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Empirica, 2018, 45(3), pp.607-638, http://www.springer.com/10663
In this work, we simulate the effects of the tax autonomy of the Austrian Länder on the levels of public employment in each Land. We show that depending on the strength of the public sector lobby, tax autonomy would require a reduction of employment in the public sector of between 25 and 35 percent of the current level. We also show that tax autonomy increases welfare levels by 1 to 1.5 percent; that is, the positive change in the disposable income of the workers more than offsets the welfare loss resulting from the lower provision of public goods. Finally, we show that the reduction of public employment is superior in terms of welfare to an alternative scenario in which employment levels are held constant but the wage levels in the public sector are adjusted.
Alessandra Bettocchi, Elena Giarda, Cristiana Moriconi, Federica Orsini, Rita Romeo
Empirica, 2018, 45(3), pp.587-605, http://www.springer.com/10663
In this study we develop a micro-founded model to analyse the economic-financial conditions of Italian households. Using household level data, we build an indicator to identify vulnerable households based on their budget constraint and the composition of their financial portfolio. Then, we calculate the impact of the predicted trends of macroeconomic variables on the indicator in order to monitor its evolution in the short term (2015–2017). The empirical analysis is based on the Survey of Household Income and Wealth of the Bank of Italy and on a set of macroeconomic forecasts. Our findings suggest that the macroeconomic scenario for the period 2015–2017 implies a progressive reduction in the percentage of vulnerable households for the full extent of the projection.
Empirica, 2018, 45(3), pp.559-585, http://www.springer.com/10663
This paper characterises the long-run distribution of Austrian public debt using a Markov chain model of the debt-GDP ratio and several key macroeconomic variables. We apply Bayesian techniques to estimate the transition probabilities of the model which allows to incorporate information from other countries. Based on the model, we argue that the historical record of Austrian fiscal policy is consistent with a stable long-run distribution of the debt-GDP ratio with an expected value close to the 60 percent threshold of the Maastricht treaty. Our results suggest that the strong increase in the debt-GDP ratio in the aftermath of the recent financial crisis should be seen as a transitory tail event rather than as a sign of long-run unsustainability. However, we also show that the existence of a stable long-run distribution depends on a continuing tendency of fiscal policy to "lean against debt" by reducing the primary deficit in face of rising debt. Finally, we assess how exogenous shocks to the primary deficit and real GDP growth affect the model-implied distribution.
This study examines the long-run causal relationship between government revenues and spending of the Swedish economy over the period 1722–2011. The results based on hidden cointegration technique and a modified version of the Granger non-causality test, show that there exists a long-run and asymmetric relationship between government spending and government revenues. Our estimation results can be summarised into three main empirical findings. First, the government follows a hard budget constraint and soft budget constraint strategies in the case of negative and positive shocks, respectively. Second, negative shocks to the fiscal budget are removed fairly quickly compared to positive shocks. Third, bi-directional causality between revenues and expenditures offers support in favour of the fiscal synchronisation hypothesis. The policy implication is that budget deficit's reduction could be achieved through government spending cut, accompanied by contemporaneous tax controls.
Empirica, 2018, 45(3), pp.507-542, http://www.springer.com/10663
We analyse the deep and comprehensive free trade area (DCFTA) between Ukraine and the EU using a multi-regional general-equilibrium simulation model. Three alternative trade structures are implemented: 1. a standard specification of perfect competition based on the Armington assumption of regionally differentiated goods; 2. monopolistic competition among symmetric manufacturing firms; and 3. a competitive selection model of heterogeneous manufacturing firms. Across these structures the DCFTA indicates relatively large gains for Ukraine of more than 3 percent. We show, however, that the gains for Ukraine are lower when we consider monopolistic competition in manufacturing. This is attributed to a movement of resources into Ukraine's traditional export sectors to the EU, which produce under constant returns. While there is little danger of deindustrialisation dominating the overall welfare gains, we do observe substantially lower gains when we consider monopolistic competition. To our knowledge, this is the first empirical confirmation of the theoretic predication that the relative gains from trade in monopolistic competition models might be lower than under perfect competition in the context of a numeric simulation of economic integration. Under the popular heterogeneous-firms monopolistic competition theory we find significant firm selection effects indicating welfare impacts for Ukraine that are less than under the Armington structure but above those found under symmetric firms and monopolistic competition. These results are important considerations for Ukraine's overall development strategy.
