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1 – 10 of 30Françoise Okah Efogo and Boniface Ngah Epo
This paper appraises the effects of monetary policy on trade in value-added (TiVA) using a panel of 38 developing countries spanning the period 1990 to 2019. Specifically, the…
Abstract
Purpose
This paper appraises the effects of monetary policy on trade in value-added (TiVA) using a panel of 38 developing countries spanning the period 1990 to 2019. Specifically, the authors subsequently summon the theory of trade in intermediate products within the New Keynesian framework for open economies that comprises price rigidity to verify this relationship and thereon control for robustness by correcting for endogeneity and unbalanced panel effect.
Design/methodology/approach
The authors mobilize the within estimator corrected for cross sectional dependence as well as the two-stage-least squares fixed effect estimator which corrects for endogeneity. For robustness, the authors also use the Hausman–Taylor estimator to control for endogeneity and random effects in annualized data and the least squares dummy variable corrected estimator.
Findings
Results suggest that the monetary policy instruments such as inflationary gaps and anticipatory inflationary outcomes significantly affect TiVA in developing countries only in the short term with no long-term effect. In addition to contributing to the scanty empirical literature, the authors provide relevant insights on monetary policy tools that can be mobilized in fashioning a global value chain penetration and upgrading strategies.
Originality/value
The authors convoke the theory of trade in intermediate products casted into the New Keynesian framework comprising price rigidity to verify the relationship between TiVA and monetary policy (b) verify for robustness by correcting for endogeneity and unbalanced panel effect.
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Sherine Al-shawarby and Mai El Mossallamy
This paper aims to estimate a New Keynesian small open economy dynamic stochastic general equilibrium (DSGE) model for Egypt using Bayesian techniques and data for the period…
Abstract
Purpose
This paper aims to estimate a New Keynesian small open economy dynamic stochastic general equilibrium (DSGE) model for Egypt using Bayesian techniques and data for the period FY2004/2005:Q1-FY2015/2016:Q4 to assess monetary and fiscal policy interactions and their impact on economic stabilization. Outcomes of monetary and fiscal authority commitment to policy instruments, interest rate, government spending and taxes, are evaluated using Taylor-type and optimal simple rules.
Design/methodology/approach
The study extends the stylized micro-founded small open economy New Keynesian DSGE model, proposed by Lubik and Schorfheide (2007), by explicitly introducing fiscal policy behavior into the model (Fragetta and Kirsanova, 2010 and Çebi, 2011). The model is calibrated using quarterly data for Egypt on key macroeconomic variables during FY2004/2005:Q1-FY2015/2016:Q4; and Bayesian methods are used in estimation.
Findings
The results show that monetary and fiscal policy instruments in Egypt contribute to economic stability through their effects on inflation, output and debt stock. The monetary policy Taylor rule estimates reveal that the Central Bank of Egypt (CBE) attaches significant importance to anti-inflationary policy and (to a lesser extent) to output targeting but responds weakly to nominal exchange rate variations. CBE decisions are significantly influenced by interest rate smoothing. Egyptian fiscal policy has an important role in output and government debt stabilization. Additionally, the fiscal authority chooses pro-cyclical government spending and counter-cyclical tax policies for output stabilization. Again, past values of the fiscal instruments are influential in the evolution of the future fiscal policy-making process.
Originality/value
A few studies have examined the interaction between monetary and fiscal policy in Egypt within a unified framework. The presented paper integrates the monetary and fiscal policy analysis within a unified dynamic general equilibrium open economy rational expectations framework. Without such a framework, it would not be easy to jointly analyze monetary and fiscal transmission mechanisms for output, inflation and debt. Also, it would be neither possible to contrast the outcome of monetary and fiscal authorities commitment to a simple Taylor instrument rule vis-à-vis optimal policy outcomes nor to assess the behavior of monetary and fiscal agents in macroeconomic stability in context of an active/passive policy decisions framework.
