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Torsten Schmidt - One of the best experts on this subject based on the ideXlab platform.

  • Zinswende in den USA — Fluch oder Segen für die Konjunktur im Euroraum?
    Wirtschaftsdienst, 2015
    Co-Authors: Svetlana Rujin, Torsten Schmidt
    Abstract:

    While the U.S. and the U.K. are likely to experience an interest rate turnaround in the near future, monetary conditions in the euro area will remain highly accommodative for a long time. The qualitative and quantitative effects of diverging monetary positions between major central banks are expected to have highly heterogeneous effects across the euro area. Thus, the reassessment of international monetary policy transmission mechanism seems relevant and timely. Simulations with the RWI-Multi Country Model quantify the effects of the interest rate hike in the U.S. and in the U.K. on domestic and eurozone economies along with the impact of the depreciation of the euro as a consequence of the recent ECB’s quantitative easing move. Sowohl in den USA als auch in Großbritannien ist in naher Zukunft mit einer Zinswende zu rechnen. Die Länder des Euroraums sind davon sicher unterschiedlich betroffen. Die Autoren stellen die wichtigsten Transmissionskanäle der internationalen Übertragung der geldpolitischen Impulse dar und quantifizieren die Effekte einer Anhebung der Zinsen in den USA und in Großbritannien auf die heimische Wirtschaft sowie auf ausgewählte Länder des Euroraums mit Hilfe des RWI-MehrländerModells. Parallel dazu werden die Auswirkungen einer anhaltenden Abwertung des Euro infolge der jüngsten Lockerung der Geldpolitik durch die EZB ermittelt.

  • Warum sich Deutschland der Rezession im Euroraum widersetzen kann
    Wirtschaftsdienst, 2012
    Co-Authors: Sebastian Breuer, Torsten Schmidt
    Abstract:

    Germany is economically closely intertwined with the other member countries of the euro area. Some of these countries are in a deep recession, and it is feared that Germany will not manage to avoid being swept up by this economic burden for long. However, the German economy also benefits from the depreciation of the euro and low interest rates in the euro area — both of which are results of the economic slump in the euro area, too. In order to get an idea of the magnitude of these countervailing effects, we perform simulations with the RWI-Multi Country Model. Copyright ZBW and Springer-Verlag Berlin Heidelberg 2012

  • Warum sich Deutschland der Rezession im Euroraum widersetzen kann
    Wirtschaftsdienst, 2012
    Co-Authors: Sebastian Breuer, Torsten Schmidt
    Abstract:

    Germany is economically closely intertwined with the other member countries of the euro area. Some of these countries are in a deep recession, and it is feared that Germany will not manage to avoid being swept up by this economic burden for long. However, the German economy also benefits from the depreciation of the euro and low interest rates in the euro area — both of which are results of the economic slump in the euro area, too. In order to get an idea of the magnitude of these countervailing effects, we perform simulations with the RWI-Multi Country Model. Deutschland ist mit den übrigen Ländern des Euroraums wirtschaftlich eng verknüpft. Einige Länder befinden sich in einer tiefen Rezession und es wird zum Teil befürchtet, dass Deutschland sich diesem Rezessionssog nicht entziehen kann. Die deutsche Wirtschaft profitiert aber auch von dem schwachen Euro und den niedrigen Zinsen. Um die Größenordnung dieser gegenläufigen Effekte abzuschätzen, werden Simulationen mit dem RWI-MehrländerModell durchgeführt.

Sebastian Breuer - One of the best experts on this subject based on the ideXlab platform.

