Download PDF Download

A joint initiative of Ludwig-Maximilians University’s Center for Economic Studies and the Ifo Institute for Economic Research
Bulletin
Volume 16 No. 1
January 2006
CES TURNS 15
The Center for Economic Studies at the University of Munich is celebrating its 15-year
milestone with some impressive figures.
(page 2)
LIMITED-DEPENDENT ECONOMETRIC MODELS
What do limited-dependent variable models have to do with the Exxon Valdez oil spill of
1989? Ask Paul A. Ruud, an expert in this type of econometric models.
(page 3)
IFO NEWS
(p. 4-5)
CES 15-YEAR ANNIVERSARY
MEASURING HAPPINESS
Some things become much clearer when the non-measurable becomes measurable. Such as
what really makes you happy. And it is not a higher income, by the way. Distinguished CES
Fellow 2005 Bruno S. Frey is breaking new ground in this novel field.
(page 6)
(p. 2)
FACULTY NEWS
(p. 6)
MUNICH SEMINARS
IMBALANCES IN THE US’S AND EUROZONE’S “NEAR ABROAD”
Why is it that countries stabilising their exchange rates against the euro show substantial
current account deficits, while those that stabilise against the dollar do not? Gunther
Schnabl has the answer.
(page 8)
(p. 8)
HANS-MÖLLER SEMINARS
(p. 3)
RESEARCH SEMINARS
(p. 6)
FEATURED RESEARCHERS
Tomer Blumkin (p. 3)
Bruno S. Frey (p. 6)
Gert Peersman (p. 7)
Marcelo Resende (p. 7)
Paul A. Ruud (p. 3)
Gunther Schnabl (p. 8)
Chung-Lei Yang (p. 8)
DISSECTING MONETARY POLICY
Placing monetary policy under the magnifying glass, as Gert Peersman is wont to do, throws
up some surprises: technological change increases the hours worked, raising government
spending has a negative effect on private consumption, and so on.
(page 7)
WORLD ECONOMY OUTLOOK
Ifo presented its economic forecast for 2006. Despite persistently high energy prices, the outlook
is rosy. Even the European economy will perk up. More in the Ifo News section. (pages 4-5)
FOLLOWING THE EVOLUTIONARY PATH
Why co-operation shows persistence in a world of one-shot encounters poses somewhat of a
puzzle, which Chung-Lei Yang attempts to solve using an evolutionary approach. (page 8)
OPTIMISING TAX AND TRANSFER SYSTEMS
Tomer Blumkin’s research interest range far and wide, from designing the optimal tax
and transfer system to the social desirability of using racial profiling for law enforcement
purposes.
(page 3)
REGULATING UTILITIES
How to regulate utilities without hampering their utility, in particular regarding how to
deal with asymmetric information, lies at the focus of one of Marcelo Resende’s lines of
research.
(page 8)
Online version of this issue available at www.cesifo.de
Vol. 16, No. 1 • January 2006
THE CESIFO BOOK SERIES WITH MIT PRESS
During 2005, CESifo published five
books within its CESifo Book Series
with MIT Press. This series presents
the findings of so-called “tandem projects”, in which an Ifo Institute or CES
researcher works with one or more
internationally renowned external
researchers to provide an overview of
current issues in a given economic
area, thus contributing to the economic
policy debate.
These five books followed on the footsteps of the inaugural volume in the
series, The Political Economy of Education, written by Mark Gradstein,
Moshe Justman and Volker Meier and
released in December 2004. That book
provides the theoretical framework
necessary for understanding the complex relationship of education, economic growth, and income distribution.
In January 2005 it was followed by The
Decline of the Welfare State, by Assaf
Razin, Efraim Sadka, and Chang Woon
Nam, whose analysis, supported by a
unified theoretical framework and
empirical findings, demonstrates how
the combined forces of demographic
change and globalisation will make it
impossible for the welfare state to
maintain itself on its
present scale.
The next book,
The European
Central
Bank: Credibility,
Transparency,
and
C e n tralizat i o n ,
written
by Jakob
de
Haan,
Sylvester C.
W. Eijffinger
and Sandra Waller,
came out in May 2005.
It examines issues that
have arisen in the first
years of ECB monetary policy and
analyses the effect
that current ECB
policy strategy and
structures may have
in the future.
