against coping well with structural change and against moving successfully toward the "new economy". Highly developed venture capital markets should help to alleviate such financial constraints. This view that labor-market institutions should be supplemented by capital market imperfections for explaining differences in employment performances is supported by our panel data analysis, in which venture capital turns out to be a significant institutional variable.

Labor Markets, Unemployment, New Economy, Panel Analysis, Venture Capital

Abstract:
The belief that house prices are driven by specific regional and institutional variables and not at all by monetary conditions is so entrenched with some market participants and some commentators that the search for empirical support would seem to be a trivial task. However, this is not the case. This paper investigates the relationship between global excess liquidity and asset prices on a global scale: How important is global liquidity? How are asset (especially house) prices and other important macro variables like consumer prices affected by global monetary conditions? This paper analyses the international transmission of monetary shocks with a special focus on the effects of a global monetary aggregate (global liquidity) on consumer prices and different asset prices.We estimate a variety of VAR models for the global economy using aggregated data that represent the major OECD countries. The impulse responses show that a positive shock to global liquidity leads to permanent increases in the global GDP deflator and in the global house price index, while the latter reaction is even more distinctive. Moreover, we find that there are subsequent spillovers to consumer prices. In contrast, we are not able to find empirical evidence in favour of the hypothesis that the MSCIWorld index as a measure of stock prices significantly reacts to changes in global liquidity.

Global liquidity, inflation control, international spillovers, asset prices, VAR analysis

Abstract:
Global monetary dynamics has been particularly strong in recent years. At the same time, house prices in many OECD countries increased sharply, significantly outpacing the relatively subdued development in consumer prices. In this paper we argue that different price elasticities on asset and consumer markets help to explain the observed relative price change between assets and consumer goods. Using a VAR analysis and aggregated data for the major OECD countries, our empirical results are supportive of this relationship. Both house and consumer prices are determined by global monetary conditions; however, while global liquidity shocks lead to relatively fast responses in global house prices, significant responses of the global CPI index to money shocks occur only after long time lags. In addition, we find subsequent spillovers from asset prices to consumer prices on a global scale.

global liquidity, inflation control, international spillovers, house prices, VAR analysis

Abstract:
Anglo-Saxon countries have been successful in the 1990s concerning labor market performance compared to the former role models Germany and Japan. This reversal in relative economic performance might be related to idiosyncracies in financial markets with bank-based financial markets as in Germany and Japan being possibly inferior to stock-market based financial markets in turbulent times and when approaching the economic frontier. A cleavage is related to venture capital markets which are flourishing on Anglo-Saxon but not on German type financial markets. Venture capital is crucial for financing structural change, new firms and innovations and therefore possibly also nowadays for employment growth.

labor markets, venture capital, unemployment, new economy, panel data analysis

Abstract:
According to the traditional "optimum currency area" approach, not much will be lost from a very hard peg to a currency union if there has been little reason for variations in the exchange rate. This paper takes a different approach and highlights the fact that high exchange rate volatility may as well signal high costs for labor markets. The impact of exchange rate volatility on labor markets in the CEECs is analyzed, finding that volatility vis-a-vis the euro significantly lowers employment growth. Hence, the elimination of exchange rate volatility could be considered as a substitute for a removal of employment protection legislation.

Central and Eastern Europe, currency union, euroization, exchange rate variability, job creation

Abstract:
The belief that the ECB follows the US Federal Reserve in setting its policy is so entrenched with market participants and commentators that the search for empirical support would seem to be a trivial task. However, this is not the case. We find that the ECB is indeed often influenced by the Fed, but the reverse is true at least as often if one considers longer sample periods. There is empirically little support for the proposition that there has been for a long time a systematic asymmetric leader-follower relationship between the ECB and the Fed. Only after September 2001 is there more evidence of such an asymmetry. We also find a clear-cut structural break between the pre-EMU and the EMU period in terms of the relationship between short term interest rates on both sides of the Atlantic.

co-movement of interest rates, European Central Bank, Federal Reserve, monetary policy, policy coordination

Abstract:
This paper empirically investigates the differences in the motives of raising privatisation proceeds for a panel of EU countries from 1990 to 2000. More specifically, we test whether privatisations can be mainly interpreted (a) as ingredients of a larger reform package of economic liberalisation in formerly overregulated economies, (b) as a reaction to an increasing macroeconomic problem pressure and (c) as a means to foster growth and increase tax income and relax the fiscal stance with an eye on the demands by integration of economic and financial markets. Whereas we are able to corroborate claim (a) only partly, we gain consistent evidence in favour of claims (b) and (c).

