comments on mourougane and vogel's the impact of selected structural reforms: speed of...
Post on 15-Dec-2015
222 Views
Preview:
TRANSCRIPT
Comments on Mourougane and Vogel'sThe Impact of Selected Structural Reforms:
Speed of Adjustment and Distributional Effects
Maroje Lang, CNB
Reform delay and fatigue
Consensus about positive (long-term) effects of structural reforms
However, structural reforms often delayed or stopped
Why ?
Motivation (authors try to answer the following):
1. why reforms are delayed: adjustment path is important for political economy reasons (short term costs vs. long-term benefits)
2. why reforms work in some countries: how institutions(rigidities in labor and product markets and characteristics
of
financial markets (including monetary policy)) affect the pace of
adjustment to selected reforms 3. how to deal with opposition to reform: analyse
the distributional effects and offer solutions
Methods used
1. descriptive analysis - illustrate the actual data on impact of reforms
2. simulations using two types of models: small macroeconomic neo-Keynesian model and micro founded DSGE model
to illustrate problem and show robustness
the right approach for the OECD study/working paper some methods are self-contained – can be presented
separately
4. DGE model
main and most interesting/promising part of the paper
closed economy with a number of frictions
analyses the adjustment path of change in selected variables – proxies for structural reforms... under different institutional settings+ distribution between agents
Policy simulations
Model with frictions
Reform proxies
Subject to Conclusion
income taxemployer social security contributionsreplacement rateconsumption taxemployment adjustment cost (+search&matching)price adjustment costfinancial market imperfections
income tax
employer social security contributions
replacement rate
↓
fiscal adjustment
different employment and price adjustment costs (EU and US)
Employment adjustment costs have a MODERATE impact on real adjustment ... while price adjustment costs affect nominals
financial market imperfections (liquidity constrained consumers)
Financial frictions have STRONG real effects
analysis of distributional effects and compensation schemes
Some reforms can entail short-term distributional costs... but budgetary schemes can reduce them
monetary policyfiscal rule
Extensions/refinements
model structural reforms which reduce employment and price adjustment costs
conduct alternative monetary policy experiments using DGE model (instead of NK, perhaps different results)
sensitivity analysis? model solution procedure? possible problem with derivation of the pricing
equation (Phillips curve) if so, does it change the results?
Typos ?
(6)
(14)
likewise (21)
)()(
1
)1(
1
11ot
ot
tot
ott
ct
ot hCC
hE
hCCP
tttttt YNCY
Phillips curve (15) (likewise 20)
jt
jt
jt
jt
jt
t
tet
jt
t
jt
tt
PYNN
P
WY
P
PEMax
jt
10
,00
s.t. tt
jtj
tj
t YP
PNY
0,0
ttt is stohastic discount factor
t
t
t
t
t
t
t
tt
t
t
t
t
Y
Y
P
P
P
PE
P
P
P
P 1111
11
111
2
111
2
111
2
1
112
111
21
t
t
t
t
t
tt
t
t
t
t
t
t
t
t
t
tet Y
Y
Y
YE
Y
Y
Y
Y
Y
Y
P
P
P
W
Alternative derivation of Phillips curve Ireland(2004) and Ali(2001)
t
jtt
jt
jt
t
tet
jt
t
jt
tt
PYNN
P
WY
P
PEMax
jt
10
,00
t
t
t
t
t
t
t
tt
t
t
t
t
Y
Y
P
P
P
PE
P
P
P
P 1111
11
111
2
111
11
1111t
t
t
t
t
tt
t
t
t
t
t
tet Y
Y
Y
YE
Y
Y
Y
Y
P
W
3. Small Neo-Keynesian model
Model difficult to understand model not shown; only some estimated equations
some variables not named and relationships not described ω*; p (producer prices?) vs pcore (consumer prices); what is
(w - p)?; typos
Estimation using general to specific approach (+ moving average terms) makes understanding the model even more difficult
additional equations defining moving averages?
Small Neo-Keynesian model (cont.)
Derived conclusions thus difficult to evaluate1. no international spillovers - international linkages not
presented
2. monetary policy can speed up the adjustment path ??? additional reason against joining the currency union? cause for common EU reforms vs individual country reforms especially interesting as also concluded that employment and price
frictions have no strong effect is it due to the difference in models used? (NK vs DGE)
2. Descriptive analysis II Correlation between the change in
institutions and cumulative change in NAIRU
Strong conclusion : very gradual impact of reforms (5-10yrs) But: weak statistics (rule of thumb 0,1 correlation, no Granger
causality) + macromodels suggest different time of impact - which one to
use? DSGE 3-4years; NK 20+ years
lag
0 ?
lag
0 ?
1. Descriptive analysis I
1. Contribution of frictions to structural unemployment (for OECD)
Use results from Bassanini and Duval (2006) to1. Define structural unemployment:
structural unemployment drops in late 1990's
2. Define contributions from reforms: contribution = constant * variable
rather show variables (if must) (+correlations)
Problem with aggregated countries data : (different directions of reforms) tax wedge seems the most important
More interesting is looking into individual countries (US)
ˆ* pgauu
xxoncontributi )(
ACTUAL US UNEMPLOYMENT
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
without tax cut?
US: the case for Bush tax cuts
top related