This was followed in September 2005
by Alleviating Urban Traffic Congestion, by Richard Arnott, Tilmann Rave
and Ronnie Schöb, advocating active
consideration of microscopic policies
to attack traffic congestion problems.
Boom-Bust Cycles and Financial Liberalization, by Aaron Tornell and Frank
Westermann, saw the light two months
later, analysing boom-bust cycles in the
developing world and discussing how
these cycles are generated by credit
market imperfections.
Finally, in December 2005, Social
Security and Early Retirement, by
Robert Fenge and Pierre Pestieau,
rounded up the year. In it, they examine empirical and theoretical evidence that explains why early
retirement has become such a burden for social security systems
and suggest pension system
reforms that will reverse the trend.
Several other volumes are in the
pipeline, due to be released in the course
of 2006. To read more about this series or
to order a book, log on to www.cesifo.de
> Publication Series > Books > CESifo
Book Series.
CES CELEBRATES 15-YEAR ANNIVERSARY
The Center for Economic Studies of the
University of Munich reached its 15-year
milestone on January 18th. Brought to
life by several visionaries, such as Wulf
Steinmann, former rector of the university, Hans Zimmermann, Hans-Werner
Sinn, Hans Möller and Edwin von
Böventer, among others, it counted
Richard Musgrave among its godfathers.
Over the years, CES has become a byword
for excellence in both theoretical and
empirical research in economics, acting as
a window to the world for the University
of Munich. The latter, together with the
Ifo Institute for Economic Research,
founded CESifo, an economics research
organisation that has placed Munich firmly in the international research arena.
Right from the start, CES invited economists from around the globe for research
2
have held 265 lectures series as well and
some have written books with Ifo or CES
researchers, which are published with
MIT Press as part of the successful
CESifo Book Series (see above).
The visitors usually go on to join the
growing CESifo Research Network,
which by now numbers 527 members.
The first CES Council: (l. to r.) Hans Möller, Franz
Gehrels, Karlhans Sauernheimer, Martin Beckmann,
Hans-Werner Sinn, Edwin von Böventer, Richard
Musgrave, Otto Gandenberger, Agnar Sandmo,
Klaus Zimmermann
visits in Munich. Until the end of 2005,
over 450 such visits had taken place,
with an average stay of 23.6 days. A further 34 visits are planned for this year.
The guest researchers—from 32 countries so far—do not limit themselves to
conducting their own research. They
Bulletin
This network constitutes the backbone of
the renowned CESifo Working Paper
series, with more than 1,600 papers published so far and a clear leader in downloads in the SSRN network. Many of
these papers are later published in prestigious economics journals.
Lastly, CES organises the annual Munich
Lectures in Economics, an award to an
outstanding economist combined with a
lecture series that is subsequently published as a book by MIT Press.
Vol. 16, No. 1 • January 2006
LIMITED-DEPENDENT VARIABLE MODELS
HANS-MÖLLER SEMINARS
Ruud
Limited-dependent econometric models are those that arise
when variables in a regression
are, well, limited in some way:
they cannot take on all possible (real) values. The simplest
example is a dependent variable that can only assume two
values, say 0 or 1, as in the
choice between entering the
labor force or not. This is the
type of variable models that
econometrician Paul A. Ruud has
focused part of his research on.
Despite their name, Ruud’s models’
applications are all but limited. His
expertise in these models has led him to
participate in a number of empirical
studies. One notable example is the study
of the economic damages caused by the
Exxon Valdez oil spill of 1989. That
study was a basis for one of the largest
settlements for environmental damage
—one billion dollars in natural resource
damages and restitution for
injuries.
A large component of the
Exxon Valdez study was the
design and implementation of
surveys. Ruud has pursued
interests in survey design
since that project and will be
working in this area with
Joachim Winter while visiting
CES. Along with Daniel
Schunk (Mannheim), they will be completing the analysis of experimental data
measuring the responses of individuals
to uncertainty.
Paul Ruud’s visit to CES kicks off a year
of sabbatical leave from the University
of California, Berkeley, where he is professor of economics. He obtained his
PhD from MIT in 1981 and has remained
at Berkeley since then, except for previous sabbaticals spent at the University of
Rochester, MIT, and Nuffield College,
Oxford University.
