Empirical Economics

Nordin, Martin; Almén, Daniel

doi: 10.1007/s00181-016-1068-6pmid: N/A

This study reinvestigates the relationship between unemployment and crime, but is the first to focus explicitly on the effects of long-term unemployment on crime. A unique finding is that long-term unemployment shows a strong association with violent crime, an effect which is greater than that of total unemployment on property crime in this and most previous studies. Long-term unemployment thus identifies a marginal group for committing crime (particularly violent crime) better than total unemployment, with the duration of unemployment plausibly increasing the strain that fosters violent behaviour.

Godøy, Anna

doi: 10.1007/s00181-016-1067-7pmid: N/A

This paper estimates how local conditions at the time of immigration influence later outcomes for refugee immigrants to Norway, exploiting the quasi-experimental nature of the Norwegian system for settlement for “quota” or resettlement refugees. A unique administrative dataset with assigned settlement municipalities is used to identify the causal effect of initial location characteristics. Being placed in a labor market where other non-OECD immigrants do well increases own annual labor earnings up to 6 years after immigration. Extended models suggest that this effect is not driven by individual scarring effects: when controlling for the contemporaneous employment rate in the assigned region, effects of initial conditions disappear. Rather, the effects appear to be due to persistence in local labor market conditions combined with limited geographical mobility in response to adverse labor market conditions.

Daouli, Joan; Demoussis, Michael; Giannakopoulos, Nicholas; Laliotis, Ioannis

doi: 10.1007/s00181-016-1073-9pmid: N/A

Using cross-sectional data from the Labour Force Survey, we investigate whether a wage curve, i.e. a negative relationship between real wages and regional unemployment, could be estimated in the Greek labour market and in the period 1999–2014. Adopting individual static and regional dynamic specifications, our results do not support the existence of such a relationship despite the extensive macroeconomic adjustment of real wages after 2009. However, allowing for period-specific heterogeneous slopes, we find that a negative relationship between wages and regional unemployment emerged in the period 2010Q2–2011Q4 which however was short-lived. This relationship appears to be exclusively due to the restructuring of the collective bargaining regime and the reduction in the national minimum wages, both of which were implemented in the private sector.

Lachowska, Marta

doi: 10.1007/s00181-016-1077-5pmid: N/A

This paper studies the correlates of subjective assessments of how easy it would be for a worker to find another job as good as the present one and how easy it would be for an employer to replace a worker. First, I study the correlates of these two subjective assessments. Second, I study whether respondents who report better chances of reemployment receive higher wages and whether respondents who think they are easy to replace receive lower wages. The results are consistent with the standard job-matching model, which predicts that wages increase with better outside opportunity of the worker and fall with better outside opportunity of the employer.

Brasch, Thomas

doi: 10.1007/s00181-015-1064-2pmid: N/A

The standard economic import price index hinges on an assumption of free trade. Applying the index to situations with barriers to trade yields biased results compared to a true import price index. To circumvent this problem, it is common to use average prices, such as unit values, as an aggregator function. However, the use of average prices is not rooted in economic theory. In this paper, I generalise the economic import price index to allow for barriers to trade in the form of quantity constraints. To illustrate the theoretical framework, I use the case of imports of textiles to Norway from 1988 to 1997. I find that a standard economic import price index, such as the Laspeyres index, grossly overstates import costs and that this bias is significantly reduced by using unit values.

Gil-Pareja, Salvador; Llorca-Vivero, Rafael; Martínez-Serrano, José

doi: 10.1007/s00181-016-1071-ypmid: N/A

Over the last decades, developed countries have provided developing countries with preferential market access via trade policies in the form of nonreciprocal preferential trade agreements (NRPTAs). Despite the lack of reciprocity of this kind of agreements, certain criteria for designating eligible countries refer to the commercial interests of benefactor countries. This paper examines for the first time the effect of NRPTAs on benefactors’ exports to beneficiary countries. Using recent developments in the econometric analysis of the gravity equation, we find robust evidence that nonreciprocal agreements have had an economically significant effect on exports not only for beneficiary countries but also for benefactor countries.

