Market Power and Income Taxation

This article analyzes concerns about market power and inequality in a model with multiple sectors, heterogeneous abilities, endogenous labor supply, and nonlinear income taxation. Proportional markups with no profit dissipation have no effect on the economy, and a policy that reduces a nonproportional markup raises (lowers) welfare when it is higher (lower) than a weighted average of other markups. With proportional (partial or full) profit dissipation, proportional markups are equivalent to a downward shift of the distribution of abilities, and the optimal policy rule with nonproportional markups maximizes consumer plus producer surplus despite concerns for distribution and labor supply distortion. (JEL D43, D61, H21, H23, H24, K21, L13, L40)

Bifurcations and Arnold Tongues of a Multiplier-Accelerator Model

In this paper, we investigate the bifurcations of a multiplier-acceler-ator model with nonlinear investment function in an anti-cyclical fiscal policy rule. Firstly, we give the conditions that the model produces supercritical flip bifurcation and subcritical one respectively. Secondly, we prove that the model undergoes a generalized flip bifurcation and present a parameter region such that the model possesses two 2-periodic orbits. Thirdly, it is proved that the model undergoes supercritical Neimark-Sacker bifurcation and produces an attracting invariant circle surrounding a fixed point. Fourthly, we present the Arnold tongues such that the model has periodic orbits on the invariant circle produced from the Neimark-Sacker bifurcation. Finally, to verify the correctness of our results, we numerically simulate a attracting 2-periodic orbit, an stable invariant circle, an Arnold tongue with rotation number 1/7 and an attracting 7-periodic orbit on the invariant circle.

The Rights to Review Policy Rules in the Perspective of Rule of Law

The State of Indonesia is a country based on law, this is as confirmed in Article 1 paragraph (3) of the 1945 Constitution, the State of Indonesia is a rule of law. Policy rules only function as part of the operational implementation of government tasks. This research used normative juridical research method, namely research in which the study refers to and bases on legal norms and rules. The statutory approach was used to look at the issue of the right to review policy rules. The conceptual approach was used to look at the conception of reviewing policy rules in the concept of rule of law. Policy rules are not a type of laws and regulations, the right to review laws and regulations cannot be applied to policy rules. The review of policy rules is more directed at doelmatigheid and the touchstone is the general principles of proper governance. The Supreme Court cannot review policy rules. Arrangements are needed to realize the protection for the parties who are harmed due to a policy rule, so that it can be in accordance with the concept of rule of law.

Public policy rule as a ground for refusing in recognition and enforcement of international commercial arbitration awards in china mainland

In China, public policy is commonly defined as “social and public interest” or “public interest”, the understanding and boundaries of which are rather vague, which gives the court more a broad discretion in applying the public policy rule. The article examines the content and development of public order in the legislation of China. The author analyses the practice of application the public policy rule in China and provides statistical data about the ground for refusal of Chinese courts to enforce international commercial arbitration awards based on the information obtained from public databases containing Chinese court decisions. The author also provides examples of court decisions denying recognition and enforcement of foreign arbitration awards in mainland China and summarizes the rules for application by the Chinese people’s courts of the public policy rule, established in judicial decisions, and the tendencies in the development of China’s approach towards international commercial arbitration.

Redefining monetary policy rules: A threshold approach

In this paper, we try to analyse the extent to which a redefinition of the monetary policy rule would help to avoid the zero-lower bound, as well as to explore the conditions needed to avoid that constraint. To that aim, we estimate the threshold values of the key variables of the policy rule: the inflation gap and the output gap. The threshold model allows us to know which are the turning points from which the relationship between the key variables and the interest rate revert. In the Eurozone countries, we have found that the inflation gap always contributes to increasing the nominal interest rate. On the contrary, the output gap works differently when it reaches values above or below the threshold value, which would favour the reduction of the interest rates towards the zero level.

