scholarly journals THE ASYMMETRIC EFFECTS OF UNCERTAINTY ON MACROECONOMIC ACTIVITY

2016 ◽  
Vol 20 (5) ◽  
pp. 1219-1246 ◽  
Author(s):  
Paul M. Jones ◽  
Walter Enders
Keyword(s):  
Financial Crisis ◽  
Linear Model ◽  
Smooth Transition ◽  
Macroeconomic Variables ◽  
Asymmetric Effects ◽  
State Of The Economy ◽  
Recent Financial Crisis ◽  
Positive Shock ◽  
Smooth Transition Autoregressive ◽  
Negative Shock

We estimate a number of macroeconomic variables as logistic smooth transition autoregressive (LSTAR) processes with uncertainty as the transition variable. The notion is that the effects of increases in uncertainty should not be symmetrical with the effects of decreases in uncertainty. Nonlinear estimation allows us to answer several interesting questions left unanswered by a linear model. For a number of important macroeconomic variables, we show that (i) a positive shock to uncertainty has a greater effect than a negative shock and (ii) the effect of the uncertainty shock is highly dependent on the state of the economy. Hence, the usual linear estimates for the consequences of uncertainty are underestimated in circumstances such as the recent financial crisis.

scholarly journals Does Money Illusion Matter?

2001 ◽  
Vol 91 (5) ◽  
pp. 1239-1262 ◽  
Author(s):  
Ernst Fehr ◽  
Jean-Robert Tyran
Keyword(s):  
Individual Level ◽  
Asymmetric Effects ◽  
Money Illusion ◽  
Positive Shock ◽  
Nominal Shocks ◽  
Negative Shock

This paper shows that a small amount of individual-level money illusion may cause considerable aggregate nominal inertia after a negative nominal shock. In addition, our results indicate that negative and positive nominal shocks have asymmetric effects because of money illusion. While nominal inertia is quite substantial and long lasting after a negative shock, it is rather small after a positive shock. (JEL C92, E32, E52)

European Welfare State Constitutions after the Financial Crisis

2020 ◽  
Keyword(s):  
Financial Crisis ◽  
Structural Changes ◽  
Social Protection ◽  
Welfare States ◽  
Constitutional Review ◽  
State Constitutions ◽  
Social Law ◽  
European Welfare State ◽  
One Step ◽  
Recent Financial Crisis

At a time when Europe is in the grip of a new crisis, it is especially useful to look back at the experiences of the European welfare states’ constitutions during the most recent financial crisis. This book provides unique insights by analysing social protection reforms undertaken in nine European countries, from both a social law and a constitutional law perspective. It highlights the mixture of short-term cuts in benefits and of structural changes in social protection schemes. The crisis might have helped to further the partial and temporary implementation of reforms, but it certainly cannot spare us from the debates and political compromises that are unavoidable in order to reform social protection thoughtfully and thoroughly. Moreover, the book records the outcome of relevant constitutional review proceedings and thereby demonstrates that, even if corrections remained restricted to relatively few cases, social rights matter. The financial crisis advanced their protection one step further, but left many questions open. One lesson is of paramount importance, also for helping us overcome the current pandemic crisis: we need a substantial and commonly accepted agreement in the Europe Union on how to balance the economy and social protection in the future.

scholarly journals Assessing the sustainable nature of housing-related taxation receipts: the case of Ireland

2016 ◽  
Vol 9 (2) ◽  
pp. 193-214 ◽  
Author(s):  
Diarmaid Addison Smyth ◽  
Kieran McQuinn
Keyword(s):  
Financial Crisis ◽  
Housing Market ◽  
Extended Period ◽  
Market Regulation ◽  
Content Type ◽  
Public Finances ◽  
Financial Market Regulation ◽  
The Public ◽  
Recent Financial Crisis ◽  
Run Up

Purpose The Irish fiscal position was significantly affected by the recent financial crisis. Budgetary surpluses quickly gave way to significant deficits post 2007, culminating into a lengthy excessive deficit procedure and entry into a formal EU/IMF assistance programme in 2010. Much of the deterioration in the public finances was caused by a sharp decline in property-related taxes because the Irish housing market rapidly contracted. In this paper, the authors quantify the extent to which disequilibria in the housing market can affect the tax take, finding significant implications over an extended period. Design/methodology/approach The authors attempt to quantify the extent of housing-related tax windfall gains and losses in Ireland over a 30-year period as a result of disequilibrium in the housing market. This involves a three-step modelling approach where we relate property-dependent taxes to the housing market while estimating equilibrium in the latter before solving for the tax take consistent with that equilibrium. In so doing, the authors find that the fiscal position compatible with equilibrium in the housing market has at times diverged greatly from actual outturns. Findings This paper confirms the significant role played by the housing market in influencing both the tax-take and the overall fiscal position. The authors find that there have been a number of instances where excesses in the housing market have spilled over into fiscal aggregates, notably in the housing bubble period between 2003 and 2008. However, with the on-going adjustments in the housing market, it would appear that prices and volumes have overcorrected in recent years. Overall, much greater emphasis should be given to the role of the housing market in forecasting key taxation aggregates. Originality/value The recent crisis highlighted how domestic policy mistakes (both in terms of budgetary planning and financial market regulation) can greatly amplify economic shocks. Irish budgetary policy in the run up to the financial crisis of 2008/2009 was clearly based on unsustainable levels of housing-related tax receipts. This paper highlights the need for a much more granular approach in framing tax forecasts and in assessing the public finances by more explicitly factoring in housing market developments.

scholarly journals The Benefits of Conservative Accounting to Shareholders: Evidence from the Financial Crisis

2013 ◽  
Vol 27 (2) ◽  
pp. 319-346 ◽  
Author(s):  
Bill Francis ◽  
Iftekhar Hasan ◽  
Qiang Wu
Keyword(s):  
Financial Crisis ◽  
Firm Value ◽  
Governance Mechanism ◽  
Current Crisis ◽  
Stock Performance ◽  
Conservative Accounting ◽  
Alternative Measures ◽  
Recent Financial Crisis ◽  
And Control ◽  
Jel Classifications

SYNOPSIS Using the recent financial crisis as a natural quasi-experiment we test whether, and to what extent, conservative accounting affects shareholder value. We find that there is a significantly positive and economically meaningful relation between conservatism and firm stock performance during the current crisis. The result holds for alternative measures of conservatism and is validated in a series of robustness checks. We further find that the relation between conservatism and firm value is more pronounced for firms with weaker corporate governance or higher information asymmetry. Overall, our paper complements LaFond and Watts (2008) by providing empirical evidence to their argument that conservatism is an efficient governance mechanism to mitigate information risk and control for agency problems, and that shareholders benefit from it. JEL Classifications: M41; M48; G01.

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