Tryphon Kollintzas

Comparisons of Business Cycles in the EC: Idiosyncracies and Regularities

This paper compares the business cycle features of the EC economies using quarterly and annual data since 1960 and the Real Business Cycle model as a guidance. The evidence suggests that there are remarkable similarities between the business cycle pattern of these countries, despite significant differences in the patterns of fiscal and monetary policies and the terms of trade. We take this evidence to suggest that the type of shocks and the propagation mechanism is fairly similar across the EC countries. Hence the process of European integration under a set of uniform institutions and policies should not be a problem as far as the business cycle is concerned. Copyright 1995 by The London School of Economics and Political Science.

A small open economy model with transaction costs in foreign capital

Abstract In this paper we develop a stochastic dynamic general equilibrium model for a small open economy in the real business cycle modeling tradition. Household preferences depend on private and public consumption and leisure. Production technology depends on public capital. Government finances its investment, consumption and transfer payments by means of a proportional income tax rate. Households buy and sell foreign assets in an international capital market with transaction costs and also receive transfer payments from abroad. We calibrate the model for the Greek economy. The volatility, persistence, and co-movement properties of the business cycle component of the data generated by the model are broadly consistent with the actual behavior of the corresponding actual data. We use the model to investigate the response of major macroeconomic variables to temporary and permanent changes in government policy variables, foreign transfers, and the rate on return of foreign assets. We find that increasing government consumption and domestic transfers financed through distorting taxation lowers capital, labor (in most cases) and output while it increases foreign asset holdings, both in the short and the long run. Increasing government investment financed by distorting taxation eventually increases capital and output and decreases labor. Finally transfers from abroad decrease capital, labor and output, while they increase consumption.

A Dynamic Model of Bargaining in a Unionized Firm with Irreversible Investment

This paper develops a dynamic model of bargaining between a firm and union. Capital is assumed to be firm-specific, so only nonnegative investments are possible. Collective bargaining contracts specify the level of the wage rate that will prevail for a fixed contract length, while the firm unilaterally chooses employment. Two types of equilibria are considered. In one equilibrium, the wage-employment outcomes lie on the marginal revenue product of labor curve and the wage is determined by a generalized Nash bargain. This equilibrium is Pareto inefficient. In another equilibrium, wage-employment pairs lie on the contract curve and wages are set above the marginal product of labor. In this equilibrium, the firms desire to reduce employment strategies in which the union bargains tougher in the future and the Pareto inefficient equilibrium prevails. Existence results are established and the equilibria are characrerized for a particular specification of the firms revenue function and the unions temporal utility function, using recursive methods. The model is calibrated on stylized facts from the U.S. economy. It turns out that the calibrated model can account for several other stylized facts; in particular, the relatively low variability of the wage rate and the countercyclicality of the union wage premium. Moreover, it is found that irreversibilities are crucial in this respect, in the ergodic as well as the nonergodic states.

Linear Rational Expectations Equilibrium Laws of Motion for Selected U.S. Raw Material Imports

In this paper, the authors develop and estimate time-series models of the rational-expectations equilibrium laws of m otion for several U.S. commodity imports: bauxite, cocoa, coffee, and petroleum. The theoretical model is based upon the optimizing behavi or of firms that import in the presence of supply shocks, delivery la gs, and adjustment and inventory holding costs. One of the important features of the empirical model is that the authors are able to estim ate elasticities that distinguish between responses to changes in the environment that importers expect to be relatively temporary versus relatively permanent. Copyright 1987 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

A generalized variance bounds test with an application to the Holt et al. inventory model

Abstract This paper derives a variance bounds test for a broad class of linear rational expectations equilibrium models. According to this test, if observed data accord with the model, then a weighted sum of autocovariances of the covariance-stationary components of the endogenous state variables should be nonnegative. The new test reinterprets Wests (1986) variance bounds test and extends its applicability by not excluding unobservable exogenous state variables, nonstationary exogenous and endogenous state variables, and nonzero initial values for the endogenous state variables. The new test is computed together with Wests test for the Holt et al. inventory model using nondurable industry data. While Wests test almost always rejects the model, the latter almost always passes the new test. This and other evidence provide strong support for the importance of supply shocks in explaining aggregate inventory behavior via the Holt et al. model.

On the Many Kinds of Growth: A Note

In this note, the authors synthesize exogenous and endogenous sources of economic growth in a stochastic dynamic log linear general equilibrium model. Endogenous growth could be the result of internal constant returns to scale, external increasing returns to scale in the production of human capital or in the production of goods. The authors get a closed form log linear representation for the dynamic laws of motion for the human and physical capital stocks. Using the solution, they distinguish between different sources of growth that combine exogenous technical progress with endogenous sources of growth that jointly can generate many possible patterns of economic growth. Copyright 1996 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Recursive Factor of Production Interrelations and Endogenous Cycling

A multivariate linear rational expectations equilibrium version of the Lucas-Prescott investment model is developed to study the behavior of factors of productions with recursive interrelations. The connection between these interrelations and endogenous cycling is established in a testable way. Maximum likelihood estimates, using annual postwar aggregate U.S. manufacturing data, provide strong evidence of capital-labor interrelations that induce a labor overshooting type of endogenous cycling. This raises questions for the methodology of current real business cycle models which rule out the possibility of such interrelations. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Distributed lags and intermediate good imports

Abstract In this paper we draw upon some recent developments in the theory of dynamic economics and econometrics to characterize the time series behavior of intermediate good imports. It is shown that adjustment costs, delivery lags, and inventory holding costs considerations lead to distributed lag import demand functions that are not subject to the Nerlove (1972) and Lucas (1976) critiques of ad hoc and fixed distributed lag modelling.

The Linear Rational Expectations Equilibrium Inventory Model: An Introduction

This paper intends to serve as an introduction to the other papers in this volume. It develops a linear rational expectations equilibrium version of the Holt et al (1960) inventory model. The necessary conditions and the sufficient conditions for a solution are derived and the stability, cycling, and comparative dynamics properties of the solution are investigated.

A Linear Rational Expectations Equilibrium Model of the American Petroleum Industry

This paper develops and estimates a model of the American petroleum industry. The model accounts for the storable and exhaustible nature of petroleum as well as the strategic interaction of agents operating in the stochastic environment of the markets for crude and refined petroleum products. The linear rational expectations modelling framework is adopted. The formulation and the econometric specification of the model are motivated by a statistical and vector autoregression analysis of the annual data for the post World War II period. The parameter estimates of the model over that period conform to the model’s restrictions. In addition, the overall fit of the model judged from the usual diagnostic statistics seems to be relatively good. Important findings of this empirical test are: a not too inelastic domestic demand for refined petroleum products; a marginal cost of domestic crude petroleum production that is an increasing function of cumulative production (exhaustibility), evidence of production smoothing inventory behavior; fast inventory adjustment to desired inventory levels; and finally, upward sloping foreign supplies of crude and refined petroleum products.