Robert Anderton

The ERM and structural change in European labour markets: A study of 10 countries

The ERM and Structural Change in European Labour Markets: A Study of 10 Countries. — This paper tests for structural changes in European labour markets and attempts to associate them with the evolution of the ERM as well as with political and institutional developments. The results indicate that diverging sacrifice ratios, rather than tax wedge and productivity effects may be the strongest impediment to labour market convergence in the transition from the ERM to full economic and monetary union. The empirical work indicates that the ERM may have provided some pressure towards more symmetric responses to shocks, but the changes have not been great.ZusammenfassungDer europäische Wechselkursmechanismus und der Strukturwandel auf europäischen Arbeitsmärkten. Eine Untersuchung von zehn Ländern. — In diesem Aufsatz werden strukturelle Veränderungen auf europäischen Arbeitsmärkten analysiert und versucht, sie mit der Entfaltung des europäischen Wechselkursmechanismus (ERM) ebenso in Verbindung zu bringen wie mit politischen und institutionellen Entwicklungen. Die Ergebnisse zeigen, daß eher Unterschiede im Tradeoffzwischen Inflation und Arbeitslosigkeit als Steuerkeil und Produktivitätseffekte die größten Hindernisse für eine Konvergenz der Arbeitsmärkte auf dem Weg vom europäischen Wechselkursmechanismus zu einer vollen Wirtschaftsund Währungsunion sein können. Die empirische Arbeit zeigt, daß der Wechselkursmechanismus zwar symmetrische Reaktionen auf Schocks verstärkt haben mag, daß aber die Veränderungen nicht groß gewesen sind.

What's trade got to do with it? Relative Demand for Skills within Swedish Manufacturing

What’s Trade Got to Do with It? Relative Demand for Skills within Swedish Manufacturing. — This paper seeks to identify the contribution of trade and technological change to the increase in inequality between skilled and unskilled workers in Sweden since the 1970s. An empirical approach is adopted which allows for the outsourcing of the low-skill parts of the production chain to low-wage locations and is applied to detailed industry and bilateral trade data, the latter distinguishing between low-wage sources of imports and OECD countries. The paper finds that, in contrast to previous studies, trade with low-wage countries may have contributed to the rise in inequality in Swedish manufacturing. The empirical results also suggest that the increased use of technology also played a role in creating greater inequality between skilled and unskilled workers in Sweden, with the magnitude of this impact increasing in the 1990s.

The Global Financial Crisis: Understanding the Global Trade Downturn and Recovery

This paper aims to shed light on why the downturn in global trade during the intensification of the financial crisis in 2008Q4–2009Q1 was so severe and synchronised across the world and also examines the subsequent recovery in global trade during 2009Q2–2010Q1. The paper finds that a structural imports function which captures the different and time‐varying import‐intensities of the components of total final expenditure – consumption, investment, government expenditure, exports, etc. – can explain the sharp decline in global imports of goods and services. By contrast, a specification based on aggregate total expenditure cannot fully capture the global trade downturn. In particular, panel estimates for a large number of OECD countries based on the individual components of expenditure suggest that the high import‐intensity of exports at the country‐level can explain a significant proportion of the decline in world imports during the crisis, while declines in the highly import‐intensive expenditure category of investment also contributed to the remaining fall in global trade. At the same time, the high and rising import‐intensity of exports also reflects and captures the rapid growth in ‘vertical specialisation’, suggesting that widespread global production chains may have amplified the downturn in world trade and partly explains its high degree of synchronisation across the globe. In addition, the estimates find that stockbuilding, business confidence and credit conditions also played a role in the global trade downturn. Meanwhile, the global trade recovery (2009Q2–2010Q1) can only be partially explained by differential elasticities for the components of demand (although the results confirm that the upturn in OECD imports was also driven by strong export growth and the reactivation of global production chains, as well as the recovery in stockbuilding and the fiscal stimulus). This may be in part because of the many policy measures that were implemented to boost global trade at that time and which cannot be captured by the specification. The paper is also a pseudo‐real‐time robustness test of the specification in that the first analysis of the global trade downturn is based on the data available at the time (i.e. October 2009 vintage), while an updated analysis of the global downturn as well as the trade upturn is based on a more recent dataset (i.e. October 2010 vintage). The results for the global downturn remain robust regardless of which vintage of the dataset is used.