European Union, panel analysis, partisan theory, privatisation proceeds,

Abstract:
This paper deals with potential instabilities in the Eurozone stemming from an insufficient interplay between monetary policy and reform effort on the one hand and the emergence of intra-Euro area divergences on the other. As a first step, we assess the effect of EMU on structural reform and investigate this question by an examination of the relationship between fixed exchange rates and reform in two wider samples of countries. We also stress that loose monetary conditions, which prevailed until some months ago, can also manifest themselves in asset price inflation, notably in the housing market. When these bubbles burst (e.g., when housing prices stop rising) this often leads to a prolonged period of economic instability and weakness rather than consumer price inflation. As a second step, we point out that risks for EMU are not only increasing because longer-term disequilibria become evident in fiscal and monetary policy, but also because serious divergences are now appearing within the Euro area which threaten its long-term cohesiveness. The most manifest example of this threat comes from what promises to be a long-term divergence between Germany and Italy, which for the time being was offset by asynchronous developments of house prices in both countries. There are still large differences within the Euro area, with the small countries performing much better than the large ones on almost every indicator. This suggests that better policies can make a large difference even if monetary policy is the same for everybody.

asset prices, international competitiveness, EMU, instabilities, labor markets, monetary policy regime, structural reform

Abstract:
Policymakers in the EU member states are currently shaping rescue packages to prevent the financial crisis hitting their economies with unmitigated force. Each government is responding to the emerging problems with a country-specific set of measures. Given the global nature of the crisis, would coordinated action at the European level not be a better approach? Was the German government - much-criticized for its initial reluctance to adopt massive fiscal stimulation measures - right after all to exploit the option value of waiting in a situation of high uncertainty? The answer to the second question is a qualified "yes". However, the answer to the first one is more complex and crucially depends on how reasonable it appears to model the impact of the economic crisis as an exogenous demand shock which has hit the euro area countries.

Policy co-ordination, fiscal multiplier, fiscal stimulus package, liquidity constraint, option value of waiting, uncertainty

Abstract:
In a baseline micro model a band of inaction due to hiring- and firing-costs is widened by option value effects of exchange rate uncertainty. Based on this micro foundation an aggregation approach is presented. Under uncertainty, intervals of weak response to exchange rate reversals (called 'play' areas) are introduced on the macro-level. 'Spurts' in new employment or firing may occur after an initially weak response. Since these mechanisms may apply to other investment cases where the aggregation of microeconomic real options effects under uncertainty are relevant, they may even be of a more general interest.

Aggregation, employment hysteresis, exchange rate uncertainty, real options

Abstract:
With the extension of its competence for social policy legislation in the Maastricht and Amsterdam treaties, the EU has adopted a significantly new social dimension in the past ten years. According to the Copenhagen criteria, the CEEC candidate countries have to adopt the former via the acquis communautaire. This paper discusses the effect of an adoption of this EU social law on future labor market performance in the CEECs. For this purpose, we model and investigate the impact of institutional uncertainty (and of its elimination) on job creation and job destruction in the CEEC candidate countries. We conclude that structural change on CEEC labor markets tends to be fostered via reducing institutional uncertainty. However, these kinds of benefits of the adoption of the acquis have to be weighed against the danger that the adoption of inefficient EU social and labor policy regulations imposed by the acquis might also entail significant risks for employment in the CEECs similar to those which have materialized in the former EU. This rather pessimistic view can be substantiated based on a public choice analysis of why the old EU members will want to impose the Social Charter even though it will harm the new members. These risks consist of a significant increase in hiring and firing costs and of higher wage rates. Based on a simple option value analysis, we investigate and evaluate the trade-off between lower institutional uncertainty and higher employment costs induced by the adoption of the acquis.