Amendola, Alessandra; Candila, Vincenzo; Scognamillo, Antonio

doi: 10.1007/s00181-016-1069-5pmid: N/A

Forecasting oil prices is not straightforward, such that it is convenient to build a confidence interval around the forecasted prices. To this end, the principal ingredient for obtaining a reliable crude oil confidence interval is its volatility. Moreover, accurate crude oil volatility estimation has fundamental implications in terms of risk management, asset pricing and portfolio handling. Generally, current studies consider volatility models based on lagged crude oil price realizations and, at most, one additional macroeconomic variable as crude oil determinant. This paper aims to fill this gap, jointly considering not only traditional crude oil driving forces, such as the aggregate demand and oil supply, but also the monetary policy rate. Thus, this work aims to contribute to the debate concerning the potential impact of (lagged) US monetary policy as well as the other crude oil future price (COFP) determinants on daily COFP volatility. By means of the recently proposed generalized autoregressive conditional heteroskedasticity mixed data sampling model, different proxies of the US monetary policy alongside US industrial production (proxy of the US aggregate demand) and oil supply are included in the COFP volatility equation. Strong evidence that an expansionary (restrictive) variation in monetary policy anticipates a positive (negative) variation in COFP volatility is found. We also find that a negative (positive) variation of industrial production increases (decreases) COFP volatility. This means that volatility behaves counter-cyclically, according to the literature. Furthermore, the out-of-sample forecasting procedure shows that including these additional macroeconomic variables generally improves the forecasting performance.

Menla Ali, Faek; Spagnolo, Fabio; Spagnolo, Nicola

doi: 10.1007/s00181-016-1075-7pmid: N/A

This paper investigates the effects of portfolio flows on the US dollar–Japanese yen exchange rate changes over the period 1988:01–2011:04. Using a time-varying transition probability Markov-switching framework, the results suggest that the impact of portfolio flows on the dollar–yen exchange rate changes is state-dependent. In particular, the results show that portfolio inflows from Japan toward the US, more than monetary variables, strengthen the probability of remaining in the dollar–yen appreciation (low volatility) state. Therefore, credit controls on the flows can be used as a policy tool to pursue economic and financial stability.

Wölfel, Katrin; Weber, Christoph

doi: 10.1007/s00181-016-1076-6pmid: N/A

There is still some doubt about those economic variables that really matter for the Fed’s decisions. In comparison with other estimations, this study uses the approach of Bayesian model averaging (BMA). The estimations show that over the long-run inflation, unemployment rates and long-term interest rates are the crucial variables in explaining the Federal Funds Rate. In the other two estimation samples, also the fiscal deficit and monetary aggregates were of relevance. There is also evidence for interest rate smoothing. In addition, we account for parameter instability by combining BMA with time-varying coefficient (TVC) modelling. We find strong evidence for structural breaks. Finally, a model average is constructed via an TVC-BMA approach.

Pauwels, Laurent; Vasnev, Andrey

doi: 10.1007/s00181-016-1080-xpmid: N/A

This paper provides a methodology for combining forecasts based on several discrete choice models. This is achieved primarily by combining one-step-ahead probability forecasts associated with each model. The paper applies well-established scoring rules for qualitative response models in the context of forecast combination. Log scores, quadratic scores and Epstein scores are used to evaluate the forecasting accuracy of each model and to combine the probability forecasts. In addition to producing point forecasts, the effect of sampling variation is also assessed. This methodology is applied to forecast US Federal Open Market Committee (FOMC) decisions regarding changes in the federal funds target rate. Several of the economic fundamentals influencing the FOMC’s decisions are integrated, or I(1), and are modeled in a similar fashion to Hu and Phillips (J Appl Econom 19(7):851– 867, 2004). The empirical results show that combining forecasted probabilities using scores generally outperforms both equal weight combination and forecasts based on multivariate models.