Unemployment dynamics across OECD countries

Article Abstract:

The European Community and the US have experienced vastly different unemployment dynamics over the last two decades. This paper investigates whether these differences are due to exposure to different shocks, or reacting differently to the same shocks. With the premise of a search theoretic framework and a structural VAR methodology, the paper robustly identifies aggregate versus reallocative shocks. With the exception of Spain where most of the dynamics seem to be driven by reallocation, it is found that most differences in unemployment dynamics arise because of differences in responses to shocks. In particular, the US labour market is quicker to adjust than the European Community. This implies that EEC economies might be dynamically `sclerotic', even if the size of the steady-state labour market flows give the impression that European labour markets are quite active. Various identifying assumptions, additional labour supply shocks and different variables are used, yet the results appear robust. JEL classification: E20; J40; J60 Keywords: Labour market flows; Unemployment; OECD economics

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Investment and the exchange rate: An analysis with firm-level panel data

Article Abstract:

This paper investigates the relationship between exchange rate fluctuations and the investment decisions of a sample of Italian manufacturing firms. The results support the view that a depreciation of the exchange rate has a positive effect on investment through the revenue channel, and a negative effect through the cost channel. The magnitude of these effects varies over time with changes in the firm's external orientation, as measured by the share of foreign sales over total sales and the reliance on imported inputs. Consistent with the predictions of our theoretical framework, the effect of exchange rate fluctuations on investment is stronger for firms with low monopoly power, facing a high degree of import penetration in the domestic market, and of a small size. We also provide evidence that the degree of substitutability between domestically produced and imported inputs influences the effect through the expenditure side. [C] 2001 Elsevier Science B.V. All rights reserved. JEL classification: F31; E22 Keywords: Investment; Exchange rate; Firm's exposure

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Herding and anti-herding: A model of reputational differentiation

Article Abstract:

We analyze a model related to the strategic herding literature where a second expert maximizes his expected second period value by conforming with a first expert (`herding'). In contrast to the herding literature we assume that an agent is most valuable if he is the only smart agent. If the value of being the only smart agent is sufficiently large, the second expert always opposes its predecessor's report; otherwise, herding may result. [C] 2001 Elsevier Science B.V. All rights reserved. JEL classification: D8; L0 Keywords: Herding; Strategic communication; Career concerns

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