Cardiff Business School

Displaying 1-40 of 44 results

  • White Papers // Mar 2011

    How Much Nominal Rigidity Is There In The US Economy? Testing A New Keynesian DSGE Model Using Indirect Inference

    The authors evaluate the Smets-Wouters model of the US using indirect inference and the bootstrap with a VAR representation of the main US data series. They find that the New Keynesian SW model is strongly rejected by the data's dynamic properties and in particular cannot match the variability of the...

    Provided By Cardiff Business School

  • White Papers // Mar 2011

    Financial Sector Shocks, External Finance Premium And Business Cycle

    This paper extends Nolan and Thoenissen (2009), hence NT, model with an explicit financial intermediary that transfer funds from households to entrepreneurs subject to a well defined loan production function. The loan productivity shock is treated as the supply side financial disturbance. Together with NT's net worth shock that resembles...

    Provided By Cardiff Business School

  • White Papers // Mar 2011

    UK Fiscal Policy Sustainability, 1955-2006

    The authors test for fiscal policy sustainability in the UK for the period 1955-2006. They find evidence of sustainability with three structural breaks, respectively occurring in the early 1970s, early 1980s and late 1990s. UK fiscal policy has been sustainable throughout the sample period except from 1973-1981 when a non-Ricardian...

    Provided By Cardiff Business School

  • White Papers // Feb 2011

    Fiscal Policy Under Imperfect Competition With Flexible Prices: An Overview And Survey

    This paper surveys the link between imperfect competition and the effects of fiscal policy on output, employment and welfare. The authors examine static and dynamic models, with and without entry under a variety of assumptions using a common analytical framework. They find that in general there is a robust relationship...

    Provided By Cardiff Business School

  • White Papers // Jan 2011

    Optimal Indexation Of Government Bonds And Monetary Policy

    Using an overlapping generations model in which the young save for old age using indexed and nominal government bonds, this paper investigates how optimal indexation is influenced by monetary policy. In order to do so, two monetary policies with markedly different long run implications are examined: inflation targeting and price-level...

    Provided By Cardiff Business School

  • White Papers // Jan 2011

    The Impact Of Price Regulations On Regional Welfare And Agricultural Productivity In China

    The nineties' agricultural reform in China that was aimed at deregulating the agricultural market eventually resulted in a huge drop in agricultural production and a high rate of inflation in agricultural prices; this apparently motivated the government to take over the control of agricultural prices in 1998. The authors examine...

    Provided By Cardiff Business School

  • White Papers // Jan 2011

    Basic, Applied And Experimental Knowledge And Productivity: Further Evidence

    Analyzing a novel dataset the authors find significantly positive effects of basic, and applied and experimental knowledge stocks on domestic output and productivity for a panel of 10 OECD countries. This letter updates the work of, among others, Mansfield (1980), Griliches (1986) and Adams (1990), at an international setting. Two...

    Provided By Cardiff Business School

  • White Papers // Nov 2010

    Banking Efficiency In Emerging Market Economies

    Bank efficiency is not the sort of subject that sets the pulse racing or the heart beating faster. On the surface the subject sounds dry and could put even the most ardent accountant or banker to sleep. Certainly, efficiency is not the hottest topic in banking in the current economic...

    Provided By Cardiff Business School

  • White Papers // Nov 2010

    An Empirical Study On Price Rigidity

    This paper uses unpublished retailer-level microdata underlying UK consumer price indices to investigate price rigidity. Based on the conventional method, little rigidity is found in frequency of price change, since the implied price duration is only 5.5 months. However, it significantly underestimates the true duration (9.3 months) as suggested by...

    Provided By Cardiff Business School

  • White Papers // Nov 2010

    The Option Of Last Resort: A Two-Currency EMU

    The key ingredients of the authors' proposal involve a temporary split of the euro into two currencies, both run by the European Central Bank. The hard euro will be maintained by the core-EMU members whereas periphery EMU countries will adopt for a suitable period of time the weak euro. All...

