Search results

The purpose of the paper is twofold: to construct and analyze a novel endogenous growth model, in which unbounded growth is possible without the need to assume increasing returns to scale, and to use the model to estimate the long-run (or dynamic) costs of recessions.

In the proposed model, endogenous technology and human capital accumulation serve as the “twin engines of growth.” Simulations are used to derive growth rates consistent with long-term experience of developed countries, to understand better the differences between balanced growth and unbounded growth and to provide an estimate of the dynamic costs of capacity utilization shocks that produce business cycle-like behavior.

Conservative calculations show that the costs of the capacity shocks can be large – about 1.5 percent of the present value of output over a 100-period horizon. The theoretical model also suggests that differences in the technology production and human capital accumulation functions, possibly due to differing institutions, may help explain diverse growth experiences.

The paper, for first time, combines two strands of the economic growth theory – endogenous technology and endogenous human capital production – into a single model. It uses the implications of the model to argue, through simulations, that the benefits of counter-cyclical policies are potentially large in the long run.

The purpose of this study is providing a possible methodological solution to the valuation of cyclical.assets. International Valuation Standards introduce a brand new definition of property: the cyclical asset (International Valuation Standards Council 2017, IVS 105, p. 39 and p. 41). Among different property valuation methods, normally this kind of properties is appraised using income approach. In this group of methodology, the opinion of value is based on a proportional relationship between property value and rent. In the past years, a group of methods called cyclical capitalization has been proposed (d’Amato, 2003; d’Amato, 2013;d’Amato, 2015; d’Amato, 2017a; d’Amato 2017 b; d’Amato, 2017c). This method proposes an integration between property valuation and property market cycle.

Cyclical capitalization method is applied using a time series of property market rent of offices in prime location in the South Bank area in London. It consists of the determination of more than one all-risk yield to reproduce the property market cycle.

A comparison between the cyclical capitalization and two traditional capitalization rate shows how the proposed model is able to provide a stable opinion of value.

The method may represent a contribution for the determination of the value of cyclical assets or for the mortgage lending value.

This paper provides the possibility to have a property valuation method less sensitive to upturn and downturn of the property market.

The valuation based on cyclical capitalization are less sensitive to the upturn and the downturn of the market.

It is one of the first scientific paper addressing the problem of the determination of the value of cyclical assets.

The purpose of this paper is to establish a model to study the determinants of financial flows, portfolio and foreign direct investment (FDI) flows, and the impact of these determinants on economic variables in samples of developing and advanced countries. The analysis then turns to an evaluation of the effects of external flows on economic activity.

To that end, the paper follows a two‐step procedure. First, the paper estimates a series of reduced‐form equations in differenced form, using annual data, for the current and the financial account balances as well as important underlying components, using a number of macroeconomic indicators reflecting the state of the business cycle as explanatory variables. These include not only a measure of economic growth, but also other factors that vary cyclically, such as the exchange rate and energy prices. In addition, the paper examines the effect of positive and negative shocks to these and other cyclical variables on components of the balance of payments. Second, the results are summarized in three directions. First, cross‐country correlations evaluate time‐series co‐movements between the current account balance and external flows with respect to major determinants of cyclicality across the samples of advanced and developing countries. Second, time‐series regressions evaluate the direct effects of financial flows on the current account balance within the samples of developing and advanced countries. Third, cross‐country regressions evaluate the impact of movements in trend and variability of financial flows on major economic indicators across the samples of developing and advanced countries.

The results are summarized in three directions. Across the samples of advanced and developing countries, the pervasive evidence highlights the negative correlation between the responses of the current account balance and the financial balance with respect to the various sources of cyclicality in the time‐series model. Second, using time‐series regressions the bulk of the evidence indicates that an increase in financial flows helps finance a widening current account deficit. Third, cross‐country regressions evaluate the impact of movements in trend and variability of financial flows on major economic indicators across the samples of developing and advanced countries. While FDI flows appear significant in differentiating growth performance within and across developing countries, their effects appear to be limited on growth performance in advanced countries. Portfolio flows are more relevant, compared to FDI flows, to financing a wider current account deficit, both in developing and advanced countries.

Overall, the evidence presented in this paper establishes the importance of financial flows to external balances and macroeconomic performance within and across the samples of developing and advanced countries. In light of this evidence, macroeconomic policies should target a combination of external balances that can be easily financed by external inflows and align domestic policies to achieve the desired cyclicality in external balances, available financing, and macroeconomic performance.

The paper aims to examine asymmetry in the cyclical behavior of private consumption in a sample of nine developing countries in the Middle East.

The empirical model includes three policy variables: government spending, the money supply, and the exchange rate. Anticipated movements in these variables are likely to vary with agents' forecasts of macroeconomic fundamentals and, therefore, determine planned consumption. Unanticipated policy changes, in contrast, determine cyclical consumption.

