Chu-Ping C. Vijverberg

Public Capital And Private Productivity

This paper uses three different approaches to investigate whether the declining provision of public capital is a major cause of declining labor productivity. The juxtaposition of approaches removes the variability in estimates due to dissimilar variable definitions and econometric methodologies. Estimates are based on U.S. time-series data and are evaluated by the implied elasticities of substitution, the prediction of labor productivity trends, and the impact of public capital on productivity. As the three approaches yield very different estimates, it will be hard to ever settle the debate about the effect of public capital on private productivity.

Mexico's Business Cycles and Synchronization with the USA in the Post‐NAFTA Years

A number of papers have investigated the increasing macroeconomic ties between Mexico and the USA. These studies have relied on linear models, however, making their results suspect. Other papers have investigated nonlinearity over the Mexican business cycle, but have not studied the links between the Mexican and US economies. In this paper a Markov�?switching model is employed to investigate the changing macroeconomic effect of the USA on Mexico. The findings show that the USA indeed appears to have a much larger impact since the passage of the North Atlantic Free Trade Association (NAFTA) than in previous years. Results also indicate that the level of foreign exchange reserves has much less predictive power for the Mexican economy since NAFTA. This suggests that the greater synchronization with the US business cycle may be more attributable to better macroeconomic management in Mexico than to the closer trade links.

Did the Classical Gold Standard Lead to Greater Business Cycle Synchronization? Evidence from New Measures

Previous studies have presented findings suggesting that the gold standard may have led to an increase in business cycle synchronization among its member countries. This follows a growing literature which posits that currency unions in general lead to greater synchronization of business cycles. The previous papers on the gold standard, however, suffer from simultaneity problems, and incomplete measures of just how synchronized output gaps are. We accordingly apply two new measures of business cycle coherence which have recently been applied to the modern Euro zone. These measures account both for differences in the sign as well as the amplitude of output gaps, and can be computed on a period‐by‐period basis, unlike previous metrics. In addition, we employ two other methods which do not allow for time‐varying estimation, but have been employed in other studies of output convergence. We find, contrary to the earlier studies, that the classical gold standard did not appear to increase the coherence of business cycles.

Time Deformation, Continuous Euler Processes and Forecasting

A continuous Euler model has time-varying coefficients. Through a logarithmic time transformation, a continuous Euler model can be transformed to a continuous autoregressive (AR) model. By using the continuous Kalman filtering through the Laplace method, this article explores the data application of a continuous Euler process. This time deformation of an Euler process deforms specific time-variant (non-stationary) behaviour to time-invariant (stationary) data on the deformed time scale. With these time-invariant data on the transformed time scale, one may use traditional tools to conduct parameter estimation and forecasts. The obtained results can then be transformed back to the original time scale. Simulated data and actual data such as bat echolocation and the US residential investment growth are used to demonstrate the usefulness of time deformation in forecasting. The results indicate that fitting a traditional autoregressive moving-average (ARMA) model on an Euler data set without imposing time transformation leads to forecasts that are out of phase while the forecasts of an Euler model stay mostly in phase. Copyright 2006 The Author Journal compilation 2006 Blackwell Publishing Ltd.

Did the Euro Common Currency Increase or Decrease Business Cycle Synchronization for its Member Countries

We use two variants of Markov switching models to assess changes in output synchronization since the creation of the euro. Out of eight eurozone countries investigated, only one—the Netherlands—has synchronization increased since euro adoption, supporting the ‘endogenous optimal currency area’ argument of Frankel and Rose. However, in three other cases, business cycle synchronization actually fell since the euros creation. Thus the ‘endogeneity’ of the optimal currency area criteria can go both ways—adopting a common currency may increase synchronization for nations ready for a common currency, but it can lower synchronization for nations that are far from synchronized before monetary unification.

Production Functions with Factor-Oriented Scale Sensitivity

It is not unreasonable to believe that most, if not all, important innovations are embodied in an industrys capital stock. The notion that the efficiency of large scale of production is brought about mainly by a larger size capital stock or a more advanced one is not new. The purpose of this paper is to search for production functions that allow the scale elasticity to vary with respect to capital stock and, at the same time, contains desirable properties of diminishing returns to labor and/or factor substitutability. There are numerous SSWK production functions. However, the objectives of this paper are to, first of all, find a general way to generate the SSWK production functions, and secondly, to find those SSWKs with certain desirable properties. Copyright 1996 by MIT Press.

The Exogeneity (at Best) of the Optimum Currency Area Criteria for the Euro Zone

A number of papers over the last decade have posited that Optimal Currency Areas are endogenous with respect to business cycle synchronization. The claim is that a common currency will greatly increase trade, and then trade will increase output synchronization. Countries that thus seem ill-suited for a common currency prior to a monetary union may become well-suited once the union is in place. There are other channels, however, through which a common currency could lead to convergent- or divergent-business cycles that this literature overlooks. We thus test directly for the impact of the Euro on business cycle synchronization using two variants of Markov Switching models. Examining four small Euro zone countries, our results indicate there was no increase in convergence with the larger economies of Germany and France in two cases, and in the other two cases, actually divergence. In contrast, when investigating three non-Euro zone countries, there is no significant loss of synchronization in two cases, and an increase in synchronization in one case. These results are precisely the opposite of what would be expected from the endogenous OCA literature, and bolster the case for caution before nations with differing cycles or structures enter a currency union.