  • Warum sich Deutschland der Rezession im Euroraum widersetzen kann
    Wirtschaftsdienst, 2012
    Co-Authors: Sebastian Breuer, Torsten Schmidt
    Abstract:

    Germany is economically closely intertwined with the other member countries of the euro area. Some of these countries are in a deep recession, and it is feared that Germany will not manage to avoid being swept up by this economic burden for long. However, the German economy also benefits from the depreciation of the euro and low interest rates in the euro area — both of which are results of the economic slump in the euro area, too. In order to get an idea of the magnitude of these countervailing effects, we perform simulations with the RWI-Multi Country Model. Copyright ZBW and Springer-Verlag Berlin Heidelberg 2012

  • Warum sich Deutschland der Rezession im Euroraum widersetzen kann
    Wirtschaftsdienst, 2012
    Co-Authors: Sebastian Breuer, Torsten Schmidt
    Abstract:

    Germany is economically closely intertwined with the other member countries of the euro area. Some of these countries are in a deep recession, and it is feared that Germany will not manage to avoid being swept up by this economic burden for long. However, the German economy also benefits from the depreciation of the euro and low interest rates in the euro area — both of which are results of the economic slump in the euro area, too. In order to get an idea of the magnitude of these countervailing effects, we perform simulations with the RWI-Multi Country Model. Deutschland ist mit den übrigen Ländern des Euroraums wirtschaftlich eng verknüpft. Einige Länder befinden sich in einer tiefen Rezession und es wird zum Teil befürchtet, dass Deutschland sich diesem Rezessionssog nicht entziehen kann. Die deutsche Wirtschaft profitiert aber auch von dem schwachen Euro und den niedrigen Zinsen. Um die Größenordnung dieser gegenläufigen Effekte abzuschätzen, werden Simulationen mit dem RWI-MehrländerModell durchgeführt.

Warwick J. Mckibbin - One of the best experts on this subject based on the ideXlab platform.

  • Climate change scenarios and long term projections
    Climatic Change, 2009
    Co-Authors: Warwick J. Mckibbin, David Pearce, Alison Stegman
    Abstract:

    Predictions of future temperature increases depend critically on the projections of future greenhouse gas emissions. Yet there is a vigorous debate about how these projections should be undertaken. This paper explores a range of methodological issues surrounding projecting greenhouse emissions over the next century. It points out that understanding future emissions requires a framework that deals with the sources of economic growth and allows for endogenous structural change. It also explores the role of convergence assumptions and the “Castles and Henderson Critique” of the Special Report on Emission Scenarios (SRES) regarding use of Market Exchange Rates (MERs) rather than Purchasing Power Parity exchange rates (PPPs) to benchmark income differentials in the world economy. In the G-Cubed Multi-Country Model, we show that emission projections based on convergence assumptions defined in MER terms, are 40% higher by 2100 than emissions generated using a PPP comparison of income differentials between economies. We support the argument presented by Castles and Henderson, that the use of MERs in the SRES represents a serious analytical error. It is not clear what this means for the SRES projections because the SRES is not transparent in its assumptions. In the G-Cubed Model, the error leads to considerably higher emissions projections.

  • Solving Large Scale Models Under Alternative Policy Closures: The MSG2 Multi-Country Model
    Advances in Computational Economics, 1999
    Co-Authors: Warwick J. Mckibbin
    Abstract:

    This paper explores a number of issues in the design and use of the MSG2 Multi-Country Model for policy simulation analysis. A brief overview of the MSG2 Model is presented in Section 2. The use of large scale Models with rational expectations such as the MSG2 Model has required the development of new numerical algorithms. The solution algorithm that is used to solve the MSG2 Model, as well as several other Multi-Country Models including the G-Cubed Model (seeMcKibbin and Wilcoxen (1995)), is summarized in Section 3. In Sections 4 and 5 the impact of alternative assumptions about fiscal and monetary closure rules are explored in more detail. In particular the standard assumptions used in the MSG2 Model of a incremental interest payments rule for fiscal are compared to other assumptions frequently used in other global Models such as a debt targeting rule and a fiscal conservatism rule. In addition, rules for monetary policy such as a fixed stock of money rule, a nominal income mle and an inflation target are compared. Both sets of policy closure assumptions are compared focusing on Australia but the insights generalize across the other countries in the Model. It is shown that these assumptions can have some important implications for both the long run and short run impacts of fiscal and monetary policy. A summary is presented in Section 6.