Communicating Monetary Policy Rules

Despite the ubiquity of inflation targeting, central banks communicate their frameworks in a variety of ways. No central bank explicitly expresses their conduct via a policy rule, which contrasts with models of policy. Central banks often connect theory with their practice by publishing inflation forecasts that can, in principle, implicitly convey their reaction function. We return to this central idea to show how a central bank can achieve the gains of a rule-based policy without publicly stating a specific rule. The approach requires central banks to specify an inflation target, inflation tolerance bands, and provide economic projections. When inflation moves outside the band, inflation forecasts provide a time frame over which inflation will return to within the band. We show how this communication replicates and provides the same information as a rule-based policy. In addition, the communication strategy produces a natural benchmark for assessing central bank performance.

Inflation Thresholds and Policy-Rule Inertia: Some Simulation Results

In August 2020, the Federal Open Market Committee approved a revised Statement on Longer-Run Goals and Monetary Policy Strategy (FOMC, 2020) and in the subsequent FOMC meetings, the Committee made material changes to its forward guidance to bring it in line with the new framework. Clarida (2021) characterizes the new framework as comprising a number of key features.

Dating Structural Changes in UK Monetary Policy

The UK historical monetary policy experience is rich of institutional changes, but it remains unclear which of these many events dominated the policy actions and what timing characterised the inception of different policy regimes. We develop a new empirical approach to answer these questions and we identify in particular the historical institutional events that effectively translated into a shift of the systematic actions of the UK monetary authorities. We find that not all institutional events triggered a contemporaneous change in the actual policy conduct, although a coherent evolution in phases is evident since 1978, when a significant monetary policy rule emerges. These occasional but not sporadic regime changes explain a considerable share of the movements in the official interest rate, as well as an overstatement of the importance of policy inertia.

Policy asymmetries and fiscal sustainability: evidence from Nigeria

PurposeThis study examines and compares different specifications of the fiscal policy rule in the fiscal sustainability analysis of Nigeria.Design/methodology/approachThis is methodologically achieved by estimating the baseline constant-parameter and Markov regime switching fiscal models. The asymmetric autoregressive distributed lag fiscal model is also employed to substantiate the differential responses of fiscal authorities to public debt.FindingsThe baseline constant-parameter fiscal model provides mixed results of sustainable and unsustainable fiscal policy. The inconclusiveness is adduced to instability in primary fiscal balance–public debt dynamics. This makes it necessary to capture regime switches in the fiscal policy rule. The Markov switching estimations show a protracted fiscal unsustainable regime that is inconsistent with the intertemporal budget constraint (IBC). The no-Ponzi game and debt stabilizing results of the Markov switching fiscal model further revealed that the transversality and debt stability conditions were not satisfied. Additional findings from the asymmetric autoregressive model estimation show that fiscal consolidation responses vary with contraction and expansion in output and spending, coupled with downturns and upturns in public debt dynamics in both the long and short run. These findings thus confirm the presence of asymmetries in the fiscal policy authorities' reactions to public debt. Further, additional evidences show the violation of the IBC which is exacerbated by the deleterious effect of the pro-cyclical fiscal policy response in boom on the improvement of the primary fiscal balance.Originality/valueThis study deviates from the extant literature by accommodating time variation, periodic switches and fiscal policy asymmetries in the fiscal sustainability analysis of Nigeria.

A RECONSIDERATION OF THE DOCTRINAL FOUNDATIONS OF MONETARY POLICY RULES: FISHER VERSUS CHICAGO

There has long been a presumption that the price-level stabilization frameworks of Irving Fisher and Chicagoans Henry Simons and Lloyd Mints were essentially equivalent. I show that there were subtle, but important, differences in the rationales underlying the policies of Fisher and the Chicagoans. Fisher’s framework involved substantial discretion in the setting of the policy instruments; for the Chicagoans the objective of a policy rule was to tie the hands of the authorities in order to reduce discretion and, thus, monetary policy uncertainty. In contrast to Fisher, the Chicagoans provided assessments of the workings of alternative rules, assessed various criteria—including simplicity and reduction of political pressures—in the specification of rules, and concluded that rules would provide superior performance compared with discretion. Each of these characteristics provided a direct link to the rules-based framework of Milton Friedman. Like Friedman’s framework, Simons’s preferred rule targeted a policy instrument.