Iris Biefang-Frisancho Mariscal

Unit roots and structural breaks in OECD unemployment

Abstract We apply unit root tests that allow for two endogenous break points in the unemployment rates of 26 OECD countries. Our results show that unit root tests that do not account for structural breaks are misspecified and suggest excessive persistence.

Capital Stock, Unemployment and Wages in the UK and Germany

This paper is concerned with the view that capital formation is an important variable in the determination of unemployment and wages in Germany and the UK. Adverse demand shocks affect employment and investment. When shocks reverse, unemployment may not fall to previous levels due to insufficient capital. The empirical results show that unemployment has risen in the last twenty years in both countries due to insufficient investment. Policies that are aimed at stimulating investment may have a permanent effect on unemployment in Germany and the UK. Copyright 2000 by Scottish Economic Society.

OECD unemployment: structural breaks and stationarity

The paper is concerned with testing the unemployment rate of twenty two OECD countries for stationarity. A sequential testing procedure was applied where the break data is endogenized. Three different models were tested for unit roots. It was found that the ‘crash’ model, which allows for a shift in the level of the unemployment rate, was most relevant. Furthermore, most breaks were associated with the first oil price shock. Results suggest that in nine countries the unit root can be rejected, in ten countries the null hypothesis cannot be rejected and in three cases the results suggest possible trend stationarity.

Capital Shortages and Asymmetries in UK Unemployment

The persistence of high unemployment has been one of the most puzzling developments of the past twenty years or so. In the UK, unemployment averaged 2.1% between 1966 and 1973, and since 1974 it has risen to an average of 7.5%. The prevailing view of the persistence of unemployment and of the continuous rise in the NAIRU is that explanations and solutions can only be found on the supply side and not on the demand side of the economy. Most economists regard the problem of job creation mainly as a matter of encouraging more employment with the existing stock of capital. However, any long-run analysis should consider that the capital stock may vary. The relationship between capital stock and employment may be a simple explanation which suggests that investment in new productive capacity increases the number of jobs, while the destruction of existing capacity may destroy jobs. It may also be that the fall in investment encourages asymmetric responses in the labour market and thus the persistence of unemployment. This paper is concerned with the determination of aggregate wages and unemployment in the UK. We try to explain the persistence of unemployment by beginning with theories that concentrate on supply side failures in the labour market. The model is extended by examining the relationship between capital stock and employment. It is argued that the fall in investment over the last twenty years or so is one of the major elements behind the fall in employment and that only a substantial rise in productive capital may reduce unemployment. It is also argued that capital scrapping during the two oil price shocks, combined with low investment subsequently, may have caused long-term unemployment. This is not to say that low skill or other worker characteristics are not important, but that investment-enhancing policies may have prevented long-term unemployment to some extent. Furthermore, we introduce a new dimension to the discussion of money wage determination and unemployment by incorporating non-linearities in the relationship. There are various reasons for expecting that wages adjust with different speed to disequilibrium errors. The asymmetric error correction model applied here, accounts for the different speeds of adjustment in response to deviations of the actual unemployment rate from the attractor, the NAIRU. The empirical investigation tests each of the hypotheses put forward. Firstly, we find that capital shortage increases NAIRU. Secondly, we test and establish that a fall in investment creates long-term unemployment, and thirdly, we provide evidence which suggests that the speed of adjustment in nominal wages depends on unemployment being above or below NAIRU.

Central Banks and Market Interest Rates

Abstract: In a world of endogenous money, the central bank’s role in monetary policy is reduced to the setting of a very short-term official rate of interest, which indicates the price at which it will make liquidity available to the banking system. However; it is changes in market rates that affect behavior; and so the ability of the central bank to influence anything at all depends, first, on the interaction between official and market rates. In this paper; we use a vector autogressive error correction model to explore the response to changes in the central bank rate of three short-term market rates that have beenfeatured previously in this journal in debates about the demand for endogenous money.

