Macro- and Monetary Economics

The increase in life expectancy is arguably the most remarkable by‐product of modern economic growth. In the last 30 years we have been gaining roughly 2.5 years of longevity every decade both in Europe and in the United States. This progress has outpaced the most optimistic scenarios and documented that demographic projections are no more reliable than economic forecasts. This book looks closely into those challenges, raising a few fundamental issues at both the macroeconomic and microeconomic levels. Among these: is it possible to turn the challenges faced by ageing and longevity into a long‐term productive opportunity? Can advanced economies engineer a healthy ageing scenario with long‐term spillovers in terms of enhanced technological progress and acceleration of long‐term growth? What is the microeconomic relationship between ageing and productivity, and how can specific policies postpone any age‐related decay in productivity at the firm and individual levels?

Britain's income distribution is like a multi-story apartment building with the numbers of residents on the different floors corresponding to the concentration of people at different income levels in any particular year. The poorest are in the basement, the richest are in the penthouse, and the majority somewhere in between. But what are the dynamics of occupancy patterns? Snapshots of the building register at different times tell us nothing about these. Over time, how much movement between floors is there, and has the frequency of moves or the distance travelled been changing over the last two decades? In particular, is there much turnover in the basement, and do basement dwellers ever reach the penthouse? Who moves the most and how far? What are the factors associated with movements up and down the income tower over time? This book addresses such questions with extensive new analysis based on data from the British Household Panel Survey (BHPS) covering 1991–2006, providing a comprehensive and original study of income mobility and poverty dynamics. There is detailed discussion of why longitudinal perspectives on the income distribution are of interest, and of the relevant concepts and measures. There is in-depth discussion of the BHPS and its household income data, and comparisons with other national and international longitudinal data sources. The book shows that patterns of income mobility in Britain have not changed over the last two decades but fewer people are persistently poor, and it discusses the reasons for these trends.

In a discipline such as economics, increasingly devoted to its computational content, the mathematical underpinnings of the computability assumptions of economic fundamentals have not been investigated systematically or reasonably exhaustively. In this book, such an attempt is made for the first time. Choice theory, adaptively rational behaviour, induction, learning, arithmetical games, computational complexity of decision processes, growth theory, and the theory of economic fluctuations are given recursion theoretic (i.e, computable) interpretations. Economic theoretic questions, posed recursion theoretically, lead to answers that are ambiguous: undecidable choices, uncomputable learning processes, algorithmically unplayable games, etc., become standard answers. The book also claims that a recursion theoretic formalization of economic analysis makes the subject intrinsically inductive and computational.

Macroeconomics increasingly uses stochastic dynamic general equilibrium models to understand theoretical and policy issues. Unless very strong assumptions are made, understanding the properties of particular models requires solving the model using a computer. This volume brings together leading contributors in the field who explain in detail how to implement the computational techniques needed to solve dynamic economics models. It is based on lectures presented at the 7th Summer School of the European Economic Association on computational methods for the study of dynamic economies, held in 1996. A broad spread of techniques is covered, and their application to a wide range of subjects discussed. The book provides the basics of a tool kit that researchers and graduate students can use to solve and analyse their own theoretical models. It is oriented towards economists who already have the equivalent of a first year of graduate studies or to any advanced undergraduates or researchers with a solid mathematical background. No competence with writing computer codes is assumed. After an introduction by the editors, it is arranged in three parts: I Almost linear methods; II Nonlinear methods; and III Solving some dynamic economies.

This book gives an analytical account of the technology for the monetary policy implementation of the European Central Bank. The issue is looked at from different perspectives, corresponding to different chapters. The first chapter addresses the issue from a theoretical point of view, taking both a positive and a normative approach and considering both normal and stressed conditions. The stabilization of a short-term rate of interest in normal conditions and the countering of liquidity risk in a financial crisis are considered the objectives of monetary policy implementation. The approach in the second chapter is historical, presenting a narrative of the creation of the framework for the implementation of monetary policy in the euro area. The analysis turns to empirical tools in the third chapter, where the experience of actually working with the technology for monetary policy implementation is dealt with. Finally a forward-looking approach is taken in the last, short chapter, which attempts to identify the future challenges of monetary policy implementation. Each chapter, except for the fourth, is written by different authors but both the editors and the authors have strived to present an organic analysis of the issue in which the different approaches complement each other. The book is by no means an official account, but could definitely not have been written had the authors not been so closely associated with the implementation of monetary policy in the euro area.

In a non-technical language, the book provides an overview of the history of ratings, the role of rating agencies, the industry, the uses of ratings and the rating process. The US subprime crisis that highlighted relevant deficiencies in the rating agencies’ activities and their systemic relevance, led to an international consensus to establish public oversight and regulation of the rating business. The book explains the global initiatives undertaken by the G-20, the Financial Stability Board, and IOSCO to address those failures and the European implementation of such a consensus. It also provides an overview of the new European System of Financial Supervisors implemented as a reaction to the crisis and examines the supervisory and enforcement powers of ESMA, the new authority in charge of the registration and oversight of rating agencies. Through an in-depth analysis of the European Regulation’s requirements on governance, conflicts of interest, methodologies, disclosures, and transparency, the book provides a clear explanation of how rating agencies operate and how the identified failures have been addressed. The explanation of all these aspects is complemented with an analysis of guidance from supervisors (ESMA and EBA), IOSCO’s recommendations, and US legislation. Finally, the book discusses possible new regulatory developments in areas such as the agencies’ business model, competition, civil liability, and ratings of sovereign debt. It concludes with the authors’ support for an enhanced regulatory and oversight coordination at global level, a reduction of the existing over-reliance on ratings, and a concentration of resources on the enforcement of the current regulatory regime.