Suchergebnisse

AbstractI specify a simple search and matching model of the labour market and estimate it on unemployment and vacancy data for Hong Kong over the period 2000–2010 using Bayesian methods. The model fits the data remarkably well. The estimation shows that productivity shocks are the main driver of fluctuations in the labour market, with cyclical movements in the separation rate playing only a subordinate role. The parameter estimates are broadly consistent with those found in the literature. To replicate the volatility of unemployment and vacancies, the model estimates require a high replacement ratio and a low bargaining power for workers, in addition to two extraneous sources of uncertainty. The estimates are robust to a relaxation of the prior information and small changes in the underlying model specification, which suggests that the data are informative and that the model is well specified. Overall, the Hong Kong labour market can be characterized by having a low degree of churning in normal times, but rapid firings and hirings in recessions and expansions.

In standard New Keynesian models, the size of the output expansion generated by aggregate demand shocks depends crucially on the elasticity of labor supply which is empirically quite small. In principle, this link can be broken in a multisectoral economy with differing degrees of price stickiness, so that the required increase in labor supply can come from other sectors. This paper reinterprets this line of reasoning in a small open economy with a traded and a non-traded sector. The latter is characterized by monopolistic competition and nominal price stickiness. The main findings of the paper are twofold. It is shown that, in fact, the size of the labor supply elasticity has no significant effect on the output response to a monetary policy shock. Yet, in this open economy framework the puzzle of the output response remains since they occur only for unrealistically high intertemporal substitution elasticities. Furthermore, it is shown that the current account response to an expansionary monetary shock crucially depends on the industrial structure of the money and not, as previously claimed, on consumption preferences alone. For reasonable model specifications the current acount moves into deficit.

This paper investigates determinacy of equilibrium in a canonical New Keynesian model under different monetary and fiscal policy rules. It is shown that a simple monetary rule that responds aggressively to inflation is a necessary condition for equilibrium determinacy, when fiscal policy is accommodating. If there is a high degree of structural distortions in the economy, then the interesting possibility arises that both aggressive monetary and fiscal policies are required to guarantee existence. When investment adjustment costs are introduced, the monetary and fiscal policy dichotomy is in principle maintained. The determinacy region is, however, highly dependent on the degree of distortion in the economy. The more prices are sticky, and the less competitive firms are, the economy is likely to exhibit indeterminacy even if monetary policy is active.

AbstractWe study the dynamics of consumption, the real interest rate and measures of labour input in Japan over the period from 1985 to 2014. We identify structural breaks in macroeconomic aggregates during the 1990s and associate them with the zero interest‐rate policy pursued by the Bank of Japan and the surprise increase in the consumption tax rate in April 1997. Formal estimation using the generalized methods of moments shows that the mid‐1990s are characterized by breaks in the structural parameters governing household consumption and labour supply decisions. Specifically, following the tax hike and during the low nominal rate period, Japanese households became less risk averse and exhibited a higher degree of habit formation.