10 January 2006
Per Pettersson-Lidbom
Stockholm University
An Empirical Approach for Estimating the
Causal Effect of Soft Budget Constraints on
Economic Outcomes
17 January 2006
Felix Kübler
University of Mannheim
Approximate Generalizations and
Computational Experiments
24 January 2006
Gregory Clark
UC Davis
The Interest Rate in the Very Long Run:
Institutions, Preferences and Modern Growth
31 January 2006 *
Steffen Huck
UCLA
7 February 2006*
Eckhard Janeba
University of Mannheim
* The subject for these seminars will be posted at
www.vwl.uni-muenchen.de/ls_marin/hmoeller1.html
DESIGNING THE OPTIMAL TAX AND TRANSFER SYSTEM
Blumkin
If you are striving to design an optimal
tax and transfer system, a good thing to
keep in mind is that you should strike a
balance between incentive considerations
and redistributive goals. Not exactly a
walk in the park, as many would-be tax
designers have found. They may soon
have the findings of Tomer Blumkin’s
research to rely on: he has focused a substantial part of his research efforts on the
normative issue of the optimal design of
tax and transfer systems.
Presently an assistant professor at the
department of economics of Ben-Gurion
University in Israel, Blumkin has
attempted to address highly policy-relevant issues which lie at the core of public
discourse. These include, inter alia, the
desirability of taxing estates, in light of
the empirical debate on the magnitude of
the various bequest motives; the redistributive role of intergenerational mobility, and the government’s role in
taxing/subsidising education as a means
to alleviate earnings inequality.
ing for law enforcement purposes (such
as the screening system at international
airports).
Tomer Blumkin and dog
He recently re-oriented himself towards
the law and economics field, where he
has examined the role of equityinformed legal rules, such as minimum
wage legislation, antidiscrimination
rules, and affirmative action policy, as
supplements to the welfare system in
promoting enhanced redistribution.
He has also addressed a highly controversial policy issue resulting from the
need to avert major terror events: the
social desirability of using racial profil-
Bulletin
Another strand in Blumkin's research
focuses on various theoretical issues in
the field of political economy, addressing
such positive issues as the link between
transparency and the degree of corruption in the public sector; the possibility
of political parties manipulating voters
by taking advantage of their policy misperceptions (referred to by Blumkin as
political framing), and the provocative
prediction that middle-of-the-road voters
may benefit from the fact that parties
become more ideologically driven.
In the past year, Blumkin has started
working on an experimental project that
aims to examine whether direct and
indirect taxation induce different behavioral responses (notably, labor-leisure
choices), as well as to what extent these
differences may impact the optimal
design of the tax system.
3
Vol. 16, No. 1 • January 2006
IFO NEWS
IFO ECONOMIC FORECAST 2006
After the record in 2004, the world economy expanded in 2005 at the surprising
pace of 4.3%. The Ifo World Economic
Climate Index remains above its long-
Stabilising at a favourable level
term average, even rising slightly in the
fourth quarter. Other indices, such as the
OECD leading indicators, also point
upwards. Next year the world economic
output growth rate should be slightly
higher than this year’s.
The expansion of the world economy
will become more broad-based. In the
United States GDP will grow at a slightly slower pace, but the economies of
Japan and China will continue to experience lively economic growth. In Europe
a clear acceleration of economic activity
is expected. Real GDP in the euro area
should increase in 2006 by 2.0%, after
last year’s 1.4%.
This forecast is based on the assumption
that commodity prices, especially the
price of oil, will remain at their present
high levels and that this will not be
accompanied by wage increases. This
will result in a slow drop in the rate of
inflation, with less pressure for restrictive monetary policies from central
banks, even though interest rates may
increase somewhat in the wake of the
economic recovery.
The German economy is experiencing an
economic upswing, as shown by the Ifo
Business Climate Index. Industrial output as well as incoming orders have been
clearly expansive. In 2005 real GDP will
have grown by 0.9% (working-day
4
adjusted: 1.1%), after growth of 1.6% in
2004.
IMPROVEMENT IN THE IFO WORLD
ECONOMIC CLIMATE
The engine of growth is foreign demand,
which has received enormous momentum from the dynamic world economic
activity and the more favourable
euro/dollar exchange rate.