N. Nergiz Dincer, Ayça Tekin-Koru, Pinar Yasar
Empirica, 2018, 45(3), pp.489-505, http://www.springer.com/10663
Turkey has been deeply integrated with the EU, its largest trading partner, particularly following the Customs Union agreement in 1996. However, the free trade agreements (FTAs) signed by the EU with third party countries may create some unfair competitive pressures, market share and welfare losses for Turkey. This study investigates the impact of the FTA signed by Algeria and the EU in 2005 on Turkey's trade flows. Covering 181 countries, a difference-in-differences analysis embedded in an extended gravity framework is employed to quantify the trade effects of the EU-Algeria FTA for the period of 1996–2013. Our findings suggest that bilateral trade between Turkey and Algeria is affected adversely due to the FTA. The counterfactual analysis shows that Turkish exports and imports to/from Algeria could have been 12 and 17 percent higher, respectively, had there been no FTA between the EU and Algeria.
This paper studies the role of regime shifts and time-varying volatilities in market integration in a Markov-switching volatility regime environment among the US, European and Asian developed securitised real estate markets. With a two-state volatility model, the study finds the co-dependence, co-movement and synchronisation of volatility regime at the high volatility state are stronger between the US and European securitised real estate markets. Although correlations among the markets are higher in a high volatility regime than in a low volatility regime, there is limited evidence of contagious effects during the high volatility periods between some markets. Moreover, the unsecuritised real estate markets are different from their securitised equivalent in the volatility regime characteristics, correlation pattern and level, as well as the extent of correlation change and contagion effect in high volatility state. Thus, the regime-switching results from stock markets may not be automatically extended to the corresponding public real estate markets, and require rigorous empirical scrutiny.
Aftab et al. (Empirica 43:461-485, 2016) in this journal assessed the impact of exchange rate volatility on Malaysia-EU trade at commodity level using the linear ARDL approach of Pesaran et al. (J Appl Econom 16:289-326, 2001) and did not find significant effects in most of the 81 Malaysian exporting and 66 importing industries. In this paper, we argue for asymmetric effects of exchange rate volatility on the same industries' trades which implies using Shin et al.'s (Festschrift in Honor of Peter Schmidt, Springer, New York, 2014) non-linear ARDL approach. While we find short-run asymmetric effects of volatility in almost all industries, we find evidence of adjustment asymmetry in 17 exporting and nine importing industries. We also find significant impact or short-run cumulative asymmetry in 12 exporting and six importing industries. The most important finding is significant long-run asymmetric effects in 36 Malaysian exporting industries and 25 Malaysian importing industries. Clearly, trade flows react to an increased exchange rate volatility differently than to a decreased volatility.
Economy in the Austrian Länder, Wien, August 2018, 63 pages
Study by: Austrian Institute of Economic Research
Online since: 13.08.2018 9:00
 
Die österreichische Wirtschaft wuchs im I. Quartal 2018 mit +0,8% gegenüber dem Vorquartal ähnlich stark wie in den zwei Quartalen davor. Im Einklang mit der anhaltenden Hochkonjunktur wurde die Beschäftigung im I. Quartal merklich ausgeweitet, während die Arbeitslosigkeit weiter sank. Wie bereits im Jahr 2017 profitierte die Wirtschaft im I. Quartal 2018 in allen Bundesländern vom Aufschwung. Regionale Konjunkturmuster waren dabei kaum zu erkennen.
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