EU enlargement, real option approach, social union, institutional uncertainty

Abstract:
We test the significance of the relationship between the exchange rate regime and the degree of structural reforms by estimating panel regressions for a world and an OECD country sample. The empirical results suggest a positive correlation between on the one side the adoption of an exchange rate rule and on the other side overall structural reforms as well as reforms in the money and banking sector in the broad country sample. For government size and for market regulation, we do not find any robust significant effect, however. The results do not confirm the main implication of Calmfors-type models, namely a higher degree of reforms under monetary policy autonomy. They corroborate conditional policy convergence and, partly, that limiting monetary policy autonomy fosters structural reforms.

exchange rates, monetary policy regime, liberalisation, panel data, political economy of reform

Abstract:
Low international competitiveness of a set of euro area countries, which have become evident by large current account deficits and rising risk premiums on government bonds, is one of the most challenging economic policy issues for Europe. We analyse the role of private restructuring and public structural reforms for the urgently needed readjustment of intra-euro area imbalances. A panel regression reveals a significant impact of private restructuring and public structural reforms on intra-euro area competitiveness. This implies that private restructuring and public reforms are rather than public transfers the best way to preserve long-term economic stability in Europe.

structural reforms, international competitiveness, current account imbalances, European Monetary Union, euro area, dynamic panel estimation, interaction term

Abstract:
This paper examines the degree of correlation of EU regional employment cycles and attempts to show whether these cycles reflect changing patterns of specialisation. By focusing on the regional level and by employing three different indicators of similarity of sectoral structure, it improves on existing studies. A dynamic panel data model is estimated pairs of regions by within groups, i.e., by a standard fixed effects estimator. Special attention is paid to capture the rich dynamics which are typical of employment data. The key finding is that employment growth is more synchronised when regions look alike in their sectoral structure.

regional employment, European Union, regional business cycles, specialisation, synchronicity

Abstract:
The purpose of this paper is to assess the implications of the Economic and Monetary Union (EMU) accession of eight Central and Eastern European Countries (CEECs) on their share in EMU-12 imports. Overcoming biases related to endogeneity, omitted variables and sample selection, our results indicate that the common currency has boosted intra-EMU imports by 7%. Under the assumption that the same relationship between the explanatory variables and imports will hold for EMU-CEEC trade, we are able to predict the future impact of the Euro. Our findings suggest that except for the least integrated countries, Poland, Latvia and Lithuania, all CEECs can expect increases in the EMU-12 import share.

Central and Eastern European countries, Euro area enlargement, gravity model, panel estimation

Abstract:
The purpose of this paper is to assess the implications of the Economic and Monetary Union (EMU) accession of eight Central and Eastern European Countries (CEECs) on their share in EMU-12 imports. Overcoming biases related to endogeneity, omitted variables and sample selection, our results indicate that the common currency has boosted intra-EMU imports by 7%. Under the assumption that the same relationship between the explanatory variables and imports will hold for EMU-CEEC trade, we are able to predict the future impact of the euro. Our findings suggest that except for the least integrated countries, Poland, Latvia and Lithuania, all CEECs can expect increases in the EMU-12 import share.

Central and Eastern European countries, Euro area enlargement, gravity model, panel estimation

Abstract:
This paper examines the effect of government ideology on monetary policy in a quarterly data set of 15 OECD countries in the period 1980.1-2005.4. Our Taylor-rule specification focuses on the interactions of a new time-variant indicator for central bank independence and government ideology. The results suggest that leftist governments did not decrease short term nominal interest rates at all. In contrast, short term nominal interest rates were higher under leftist governments. A potential reason for this finding might be that leftist governments have sought to make a market-oriented policy shift by delegating monetary policy to conservative central bankers.

Monetary policy, Taylor rule, government ideology, partisan politics, central bank independence, panel data

Abstract:
The paper scrutinizes the role of wages and capital flows for competitiveness in the new EU member states in the context of real convergence. For this purpose it extends the seminal Balassa-Samuelson model by international capital markets. The augmented Balassa-Samuelson model is linked to the monetary overinvestment theories of Wicksell and Hayek in order to trace cyclical deviations of real exchange rates from the productivity-driven equilibrium path. Panel estimations for the period from 1993 to 2008 reveal mixed evidence for the role of capital markets for both the economic catch-up process and international competitiveness of the Central and Eastern European countries.

exchange rate regime, wages, Central and Eastern Europe, EMU accession, panel model

Abstract:
According to the traditional "optimum currency area" approach, not much will be lost from a very hard peg to a currency union if there has been little reason for variations in the exchange rate. This paper takes a different approach, and highlights the fact that high exchange rate volatility may as well signal high costs for labor markets. The impact of exchange rate volatility on labor markets in the CEECs is put to the test, finding that volatility vis-a-vis the euro significantly increases unemployment. Hence, the elimination of exchange rate volatility could be considered as a substitute for a removal of employment protection legislation. However, labor market reform could be argued to be an equally worthy strategy, backed up by central bank independence and the adoption of an anti-inflation monetary policy rule.