Investments are also beginning
to perk up. Private consumption, however, is still not back
on its feet.
The Ifo World Economic Climate Index
(WES) rose for the first time since the
beginning of 2004, after weakening
steadily from the high level in previous
surveys. The 3rd quarter results first signalled that the indicator’s downturn was
bottoming, but the improvement applied
only to the assessments of the current
economic situation. The expectations for
the coming six months weakened slightly. Overall, the World Economic Survey
signals a robust international economy.
The slight weakening in the world economy in 2004 was presumably only temporary. WES experts now see this weakening replaced by an acceleration of economic growth.
The outlook for the German
economy remains good for
2006. With a continuingly
favourable international economic environment, exports
will remain the most important
factor of economic growth.
Investments in plant and equipment are likely to expand
noticeably, not least due to improved
depreciation allowances and to a less
steep decline in construction spending.
Private consumption will be stimulated
somewhat in the second half-year in
anticipation of the planned hike in VAT
starting in 2007. Annual average growth
in real GDP for 2006 will be 1.7%, or
1.9% after calendar adjustments. Since
trend growth of economic output is 1%,
capacity utilisation in the economy will
increase perceptibly. The inflation rate,
at 1.7%, is expected to be somewhat
lower than 2005 (2.0%).
Despite these factors, improvement in
the labour market situation will be hesitant. The number of those gainfully
employed will increase by 215,000 on
average for 2006, but 100,000 of this
will be from job creation schemes. The
number of unemployed will decline by
an annual average of 150,000; in the
winter months it will probably exceed
the 5 million mark.
The public finance situation did not
improve much in 2005. With a deficit of
3.6% of GDP, the Maastricht deficit ceiling was exceeded for the fourth time in
a row. Taking the measures planned by
the Federal Government into consideration, the Stability and Growth Pact will
also be violated in 2006, with a ratio of
3.2%.
Bulletin
Signs of improvement are especially evident in Western Europe, where both the
assessments of the current situation and
the expectations for the next six months
were stronger. In Asia as well, the climate
indicator rose, even though the more confident appraisals of the current economic
situation were partly offset by more cautious future expectations. Only in North
America did the climate indicator decline
as a result of clearly worsening expectations as well as less positive appraisals of
the current economic situation.
In contrast to the survey results of the
previous three quarters, now a clear rise
in inflation is expected. Whereas the
WES experts assumed in the past surveys that the consumer prices would
increase worldwide by 2.9%, they now
anticipate a rise of 3.3%. The sharp price
increases for oil and other raw materials
are now expected to have a stronger
effect on consumer prices than assumed
in the previous surveys. Certainly as a
Vol. 16, No. 1 • January 2006
result of the rising inflation expectations,
the WES experts anticipate further hikes
in interest rates, especially in North
America and Asia but also in Western
Europe. The US-Dollar is regarded as
adequately valued, after having been
seen as undervalued for two years. The
euro and the British pound were
appraised less frequently as overvalued
than in the previous surveys. For the first
time since the beginning of 2004, the
Japanese yen has been appraised as
slightly undervalued.
form of personal income tax, employee
and employer social insurance contributions as well as value-added tax, which is
also a tax on the value added of human
labour. This is the result of a new study
by the Ifo Institute that examines the
marginal tax rate for various household
types. These findings apply – with slight
fluctuations in the individual results – for
all the examined types of households
with average earnings (single or dualincome married couples with two children; western or eastern Germany).
UPSWING GAINS MOMENTUM
Even taking into account the coalition
agreement of the new German government, the situation does not change
much. In 2007 the marginal tax burden
of a single person with an average
income will be 68.1% (2005: 68.0%),
and for a dual-income family (one average salary plus one third) and two children will stand at 63.8% (2005: 64.2%).
In eastern Germany a single, employed
person will have a marginal tax rate of
64.9% (2005: 65.1%) in comparison to
64.2% (2005: 63.7%) for a family.
The Ifo Business Climate Index for
German industry and trade rose again
clearly in January, after a significant
improvement in the previous months.
The surveyed firms expressed greater
satisfaction with their current business
situation than in December, and they
again gave more favourable assessments
of their business expectations for the
next six months. Doubts regarding the
durability of the upswing, which has
been observable since last summer,
should be further dispelled by these
results. The upswing has gained both in
breadth and momentum.