    Provided By Cardiff Business School

  • White Papers // Sep 2010

    How Robust Is The R&D?Productivity Relationship? Evidence From OECD Countries

    The authors examine the robustness of R&D and productivity relationship in a panel of 16 OECD countries. They control for fifteen productivity determinants predicted by different theoretical models. Following the advances in non-stationary panel data econometrics, they estimate four variants of thirteen specifications. All models appear co-integrated. Results are rigorously...

    Provided By Cardiff Business School

  • White Papers // Jul 2010

    Non-smooth Dynamics And Multiple Equilibria In A Cournot-Ramsey Model With Endogenous Markups

    The authors consider a Ramsey model with a continuum of Cournotian industries where free entry generates an endogenous markup. The model produces two different regimes, monopoly and oligopoly, resulting in non-smooth dynamics. They analyze the global dynamics of the model, demonstrating the model may exhibit hetero clinic orbits connecting multiple...

    Provided By Cardiff Business School

  • White Papers // Jul 2010

    Economic Policy And Output Volatility In Spain, 1950-1998: Was Fiscal Policy Destabilizing?

    Was Spanish fiscal policy destabilizing? The authors estimate policy reaction functions and test the impact of fiscal shocks on growth volatility over the period 1950-1998. They find that a transition from pro-cyclical to countercyclical fiscal policy occurred in the late years of the Franco regime, contributing to the stabilization of...

    Provided By Cardiff Business School

  • White Papers // Jul 2010

    The Strength And Persistence Of Entrepreneurial Cultures

    The twentieth century United States provides a natural experiment to measure the strength and persistence of entrepreneurial cultures. Assuming immigrants bear the cultures of their birth place, comparison of revealed entrepreneurial propensities of US immigrant groups in 1910 and 2000 reflected these backgrounds. According to this test North-western Europe, where...

    Provided By Cardiff Business School

  • White Papers // Jun 2010

    Multilateral Trade Liberalisation, Foreign Direct Investment And The Volume Of World Trade

    A paradox in international trade is that multilateral trade liberalization has resulted in increases in both the volume of world trade and the amount of Foreign Direct Investment (FDI). This note presents a Cournot duopoly model with two regions, each consisting of two countries, and with an inter-regional transport cost....

    Provided By Cardiff Business School

  • White Papers // May 2010

    Taylor Rule Or Optimal Timeless Policy? Reconsidering The Fed's Behavior Since

    The authors calibrate a standard New Keynesian model with three alternative representations of monetary policy-an optimal timeless rule, a Taylor rule and another with interest rate smoothing-with the aim of testing which if any can match the data according to the method of indirect inference. They find that the only...

    Provided By Cardiff Business School

  • White Papers // Apr 2010

    Fiscal Policy Under Imperfect Competition: A Survey

    This paper surveys the link between imperfect competition and the effects of fiscal policy on output, employment and welfare. The authors examine static and dynamic models, with and without entry under a variety of assumptions using a common analytical framework. They find that in general there is a robust relationship...

    Provided By Cardiff Business School

  • White Papers // Apr 2010

    Risk Management And Managerial Efficiency In Chinese Banks: A Network DEA

    Risk Management in Chinese banks has traditionally been the Cinderella of its internal functions. Political structure and developmental imperative have often overridden standard practice of risk management resulting in large Non-Performing Loan (NPL) ratios. One of the stated aims of opening up the Chinese banks to foreign strategic investment is...

    Provided By Cardiff Business School

  • White Papers // Apr 2010

    The Greek Debt Crisis: Likely Causes, Mechanics And Outcomes

    The authors use insights from the literature on currency crises to offer an analytical treatment of the crisis in the market for Greek government bonds. They argue that the crisis itself and its escalating nature are very likely to be the result of: steady deterioration of Greek macroeconomic fundamentals over...

    Provided By Cardiff Business School

  • White Papers // Mar 2010

    Motivated Sellers In The Housing Market

    The authors present a search-and-matching model of the housing market where potential buyers' willingness to pay is private information and sellers may become desperate as they are unable to sell. A unique steady state equilibrium exists where desperate sellers offer sizeable price cuts and sell faster. If the number of...

