The EMU sovereign-debt crisis: Fundamentals, expectations and contagion

We offer a detailed empirical investigation of the European sovereign debt crisis based on the theoretical model by Arghyrou and Tsoukalas (2010). We find evidence of a marked shift in market pricing behaviour from a ‘convergence-trade’ model before August 2007 to one driven by macro-fundamentals and international risk thereafter. The majority of EMU countries have experienced contagion from Greece. There is no evidence of significant speculation effects originating from CDS markets. Finally, the escalation of the Greek debt crisis since November 2009 is confirmed as the result of an unfavourable shift in countryspecific market expectations. Our findings highlight the necessity of structural, competitiveness-inducing reforms in periphery EMU countries and institutional reforms at the EMU level enhancing intra-EMU economic monitoring and policy co-ordination.

The EMU sovereign-debt crisis: fundamentals, expectations and contagion

In a research project conducted while visiting the DG-ECFIN in June 2010, we provided a detailed empirical investigation of the EMU sovereign-debt crisis up to February 2010.

Eye Care Service in Scotland: Did the Scots Get it Right?

In March 2004, the Scottish government announced a review of eye care services in Scotland, which culminated in the introduction of free eye examinations from 1st April 2006. This free eye examination is not just a sight test; it is a thorough examination to check the health of the patient’s eyes and to look for signs of other health problems. The Scottish government commissioned private ophthalmic optician practices to perform these eye examinations. Consequently, since April 2006 individuals in Scotland could walk into any high street optometry practice and get a ‘free’ eye examination funded under the NHS.

Estimating United States Phillips Curves With Expectations Consistent With The Statistical Process Of Inflation

‘Modern’ Phillips curve theories predict inflation is an integrated, or near integrated, process. However, inflation appears bounded above and below in developed economies and so cannot be ‘truly’ integrated and more likely stationary around a shifting mean. If agents believe inflation is integrated as in the ‘modern’ theories then they are making systematic errors concerning the statistical process of inflation. An alternative theory of the Phillips curve is developed that is consistent with the ‘true’ statistical process of inflation. It is demonstrated that United States inflation data is consistent with the alternative theory but not with the existing ‘modern’ theories.

Fiscal Sustainability in a New Keynesian Model

Recent work on optimal monetary and fiscal policy in New Keynesian models suggests that it is optimal to allow steady-state debt to follow a random walk. Leith and Wren-Lewis (2012) consider the nature of the timeinconsistency involved in such a policy and its implication for discretionary policy-making. We show that governments are tempted, given inflationary expectations, to utilize their monetary and fiscal instruments in the initial period to change the ultimate debt burden they need to service. We demonstrate that this temptation is only eliminated if following shocks, the new steady-state debt is equal to the original (efficient) debt level even though there is no explicit debt target in the government’s objective function. Analytically and in a series of numerical simulations we show which instrument is used to stabilize the debt depends crucially on the degree of nominal inertia and the size of the debt-stock. We also show that the welfare consequences of introducing debt are negligible for precommitment policies, but can be significant for discretionary policy. Finally, we assess the credibility of commitment policy by considering a quasi-commitment policy which allows for different probabilities of reneging on past promises. This on-line Appendix extends the results of this paper.

Prise en charge par une équipe pluridisciplinaire des patients avec multiples vulnérabilités dans un service d'urgence