In manufacturing more favourable
assessments of the current situation and
more optimistic expectations led to a
strong improvement of the business climate. Export expectations have also
improved. Particularly, the producers of
investment and intermediary goods
reported a better situation and outlook. In
construction and in retailing especially
business expectations improved. Only in
wholesaling did the business climate cool
slightly. Although the surveyed wholesalers gave more confident appraisals of
their business prospects, they were more
reserved regarding their current situation
than they were last month.
In eastern Germany the rise in the business climate index was similar to the federal average.
TWO THIRDS FOR THE STATE
In Germany approximately two thirds of
value added that arises from additional
earned income goes to the state in the
The reforms of the Grand Coalition will
have no positive effect on the marginal
tax rate. Without the coalition agreement, the marginal tax rate of the sample
family would be 63.7%, only minimally
lower than the 63.8% as in the coalition
agreement. The reason is that the
increase in the value-added tax has a
somewhat stronger effect than the lowering of the social insurance contributions.
This will not help revive the labour market or reduce the incentives to work in
the shadow economy.
The marginal tax burden is much more
favourable for a typical household in the
USA (only 38%) and in the United Kingdom (ca. 49%). Even Sweden, the
Netherlands and Denmark have lower
marginal tax rates. Only in France does
the state pocket more of additional value
added, ca. 70%, than in Germany.
CHILDREN SUPPORT PUBLIC FINANCES
A controversial point in the discussion
on family-policy measures in Germany
is whether parents raise their children at
the expense of the general public
because of the numerous, publicly
financed grants and services that they
Bulletin
receive? Or whether children bolster
public finances via future taxes and
social insurance contributions thereby
contributing to their sustainability?
To clarify this question, the Ifo Institute
for Economic Research, Munich, presented detailed calculations of the “fiscal
balance” of a child within the framework
of the current German tax and social system in a study financed by the Robert
Bosch Foundation. The results are part of
a report of the commission on families
and demographic change chaired by former Saxon minister president, Kurt
Biedenkopf. The main result of the study
is that the upbringing of a child in Germany leads, on balance, to the transfer of
a significant sum of money to the public
finances under the present German laws.
The Ifo researchers took a child born in
2000 with an average development in
terms of education, working life, own
children and numerous other aspects and
calculated a net contribution in taxes and
social insurance contributions to public
finances of ca. 77,000 euros. This is a
conservative estimate and takes into
account that not all children enter the
workforce in the course of their life or
contribute to the social insurance system.
The net burden per child of 77,000 euros
determined in the study is an orientation
point for reforms of family policies
aimed at raising the German birth rate to
the European average. A restructuring
and consolidation of existing measures is
a first step. Introducing the French model
of “family splitting” in determining
income tax could follow. A grant to parents as practiced in Sweden could also be
introduced but especially urgent is a
reform of the statutory retirement insurance system.
A further reduction of benefits in the
pay-as-you-go system for all insured is
necessary, followed by a benefit system
based on the number of children and an
obligation that those with few or no children invest more in fully funded insurance. A portion of the savings in such a
system could be withdrawn when a child
is born, providing an additional incentive
in family planning.
5
Vol. 16, No. 1 • January 2006
MEASURING HAPPINESS
FACULTY NEWS
Frey
The 2005 Munich
Lectures in Economics offered a
superb chance to
learn about the
ground-breaking
research on the
economics of happiness by Distinguished CES Fellow Bruno Frey.
The possibility of
measuring utility
directly enables
researchers to better capture the
worth attached to
public
goods,
such as the natural environment.
Such goods are
Distinguished CES Fellow Award: (l. to r.) LMU
not traded in the
Prorector Reinhard Putz, Lord Richard Layard
market, but they
(laudation), Bruno Frey (Awardee), Bavarian State
Happiness is the
can still conLMU provost
Minister
of
Sciences
Thomas
Goppel,
goal
everyone
Thomas May, and CES Director Hans-Werner Sinn
tribute to a higher
strives for. Howlevel of life satisever, the conventional position in economfaction. This approach makes is possible
ics has been to consider happiness (or utilto assign quantitative values to a public
ity) as empirically non-measurable, and
good and thus sugggests how much the
the assertions of people regarding their
state should invest in them.