Did the underlying behaviour of inflation change in the 1980s? A study of 17 countries

Did the Underlying Behaviour of Inflation Change in the 1980s? A Study of 17 Countries. - Have the ERM member countries experienced a regime change to a lower degree of persistence for inflation in the 1980s compared to the 1970s? Some results give the impression that deflationary policies associated with ERM membership may have reduced the mean level of inflation, but did not reduce the persistence parameter over the last decade. However, other results show that the persistence parameter does decline for a majority of ERM members. Surprisingly, the results also show stronger evidence of a fall in inflation persistence for some non-ERM countries who adopted a strong anti-inflationary stance over the same period.ZusammenfassungIst es in den achtziger Jahren grundlegend zu einem anderen Inflationsverhalten gekommen? Eine Studie für 17 Länder. - Haben die Mitgliedsländer des Europäischen Währungsmechanismus (EWM) einen derart markanten Wandel erfahren, daß sich die Inflation in den achtziger Jahren weniger beharrlich fortgesetzt hat als in den siebziger Jahren? Einige Ergebnisse vermitteln den Eindruck, daß die Deflationspolitik verbunden mit der Mitgliedschaft im EWM wohl dazu geführt hat, daß das durchschnittliche Inflationsniveau gesunken ist, aber nicht, daß die Parameter für die Beharrlichkeit der Inflation über die letzte Dekade gefallen sind. Jedoch lassen andere Resultate erkennen, daß die Beharrlichkeit der Inflation in einigen EWM-Ländern nachgelassen hat. Andere Resultate zeigen allerdings auch, daß die Beharrlichkeit der Inflation in einigen Nicht-EWM-Ländern, die zur gleichen Zeit eine dezidierte Antiinflationspolitik betrieben haben, noch stärker zurückgegangen ist.

Policy Regimes and the Persistence of Wage Inflation and Unemployment

This paper uses time-varying parameter estimation techniques to discover whether the exchange-rate mechanism (ERM) member countries experienced a regime change to a lower degree of persistence for both wage inflation and unemployment in the 1980s. The results show that the persistence of wage inflation may have changed over the 1980s for some countries, but that this experience was not unique to ERM membership (although the time profile of the persistence parameter for some ERM member countries corresponds with policy shifts related to ERM membership). Furthermore, only a few countries show a decline in the persistence of unemployment in the 1980s. Copyright 1998 by Blackwell Publishers Ltd and The Victoria University of Manchester

Key Elements of Global Inflation

Against the background of large fluctuations in world commodity prices and global growth, combined with ongoing structural changes relating to globalization, this paper examines some of the key factors affecting global inflation. The paper empirically investigates various relative price and structural impacts on global inflation by: estimating a GVAR to examine how oil price shocks feed through to core and headline inflation; calculating the impact of increased imports from low-cost countries on manufacturing import prices; estimating Phillips curves in order to shed light on whether the inflationary process in the OECD countries has changed over time, particularly with respect to the roles of import prices, unit labour costs and the output gap. Overall, the paper finds that there seem to be various significant pressures on global trade prices and labour markets associated with structural factors possibly partly due to globalisation which, in addition to monetary policy, seem to be behind some of the changes in the inflation process over the period examined in this paper.