Abstract:
The variability of the euro seems to have a statistically significant and economically small, but non-negligible, impact on labour markets in Euroland. Unemployment tends to increase and employment growth tends to fall whenever the effective exchange rate of the euro or the bilateral euro/dollar exchange rate becomes more variable. In the US a similar effect seems to be operating, but it is statistically less strong, especially concerning employment growth, which seems largely insulated from exchange rate variability. These results fit the general observation that US labour markets are more flexible and that the euro area is considerably more open than the US (exports of goods and services amount to close to 18 per cent of Euroland GDP versus only about 11 per cent for the US).

Abstract:
This paper analyzes the monetary policy interdependence between the European Central Bank (ECB) and the Federal Reserve (Fed) for the period 1999-2006. Two models are specified: a partial Vector Error Correction Model (VECM) and a general VECM. In the partial VECM, we look for a long-run interdependent relationship between the interest rates of the two currency areas and specify the Taylor Rule terms as exogenous variables. In the general VECM, we regard all variables as endogenous, and look for long-run equilibrium relationships among them, which may reveal monetary policy interdependence between the two central banks. Weak exogeneity is checked in both models in order to establish a possible leader-follower relationship. The empirical results of both models indicate interdependence between the ECB and the Fed, but only the general VECM testifies a leader-follower pattern between the two central banks. According to this pattern, the ECB does follow the Fed.

Monetary policy, interdependence, European Central Bank, Federal Reserve, Taylor rule, VECM

Abstract:
The belief that the European Central Bank (ECB) follows the US Federal Reserve (the Fed) in setting its policy is so entrenched with market participants and commentators that the search for empirical support would seem to be a trivial task. However, this is not the case. We find that the ECB is indeed often influenced by the Fed, but the reverse is true at least as often if one considers longer sample periods. There is empirically little support for the proposition that there has for a long time been a systematic asymmetric leader-follower relationship between the ECB and the Fed. Only after September 2001 is there more evidence of such an asymmetry. There is a clear-cut structural break between the period pre-economic and monetary union (EMU) and EMU itself in terms of the relationship between short-term interest rates on both sides of the Atlantic.

Abstract:
This paper examines the interactions between money, consumer prices and commodity prices at a global level from 1970 to 2008. Using aggregated data for major OECD countries and a cointegrating VAR framework, we are able to establish long run and short run relationships among these variables while the process is mainly driven by global liquidity. According to our empirical findings, different price elasticities in commodity and consumer goods markets can explain the recently observed overshooting of commodity over consumer prices. Although the sample period is rather long, recursive tests corroborate that our CVAR fits the data very well.

Commodity prices, cointegration, CVAR analysis, global liquidity, inflation, international spillovers

Abstract:
It is widely assumed that a common currency makes it desirable to have also a common fiscal policy. However, if fiscal policy is a source of shocks, independent national fiscal policies are generally preferable because they allow for risk diversification.

Currency union, fiscal policy coordination, stabilisation

Abstract:
This paper investigates the relationship between the exchange rate regime and the degree of structural reforms using panel data techniques. We look at a broad sample of countries (the "world sample") and also an OECD sample. Our main findings suggest that adopting a fixed exchange rate rule is positively correlated with the degree of overall structural reforms and the trade component. The paper also highlights the fact that considering a heterogeneous panel of countries as opposed to a limited does not matter for this results.

exchange rates, monetary policy regime, liberalisation, panel data

Abstract:
Global liquidity expansion has been very dynamic since 2001. Contrary to conventional wisdom, high money growth rates have not coincided with a concurrent rise in goods prices. At the same time, however, asset prices have increased sharply, significantly outpacing the subdued development in consumer prices. We investigate the interactions between money and goods and asset prices at the global level. Using aggregated data for major OECD countries, our VAR results support the view that different price elasticities on asset and goods markets explain the observed relative price change between asset classes and consumer goods.

