Corruption and the size of government: causality tests for OECD and Latin American countries

The purpose of this article is to examine the causality between government size and corruption, and to verify if there is a different pattern of causality between developed Organization for Economic Co-operation and Development (OECD) countries (excluding Mexico) and developing countries (Latin American countries) during the period 1996 to 2003. Applying Granger and Huang`s (1997) methodology we find evidence that size of government Granger causes corruption in both samples. Since a larger government involvement in private markets today will be followed in future by a higher level of corruption a policy advice would be to enhance governance. The promotion of good governance helps to combat corruption given that it complements efforts to reduce corruption more directly, and it is strongly recommended by the International Monetary Fund, other multilateral institutions, and all worried with the negative impacts of corruption on economic activity.

Inflation Targeting Matters: Evidence from OECD Economies` Sacrifice Ratios

Using data from OECD economies, we show that inflation targeters suffered smaller output losses during disinflations when compared to nontargeters. We also study why some countries choose to inflation target while others do not and find that higher average inflation and smaller debt levels render the adoption of the regime more likely. Applying Heckman`s procedure to control for selection bias does not alter the link between inflation targeting and less costly disinflations.

Health expenditures in the OECD: A political economy analysis using structural breaks

A Masters Thesis, presented as part of the requirements for the award of a Research Masters Degree in Economics from NOVA – School of Business and Economics

Health systems efficiency after the crisis in the OECD

This work evaluates the efficiency position of the health system of each OECD country. It identifies whether, or not, health systems changed in terms of quality and performance after the financial crisis. The health systems performance was calculated by fixed-effects estimator and by stochastic frontier analysis. The results suggest that many of those countries that the crisis affected the most are more efficient than the OECD average. In addition, some of those countries even managed to reach the top decile in the efficiency ranking. Finally, we analyze the stochastic frontier efficiency scores together with other health indicators to evaluate the health systems’ overall adjustments derived from the crisis.

Explaining Variation in Organizational Change: The Reform of Human Resource Management in the European Commission and the OECD

In this article we investigate the reforms of human resource management in the European Commission and the OECD by analyzing comparatively to what extent both organizations have adjusted their respective structures towards the ideal type of the so-called New Public Management (NPM). The empirical findings show that reforms towards NPM are more pronounced in the Commission than in the OECD. These findings are surprising for two reasons: First, it seems rather paradoxical that the OECD as central promoter of NPM at the international level lags behind the global trend when it comes to reforming its own structures. Second, this result is in contradiction with theoretical expectations, as they can be derived from theories of institutional isomorphism. To nevertheless account for the surprising results, it is necessary to modify and complement existing theories especially with regard to the scope conditions of their causal mechanisms.

Fiscal insurance and debt management in OECD economies

Assuming the role of debt management is to provide hedging against fiscal shocks we consider three questions: i) what indicators can be used to assess the performance of debt management? ii) how well have historical debt management policies performed? and iii) how is that performance affected by variations in debt issuance? We consider these questions using OECD data on the market value of government debt between 1970 and 2000. Motivated by both the optimal taxation literature and broad considerations of debt stability we propose a range of performance indicators for debt management. We evaluate these using Monte Carlo analysis and find that those based on the relative persistence of debt perform best. Calculating these measures for OECD data provides only limited evidence that debt management has helped insulate policy against unexpected fiscal shocks. We also find that the degree of fiscal insurance achieved is not well connected to cross country variations in debt issuance patterns. Given the limited volatility observed in the yield curve the relatively small dispersion of debt management practices across countries makes little difference to the realised degree of fiscal insurance.

Deconstructing Shocks and Persistence in OECD Real Exchange Rates

This paper analyzes the persistence of shocks that affect the real exchange rates for a panel of seventeen OECD developed countries during the post-Bretton Woods era. The adoption of a panel data framework allows us to distinguish two different sources of shocks, i.e. the idiosyncratic and the common shocks, each of which may have di¤erent persistence patterns on the real exchange rates. We first investigate the stochastic properties of the panel data set using panel stationarity tests that simultaneously consider both the presence of cross-section dependence and multiple structural breaks that have not received much attention in previous persistence analyses. Empirical results indicate that real exchange rates are non-stationary when the analysis does not account for structural breaks, although this conclusion is reversed when they are modeled. Consequently, misspecification errors due to the non-consideration of structural breaks leads to upward biased shocks' persistence measures. The persistence measures for the idiosyncratic and common shocks have been estimated in this paper always turn out to be less than one year.

