Macroprudential policies, such as caps on loan-to-value (LTV) ratios, have become part of the policy paradigm in emerging markets and advanced countries alike. Given that housing is the most important asset in household portfolios, relaxing or tightening access to mortgages may affect the distribution of household wealth in the country. In a stylised model we show that the final level of wealth inequality depends on the size of the LTV ratio, housing prices, credit cost and the strength of a bequest motive, and therefore it is not possible to predict an unequivocal effect of LTV ratios on wealth inequality. These trade-offs are illustrated with estimations of “Gini Recentered Influence Function” regressions on household survey data from 12 Euro-zone countries that participated in the first wave of the Household Finance and Consumption Survey. The results show that, among the households with active mortgages, high LTV ratios at the time of acquisition are related to high contributions to wealth inequality today, while house price increases are negatively related to inequality contributions. A proxy for the strength of bequest motives tends to be negatively related with wealth inequality, but credit cost does not show a significant link to the distribution of wealth.
Markov-switching models are usually specified under the assumption that all the parameters change when a regime switch occurs. Relaxing this hypothesis and being able to detect which parameters evolve over time is relevant for interpreting the changes in the dynamics of the series, for specifying models parsimoniously, and may be helpful in forecasting. We propose the class of sticky infinite hidden Markov-switching autoregressive moving average models, in which we disentangle the break dynamics of the mean and the variance parameters. In this class, the number of regimes is possibly infinite and is determined when estimating the model, thus avoiding the need to set this number by a model choice criterion. We develop a new Markov chain Monte Carlo estimation method that solves the path dependence issue due to the moving average component. Empirical results on macroeconomic series illustrate that the proposed class of models dominates the model with fixed parameters in terms of point and density forecasts.
The conditional equality and egalitarian equivalence criteria were proposed by Fleurbaey (Fairness, responsibility, and welfare, Oxford University Press, Oxford, 2008) to provide better foundations to interpersonal comparisons in the context of heterogeneous preferences and multidimensional welfare. The first implementations of the egalitarian equivalence criterion follow an approach where the preferences are captured at the group level (based on socio-demographic variables) rather than at the individual level. Our contribution is to extend these models by using information on individual preferences, derived from the potential discrepancy between the group level optimal choice and the revealed choice of the individuals. We implement and compare the conditional equality and egalitarian equivalence criteria on a 2004 US microeconomic dataset and find that these criteria are relatively consistent in the identification of the worst-off. We also show that up to 18 % of the worst-off are no longer categorized as worst-off when the empirical approach accounts for individual preferences.
Recent developments in trade theory strongly emphasize that international trade requires an intensive use of skilled workers. Against this background, we explore in this paper whether labor skills are a key determinant of real exchange rates in the long run. Using panel regressions covering 22 countries over the period 1950–2010, we find that labor skills are indeed a structural determinant of real exchange rates, with a permanent increase of the skilled–unskilled labor ratio leading to a long-run appreciation of the real exchange rate. This finding is robust to the inclusion of several control variables, like those used in traditional analyses of real exchange rates.
This paper provides new empirical evidence about the relationship that may exist between real exchange rates and commodity prices in developing countries that are specialized in the export of a main primary commodity. It investigates how structural factors like the exchange rate regime, the degree of financial and trade openness, the degree of export concentration and the type of the commodity exports affect the strength of the commodity price-real exchange rate dependence.
With the current sovereign debt crisis, the incompleteness of economic integration in the Economic and Monetary Union (EMU) has become patent, leading to an intense debate among academics and policy makers. Much of the debate concerns fiscal rules and austerity measures, both of which weigh on growth prospects. In this paper we look at the main structural shortcomings of EMU through the lens of general equilibrium theory. We address two issues (international sharing of macroeconomic risks and coordinated growth stimulation) which are at the heart of the sustainability of EMU. We propose : (A) a specific scheme for mutual insurance of macroeconomic risks ; (B) locating responsibility for demand policies at the EMU level, with ambitious investment programs (public, or fiscally-neutral private) as main instrument. JEL Classification : E24, E63, H63.
Hedging strategies for commodity prices largely rely on dynamic models to compute optimal hedge ratios. This paper illustrates the importance of considering the commodity inventory effect (effect by which the commodity price volatility increases more after a positive shock than after a negative shock of the same magnitude) in modelling the variance-covariance dynamics. We show by in-sample and out-of-sample forecasts that a commodity price index portfolio optimized by an asymmetric BEKK-GARCH model outperforms the symmetric BEKK, static (OLS) or naïve models. Robustness checks on a set of commodities and by an alternative mean-variance optimization framework confirm the relevance of taking into account the inventory effect in commodity hedging strategies.
This paper proposes an ex-post measure of inequality of opportunity in France and its regions by assessing the inequality between individuals exerting the same effort. To this end, we define a fair income that fulfils ex-post equality of opportunity requirements. Unfairness is measured by an unfair Gini based on the distance between the actual income and the fair income. Our findings reveal that the measures of ex-post inequality of opportunity largely vary across regions, and that this is due to differences in reward schemes and in the impact of the non responsibility factors of income. We find that most regions have actual incomes closer to fair incomes than to average income, excepted Ile de France where the actual income looks poorly related to effort variables. Finally, we find that income inequality and inequality of opportunity are positively correlated among regions. Copyright Springer Science+Business Media New York 2013
Commodity price booms, as those recorded in the last decade, may have a significant economic impact in small, commodity exporting, developing countries. Whether the impact on output is positive or negative is still unclear. It depends on various factors, notably on the impact that commodity prices can have on the real exchange rate of the commodity exporting countries. Two recent papers show that the real exchange rate appreciates when commodity prices increase. Our analysis produces new estimates of this relationship by focusing on a large sample of developing countries which are specialized in the export of one leading commodity. By using non-stationary panel techniques robust to cross-sectional dependence, we find that the price of the dominant commodity has a significant long-run impact on the real exchange rate when the exports of the leading commodity have a share of at least 20 percent in the country's total exports of merchandises. Our results also show that the larger this share, the larger the size of the impact.