Global liquidity, inflation control, monetary policy transmission, asset prices

Abstract:
According to the traditional 'optimum currency area' approach, the case for adopting a common currency is stronger if the countries are subject to relatively similar output shocks. This Paper takes a different approach and highlights the fact that high exchange rate volatility may as well signal high costs for labor markets. The impact of exchange rate volatility on labor markets in the CEECs is analyzed, finding that volatility vis-a-vis the euro significantly lowers employment growth and raises the unemployment rate. Hence, the elimination of exchange rate volatility can be considered equally important for labor markets as a removal of employment protection legislation.

Central and Eastern Europe, currency union, euroization, exchange rate variability, job creation

Abstract:
The paper scrutinizes the role of wages and capital flows for competitiveness in the new EU member states in the context of real convergence. For this purpose it extends the seminal Balassa-Samuelson model by international capital markets. The augmented Balassa-Samuelson model is linked to the monetary over-investment theories of Wicksell and Hayek in order to trace cyclical deviations of real exchange rates from the productivity-driven equilibrium path. Panel estimations for the period from 1993 to 2008 reveal mixed evidence for the role of capital markets for both the economic catch-up process and international competitiveness of the Central and Eastern European
countries.

Exchange rate regime, wages, Central and Eastern Europe, EMU accession, panel model

Abstract:
The paper scrutinizes the role of wages and capital flows for competitiveness in the new EU member states in the context of real convergence. For this purpose it extends the seminal Balassa-Samuelson model by international capital markets. The augmented Balassa-Samuelson model is linked to the monetary overinvestment theories of Wicksell and Hayek in order to trace cyclical deviations of real exchange rates from the productivity-driven equilibrium path. Panel estimations for the period from 1993 to 2008 reveal mixed evidence for the role of capital markets for both the economic catch-up process and international competitiveness of the Central and Eastern European countries.

exchange rate regime, wages, Central and Eastern Europe, EMU accession, panel model

Abstract:
This study analyses the allocation of power in the Governing Council of the European Central Bank (ECB) as it enlarges to accommodate new members of the economic and monetary union. For this purpose, two classical power indices that have their origin in solutions to co-operative games are applied. First, an assessment is made of the effects of enlargement on the voting power of different subgroups of the Governing Council that arise in the wake of the continuous accession process. Second, a systematic comparison is carried out to the status quo rule ('one member, one vote') with respect to the voting power of the ECB Executive Board and to the representativeness of European monetary policy, along with the potential for its renationalization.

Abstract:
This paper quantifies the impact of incentives related to potential membership on institutional change as measured by the World Bank Governance Indicators (WBGI). Based on a panel of 25 transition countries for the period from 1996 to 2008 we show that pre-accession incentives provided by EU and NATO clearly matter for institutional development. In addition, path-dependency determined by cultural norms may be overcome by economic liberalization while foreign aid seems to hamper institutional development.

EU, NATO, Transition Economies, Institutional Change, Governance

Abstract:
This paper quantifies the impact of incentives related to potential membership on institutional change as measured by the World Bank Governance Indicators (WBGI). Based on a panel of 25 transition countries for the period from 1996 to 2008 we show that pre-accession incentives provided by EU and NAT Oclearly matter for institutional development. In addition, path-dependency determined by cultural norms may be overcome by economic liberalization while foreign aid seems to hamper institutional development.

EU, NATO, transition economies, institutional change, governance

Abstract:
This paper quantifies the impact of incentives related to potential membership on institutional change as measured by the World Bank Governance Indicators (WBGI). Based on a panel of 25 transition countries for the period from 1996 to 2008 we show that pre-accession incentives provided by EU and NATO clearly matter for institutional development. In addition, path-dependency determined by cultural norms may be overcome by economic liberalization while foreign aid seems to hamper institutional development.

EU, NATO, transition economies, institutional change, governance

Abstract:
The purpose of this contribution is to illustrate the mechanism by which higher oil prices might lead to lower interest rates in the context of a simple model that takes into account the global external savings equilibrium. The simple model has interesting implications for how one views the huge US current account deficit and how the emergence of China’s savings surplus and oil supply shocks impact the global economy. We show that the new equilibrium is located at a lower interest rate but also at a lower income level than without the China effect. Moreover, we argue that the lower real interest rates resulting from excess OPEC savings have facilitated the adjustment to the subprime crisis.