  • Greenhouse abatement policy: insights from the G-cubed Multi-Country Model
    The Australian Journal of Agricultural and Resource Economics, 1998
    Co-Authors: Warwick J. Mckibbin
    Abstract:

    The third meeting of the Conference of the Parties of the Framework Convention on Climate Change held in Japan last December was a lost opportunity to set a realistic policy framework for addressing climate change in the coming decades. A number of countries proposed targets for greenhouse emissions, to be reached by a target date. The outcome was a range of different targets for each country. Analysis with the G‐cubed multi‐country Model suggests that fixed targets are a costly way to address climate change. The extent of potential cost suggests the agreement will eventually fail. A better way to address climate change is to focus on uniformity in policy instruments that deliver differentiated outcomes rather than focus on differentiated policy settings.

  • The Macroeconomic Consequences of the Savings and Loan Debacle
    The Review of Economics and Statistics, 1994
    Co-Authors: Joyce Manchester, Warwick J. Mckibbin
    Abstract:

    This paper used a general equilibrium framework to examine the macroeconomic consequences of the recent failures and subsequent bailout in the savings and loan industry. We distinguish between the losses in the capital stock, the economic effects of alternative methods of funding those real losses, and the intertemporal transfer of real resources implicit in backing the financial assets used. We then embed the analysis in a general equilibrium, Multi-Country Model with intertemporal budget constraints that allows for the interaction of intertemporal adjustment and expectation revisions. The more complete Model is used to explore the consequences of the S&L debacle on the evolution of the U.S. economy during the 1980s and 1990s. Copyright 1994 by MIT Press.

Alison Stegman - One of the best experts on this subject based on the ideXlab platform.

  • Climate change scenarios and long term projections
    Climatic Change, 2009
    Co-Authors: Warwick J. Mckibbin, David Pearce, Alison Stegman
    Abstract:

    Predictions of future temperature increases depend critically on the projections of future greenhouse gas emissions. Yet there is a vigorous debate about how these projections should be undertaken. This paper explores a range of methodological issues surrounding projecting greenhouse emissions over the next century. It points out that understanding future emissions requires a framework that deals with the sources of economic growth and allows for endogenous structural change. It also explores the role of convergence assumptions and the “Castles and Henderson Critique” of the Special Report on Emission Scenarios (SRES) regarding use of Market Exchange Rates (MERs) rather than Purchasing Power Parity exchange rates (PPPs) to benchmark income differentials in the world economy. In the G-Cubed Multi-Country Model, we show that emission projections based on convergence assumptions defined in MER terms, are 40% higher by 2100 than emissions generated using a PPP comparison of income differentials between economies. We support the argument presented by Castles and Henderson, that the use of MERs in the SRES represents a serious analytical error. It is not clear what this means for the SRES projections because the SRES is not transparent in its assumptions. In the G-Cubed Model, the error leads to considerably higher emissions projections.

Alpo Willman - One of the best experts on this subject based on the ideXlab platform.

  • Limited information minimal state variable learning in a medium-scale Multi-Country Model
    Economic Modelling, 2013
    Co-Authors: Alistair Dieppe, Alberto González Pandiella, Stephen G. Hall, Alpo Willman
    Abstract:

    Rational expectations has been the dominant way to Model expectations, but the literature has quickly moved to a more realistic assumption of boundedly rational learning where agents are assumed to use only a limited set of information to form their expectations. A standard assumption is that agents form expectations by using the correctly specified reduced form Model of the economy, the minimal state variable solution (MSV), but they do not know the parameters. However, with medium-sized and large Models the closed-form MSV solutions are difficult to attain given the large number of variables that could be included. Therefore, agents base expectations on a misspecified MSV solution. In contrast, we assume that agents know the deep parameters of their own optimising frameworks. However, they are not assumed to know the structure nor the parameterisation of the rest of the economy, nor do they know the stochastic processes generating shocks hitting the economy. In addition, agents are assumed to know that the changes (or the growth rates) of fundament variables can be Modelled as stationary ARMA(p,q) processes, the exact form of which is not, however, known by agents. This approach avoids the complexities of dealing with a potential vast multitude of alternative misspecified MSVs.