Conflict, Effort and Capital Stock in UK Wage Determination

The paper is concerned with the determination of wages, unemployment and labour productivity in the UK. The theoretical model suggests that in addition to economic factors, historical and ideological elements play an important role in the determination of wages, unemployment and productivity. Particular emphasis is put on the capital shortage hypothesis. It is argued that capital scrapping in response to the two oil price shocks, combined with subsequent sluggish growth in capital, may be responsible for the rise of the NAIRU and the persistence of unemployment. The empirical analysis is concerned with testing the theoretical model, using quarterly data for the UK from 1966 until 1994. We use cointegration analysis for the determination of wages, unemployment and labour productivity.

Monetary Policy Transparency in the UK:The Impact of Independence and Inflation Targeting

Abstract There is a widespread belief that the transparency of UK monetary policy has increased substantially as a result of the introduction of inflation targeting in 1992 and a number of procedural and institutional reforms which accompanied and followed it. Here, money market responses (and other data) are used to test the possibility that improved anticipation of policy moves may be the result of developments other than the institutional reforms popularly cited. We find overwhelming evidence that the switch to inflation targeting itself significantly reduced monetary policy surprises, while subsequent reforms have contributed little. Where we advance substantially on earlier work is to look at the cross‐sectional dispersion of agents’ anticipation. If the benefit of transparency is the elimination of policy surprise, there is little benefit if the averagely correct anticipations of agents conceal a wide dispersion of view.

Wage determiniation in the UK: further empirical results using conintegraion

The present paper examines the long-run behaviour of two types of wage models for the UK over the preiod 1996:1–1989:2 These models, differing in their theoretical construction,are estimated and explored using various tests for cointegration.The Hall(1986,1989) model is based on Saragans(1964) wage specification, while the Arestis and Skott (1993) and Arestis and Biefang-Frisancho Mariscal (1993) model is concerned with distributional and wage efficeincy theortical effects. Both models exhibit at least one economically sensible long-run relationship for wage determination with significant and correctly signed parameters and show expected proportionality between wages and productivity. Further, the Arestis and Skott(1993) model shows the effects of effciency wage elements on effort.

Monetary Policy Transparency:Lessons from Germany and the Eurozone

The conduct of monetary policy emphasises institutional arrangements which make monetary policy decision-making more ‘transparent’. Judged by these institutional features neither the Bundesbank, nor the ECB, score very highly. We test for (i) agents’ average ability to anticipate policy rate changes under the Bundesbank and the ECB and (ii) and agents’ forecasting unanimity of money market rates. Rising forecasting uncertainty may either be due to a lack of ECB transparency or to larger inflation and growth forecasting errors. Our results indicate that inflation forecast spreads widened amongst private agents and that inflation forecasting uncertainty increased the forecasting spread of money market rates

A two-state Markov-switching distinctive conditional variance application for tanker freight returns

The few papers that explore different ways to measure shipping freight dynamics have differed in their interpretation of the most suitable measure for conditional freight volatility and consequently for the most appropriate freight risk measure. Furthermore, recent empirical work in maritime studies suggests the possibility of conditional freight volatility switching between different regime states that are dynamically distinct. This paper attributes these dissimilarities in findings within maritime literature to the possibility of freight returns switching between distinctive volatility structures. Therefore, it proposes a two-state Markov-switching distinctive conditional variance model by matching the two-state conditional freight variance to the most suitable GARCH specification. This provides for the first time a distinctive empirical insight into the dynamics of tanker freight rates by explaining the dissimilarities within the maritime literature in measuring freight risk that improves our understanding of the changes in volatility dynamics of the freight supply curve. Thus, this study postulates that the dynamics of freight rates are distinct and conditional on the freight volatility regime-state that prevails at the time. Empirical findings postulate that volatilities within tanker freight returns are better modelled by a framework that is capable of capturing volatility dynamics within the tanker freight market. This study attempts to explain the dissimilarities within the maritime literature in measuring freight risk by improving our understanding of the changes in volatility dynamics of the freight supply curve.