    Provided By Cardiff Business School

  • White Papers // Dec 2009

    Some Problems In The Testing Of DSGE Models

    The authors review the methods used in many papers to evaluate DSGE models by comparing their simulated moments and other features with data equivalents. They note that they select, scale and characterise the shocks without reference to the data; crucially they fail to use the joint distribution of the features...

    Provided By Cardiff Business School

  • White Papers // Dec 2009

    Efficiency And Convergence In The Jamaican Banking Sector 1998-2007

    Deregulation, re-regulation and continuing globalization embody an imperative that banks increase efficiency to survive. The authors employ non-parametric bootstrap DEA to measure technical efficiency among Jamaican banks between 1998 and 2007. In addition, they test for conditional convergence to identify pointing variables for technical efficiency. Overall, the results suggest that...

    Provided By Cardiff Business School

  • White Papers // Dec 2009

    Two Orthogonal Continents? Testing A Two-Country DSGE Model Of The US And The EU Using Indirect Inference

    The authors examine a two country model of the EU and the US. Each has a small sector of the labor and product markets in which there is wage/price rigidity, but otherwise enjoys flexible wages and prices with a one quarter information lag. Using a VAR to represent the data,...

    Provided By Cardiff Business School

  • White Papers // Dec 2009

    Measuring Post-Crisis Productivity For Jamaican Banks

    This paper examines the changes to total factor productivity of Jamaican banks between 1998 and 2007. Using Data Envelopment Analysis with bootstrap to construct a Malmquist index, bank productivity is measured and decomposed into technical progress and efficiency. The results suggest an inconsistent growth pattern for banks between 1998 and...

    Provided By Cardiff Business School

  • White Papers // Dec 2009

    Controlling Banker's Bonuses: Efficient Regulation Or Politics Of Envy?

    The positive relationship between bank CEO compensation and risk taking is a well established empirical fact. The global banking crisis has resulted in a chorus of demands to control banker's bonuses and thereby curtail their risk taking activities in the hope that the world can avoid a repeat in the...

    Provided By Cardiff Business School

  • White Papers // Dec 2009

    Can The Fiscal Theory Of The Price Level Explain UK Inflation In The 1970s?

    The authors investigate whether the Fiscal Theory of the Price Level can deliver a reasonable explanation for UK inflation in the 1970s, a period in which the government greatly increased public spending without raising taxes and monetary policy was accommodative. The model is tested for its implied co-integration between inflation...

    Provided By Cardiff Business School

  • White Papers // Nov 2009

    A Banking Explanation Of The US Velocity Of Money: 1919-2004

    The paper shows that US GDP velocity of M1 money has exhibited long cycles around a 1.25% per year upward trend, during the 1919-2004 period. It explains the velocity cycles through shocks constructed from a DSGE model and annual time series data (Ingram et al., 1994). Model velocity is stable...

    Provided By Cardiff Business School

  • White Papers // Nov 2009

    Monetary Effects On Nominal Oil Prices

    The paper presents a theory of nominal asset prices for competitively owned oil. Focusing on monetary effects, with flexible oil prices the US dollar oil price should follow the aggregate US price level. But with rigid nominal oil prices, the nominal oil price jumps proportionally to nominal interest rate increases....

    Provided By Cardiff Business School

  • White Papers // Nov 2009

    Exchange Rate Uncertainty And Deviations From Purchasing Power Parity: Evidence From The G7 Area

    Arghyrou, Gregoriou and Pourpourides (2009) argue that exchange rate uncertainty causes deviations from the law of one price. The authors test this hypothesis on aggregate data from the G7- area. They find that exchange rate uncertainty explains to a significant degree deviations from Purchasing Power Parity. This paper tests this...

    Provided By Cardiff Business School

  • White Papers // Sep 2009

    The Monetary Policy Implications Of Behavioral Asset Bubbles

    The author introduces behavioral asset pricing rules into a wider dynamic stochastic general equilibrium framework. Asset price bubbles emerge endogenously within the model. The author finds that in this model the only monetary policy that would be likely to enhance welfare is a counter-intuitive "Running with the wind" policy. The...