happiness as unreliable. What people do,
Second, happiness research makes it posrather than what they say, is what counts.
sible to find out which aspects of life are
But, asserts Mr Frey, a dramatic change
important to the population. Among ecohas taken place in the past few years: hapnomic factors, a satisfying occupation
piness is measurable after all. Different
has proved to be by far the most impormethods make it possible to find out how
tant happiness factor. Those without
happy people feel. In particular, a wellemployment, even when they receive the
crafted survey can show how satisfied
same income as those working, are not
people are with their lives. The “subjective
satisfied with their life. Higher income,
satisfaction” captured in this way provides
by contrast, does not bring much addia good approximation to an individual’s
tional satisfaction: the comparison with
utility. Psychologists have demonstrated
your peers is decisive. In other words, it
that people who describe themselves as
is relative income what counts. This
happy laugh more often, have fewer social
explains the fact that people in developed
problems, suffer less from depression and
countries, despite far higher income, are
are at lower risk of committing suicide.
not much happier than their forefathers.
Happiness research, based upon the
measurement of life satisfaction, constitutes a minor revolution in economics.
Three areas are affected.
First, economic theory is expanded and
improved. With utility being directly
measurable, bad decisions can be examined in a new light. Those who make a
bad decision are less satisfied with their
life afterwards than if, according to their
own perception, they had made the right
one. Research has shown that many people do actually choose the wrong option:
when confronted with either higher
income or more leisure time, for instance,
many opt for the money; future leisure
time is undervalued. They realise too late
that their life satisfaction level rises only
briefly as a result of that decision.
6
Happiness, then, does not depend solely
on the enjoyment of goods and services;
the non-material aspects of life, such as
being able to participate actively in politics, are just as important. That’s one reason why people in democratic societies are
happier than those in authoritarian ones.
Third, happiness research provides important insights for economic and social policies. It especially shows how important it
is for the state to provide the conditions
for the unemployed to find work again.
The state must take the concerns of its citizenry more seriously and, for this, direct
democracy and federalism are the most
suitable systems: the states and communities can finance themselves with their own
taxes and decide best how they want to
apply their resources.
Bulletin
• Andreas Haufler turned down an offer for a
professorship at the University of Tübingen.
• Klaus M. Schmidt has been elected as a
full member of the Berlin-Brandenburg
Academy of Sciences.
• Bund-Länder Programme (Excellence Initiative). An international commission of
the Joint Committee of the Research Council and the German Research Foundation
delivered a positive assessment of the
Excellence Cluster Innovation: Tracing
Patterns of Competence, Competition and
Governance submitted by the University of
Munich under the leadership of Dietmar
Harhoff, Sven Rady and Klaus Schmidt. A
comprehensive application for the next
round was requested for submission no
later than next April.
RESEARCH SEMINARS
Winter Semester 2006
Monday 3:15 p.m. CES, Schackstr. 4
9 January 2006
Daniel Schunk
University of Mannheim, under the auspices
of the SFB/TR 15 GESY
Sequential Decision Behaviour with
Reference Point Preferences: Theory and
Experimental Evidence
16 January 2006
Thomas Eife
University of Munich
Price Setting Behaviour and Price Setting
Regulations at the Euro Changeover
16 January 2006
Uwe Böwer
University of Munich
Determinants of Business Cycle
Synchronisation across Euro Area Countries
23 January 2006
Mathias Kifmann
University of Konstanz
Optimal cost reimbursement of health
insurers to reduce risk selection
30 January 2006
Nicolas Vieille
HEC Paris
Social Learning in One-Arm Bandit Problems
6 February 2006*
Thomas Maier
University of Munich
6 February 2006*
Laura Gariup
University of Munich
* The topic for this seminars will be posted at
www.vwl.uni-muenchen.de/ls_rady/seminar.html
Vol. 16, No. 1 • January 2006
CESIFO INTERNATIONAL SPRING CONFERENCE 2006
MONEY MATTERS
Peersman
Every year in
spring, the CESifo
Group holds a
conference
to
examine
the
prospects for the
global economy
in the coming
months, paying in
particular attention to European
economy developments. A must for decision-makers in industry and the financial
community, the CESifo International
Spring Conference is well regarded for
its macroeconomic forecasts as well as
industry analyses.