Introduction: Les centres d'urgence se trouvent régulièrement confrontés à des patients avec de multiples vulnérabilités médico-sociales qui recourent préférentiellement aux urgences pour y recevoir des soins de bases. Leurs fréquentes consultations contribuent à encombrer les urgences : dans notre service d'urgence entre avril 2008 et mars 2009, une étude ayant pour but de caractériser ces patients a montré que 14 % de l'ensemble des consultations ont été causées par 5 % des patients admis > 4 x/an.Matériel et méthode: Cohorte prospective des patients admis aux urgences et présentant des critères touchant > 3 axes de vulnérabilités sur les 5 axes reconnus habituellement (déterminants somatiques, de santé mentale, comportemental, social, de consommation de soins). Les patients inclus ont été soit signalés par le personnel médico-infirmier des urgences, soit dépistés par une équipe pluridisciplinaire (2 infirmières, 1 assistant social, 1 médecin) durant les jours ouvrables du 1.9.2010 au 14.12.2010.Résultats: 75 patients ont été inclus (65 % d'hommes). La moyenne d'âge était de 43 ans. 59 % étaient des migrants en provenance de : Europe (22 %), Afrique (22 %), Asie (12 %), Amériques du Sud (6 %) et du Nord (1 %). Les vulnérabilités les plus fréquentes étaient: somatiques 76 % (maladies aiguës/chroniques sévères 50 %, mauvaise adhérence thérapeutique 40 %), liées à la santé mentale 65 % (troubles anxieux et dépressifs 54 %), comportementales 80 % (addictions aux substances 73 %), sociales 93 % (absence de domicile fixe 31 %, absence d'assurance-maladie 15 %, barrières linguistiques 24 %, à l'assistance sociale 46 %) et consommation de soins (> 4 visites aux urgences/an 57 %, absence de médecin de premier recours 33 %). La charge de travail moyenne pour orienter ces patients vers des structures de santé primaire était de 3 heures/cas. Les interventions ont été d'évaluer le réseau de soins déjà impliqué (98 %), de réorienter dans le réseau ambulatoire (64 %) ou vers les services sociaux (37 %).Conclusion: Les vulnérabilités multiples sont relativement peu fréquentes dans notre service d'urgence mais leur complexité requiert des ressources qui dépassent ce que peuvent offrir des équipes de soins habituelles aux urgences. Une prise en charge individuelle par une équipe pluridisciplinaire est susceptible de fournir ces ressources et de réorienter ces patients vers des structures ambulatoires adaptées à leurs besoins.

Fiscal Sustainability in a New Keynesian Model

Recent work on optimal monetary and fiscal policy in New Keynesian models suggests that it is optimal to allow steady-state debt to follow a random walk. Leith and Wren-Lewis (2012) consider the nature of the timeinconsistency involved in such a policy and its implication for discretionary policy-making. We show that governments are tempted, given inflationary expectations, to utilize their monetary and fiscal instruments in the initial period to change the ultimate debt burden they need to service. We demonstrate that this temptation is only eliminated if following shocks, the new steady-state debt is equal to the original (efficient) debt level even though there is no explicit debt target in the government’s objective function. Analytically and in a series of numerical simulations we show which instrument is used to stabilize the debt depends crucially on the degree of nominal inertia and the size of the debt-stock. We also show that the welfare consequences of introducing debt are negligible for precommitment policies, but can be significant for discretionary policy. Finally, we assess the credibility of commitment policy by considering a quasi-commitment policy which allows for different probabilities of reneging on past promises. This on-line Appendix extends the results of this paper.

Expectations Traps and Coordination Failures with Discretionary Policymaking

Discretionary policymakers cannot manage private-sector expectations and cannot coordinate the actions of future policymakers. As a consequence, expectations traps and coordination failures can occur and multiple equilibria can arise. To utilize the explanatory power of models with multiple equilibria it is first necessary to understand how an economy arrives to a particular equilibrium. In this paper we employ notions of learnability and self-enforceability to motivate and identify equilibria of particular interest. Central among these criteria are whether the equilibrium is learnable by private agents and jointly learnable by private agents and the policymaker. We use two New Keynesian policy models to identify the strategic interactions that give rise to multiple equilibria and to illustrate our methods for identifying equilibria of interest. Importantly, unless the Pareto-preferred equilibrium is learnable by private agents, we find little reason to expect coordination on that equilibrium.