    Provided By Cardiff Business School

  • White Papers // Sep 2009

    Can Behavioral Finance Models Account For Historical Asset Prices?

    The author constructs a behavioral model of asset pricing in which agents choose whether to base their expectations on chartist or fundamental forecasts. The author simulates the model in order to test its efficacy in explaining the moments and time series properties of the FTSE All-Share index, and find that...

    Provided By Cardiff Business School

  • White Papers // Sep 2009

    Inflation, Human Capital And Tobin's Q

    A pervasive empirical finding for the US economy is that inflation is negatively correlated with the normalized market price of capital (Tobin's q) and growth. A dynamic stochastic general equilibrium model of endogenous growth is developed to explain these stylized facts. In this model, human capital is the principal driver...

    Provided By Cardiff Business School

  • White Papers // Sep 2009

    Bank Productivity In China 1997-2007: An Exercise In Measurement

    This paper examines the productivity growth of the nationwide banks of China and a sample of city commercial, banks for the eleven years to 2007. Estimates of total factor productivity growth are constructed with appropriate confidence intervals, using a bootstrap method for the Malmquist index. This paper adjusts for the...

    Provided By Cardiff Business School

  • White Papers // Sep 2009

    Rational Cost Inefficiency In Chinese Banks

    According to a frequently cited finding by Berger et al (1993), X-inefficiency contributes 20% to cost-inefficiency in western banks. Empirical studies of Chinese banks tend to place cost-inefficiency in the region of 50%. Such estimates would suggest that Chinese banks suffer from gross cost inefficiency. Using a nonparametric bootstrapping method,...

    Provided By Cardiff Business School

  • White Papers // Aug 2009

    Auditor Quality And The Role Of Accounting Information In Explaining UK Stock Returns

    Using a variance decomposition approach, the authors examine the importance of accounting information - in particular the cash flow and accruals components of earnings - in explaining the variation in UK company stock returns. They extend prior research by analyzing whether auditor quality moderates the role of accruals and cash...

    Provided By Cardiff Business School

  • White Papers // Aug 2009

    The Horizon Effect Of Stock Return Predictability And Model Uncertainty On Portfolio Choice: UK Evidence

    The authors study how stock return's predictability and model uncertainty affect a rational buy-and-hold investor's decision to allocate her wealth for different lengths of investment horizons in the UK market. They consider the FTSE All-Share Index as the risky asset, and the UK Treasury bill as the risk free asset...

    Provided By Cardiff Business School

  • White Papers // Jul 2009

    The Banking Crisis - A Rational Interpretation

    Modern macroeconomic models have been widely criticized as relying too much on rationality and market efficiency. However, basically their predictions about this crisis are being borne out by events. 'Crashes' are an integral part of an 'Efficient market' capitalism and are brought on by swings in the news about productivity...

    Provided By Cardiff Business School

  • White Papers // Jul 2009

    Immiserizing Growth And The Metzler Paradox In The Ricardian Model

    Conditions for the occurrence of immiserizing growth and the Metzler paradox are analysed in the Ricardian model when consumers in the foreign country have Leontief preferences while consumers in the home country have Cobb-Douglas preferences. By using specific functional forms, the conditions for the occurrence of the two paradoxes are...

    Provided By Cardiff Business School

  • White Papers // Jun 2009

    Tacit Collusion Over Foreign Direct Investment Under Oligopoly

    A two-country model of the FDI versus export decisions of firms is analysed. The analysis considers both the Cournot duopoly and the Bertrand duopoly models with differentiated products. It is shown that the static game is often a prisoners' dilemma where both firms are worse off when they both undertake...

    Provided By Cardiff Business School

  • White Papers // Jun 2009

    Market Power Versus Efficient-Structure In Arab GCC Banking

    This paper evaluates the performance of the Arab GCC banking industry in the context of the Structure-Conduct-Performance hypothesis in the period 1993-2002. The paper uses panel estimation differentiating between bank fixed effects and country fixed effects. It examines the Relative-Market-Power and the Efficient-Structure hypotheses differentiating between the two by employing...

