Manfred W. Keil

Capital mobility for developing countries may not be so high

International capital flows to developing countries have taken on considerable policy importance in recent years. There is disagreement, however, about whether financial capital mobility has become so high that developing countries have little ability to sterilize capital flows. This paper reviews several popular methods of estimating the degree of capital mobility for developing countries and shows that they are subject to potentially important upward biases due to inappropriate assumptions concerning the roles of domestic inflation and sterilization. Corrections for these factors can cut estimates of capital mobility by one half or more.

An Analysis of Canadian Unemployment

The paepr reviews different reasons for the emergence in the 1980s of an unemployment gap between Canada and the U.S. We develop a small equilibrium model ofthe Canadian labor market to quantify and evaluate these reasons. We conclude that the gap is essentially due to the liberalization of the benefits system in 1971, the effects of which have often been masked by raw-material booms. The huge increase in unemployment in 1981-82 appears to have been due to a sharp monetary squeeze, exacerbated by a fall in the price of exports.

Shrunken earnings predictions are better predictions

Analysts’ earnings forecasts are not perfectly correlated with actual earnings. One statistical consequence is that the most optimistic and most pessimistic forecasts are usually too optimistic and too pessimistic. The forecasts’ accuracy can be improved by shrinking them towards the mean. Insufficient appreciation of this statistical principle may partly explain the success of contrarian investment strategies, in particular why stocks with the most optimistic earnings forecasts underperform those with the most pessimistic forecasts.

Political Business Cycles

Few concepts in political economy are more widely known than the political business cycle (PBC). Nor have many given rise to such heated debate among scholars. The extent of debate reflects the highly mixed empirical evidence that has been found, but the heat of the debate has come largely from the challenge to the economists’ favorite assumption — rationality — posed by traditional formulations of the political business cycle theory. This in turn follows from the roles of macroeconomists and political scientists in the early contributions to political business cycle analysis. (For discussions of these see Drazen, 2000; Keech, 1995; Paldam, 1997).

Measures of financial openness and interdependence

Purpose - The purpose of this paper is to review concepts and measurements related to financial globalization such as financial openness, financial integration, monetary interdependence, and the mobility and movement of capital. Design/methodology/approach - This paper surveys the theoretical and empirical literature on monetary interdependence and financial globalization. The major ways in which these concepts are measured empirically are presented and critiqued. Findings - Disagreements about the degree of financial integration and capital mobility are, in part, explained by the different approaches to measuring these concepts. One major challenge in obtaining a good measures is controlling for other major factors that may influence observed correlations among financial variables. While these relationships still cannot be estimated precisely, it can be safely said that while high for many countries, few if any financial markets are perfectly integrated across countries. Originality/value - By offering a comprehensive analysis of these different measurements, the paper underscores the different implications for national policies and the operation of the international monetary system of different dimensions of globalization. In particular, the proposition that financial globalization has left most countries with little autonomy for domestic monetary policy is subject to serious debate, at least in the short run.

Internal migration and unemployment in Germany: an Anglo-Irish perspective.

Internal Migration and Unemployment in Germany: An Anglo-Irish Perspective. — The paper analyzes the effect on the migration rate of a number of labour market variables; in particular, relative wage levels and growth rates, and the relative unemployment rates in the home and foreign country. We study the Ireland-U.K. migration rate and use the estimates to predict migration between the two parts of unified Germany. We conclude that magnitudes of unemployment differences and wage differentials are such that currently observed substantial migration flows will not slow down for the forseeable future.ZusammenfassungInterne Wanderungen und Arbeitslosigkeit in Deutschland aus anglo-irischer Perspektive. — In diesem Aufsatz werden die Wirkungen einer Reihe von Arbeitsmarkt-Variablen auf die Wanderungsrate analysiert, insbesondere die Wirkungen der relativen Lohnhöhe und ihrer Wachstumsraten sowie des Verhältnisses der Arbeitslosenquoten zwischen Inland und Ausland. Die Verfasser untersuchen die Wanderungsraten zwischen Irland und dem Vereinigten Königreich und verwenden die Schätzungen für Voraussagen über die Wanderungen zwischen den beiden Teilen Deutschlands nach der Vereinigung. Sie kommen zu dem Ergebnis, daβ die Unterschiede in der Arbeitslosigkeit und in der Lohnhöhe so groβ sind, daβ sich die gegenwärtig beobachteten Wanderungsbewegungen in der absehbaren Zukunft nicht abschwächen werden.

Univariate Regressions of Employment on Minimum Wages in the Panel of U.S. States

The paper finds a strong negative correlation between youth employment and minimum wages for the panel of U.S. states, 1976-2007. Such a correlation is not observed in earlier panels. The source of the new results is traced to the greater variance of minimum wages across states emerging after about 2000.

A model of speculative efficiency with ‘news’ error components

This paper proposes a theoritical model to assess of ‘news’ on the spot-forward-exchange-rate relationship and thereby predicts of the impact of ‘news’on the exchange rate. Two types of ‘news’ are analysed: rational expectations type innovations and announcement effects form newspapers. By using historical data form a time period which includes the German hyperinflation of the early 1920s, an estimate from of the model is derived which is substantially simpler than the version requried using contemporary data. Preliminary results support the main theoretical predictions but also cast some doubt on a literal interpretation of the exchange rate model plus rational expectations.

The 2009 Recession in the U.S.

Nearly all pundits agree that the recession, which began in December 2007, will see a steep decline in U.S. output in 2009. In this paper we present a forecasting equation which performs well according to the standard econometric criteria and has a standard error of forecast which is a little better than the RMSE of CBO forecasts back to 1986. The forecast for 2009 is grim but not disastrous: we predict growth of -0.5%, more or less the same as 1981 and 2000, and about the same as the 20% most optimistic of the CBOs panel of blue chip forecasters. We use the forecast model to classify the seven worst recessions since 1955, finding that falls in the value of household financial assets are the most powerful causes in five of them, including the present. In addition, we look at the relationship between the housing market and the financial crisis. Perhaps counter-intuitive to some, we conclude that neither falls in house-prices nor mortgage-defaults are deflationary per se.