Gerard H. Kuper

Modelling government investment and economic growth on a macro level: a review

This paper reviews empirical research on the impact of government capital spending on economic growth. The pros and cons of five different ways to model the relationship between public investment and economic growth are reviewed, while some estimation results are presented for illustrative purposes. We start with the production function approach in which the public capital stock is added as an additional input factor in a production function, which is then estimated at a national or regional level. Alternatively, a cost or profit function in which the public capital stock is included could be estimated by what we call the behavioural approach. A third way to examine the relationship between government investment and economic growth is the so-called VAR approach. By imposing as few economic restrictions as possible this approach tries to solve some of the problems raised by the production and behavioural approach. The first three approaches are all based on time-series (or panel data). A fourth way to model the growth effects of public capital spending is to include government investment spending in cross- section growth regressions. Finally some attempts to estimate the growth effects of public investment spending using structural econometric models are discussed.

Indicators of Financial Crises Do Work! An Early-warning System for Six Asian Countries

Indicators of financial crisis generally do not have a good track record. This paper presents an early warning system for six countries in Asia, in which indicators do work.We distinguish three types of financial crises, currency crises, banking crises and debt crises, and extract four groups of indicators from the literatureexternal, financial, domestic (real and public), and global indicatorsthat are likely to affect the probability of financial crises. The significance of the indicator groups is tested in a multivariate logit model on a panel of six Asian countries for the period 1970:01-2001:12. An additional feature is that we examine four different currency crisis dating definitions. A within-sample signal extraction experiment reveals that some currency crises dating schemes outperform others.

The Impact of Newspapers on Consumer Confidence: Does Spin Bias Exist?

It is sometimes argued that news reports in the media suffer from biased reporting. Mullainathan and Shleifer (2002, 2005) argue that there are two types of media bias. One bias, called ideology, reflects a news outlets desire to affect reader opinions in a particular direction. The second bias, referred to as ‘spin’ or ‘slanting’, reflects the outlets attempt to simply create a memorable story. Competition between outlets can eliminate the effect of ideological bias, but increases the incentive to spin or slant stories. We examine whether we find some evidence of spin in Dutch newspaper reporting on the state of the economy. If newspapers are indeed able to create memorable stories this should, according to our hypothesis, affect the opinion of readers with respect to the state of the economy. Sentiments about the actual state of the economy could be magnified by spin. As a result, consumer confidence–a variable that routinely measures the opinion on the state of the economy–can be expected to be affected not only by economic fundamentals, but also by the way these fundamentals are reported. We construct a variable that reflects the way consumers perceive economic news reported in newspapers. We find that this variable indeed has a significant impact on consumer confidence, which is short-lived.

Do daily retail gasoline prices adjust asymmetrically

This paper analyses adjustments in the Dutch retail gasoline prices. We estimate an error correction model on changes in the daily retail price for gasoline (taxes excluded) for the period 1996–2004, taking care of volatility clustering by estimating an EGARCH model. It turns out that the volatility process is asymmetrical: a positive shock to the retail price has a greater effect on the variance of the retail price than a negative shock. We conclude that the retail price and the spot price do not drift apart in the long run. However, there is a faster reaction to upward changes in spot prices than to downward changes in spot prices in the short run. This asymmetry starts 3 days after the change in the spot price and lasts for 4 days.

Path-dependency and input substitution: implications for energy policy modelling

In most policy-oriented energy models, the effectiveness of energy policy instruments crucially depends both on the values of the substitution elasticities between the various inputs and on the rates of technological progress. In this paper, we argue that due to the fixed-cost nature of adjustments to relative price changes, these technological parameters are affected by past developments. Failing to account for the role of history will result in biased parameter estimates, and hence the implication for energy policy modelling is that the estimation period should be carefully selected. We provide an empirical illustration using data for the Netherlands.

Endurance in speed skating: The development of world records

We analyse the development of world records speed skating from 1893 to 2000 for both men and women. The historical data show that it is likely that the relation between skating speed and distance of the various events is non-linear and converges to a limit value. We pay special attention to technical innovations in speed skating, especially, the introduction of the klapskate in the 1996/1997 season, and its impact on the long-run limit value. We focus on endurance and we estimate lower bounds for world records given the current technological state of the art. We illustrate the forecasting properties of our model using the Salt Lake City 2002 Winter Games results.

Measuring Oil Price Volatility

In this paper we try to measure oil price uncertainty. The measure of uncertainty is based on the conditional standard deviations which are derived from univariate (G)ARCH models. The measure of uncertainty we choose is the within-year high-low range of the conditional standard deviations. It is likely that the higher the uncertainty, the higher the high-low range within a year will be. We focus on volatility of the price of a barrel Brent crude, over the period 5 January, 1982 to 23 April, 2002 representing 5296 observations. The preferred model is a symmetric GARCH(1,3) model. Asymmetric leverage effects are not found. We also examine the volatility in monthly time series for the period January, 1970 to April, 2002. For this time span and frequency we prefer the GARCH(1,1) model.

Olympic Participation and Performance since 1896

Abstract We analyze the decision to participate and Olympic performance at the country level. We use an unbalanced panel of 118 countries over 24 editions of the Olympic Summer Games. The main focus of the paper is on economic, geographic and demographic explanations of Olympic participation and success. We estimate the impact of income per capita, population size, home advantage, and institutional variables on participation and success rates. We present separate results for events before the Second World War and after. These results show that income is an important determinant of Olympic participation and success. Socialist countries send more athletes to the games and have more success in medal counts. The home advantage has become less prominent.

CESAM - THE CCSO ANNUAL MODEL OF THE DUTCH ECONOMY

This paper presents CESAM, a macroeconometric model of the Dutch economy based on annual data. CESAM can be characterized as a Keynesian expenditure model including a neoclassical production model and a post-Keynesian financial model. This characterization holds for most of the Dutch macroeconometric models including, for instance, FREIA-KOMPAS of the Dutch Central Planning Bureau. There are, however, some interesting features that distinguish CESAM from other Dutch models: the production structure is based on a putty-clay vintage approach; the financial model is based on a system of financial accounts and is modelled using the portfolio approach; and the institutional structure of Dutch public finance is described in detail. The main objectives in using the model are to generate medium-term forecasts of the Dutch economy and to analyse economic policy.

On the effect of high energy prices on investment

Empirical analyses of firm behaviour typically assume that there is a stable relationship between investment on the one hand and changes in the relative prices of inputs, output demand and other determinants on the other hand. However, because of the lumpy nature and irreversibility of investments and the presence of uncertainty about future economic developments, a specific percentage change in relative prices and output demand may not always lead to the same percentage change in capital stocks. That means that different regimes may exist in investment behaviour. We test whether such regimes exist using high-quality data on eight manufacturing industries in the Netherlands. Three different regimes can be identified that are characterized by differences in the relative input price levels and we find that if relative prices take on extreme values, the propensity to adjust the scale of production to changes in demand is very low.