    Provided By Cardiff Business School

  • White Papers // Mar 2011

    How Much Nominal Rigidity Is There In The US Economy? Testing A New Keynesian DSGE Model Using Indirect Inference

    The authors evaluate the Smets-Wouters model of the US using indirect inference and the bootstrap with a VAR representation of the main US data series. They find that the New Keynesian SW model is strongly rejected by the data's dynamic properties and in particular cannot match the variability of the...

    Provided By Cardiff Business School

  • White Papers // Nov 2009

    Monetary Effects On Nominal Oil Prices

    The paper presents a theory of nominal asset prices for competitively owned oil. Focusing on monetary effects, with flexible oil prices the US dollar oil price should follow the aggregate US price level. But with rigid nominal oil prices, the nominal oil price jumps proportionally to nominal interest rate increases....

    Provided By Cardiff Business School

  • White Papers // Mar 2011

    Financial Sector Shocks, External Finance Premium And Business Cycle

    This paper extends Nolan and Thoenissen (2009), hence NT, model with an explicit financial intermediary that transfer funds from households to entrepreneurs subject to a well defined loan production function. The loan productivity shock is treated as the supply side financial disturbance. Together with NT's net worth shock that resembles...

    Provided By Cardiff Business School

  • White Papers // Apr 2010

    Fiscal Policy Under Imperfect Competition: A Survey

    This paper surveys the link between imperfect competition and the effects of fiscal policy on output, employment and welfare. The authors examine static and dynamic models, with and without entry under a variety of assumptions using a common analytical framework. They find that in general there is a robust relationship...

    Provided By Cardiff Business School

  • White Papers // Feb 2011

    Fiscal Policy Under Imperfect Competition With Flexible Prices: An Overview And Survey

    This paper surveys the link between imperfect competition and the effects of fiscal policy on output, employment and welfare. The authors examine static and dynamic models, with and without entry under a variety of assumptions using a common analytical framework. They find that in general there is a robust relationship...

    Provided By Cardiff Business School

  • White Papers // Mar 2011

    UK Fiscal Policy Sustainability, 1955-2006

    The authors test for fiscal policy sustainability in the UK for the period 1955-2006. They find evidence of sustainability with three structural breaks, respectively occurring in the early 1970s, early 1980s and late 1990s. UK fiscal policy has been sustainable throughout the sample period except from 1973-1981 when a non-Ricardian...

    Provided By Cardiff Business School

  • White Papers // Jul 2010

    Economic Policy And Output Volatility In Spain, 1950-1998: Was Fiscal Policy Destabilizing?

    Was Spanish fiscal policy destabilizing? The authors estimate policy reaction functions and test the impact of fiscal shocks on growth volatility over the period 1950-1998. They find that a transition from pro-cyclical to countercyclical fiscal policy occurred in the late years of the Franco regime, contributing to the stabilization of...

    Provided By Cardiff Business School

  • White Papers // Nov 2010

    Banking Efficiency In Emerging Market Economies

    Bank efficiency is not the sort of subject that sets the pulse racing or the heart beating faster. On the surface the subject sounds dry and could put even the most ardent accountant or banker to sleep. Certainly, efficiency is not the hottest topic in banking in the current economic...

    Provided By Cardiff Business School

  • White Papers // Nov 2010

    An Empirical Study On Price Rigidity

    This paper uses unpublished retailer-level microdata underlying UK consumer price indices to investigate price rigidity. Based on the conventional method, little rigidity is found in frequency of price change, since the implied price duration is only 5.5 months. However, it significantly underestimates the true duration (9.3 months) as suggested by...

    Provided By Cardiff Business School

  • White Papers // Apr 2010

    Risk Management And Managerial Efficiency In Chinese Banks: A Network DEA

    Risk Management in Chinese banks has traditionally been the Cinderella of its internal functions. Political structure and developmental imperative have often overridden standard practice of risk management resulting in large Non-Performing Loan (NPL) ratios. One of the stated aims of opening up the Chinese banks to foreign strategic investment is...