China factor, current account adjustment, interest rate, oil prices, saving glut

Abstract:
This paper examines the significance of different fundamental regimes by applying various monetary models of the exchange rate to one of the politically most important exchange rates, the exchange rate of the US dollar vis-à-vis the euro (the DM). We use monthly data from 1975:01 to 2007:12. Applying a novel time-varying coefficient estimation approach,we come up with interesting properties of our empirical models. First, there is no stable long-run equilibrium relationship among fundamentals and exchange rates since the breakdown of Bretton Woods. Second, there are no recurring regimes, i.e. across different regimes either the coefficient values for the same fundamentals differ or the significance differs. Third, there is no regime in which no fundamentals enter. Fourth, the deviations resulting from the stepwise cointegrating relationship act as a significant error-correction mechanism. In other words, we are able to show that fundamentals play an important role in determining the exchange rate although their impact differs significantly across different subperiods.

Structural exchange rate models, cointegration, structural breaks, switching regression, time-varying coefficient approach

Abstract:
This paper deals with the impact of the $/€ exchange rate on German exports in the period from 1995Q1 to 2008Q4. Our main aim is to identify "pain thresholds" for German exporters. We rely on a non-linear model according to which suddenly strong spurts of exports occur when changes of the EXR go beyond a kind of "play" area (analogous to a mechanical play). We implement an algorithm describing play-hysteresis into a regression framework. A unique "pain threshold" of the $/€ exchange rate does not exist, since the borders of the play area and, thus, also the "pain threshold" (as the upper border) depend on the historical path of the whole process. We come up with an estimate of a play area width of 24 US dollar cent per euro. At the end of our estimation period, the previous exchange rate movements had shifted the upper bound of the play area to about 1.55 US dollar per euro. In our interpretation, this is the current "pain threshold", where a strong spurt reaction of exports to a further appreciation of the euro is expected to start.

exchange rate movements, play hysteresis, modelling techniques, switching regression, export demand

Abstract:
We assess the differences that emerge in Taylor rule estimations for the ECB when using ex-pos data instead of real time forecasts and vice versa.We argue that previous comparative studies i this field mixed up two separate effects. First, the differences resulting from the use of ex-post and real time data per se and, second, the differences emerging from the use of non-modified real time data instead of real-time data based forecasted values and vice versa. Since both effects can influence the reaction to inflation and the output gap either way, we use a more clear-cut approach to disentangle the partial effects. Our estimation results indicate that using real time instead of ex pos data leads to higher estimated inflation coefficients while the opposite is true for the output gap coefficients. If real time data forecasts for the current period are used (since actual data become available with a lag), this empirical pattern is even strengthened in the sense of even increasing the inflation response but lowering the reaction to the output gap while the reverse is true if “true” forecasts of real time data for several periods are employed.

European Central Bank, monetary policy, real time data, Taylor rule

Abstract:
We analyze the importance of global shocks for the global economy and national policy makers. More specifically, we investigate whether monetary policy has become less effective in the wake of financial globalization. We also examine whether there is increasing uncertainty for central banks due to globalization-driven changes in the national economic structure. A FAVAR framework is applied to derive structural shocks on a worldwide level and their impact on other global and also national variables.We estimate our macro model using quarterly data from Q1 1984 to Q4 2007 for the G7 countries plus the euro area. According to our results, global liquidity shocks are a driving force of the global economy and various national economies. However, some other shocks such as originating from house prices,GDP, technology and long-term interest rates play a role at the global level as well. These results prove to be robust across different specifications. Structural break tests indicate that global liquidity shocks have recently become more important as a determinant for house prices. In general, global variables have become more powerful over time in driving national variables.