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This paper analyzes variations in the effects of monetary and fiscal shocks on responses of macroeconomic variables, determinacy region, and welfare costs due to changes in trend…
Abstract
Purpose
This paper analyzes variations in the effects of monetary and fiscal shocks on responses of macroeconomic variables, determinacy region, and welfare costs due to changes in trend inflation.
Design/methodology/approach
The authors develop the New-Keynesian model, in which the central banks can employ either nominal interest rate (IR rule) or money supply (MS rule) to conduct monetary policies. They also use their capital and recurrent spending budgets to conduct fiscal policies. By using the simulated method of moment (SMM) for parameter estimation, the authors characterize Vietnam's economy during 1996Q1–2015Q1.
Findings
The results report that consequences of monetary policy and fiscal policy shocks become more serious if there is a rise in trend inflation. Furthermore, the money supply might not be an effective instrument, and using the government budget for recurrent spending produces severe consequences in the high-trend inflation economy.
Practical implications
This paper's findings are critical for economists and monetary and fiscal authorities in effectively designing both the monetary and fiscal policies in confronting the shift in the inflation targets.
Originality/value
This is the first paper that examines the effects of trend inflation on the monetary and fiscal policy implementation in the case of Vietnam.
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This paper aims to estimate the impact of the 2000s commodity boom in the major Latin American economies.
Abstract
Purpose
This paper aims to estimate the impact of the 2000s commodity boom in the major Latin American economies.
Design/methodology/approach
The author used a structural vector autorregresive analysis where the selection of variables is conditional on a New Keynesian Model for a small open economy.
Findings
The evidence indicates that the Argentinean nominal exchange rate appreciated less while its output and inflation grew more than those of the other nations when subjected to commodity shocks. These results are interpreted as a more aggressive leaning-against-the-wind intervention by Argentina, probably to avoid the Dutch disease. Although the effects with regard to output were indeed stronger in Argentina, this was only at the expense of higher inflation and volatility suffered during the boom.
Originality/value
At the time of the writing of this paper, no work had evaluated Argentinean underperformace to the manner in which its exchange rate policy was handled in comparison with the rest of the region during the boom. This paper intends to fill this gap.
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Social spending is at the forefront of the tools used to repair the damage caused by the global epidemic. However, one of the most critical questions in recent days is as follows…
Abstract
Purpose
Social spending is at the forefront of the tools used to repair the damage caused by the global epidemic. However, one of the most critical questions in recent days is as follows: what are the effects of social expenditures in eliminating unemployment? The primary purpose of this article is to provide empirical evidence on the impact of social spending on chronic unemployment in the selected organization for economic co-operation and development (OECD) countries.
Design/methodology/approach
In this study, the data of 30 selected OECD countries between 1991 and 2018 have been compiled. First, countries have been divided into four categories according to their spending intensity to determine the effects of social spending on the long-term unemployment rate. Then, the auto-regressive distributed lag (ARDL) approach and the error correction models (ECM) examine the variables' short- and long-term interactions.
Findings
The author found that the change in the share of social expenditures in GDP affects chronic unemployment similarly. This finding is consistent with the results of studies in the literature dealing with the relationship between public sector size and unemployment. However, the research findings are specifically about the effects of social expenditures on chronic unemployment. In this respect, the results reflect that expenditures with passive characteristics have an expansionary effect on long-term unemployment. In addition, the progressive effect of social expenditures on chronic unemployment is increasing in countries with high expenditure intensity. In countries with relatively low spending intensity, the impact of social spending is limited to the short run and is lower.
Originality/value
Multiple studies have reported that public policies developed in line with the incentives of active employment and public or private sector investments reduce the unemployment rate by positively affecting the output/employment level. This study, unlike other studies, focuses on the effects of social expenditures on chronic unemployment. It also compares the effects of social spending on the long-term unemployment rate for countries with varying spending intensities. Therefore, this article tests the impact of social expenditures used against a concrete socioeconomic problem in the OECD sample. In this respect, the findings contribute to the literature by addressing the relationship between social spending and chronic unemployment.
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