    Provided By Cardiff Business School

  • White Papers // Aug 2009

    Auditor Quality And The Role Of Accounting Information In Explaining UK Stock Returns

    Using a variance decomposition approach, the authors examine the importance of accounting information - in particular the cash flow and accruals components of earnings - in explaining the variation in UK company stock returns. They extend prior research by analyzing whether auditor quality moderates the role of accruals and cash...

    Provided By Cardiff Business School

  • White Papers // Jun 2009

    Tacit Collusion Over Foreign Direct Investment Under Oligopoly

    A two-country model of the FDI versus export decisions of firms is analysed. The analysis considers both the Cournot duopoly and the Bertrand duopoly models with differentiated products. It is shown that the static game is often a prisoners' dilemma where both firms are worse off when they both undertake...

    Provided By Cardiff Business School

  • White Papers // Jun 2009

    Market Power Versus Efficient-Structure In Arab GCC Banking

    This paper evaluates the performance of the Arab GCC banking industry in the context of the Structure-Conduct-Performance hypothesis in the period 1993-2002. The paper uses panel estimation differentiating between bank fixed effects and country fixed effects. It examines the Relative-Market-Power and the Efficient-Structure hypotheses differentiating between the two by employing...

    Provided By Cardiff Business School

  • White Papers // Mar 2009

    A Correction Function Approach To Solve The Incidental Parameter Problem

    The authors propose a strategy to solve the incidental parameter problem. The method is demonstrated under a simple panel Poisson count model. They also extend the strategy to accommodate cases when information orthogonality is unavailable, such as the linear AR(p) panel model. For the AR(p) model, there exists a correction...

    Provided By Cardiff Business School

  • White Papers // Mar 2009

    Consistent Estimation, Model Selection And Averaging Of Dynamic Panel Data Models With Fixed Effect

    In the context of an autoregressive panel data model with fixed effect, the authors examine the relationship between consistent parameter estimation and consistent model selection. Consistency in parameter estimation is achieved by using the transformation of the fixed effect proposed by Lancaster (2002). They find that such transformation does not...

    Provided By Cardiff Business School

  • White Papers // Aug 2009

    The Horizon Effect Of Stock Return Predictability And Model Uncertainty On Portfolio Choice: UK Evidence

    The authors study how stock return's predictability and model uncertainty affect a rational buy-and-hold investor's decision to allocate her wealth for different lengths of investment horizons in the UK market. They consider the FTSE All-Share Index as the risky asset, and the UK Treasury bill as the risk free asset...

    Provided By Cardiff Business School

  • White Papers // Jul 2010

    The Strength And Persistence Of Entrepreneurial Cultures

    The twentieth century United States provides a natural experiment to measure the strength and persistence of entrepreneurial cultures. Assuming immigrants bear the cultures of their birth place, comparison of revealed entrepreneurial propensities of US immigrant groups in 1910 and 2000 reflected these backgrounds. According to this test North-western Europe, where...

    Provided By Cardiff Business School

  • White Papers // Dec 2009

    Some Problems In The Testing Of DSGE Models

    The authors review the methods used in many papers to evaluate DSGE models by comparing their simulated moments and other features with data equivalents. They note that they select, scale and characterise the shocks without reference to the data; crucially they fail to use the joint distribution of the features...

    Provided By Cardiff Business School

  • White Papers // Dec 2009

    Efficiency And Convergence In The Jamaican Banking Sector 1998-2007

    Deregulation, re-regulation and continuing globalization embody an imperative that banks increase efficiency to survive. The authors employ non-parametric bootstrap DEA to measure technical efficiency among Jamaican banks between 1998 and 2007. In addition, they test for conditional convergence to identify pointing variables for technical efficiency. Overall, the results suggest that...

    Provided By Cardiff Business School

  • White Papers // Dec 2009

    Two Orthogonal Continents? Testing A Two-Country DSGE Model Of The US And The EU Using Indirect Inference

    The authors examine a two country model of the EU and the US. Each has a small sector of the labor and product markets in which there is wage/price rigidity, but otherwise enjoys flexible wages and prices with a one quarter information lag. Using a VAR to represent the data,...