Traditionally divided into two sections
held on consecutive days, the conference
addresses global issues on the first day
and conducts industry-specific analyses
on the second day. This year, the overarching theme will be the effect of persistently high energy prices on the global
economy,
the
subject of the
keynote speech
by Fatih Birol, of
the International
Energy Agency.
Jim O’Neill, of
Goldman Sachs,
will then examine
the issue from the
point of view of
the effects upon the US economy, followed by Klaus Abberger, of the Ifo
Institute, who will analyse the effects on
the European economy.
Further topics of the first day will be the
recycling of petrodollars, the Middle
East in an era of high energy prices, and
the Asian economies.
The second day will be devoted to specific industries, such as petrochemicals,
commercial vehicles, microelectronics,
mechanical engineering and retail trade.
CESifo International Spring Conference
March 23-24, 2006 • ARTrium complex, British Embassy Berlin
To register: www.cesifo.de/isc
EFFICIENT REGULATORY REGIMES FOR UTILITIES
Resende
Marcelo Resende’s research
interests lie in the interface of
Industrial Organization and
Applied Econometrics and
have mostly focused on the
econometric analysis of
imperfectly competitive markets and assessment of regulatory regimes. During his stay
at CES he will continue his
research on the efficiency and
incentive properties of different regulatory regimes for selected utilities, aiming at devising strategies for
incorporating asymmetric information
between the regulator and the regulated
firm (both in terms of adverse selection
and moral hazard) into the analysis.
He has also investigated the determinants
of aggregate mergers and acquisitionsM&A waves in the UK taking as reference
explicitly non-linear models
(with Markov switching).
Stock market prices, real
money supply growth and real
GDP growth do seem to have a
role in explaining the transition between low and high
level regimes for M&A.
Marcelo Resende holds a
D.Phil. in Economics from the
University of Oxford and is
currently a visiting fellow at the European University Institute. He is an associate professor at the Instituto de Economia, Universidade Federal do Rio de
Janeiro (Brazil) since 1998, where he was
previously an assistant professor. He has
also held academic appointments at Universidade do Estado do Rio de Janeiro
and Pontifícia Universidade Católica do
Rio de Janeiro, Brazil.
Bulletin
Gert Peersman
studies what each
of us would like to
have more of:
money. Unfortunately, this is a
commodity which
is as difficult to
study as it is to
obtain.
Peersman’s early work
(with Frank Smets at the European Central Bank) concentrated on the effect of
monetary policies in Eurozone countries.
He found, among other things, that these
policies have a magnified impact during
recessions relative to booms – an asymmetry is explained by the fact that firms
often face stronger credit constraints during recessions.
More recently, in joint research with
Roland Straub (IMF), he has taken some
testable implications of the popular (and
certainly complicated-sounding) New
Keynesian dynamic stochastic general
equilibrium (NK DSGE) model to the data.
Some of their findings have confirmed
the model’s more controversial outcomes:
increases in government spending are, for
instance, found to have a negative effect
on private consumption and investment.
In other dimensions, the data reject NK
DSGE model. For example, and this is
something most of us can attest to, technological change is found to increase the
hours worked.
The newspapers have, in recent months,
been filled with grim tales regarding the
disastrous economic effects of the current
surge in oil prices. As it turns out, things
aren’t nearly as bad during this round of
oil price shocks as they were during the
oil crises of the 1970s. During his stay at
CES, Gert Peersman will be exploring to
what extent this can be attributed to more
judicious monetary policy.
Gert Peersman is professor of monetary
economics at the department of Financial
Economics of Ghent University. He
obtained his Masters degree at the University of Louvain (where he is a guest
professor) and his PhD at Ghent University in 2001. After his PhD, he worked as
an economist for the Bank of England’s
International Economic Analysis Division
for 2 years, where he continues to consult.
7
Vol. 16, No. 1 • January 2006
IMBALANCES AT THE PERIPHERY
Yang
Schnabl
Since the 1990s the current
accounts of the countries at
the peripheries of the United
States and the euro area have
evolved asymmetrically. The
countries which stabilise their
exchange rates against the US
dollar have run increasing
current account surpluses. By
contrast, the countries stabilising their exchange rate
against the euro have experienced substantial current account deficits.