The Impact of Globalisation on the Euro Area Macroeconomy

The general acceleration of trade globalisation over the last decade - or a growing interdependence of economies via trade, production and financial market linkages - has engendered several macroeconomic implications for the euro area. This paper focuses on assessing the key impacts on the euro area macroeconomy through an analysis of prospective channels, stylised facts and review of relevant empirical findings. It takes a long-term perspective over a period predominantly characterised by the rapid growth of globalisation, nothwithstanding the more recent interruption to the growth of global trade and capital flows that emerged towards the end of 2008 associated with the global financial turmoil and the associated downturn in global economic activity. Following an overview of the salient aspects of globalisation, which highlights the increasing openness of the euro area in terms of both trade and capital flows as well as the global reduction in transportation and information costs and the rise in the effective global supply of labour, the paper then assesses the external impacts of globalisation on the euro area, focussing on trade performance, export specialisation and import prices. It then investigates euro area domestic adjustment to globalisation with a supply-side focus, analysing separately impacts on productivity, labour markets and prices.

Macroeconomic Performance in a Globalising Economy

The process of globalisation has been ongoing for centuries, but few would doubt that it has accelerated and intensified in recent decades. This acceleration is evidenced as much by the strong synchronicity in the rapid transmission of financial crises starting in late 2007 as it is by the decade of almost unprecedented growth in international trade and financial market liberalisation that preceded it. This book shows how the international economy has become more connected via increased production, trade, capital flows and financial linkages. Using a variety of methodologies, including both panel econometrics and DSGE modelling, a team of experts from academia, central banks and the IMF examine how this increased globalisation has affected competitiveness, productivity, inflation and the labour market. This timely contribution to the globalisation literature provides a longer-term perspective while also evaluating some of the potential implications for policy makers, particularly from a European perspective.

The Global Financial Crisis: Understanding the Global Trade Downturn and Recovery1

This paper aims to shed light on why the downturn in global trade during the intensification of the financial crisis in 2008Q4–2009Q1 was so severe and synchronised across the world and also examines the subsequent recovery in global trade during 2009Q2–2010Q1. The paper finds that a structural imports function which captures the different and time‐varying import‐intensities of the components of total final expenditure – consumption, investment, government expenditure, exports, etc. – can explain the sharp decline in global imports of goods and services. By contrast, a specification based on aggregate total expenditure cannot fully capture the global trade downturn. In particular, panel estimates for a large number of OECD countries based on the individual components of expenditure suggest that the high import‐intensity of exports at the country‐level can explain a significant proportion of the decline in world imports during the crisis, while declines in the highly import‐intensive expenditure category of investment also contributed to the remaining fall in global trade. At the same time, the high and rising import‐intensity of exports also reflects and captures the rapid growth in ‘vertical specialisation’, suggesting that widespread global production chains may have amplified the downturn in world trade and partly explains its high degree of synchronisation across the globe. In addition, the estimates find that stockbuilding, business confidence and credit conditions also played a role in the global trade downturn. Meanwhile, the global trade recovery (2009Q2–2010Q1) can only be partially explained by differential elasticities for the components of demand (although the results confirm that the upturn in OECD imports was also driven by strong export growth and the reactivation of global production chains, as well as the recovery in stockbuilding and the fiscal stimulus). This may be in part because of the many policy measures that were implemented to boost global trade at that time and which cannot be captured by the specification. The paper is also a pseudo‐real‐time robustness test of the specification in that the first analysis of the global trade downturn is based on the data available at the time (i.e. October 2009 vintage), while an updated analysis of the global downturn as well as the trade upturn is based on a more recent dataset (i.e. October 2010 vintage). The results for the global downturn remain robust regardless of which vintage of the dataset is used.

Asymmetric wage adjustment and employment in European firms

We explore the impact of wage adjustment on employment with a focus on the role of downward nominal wage rigidities. We use a harmonised survey dataset, which covers 25 European countries in the period 2010-2013. These data are particularly useful for this paper given the firm-level information on the change in economic conditions and collective pay agreements. Our findings confirm the presence of wage rigidities in Europe: first, collective pay agreements reduce the probability of downward wage adjustment; second, the rise in the probability of downward base wage responses following a decrease in demand is significantly smaller than the rise in the probability of an upward wage response associated with an increase in demand. Estimation results point to a negative effect of downward wage rigidities on employment at the firm level.