Global shocks, international business cycle, international policy coordination and transmission, factor augmented vector autoregressive (FAVAR) models, common factors

Abstract:
Labor market performance tends to vary across countries and over time.These variances are investigated in regard to venture capital (VC) support provided within these countries to assist the creation of new business and job opportunities.When comparing the VC market of the United States to that of some European countries, the U.S. market has been much more successful in creating and maintaining a venture capital market. Upon comparison, both the United States and Europe differ in the total level of VC investments and in the structure of the investments.While many European markets utilize banks for VC backing and focus on manufacturing and consumer industry, the United States uses private VC support and focuses on computer, telecommunications, and biomedical industries. Following a brief overview of theoretical considerations of successful VC markets, the empirical data of the analysis are presented.Panel data from twenty Organization of Economic Cooperation and Development (OECD) countries from the period 1986 to 1999 are analyzed via several formulas.The variables are discussed, and the results indicate VC investment does improve labor market performance by reducing unemployment and increasing employment.The long-term effects and areas for future research are considered, as are the limitations of the findings. (AKP)

Organisation for Economic Co-operation & Development (OECD), Venture capital, Job creation, Macroeconomics, Venture capital markets, Private investments, Public investments, Labor markets, Employment rates, Firm performance, Labor economics

Abstract:
Evaluating the costs and benefits of exchange rate stability, requires a different approach to Mercosur than to the European Union (EU). Trade integration within Mercosur is much more limited; currencies are driven by other factors such as confidence in the ability to serve external debt and the solidity of domestic political institutions. This also implies that the correlation between exchange rates and interest rates is different. This research paper at first provides a comparative picture of the degree of trade integration within the EU, and within the Southern Cone. It then investigates the correlation between two aspects of financial market volatility¿exchange rate and interest rate volatility¿and compares the situation in the Southern Cone and in the EU between the 1980s to 1990s.

Abstract:
This paper examines the contemporaneous relationship between the exchange rate regime and structural economic reforms over a period of 30 years. Using panel data techniques, we look at both a broad (world sample) and an OECD country sample. We investigate empirically whether structural reforms have complemented or substituted for monetary commitment in the attempt to improve macroeconomic performance. Our results suggest that, on average, an exchange rate rule positively correlates with the amount of overall structural reforms and of trade liberalization in particular. We do not find a significant and robust impact of exchange rate commitment on labor and product market reform, on the other hand. The results are similar for both the wider, more heterogeneous world sample and the panel of OECD economies. They contradict the hypothesis that exchange rate commitments may have slowed down the pace of structural reform, but neither provide robust evidence that losing the possibility of an exchange rate adjustment promotes labor and product market reforms.

Abstract:
The paper investigates the link between monetary policy and structural reforms in open economies. We test three hypotheses: (a) the Calmfors hypothesis that the degree of reforms is higher in the case of autonomous policy and lower in the case of commitment, (b) the TINA hypothesis which implies a positive impact of a monetary policy rule on the extent of reforms, and (c) a third factors hypothesis. In our empirical analysis on panel data of 23 OECD countries from 1980-2000 we find little evidence for the Calmfors hypothesis, but evidence in favor of the TINA argument for labor market and regulatory reform.

Exchange rates, monetary policy commitment, liberalization

Abstract:
This paper examines the contemporaneous relationship between the exchange rate regime and structural economic reforms over a period of 30 years. Using panel data techniques, we look at both a broad 'world sample' and an OECD country sample. We investigate empirically whether structural reforms have complemented or substituted for monetary commitment in the attempt to improve macroeconomic performance. Our results suggest that, on average, an exchange rate rule positively correlates with the amount of overall structural reforms and of trade liberalization in particular. However, we do not find a significant and robust impact of exchange rate commitment on labour and product market reform. The results are similar for both the wider, more heterogeneous world sample and the panel of OECD economies. They contradict the hypothesis that exchange rate commitments may have slowed the pace of structural reform, but neither provides robust evidence that losing the possibility of an exchange rate adjustment promotes labour and product market reforms.

exchange rates, liberalisation, panel data, political economy of reforms

Abstract:
This paper examines the contemporaneous relationship between the exchange rate regime and structural economic reforms over a period of 30 years. We investigate empirically whether structural reforms are complements or substitutes for monetary commitment in the attempt to improve macroeconomic performance. The results contradict the hypothesis that exchange rate commitments may have slowed down the pace of structural reform, but neither provide robust evidence that losing the possibility of an exchange rate adjustment promotes labor and product market reforms.

Exchange rates, monetary policy regime, liberalisation, panel data, political economy of reform