The results indicate that fluctuations in private consumption are mostly cyclical. The stabilizing function of policy shocks varies across countries and appears to be asymmetric within countries.

Asymmetry necessitates a thorough evaluation of the positive and negative effects attributed to changes in policy variables and the necessary reforms to relax binding constraints.

1.1 What Are Accounts For? Overview The purpose of accounts is to reveal performance in the conduct of a business or other activity concerned with use of economic resources (e.g. a club). It is thus a matter of stewardship. Although, like economics, it is necessary in accounting to use money as a measure of performance, it is concerned with the individual organisation rather than with economic phenomena as a whole.

The purpose of this paper is to examine the effects of exchange rate shock on the broad spectrum of the US economy using a factor-augmented VAR model (FAVAR).

The authors developed a two-factor FAVAR model and estimated it with the single-step Bayesian likelihood approach using the Gibbs sampling technique. The two factors represented, respectively, the economic activity and price pressures. The exchange rate shock was identified with the Choleski decomposition method for VARs. The authors used the data of 117 time series for the period from 1973:02 to 2007:12. Impulse responses and variance decompositions were computed as the main results.

The authors found that exchange rate shock has pervasive effects on the US economy as the following: depreciation does not appear to help reduce the US trade deficit as both import and export rise with the depreciation shock; in the short run, depreciation appears expansionary as industrial production, manufacturing and employment all increase within a year; in the medium run, depreciation appears inflationary, as consumer price, producer price, import price and export price all increase; and in the medium run, depreciation appears contractionary as personal consumption, consumer confidence, stock price and housing start tend to fall.

Some caveats remain: first, our simple model symmetrically estimates depreciation shock and appreciation shock and, hence, cannot draw inferences for how exchange rate appreciation and depreciation may affect the US economy asymmetrically. Second, the simple model used did not distinguish the different possible sources of exchange rate depreciation shock, the knowledge of which may lead to richer policy implications and is the direction of research for the future.

This research contributes to the literature of whether exchange rate is expansionary or contractionary to the US economy using the FAVAR model. This is the first comprehensive study in the literature studying the pervasive effects of the exchange rate on the broad spectrum of the US economy in one integrated model.

Examines the effects of a monetary expansion on certain key macroeconomic variables, in particular the nominal exchange rate, competitiveness, and domestic output and employment, using a modified version of the Dornbusch (Journal of Political Economy, 1976) model. Dornbusch′s original analysis of the implications of sticky prices was conducted on the basis of two alternative assumptions concerning the supply side of the economy, a fixed (full‐employment) level of output and (in his Appendix) continuous goods market clearing, maintained by instantaneous output adjustment. Neither of these assumptions appears particularly satisfactory and the model presented here attempts to address the issue by assuming output to be instantaneously fixed, but to respond gradually to excess demand or supply in the goods market. The structure of the resulting model is such as to imply a third‐order dynamic adjustment process which is solved explicitly. Two principal conclusions follow from the analysis. First, despite the fact that the monetary expansion inevitably reduces the domestic interest rate, nominal exchange rate overshooting need not result. Second, the dynamics of adjustment are considerably more complicated than in the original Dornbusch model and may, in fact, be cyclical in nature.

The purpose of this paper is to study the role of public and private imbalances in the cyclicality of the current account balance in a sample of advanced and developing countries. Within developing countries, the evidence does not establish the dependency of private investment on private savings and private consumption is the main driver of the saving/investment balance. In contrast, private savings seem to be better mobilized to finance private investment and the latter is the main driver of the saving/investment balance in advanced countries. Deterioration in the current account balance in response to higher private consumption could be detrimental to growth and external stability. In contrast, an investment strategy that promotes growth is likely to attract financial flows and reduce the risk of a widening current account deficit on external stability.

The paper studies determinants of the current account deficit. It studies current account fluctuations in the short‐run and explains these fluctuations by analyzing movements in the underlying components: public and private savings as well as investments and resulting imbalances. Of particular interest is the interaction between the government budget deficit, the private saving/investment balance, and the current account balance.

Using time‐series estimates, co‐movements indicate that fluctuations in the current account balance in many advanced countries appear to be driven by private investment that determines cyclicality in imports. In contrast, cyclicality in the current account appears to be driven by private consumption that determines fluctuations in imports in many developing countries. In general, fluctuations in the government budget deficit are mostly driven by government investment and fluctuations in the private saving/investment balance are mostly driven by fluctuations in private investment. Further, fluctuations in the current account balance appear to be mostly driven by fluctuations in the private saving/investment balance.

The paper explains the dynamics of the current account in relation to developments in public and private imbalances and its underlying components. It shows the effects of changes in the budget deficit and its underlying components on cyclicality in the current account. Similarly, cyclicality in the current account balance with cyclical movements in private savings and investment is studied, along with which factors affect the components of the current account balance. In particular, the paper establishes which components of the current account significantly respond to the cyclical changes in macroeconomic variables.