    Provided By Cardiff Business School

  • White Papers // Dec 2009

    Measuring Post-Crisis Productivity For Jamaican Banks

    This paper examines the changes to total factor productivity of Jamaican banks between 1998 and 2007. Using Data Envelopment Analysis with bootstrap to construct a Malmquist index, bank productivity is measured and decomposed into technical progress and efficiency. The results suggest an inconsistent growth pattern for banks between 1998 and...

    Provided By Cardiff Business School

  • White Papers // Dec 2009

    Controlling Banker's Bonuses: Efficient Regulation Or Politics Of Envy?

    The positive relationship between bank CEO compensation and risk taking is a well established empirical fact. The global banking crisis has resulted in a chorus of demands to control banker's bonuses and thereby curtail their risk taking activities in the hope that the world can avoid a repeat in the...

    Provided By Cardiff Business School

  • White Papers // Dec 2009

    Can The Fiscal Theory Of The Price Level Explain UK Inflation In The 1970s?

    The authors investigate whether the Fiscal Theory of the Price Level can deliver a reasonable explanation for UK inflation in the 1970s, a period in which the government greatly increased public spending without raising taxes and monetary policy was accommodative. The model is tested for its implied co-integration between inflation...

    Provided By Cardiff Business School

  • White Papers // Nov 2009

    A Banking Explanation Of The US Velocity Of Money: 1919-2004

    The paper shows that US GDP velocity of M1 money has exhibited long cycles around a 1.25% per year upward trend, during the 1919-2004 period. It explains the velocity cycles through shocks constructed from a DSGE model and annual time series data (Ingram et al., 1994). Model velocity is stable...

    Provided By Cardiff Business School

  • White Papers // Nov 2009

    Exchange Rate Uncertainty And Deviations From Purchasing Power Parity: Evidence From The G7 Area

    Arghyrou, Gregoriou and Pourpourides (2009) argue that exchange rate uncertainty causes deviations from the law of one price. The authors test this hypothesis on aggregate data from the G7- area. They find that exchange rate uncertainty explains to a significant degree deviations from Purchasing Power Parity. This paper tests this...

    Provided By Cardiff Business School

  • White Papers // May 2010

    Taylor Rule Or Optimal Timeless Policy? Reconsidering The Fed's Behavior Since

    The authors calibrate a standard New Keynesian model with three alternative representations of monetary policy-an optimal timeless rule, a Taylor rule and another with interest rate smoothing-with the aim of testing which if any can match the data according to the method of indirect inference. They find that the only...

    Provided By Cardiff Business School

  • White Papers // Sep 2009

    The Monetary Policy Implications Of Behavioral Asset Bubbles

    The author introduces behavioral asset pricing rules into a wider dynamic stochastic general equilibrium framework. Asset price bubbles emerge endogenously within the model. The author finds that in this model the only monetary policy that would be likely to enhance welfare is a counter-intuitive "Running with the wind" policy. The...

    Provided By Cardiff Business School

  • White Papers // Sep 2009

    Can Behavioral Finance Models Account For Historical Asset Prices?

    The author constructs a behavioral model of asset pricing in which agents choose whether to base their expectations on chartist or fundamental forecasts. The author simulates the model in order to test its efficacy in explaining the moments and time series properties of the FTSE All-Share index, and find that...

    Provided By Cardiff Business School

  • White Papers // Sep 2009

    Inflation, Human Capital And Tobin's Q

    A pervasive empirical finding for the US economy is that inflation is negatively correlated with the normalized market price of capital (Tobin's q) and growth. A dynamic stochastic general equilibrium model of endogenous growth is developed to explain these stylized facts. In this model, human capital is the principal driver...

    Provided By Cardiff Business School

  • White Papers // Sep 2009

    Bank Productivity In China 1997-2007: An Exercise In Measurement

    This paper examines the productivity growth of the nationwide banks of China and a sample of city commercial, banks for the eleven years to 2007. Estimates of total factor productivity growth are constructed with appropriate confidence intervals, using a bootstrap method for the Malmquist index. This paper adjusts for the...

