The Five Presidents’ Report: An Assessment of the Measures Proposed to Complete Europe’s Economic and Monetary Union

The Five Presidents’ Report presents a range of actions to complete Europe’s Economic and Monetary Union. This article examines whether the Five Presidents’ Report will lead to significant beneficial reforms, having regard to the European sovereign debt crisis and the legal framework of the Economic and Monetary Union (EMU). The article discusses the background to the production of the Five Presidents’ Report, including how preceding reports responded to the European sovereign debt crisis. The proposals to create a European Deposit Insurance Scheme (EDIS), European Fiscal Board (EFB) and a Eurozone Treasury are focussed upon in this article. The article concludes that the measures proposed in the report do not go far enough towards establishing financial stability in the Eurozone. A key criticism is that counter-cyclical policy has not been the focus of the report’s recommendations on fiscal matters.

Income and GDP in the model with government

In the modern capitalist economy, the government fulfills three main economic functions. First, through fiscal policy, it influences employment, prices, and the GDP growth rate. With progressive taxation and welfare provision, the government can stabilize the economy through counter-cyclical policy. The government’s activity may expand or contract the market if the government’s expenditure exceeds the demand-depressing effects of taxation so that the resulting budget deficit increases the market. The controversy over the fiscal multiplier. Second, government supplements and corrects the market allocation of resources. A fiscal deficit provides a surplus for the private sector and is easier to organize than a rise in private-sector investment. Third, it can mitigate the degree of income disparities and assure a more socially just distribution by reallocating incomes spontaneously generated in the market economy. The government debt that results from fiscal deficits is really a system of income redistribution. However, the household distribution of income has become more unequal in recent years.

A Comparative Study of State Social Policies on Education and Its Shadow in South Korea and Iran

Education and private tutoring activities particularly are under influence of state social policies. The paper uses term “social policy” to show macro social and political attitudes of each state toward education. This paper compares social policies concerning education and its shadow in six states of South Korea with their four counterparts in Iran from 1980 to 2010. An overview of each state’s policy in both countries provides two main similarities. First, during the last three decades, policies did not control the rapid expansion of the shadow education system. Second, the state policies indicated a contradictory situation which simultaneously limited and accelerated the expansion of private tutoring activities. Despite these similarities, state policies necessarily did not lead to the same results. While, change and transformation in the political structure in South Korea (i.e., from a totalitarian toward a neoliberal system) presumably has redefined the role of the shadow education system as a tool in the service of social and economic development of the country; In Iran, however, the political system, through a cyclical policy process (i.e., closed to semi-open to closed), seems to have accelerated a “brain drain” phenomenon as the outcome of private tutoring activities.

Seasonal and cyclical behaviour of farm gate milk prices

Purpose – The purpose of this paper is to analyze how the German, Irish and average EU farm gate milk prices have changed after the common agricultural policy (CAP) reform in 2003. In addition the dynamics of these prices are compared to a US farm gate price. Design/methodology/approach – These milk price time series are divided into two time periods, pre and post the CAP 2003 reform, and decomposed into their trend, seasonal and cyclical components. For the decomposition a state space model is used following the approach of Harvey (1989). Findings – The results show that the dynamics of the EU, German and Irish series converged after the CAP 2003 reform were implemented and that a three-year cycle is underlying the European milk prices which is comparable with the cycle length of the US milk price. In addition it is shown that most of the observed price variation in recent times is attributed to the cyclical component. Research limitations/implications – The division of the milk price time series into periods pre and post the CAP 2003 reform is somewhat subjective because not all measures were immediately applied after the reform. It is also possible that other factors may have contributed to the changed dynamics which have been observed. In addition this leads to a short data sample. Practical implications – The results show that policy makers should consider counter cyclical policy measures given the importance of the cyclical component. Also most models used to evaluate policies do not account for cycles which may lead to wrong conclusions. In addition farmer should be aware of the cyclical nature of milk prices as they budget and plan for the future. Originality/value – No previous decomposition studies of European milk prices exist.

Review of Facilities for Low-Income Countries - Supplement 1

This supplement aims to assess the economic impact of the Fund’s support through its facilities for low-income countries (LICs). It relies on two complementary econometric analyses: the first investigates the longer-term impact of Fund engagement—primarily through successive medium-term programs under the Extended Credit Facility (ECF) and its predecessors (and more recently the Policy Support Instrument (PSI))—on economic growth and a range of other indicators and socio-economic outcomes; the second focuses on the role of IMF shock-related financing—through augmentations of ECF arrangements and short-term and emergency financing instruments—on short-term macroeconomic performance. The empirical results shed some light on two channels through which different Fund facilities may have helped LICs respond to the global financial crisis—(i) by supporting a gradual buildup of macroeconomic buffers in the decades prior to the crisis and (ii) by providing liquidity support at the height of the crisis. The combination of strong pre-crisis buffers and crisis financing allowed LICs to pursue counter-cyclical policy responses that preserved spending and facilitated a rapid recovery.

A CONSISTENT ESTIMATE FOR THE IMPACT OF SINGAPORE'S EXCHANGE RATE ON COMPETITIVENESS

Services form a larger part of the Singapore economy. However, it is difficult to analyze the exchange rate impact on services due to the lack of price data. Regression of output or export on exchange rate, while highly intuitive, is likely to suffer from the endogeneity problem since Singapore's exchange rate is used as a counter-cyclical policy tool. This results in inconsistent estimates. I propose a novel approach to overcome these limitations by using Hong Kong as a control for Singapore's economy to implement a pseudo "difference-in-difference" method, exploiting time variation in output, to achieve consistent estimates.