New evidence of the real interest rate parity for OECD countries using panel unit root tests with breaks

This paper tests for real interest parity (RIRP) among the nineteen major OECD countries over the period 1978:Q2-1998:Q4. The econometric methods applied consist of combining the use of several unit root or stationarity tests designed for panels valid under cross-section dependence and presence of multiple structural breaks. Our results strongly support the fulfillment of the weak version of the RIRP for the studied period once dependence and structural breaks are accounted for.

Is the consumption-income ratio stationary? Evidence from linear and nonlinear panel unit root tests for OECD and non-OECD countries

This paper applies recently developed heterogeneous nonlinear and linear panel unit root tests that account for cross-sectional dependence to 24 OECD and 33 non-OECD countries’ consumption-income ratios over the period 1951–2003. We apply a recently developed methodology that facilitates the use of panel tests to identify which individual cross-sectional units are stationary and which are nonstationary. This extends evidence provided in the recent literature to consider both linear and nonlinear adjustment in panel unit root tests, to address the issue of cross-sectional dependence, and to substantially expand both time-series and cross sectional dimensions of the data analysed. We find that the majority (65%) of the series are nonstationary with slightly fewer OECD countries’ (61%) series exhibiting a unit root than non-OECD countries (68%).

Joint estimates of automatic and discretionary fiscal policy for the OECD

Official calculations of automatic stabilizers are seriously flawed since they rest on the assumption that the only element of social spending that reacts automatically to the cycle is unemployment compensation. This puts into question many estimates of discretionary fiscal policy. In response, we propose a simultaneous estimate of automatic and discretionary fiscal policy. This leads us, quite naturally, to a tripartite decomposition of the budget balance between revenues, social spending and other spending as a bare minimum. Our headline results for a panel of 20 OECD countries in 1981-2003 are .59 automatic stabilization in percentage-points of primary surplus balances. All of this stabilization remains following discretionary responses during contractions, but arguably only about 3/5 of it remains so in expansions while discretionary behavior cancels the rest. We pay a lot of attention to the impact of the Maastricht Treaty and the SGP on the EU members of our sample and to real time data.

Joint estimates of automatic and discretionary fiscal policy: the OECD 1981-2003

Official calculations of automatic stabilizers are seriously flawed since they rest on the assumption that the only element of social spending that reacts automatically to the cycle is unemployment compensation. This puts into question many estimates of discretionary fiscal policy. In response, we propose a simultaneous estimate of automatic and discretionary fiscal policy. This leads us, quite naturally, to a tripartite decomposition of the budget balance between revenues, social spending and other spending as a bare minimum. Our headline results for a panel of 20 OECD countries in 1981-2003 are .59 automatic stabilization in percentage-points of primary surplus balances. All of this stabilization remains following discretionary responses during contractions, but arguably only about 3/5 of it remains so in expansions while discretionary behavior cancels the rest. We pay a lot of attention to the impact of the Maastricht Treaty and the SGP on the EU members of our sample and to real time data.

Joint estimates of automatic and discretionary fiscal policy: the OECD 1981-2003

Official calculations of automatic stabilizers are seriously flawed since they rest on the assumption that the only element of social spending that reacts automatically to the cycle is unemployment compensation. This puts into question many estimates of discretionary fiscal policy. In response, we propose a simultaneous estimate of automatic and discretionary fiscal policy. This leads us, quite naturally, to a tripartite decomposition of the budget balance between revenues, social spending and other spending as a bare minimum. Our headline results for a panel of 20 OECD countries in 1981-2003 are .59 automatic stabilization in percentage-points of primary surplus balances. All of this stabilization remains following discretionary responses during contractions, but arguably only about 3/5 of it remains so in expansions while discretionary behavior cancels the rest. We pay a lot of attention to the impact of the Maastricht Treaty and the SGP on the EU members of our sample and to real time data.

A Comparison of the poverty impact of transfers, taxes and market income across five OECD Countries

This paper compares the poverty reduction impact of income sources, taxes and transfers across five OECD countries. Since the estimation of that impact can depend on the order in which the various income sources are introduced into the analysis, it is done by using the Shapley value. Estimates of the poverty reduction impact are presented in a normalized and un-normalized fashion, in order to take into into account the total as well as the per dollar impacts. The methodology is applied to data from the Luxembourg Income Study (LIS) database.