Capital-Flow Volatility and Economic Openness: A Wavelet Approach

The paper analyzes the interaction between capital-flow volatility and trade openness in five developed economies and four emerging markets by applying wavelet analysis over the period from 1990Q1 to 2017Q1. The main findings reveal that, in the medium term, capital-flow volatility drives trade openness in emerging markets and developing economies. Special attention should be paid to developed countries during the 2008 economic crisis, when trade exposure is shown to have had significant effects on capital-flow volatility. In the long term, the direction of comovement is rather idiosyncratic in our set of emerging markets and developing countries. Moreover, in both groups of countries, the intensity and persistence of relationships are very sensitive to the volatility of real GDP and secondary to geopolitical risk and oil-price volatility.

A Simple Economic Model to Explain Different Digitization Patterns

Many firms have to decide whether and how much of their business activities they want to digitize. Several studies point to considerable differences, especially between small- and large-sized firms. This paper develops a simple model that shows under which conditions digitization can be profitable for a firm. At first, different competitive situations are taken into account and subsequently, the effects of security problems on digitization decisions are examined using the example of the dangers of a cyberattack. The results show that digitization is a dominant strategy, which results in a prisoner’s dilemma if the competition is fierce. Moreover, in highly competitive markets, firms should set common security standards to protect against unauthorized access.

How Large Are Firing Costs? A Cross-Country Study

This paper provides evidence for the size and the cyclicality of firing costs for the United States and Germany. In contrast to the existing literature, we use the optimality conditions obtained in a search and matching model to find a reduced form equation for firing costs. We find that our estimates are slightly larger compared with other studies and document sizable time-variation in firing costs.

The EMU-REER Spillovers on Southeastern European Economies: A G-VAR Model

In this paper, we empirically investigate the spillovers of Real Effective Exchange rate of European Monetary Union (EMU-REER) on Industrial Production, Real Effective Exchange rate, Foreign Reserves and interest rates for the South Eastern European (SEE) economies of Bulgaria, Croatia, Greece, North Macedonia, Romania, and Slovenia, using monthly data over 2002–2016. In a global vector autoregressive framework with EMU-REER as a global variable, we show that the EMU variable has a lasting impact on the SEE variables and economies. Specifically, we provide strong evidence that this impact of EMU-REER is not only of a greater importance compared to the importance of the domestic variables, but also that it negatively affects the competitive stance of the investigated SEE economies, which is partly compensated by the lower interest rates that certain SEE countries face in return. Our results offer potential policy implications with respect to monetary policy coordination and discretion.

What Happened to Polarization and Inequality Between 2008 and 2018 in Spain?

The main objective of this paper is to empirically examine the dynamics of income distribution in Spain between 2008 and 2018 using SILC data. We consider the concepts of polarization and inequality as different aspects of the income distribution. To compute both aspects, we use the measures of Palacios-González and García-Fernández (2012) and the Gini index respectively. Findings indicate that polarization and inequality fluctuate around an upward trend during these years in Spain. Furthermore, the lower and middle income households have been more adversely affected than those with higher incomes, and the middle class has not benefited from the economic growth in Spain.

Financial Development and Its Effect on Inequality: A Case of Fair Profit Maximization, Favoritism, or Discrimination?

Financial development negatively affects inequality and poverty in many countries. This research uniquely examines whether the negative effect of financial development on inequality in Israel is also significantly dependent on the gender, ethnic, and religious characteristics of the population. The results suggest that a part of the role that underdeveloped financial systems play in inequality may be due to favoritism toward advantaged majority groups regarding allocation of small business credit. The research has important policy implications regarding the role of financial system regulation and the effect of favoritism in determining inequality and poverty patterns.

Does Government Size Explain Unemployment in MENA Countries?

Economists typically believe that government size is an integral determinant of labor market efficiency. Therefore, it is important in practical and theoretical terms to understand the impact of government size on the unemployment rate. Recent empirical studies indicate the negative impact of government size on labor market performance. This paper explores the relationship between government size and the unemployment rate in seventeen MENA countries during the period 2003 – 2017 using seemingly unrelated regression models (SURs). The research found a statistically significant negative effect of government size on the labor market. It also found that total government expenditure as well as investment expenditure play a dampening role on the labor market. Causality tests indicate that there is significant two-way causal relationship between government size and the unemployment rate. But the dynamic analysis of causality indicates one-direction causality from the unemployment rate to government size. The proper policy must therefore start with addressing unemployment in MENA countries, one of whose tools is government sizing.