    Provided By Cardiff Business School

  • White Papers // Sep 2009

    Rational Cost Inefficiency In Chinese Banks

    According to a frequently cited finding by Berger et al (1993), X-inefficiency contributes 20% to cost-inefficiency in western banks. Empirical studies of Chinese banks tend to place cost-inefficiency in the region of 50%. Such estimates would suggest that Chinese banks suffer from gross cost inefficiency. Using a nonparametric bootstrapping method,...

    Provided By Cardiff Business School

  • White Papers // Jul 2009

    The Banking Crisis - A Rational Interpretation

    Modern macroeconomic models have been widely criticized as relying too much on rationality and market efficiency. However, basically their predictions about this crisis are being borne out by events. 'Crashes' are an integral part of an 'Efficient market' capitalism and are brought on by swings in the news about productivity...

    Provided By Cardiff Business School

  • White Papers // Apr 2009

    On The Cyclicality Of Real Wages And Wage Differentials

    The authors show that two models of the labor market, a Walrasian model and a labor contracting model, both have an approximate dynamic factor structure. They use this result to motivate the empirical approach to estimating the cyclical properties of real wages, which does not impose any structure between real...

    Provided By Cardiff Business School

  • White Papers // Jan 2011

    Optimal Indexation Of Government Bonds And Monetary Policy

    Using an overlapping generations model in which the young save for old age using indexed and nominal government bonds, this paper investigates how optimal indexation is influenced by monetary policy. In order to do so, two monetary policies with markedly different long run implications are examined: inflation targeting and price-level...

    Provided By Cardiff Business School

  • White Papers // Jan 2011

    The Impact Of Price Regulations On Regional Welfare And Agricultural Productivity In China

    The nineties' agricultural reform in China that was aimed at deregulating the agricultural market eventually resulted in a huge drop in agricultural production and a high rate of inflation in agricultural prices; this apparently motivated the government to take over the control of agricultural prices in 1998. The authors examine...

    Provided By Cardiff Business School

  • White Papers // Jan 2009

    Economic Policy: Protectionism As An Elite Strategy

    The EU has pursued protectionist policies not merely in food but also in manufacturing at the customs union level. In services it has not dismantled much of the existing national protectionism. The economic costs are calculated here at some 3% of GDP for the UK and some 4% for the...

    Provided By Cardiff Business School

  • White Papers // Jan 2011

    Basic, Applied And Experimental Knowledge And Productivity: Further Evidence

    Analyzing a novel dataset the authors find significantly positive effects of basic, and applied and experimental knowledge stocks on domestic output and productivity for a panel of 10 OECD countries. This letter updates the work of, among others, Mansfield (1980), Griliches (1986) and Adams (1990), at an international setting. Two...

    Provided By Cardiff Business School

  • White Papers // Sep 2010

    How Robust Is The R&D?Productivity Relationship? Evidence From OECD Countries

    The authors examine the robustness of R&D and productivity relationship in a panel of 16 OECD countries. They control for fifteen productivity determinants predicted by different theoretical models. Following the advances in non-stationary panel data econometrics, they estimate four variants of thirteen specifications. All models appear co-integrated. Results are rigorously...

    Provided By Cardiff Business School

  • White Papers // Jun 2010

    Multilateral Trade Liberalisation, Foreign Direct Investment And The Volume Of World Trade

    A paradox in international trade is that multilateral trade liberalization has resulted in increases in both the volume of world trade and the amount of Foreign Direct Investment (FDI). This note presents a Cournot duopoly model with two regions, each consisting of two countries, and with an inter-regional transport cost....

    Provided By Cardiff Business School

  • White Papers // Mar 2010

    Motivated Sellers In The Housing Market

    The authors present a search-and-matching model of the housing market where potential buyers' willingness to pay is private information and sellers may become desperate as they are unable to sell. A unique steady state equilibrium exists where desperate sellers offer sizeable price cuts and sell faster. If the number of...

    Provided By Cardiff Business School