Scheduled Service Versus Personal Transportation: The Role of Distance

This paper presents a theoretical and empirical analysis of the relationship be- tween frequency of scheduled transportation services and their substitutability with personal transportation (using distance as a proxy). We study the interaction between a monopoly firm providing a high-speed scheduled service and private transportation (i.e., car). Interestingly, the carrier chooses to increase the frequency of service on longer routes when competing with personal transportation because by providing higher frequency (at extra cost) it can also charge higher fares which can boost its profits. However, in line with the results of earlier studies, frequency decreases for longer flights when driving is not a viable option. An empirical application of our analysis to the European airline industry confirms the predictions of our theoretical model. Keywords: short-haul routes; long-haul routes; flight frequency; distance JEL Classification Numbers: L13; L2; L93

Rational Expectations Dynamics: A Methodological Critique

This paper analyses RE macromodels from the methodological perspective. It proposes a particular property, robustness, which should be considered a necessary feature of scienti cally valid models in economics, but which is absent from many RE macromodels. To restore this property many macroeconomists resort to detailed and implausible assumptions, which take their models a long way from simple Rational Expectations. The paper draws attention to the problems inherent in the technique of local linearisation and concludes by proposing the use of nonlinear models, analysed globally.

Service offshoring and white-collar employment

This paper empirically studies the effects of service offshoring on white-collar employment, using data for more than one hundred U.S. occupations. A model of firm behavior based on separability allows to derive the labor demand elasticity with respect to service offshoring for each occupation. Estimation is performed with Quasi-Maximum Likelihood, to account for high degrees of censoring in the employment variable. The estimated elasticities are then related to proxies for the skill level and the degree of tradability of the occupations. Results show that service offshoring increases high skilled employment and decreases medium and low skilled employment. Within each skill group, however, service offshoring penalizes tradable occupations and benefits non-tradable occupations.

General Practitioners' willingness to pay for continuing medical education in a fee-for-service universal coverage health care system

Background: Sponsoring of physicians meetings by life science companies has led to reduced participation fees but might influence physician's prescription practices. A ban on such sponsoring may increase participation fees. We aimed to evaluate factors associated with physicians' willingness to pay for medical meetings, their position on the sponsoring of medical meetings and their opinion on alternative financing options. Methods: An anonymous web-based questionnaire was sent to 447 general practitioners in one state in Switzerland, identified through their affiliation to a medical association. The questionnaire evaluated physicians' willingness to pay for medical meetings, their perception of a bias in prescription practices induced by commercial support, their opinion on the introduction of a binding legislation and alternative financing options, their frequency of exchange with sales representatives and other relevant socioeconomic factors. We built a multivariate predictor logistic regression model to identify determinants of willingness to pay. Results: Of the 115 physicians who responded (response rate 26%), 48% were willing to pay more than what they currently pay for congresses, 79% disagreed that commercial support introduced a bias in their prescription practices and 61% disagreed that it introduced a bias in their colleagues' prescription practices. Based on the multivariate logistic regression, perception of a bias in peers prescription practices (OR=7.47, 95% CI 1.65-38.18) and group practice structure (OR=4.62, 95% CI 1.34-22.29) were significantly associated with an increase in willingness to pay. Two thirds (76%) of physicians did not support the introduction of a binding legislation and 53% were in favour of creating a general fund administered by an independent body. Conclusion: Our results suggest that almost half of physicians surveyed are willing to pay more than what they currently pay for congresses. Predictors of an increase in physicians' willingness to pay were perception of the influence of bias in peers prescription practices and group practice structure. Most responders did not agree that sponsoring introduced prescribing bias nor did they support the 2 introduction of a binding legislation prohibiting sponsoring but a majority did agree to an independent body that would centrally administer a general fund.

Employment effects of service offshoring: evidence from matched firms

This paper studies the effects of service offshoring on the level and skill composition of domestic employment, using a rich data set of Italian firms and propensity score matching techniques. The results show that service offshoring has no effect on the level of employment but changes its composition in favor of high skilled workers.