  • The ECB's New Multi-Country Model for the euro area: NMCM — Simulated with rational expectations
    Economic Modelling, 2012
    Co-Authors: Alistair Dieppe, Alberto González Pandiella, Alpo Willman
    Abstract:

    The Model presented here is a New estimated medium-scale Multi-Country Model (NMCM) which covers the five largest euro area countries and is used for forecasting and scenarios analysis at the European Central Bank. The Model has a tight theoretical structure which allows for non-unitary elasticity of substitution, non-constant augmenting technical progress and heterogeneous sectors with differentiated price and income elastiticites of demand across sectors. Furthermore, it has the explicit inclusion of expectations on the basis of three optimising private sector decision making units: i.e. firms, trade unions and households, where output is in the short run demand-determined and monopolistically competing firms set prices and factor demands. Labour is indivisible and monopoly-unions set wages and households make consumption/saving decisions. We assume agents optimise under limited information where each agent knows only the parameters related to his/her optimization problem. Therefore we estimate with GMM, which implicitly assumes limited information boundedly rational expectations. In this paper we provide some simulation results under the assumption of Model-consistent rational expectations, we show that there is some heterogeneity across countries and that the reactions of the economies to shocks depends strongly on whether the shocks are pre-announced, announced and credible or unannounced and uncredible. JEL Classification: C51, C6, E5

  • The ECB's New Multi-Country Model for the Euro area: NMCM - with Boundedly Rational Learning Expectations*
    2011
    Co-Authors: Alistair Dieppe, Alberto González Pandiella, Stephen G. Hall, Alpo Willman
    Abstract:

    Rational expectations has been the dominant way to Model expectations, but the literature has quickly moved to a more realistic assumption of boundedly rational learning where agents are assumed to use only a limited set of information to form their expectations. A standard assumption is that agents form expectations by using the correctly specified reduced form Model of the economy, the minimal state variable solution (MSV), but they do not know the parameters. However, with medium-sized and large Models the closed-form MSV solutions are difficult to attain given the large number of variables that could be included. Therefore, agents base expectations on a misspecified MSV solution. In contrast, we assume agents know the deep parameters of their own optimizing frameworks. However, they are not assumed to know the structure nor the parameterization of the rest of the economy, nor do they know the stochastic processes generating shocks hitting the economy. In addition, agents are assumed to know that the changes (or the growth rates) of fundament variables can be Modeled as stationary ARMA(p,q) processes, the exact form of which is not, however, known by agents. This approach avoids the complexities of dealing with a potential vast multitude of alternative mis-specified MSVs. Using a new Multi-Country Euro area Model with Boundedly Estimated Rationality we show this approach is compatible with the same limited information assumption that was used in deriving and estimating the behavioral equations of different optimizing agents. We find that there are strong differences in the adjustment path to the shocks to the economy when agent form expectations using our learning approach compared to expectations formed under the assumption of strong rationality. Furthermore, we find that some variation in expansionary fiscal policy in periods of downturns compared to boom periods.

  • The Spanish Block of the Escb-Multi-Country Model
    2002
    Co-Authors: Alpo Willman, Ángel Estrada
    Abstract:

    This paper presents the Spanish country block (ES-MCM) of the ESCB Multi-Country Model for the euro area, which has been built in a close co-operation with the ECB and the Banco de Espaa. The theoretical structure of the ES-MCM block is in line with most current mainstream macro Models, i.e. the supply factors determine the long-run equilibrium, while in the short run output is demand-determined, resulting from a sluggish adjustment of prices and quantities. The paper is structured as follows. First, a simplified theoretical counterpart of the ES-MCM block is presented and its steady-state comparative statistics and stock-flow equilibrium properties are studied. The theoretical analysis is followed by the review of the estimated equations of the ES-MCM block. Finally the simulation properties of the ES-MCM block are presented in the light of five alternative shock simulations. JEL Classification: E10, E13, E17