While the determinants of the “global
imbalances” between the US and its
periphery have been controversially discussed, the asymmetric nature of current
account developments at the US periphery and Central and Eastern Europe has
remained largely untouched. Based on
work carried out with Ronald McKinnon, of Stanford University, Gunther
Schnabl will investigate, while at CES,
the impact of US current account developments and macroeconomic policies on
the current account balances of small
open economies depending on their
exchange rate strategies.
Mr. Schnabl has considerable expertise
in exchange rate economics and
exchange rate systems, European monetary integration and the Japanese economy. He has worked on exchange rate
policies in East Asia, Eastern
Europe and the Commonwealth of Independent States
(CIS) in the context of underdeveloped financial markets.
He has conducted research
recently on the East Asian and
European monetary integration. In several joint research
papers with Ronald McKinnon, he has elaborated on the
motivation for the informal dollar pegs
in East Asia. He has argued in favour of
the Chinese dollar peg. In his joint works
with Paul De Grauwe he has analyzed
the pro-and-cons of exchange rate stability against the euro and has examined
EMU entry strategies for the new member states.
Gunther Schnabl was, until recently, an
associate professor for economic policy
at Tuebingen University. He has been an
adviser for exchange rate policies at the
DG International and European Relations
of the European Central Bank. He has
done research at the Catholic University
Leuven, Bank of Japan, Stanford University, Federal Reserve Bank of New York,
Deutsche Bundesbank and Tokyo University. Schnabl has been appointed as a
full professor for international economics
at the Faculty of Economics and Business
Administration of Leipzig University.
MUNICH SEMINARS
Deutschlands große Tageszeitung
Chaired by Hans-Werner Sinn (CESifo) and Nikolaus Piper (Süddeutsche Zeitung)
Monday, 6 pm, CESifo Conference Centre, Ludwig-Erhard-Hall, Poschingerstr. 5, Munich
9 January 2006
Roland Berger
Chairman, R. Berger Strategy Consultants
Die ersten 100 Tage nach der Wahl
6 February 2006
23 January 2006
Johann Eekhoff, University of Cologne
Private Krankenversicherung für alle
Meeting the Challenge
of Globalisation
Bulletin
YANG’S EVOLUTIONARY APPROACH
Martin Wolf
Financial Times
What explains
co-operation
in terms of
multi-level
selection?
Finding
an
answer to this
question using
evolutionary
approaches
motivated
Chung-Lei Yang, an associate research
fellow at RCHSS of Academia Sinica, Taiwan, to focus his research onto co-operation in assortative-matching environments using experimental methods.
In one recent experiment, subjects displayed significantly different behavior in
a multi-round assortative-matching Prisoners’ Dilemma game, which offers a
potential explanation for persistence of
co-operation in a world of a “one-shot
encounter” nature.
A similarly motivated experiment in the
Public Good framework, conducted jointly with Gary Charness, is currently underway. Casual examination of the preliminary data suggests that some voluntary
group formation devices can indeed lead
to the realisation of almost all potential
gains from trade regarding both the optimal level of contribution and group size.
In another line of research, conducted
jointly with Cheng-Zhong Qin, Yang
revisited the King Solomon Dilemma
and discovered a simple mechanism that
robustly implements the desired outcome. Both researchers are working at
present on ways to formally characterise
the nature of information robustness of
mechanisms of this kind.
Yang obtained his PhD at the Economics
Department, University of Dortmund. He
spent two years at Boston University on a
DFG postdoctoral grant in 1994-6 and in
2004-5 spent six months visiting the University of California at Santa Barbara.
Munich Society for the Promotion of Economic Research (Münchener Gesellschaft zur Förderung der
Wirtschaftswissenschaft, CESifo GmbH) is the international platform of Ludwig-Maximilians University and the Ifo
Institute for Economic Research.
President and CEO: Hans-Werner Sinn
Address: CESifo, Poschingerstr. 5, 81679 Munich (Germany)
Telephone +49 (0) 89/9224-1410, Fax: +49 (0) 89/9224-1409
Chief Editor: Raji Jayaraman (RJ), CESifo Editor: Julio C. Saavedra (JS). Ifo News provided by Annette Marquardt (AM).
Contributor: Silke Uebelmesser (SÜ).