Emmanuel V. Pikoulakis

Non-Leisure Time, the Price of Capital and Okun's Law: A Model Applied to the Informal Economy

I derive a rule for the allocation of non-leisure time which can account for variations in labor time between the market and the non-market sectors and can accord well with Okuns law. Applying this rule empirically to the informal economy confirms, contrary to previous findings, that corporate and personal income taxes do not influence this economy, unlike the price of capital which does.

The Allocation of Non-Leisure Time and the Price of Capital: A Model Applied Empirically to the Wage Curve

Our aim in this paper is, first, to derive a model capable of explaining the stylized fact that fluctuations in labor market activities over the business cycle are primarily accommodated by changes in employment rather than in wages and, secondly, to test this model empirically. The model is simple, analytically tractable, capable of explaining a wide range of labor market behavior and, crucially, capable of explaining away real wage rigidities without resorting to market imperfections. Second, when tested empirically, the model is found to be strongly supported by the data of a diverse spectrum of economies. As it turns out, our model shares a key property with Phelps (1994) and Phelps and Zoega (1998), namely, that variations in the price of assets play a pivotal role in explaining variations in employment and in wage rates.

The Importance of Education Quality for Growth and Development

In this paper we present a model of optimizing behavior in a two-sector, centrally planned, economy that faces a given interest rate and that is capable of generating sustainable growth. By allowing the model economy to benefit from innovations at the technology frontier through a simple process of technological transfers, we are able to show that education quality not only speeds up the process of technology diffusion but it also helps account for 45-53 per cent of differences in labor productivity. As we argue, failure to control for the gap in technology levels between the leader and the follower economies severely biases downwards the semi-elasticity on educational attainment and it severely biases upwards the share of earnings from capital.

Turning Potential Growth Disasters into Growth Miracles: The Bare Essentials of Conditional Convergence

In this paper I simplify the modeling of transitional dynamics and empirically explain why so many developing economies have seen their per capita income diverge from that of most OECD economies. I also provide evidence that strongly supports conditional convergence among the sample considered consisting of 40 non-OECD plus 24 OECD economies. Diverging per capita incomes and conditional convergence are, thus, not inconsistent with each other. Introducing installation costs into the analysis unlocks the key role of the price of capital in growth and development. My findings are consistent with a model of imperfect competition where optimizing agents save a constant fraction of their incomes.

The Real Exchange Rate and its Real Fundamentals: A Story of Success in a Nutshell

Questions regarding the volatility of the real exchange rate, its speed of adjustment to equilibrium, the direction and magnitude of permanent deviations from Purchasing Power Parity, and the relation between real exchange rates and interest rate differentials can all be addressed by models of optimizing behavior founded in the Consumption Capital Asset Pricing Model and the Ramsey-Cass-Koopmans model. As a result, the behavior of the real exchange rate encountered in the data is fully consistent with the fundamentals in these models.

The random walk hypothesis of the exchange rate: Implications for a risk premium

Abstract We show that the exchange rate can follow a random walk without assuming risk neutrality. We are thus able to derive a random walk hypothesis for the exchange rate which is associated with a risk premium that may differ from zero.