Capital accumulation in a model of growth and creative destruction

Capital accumulation and creative destruction is modeled together with risk-averse households. The novel aspect - risk-averse households - allows to use well-known models not only for analyzing long-run growth as in the literature but also short-run fluctuations. The model remains analytically tractable due to a very convenient property of the householdÕs investment decision in this stochastic continuous-time setup. Classification-E32, O41, O31creative destruction, risk averse households, capital accumulation, endogenous fluctuations and growth

Matching and Saving in Continuous Time: Proofs

This paper provides the proofs to the analysis of a continuous time matching model with saving in Bayer and Wälde (2010a). The paper proves the results on consumption growth, provides an existence proof for optimal consumption and a detailed derivation of the Fokker-Planck equations.continuous time uncertainty, Fokker-Planck equations, existence proof

How Bad is Globalization for Labour Standards in the North?

We analyse a world consisting of "the North" and "the South" where labour standards in the North are set by trade unions. Standards set by unions tend to increase output and welfare. There are no unions in the South and work standards are suboptimal. Trade between these two countries can imply a reduction in work standards in the North. Moreover, when trade unions are established in the South, the North, including northern unions, tend to lose. Quantitatively, these effects are small and overcompensated by gains in the South. The existing empirical literature tends to support our findings.occupational health and safety, trade unions, international trade, welfare

On the non-causal link between volatility and growth

A model highlighting the endogeneity of both volatility and growth is presented. Volatility and growth are therefore correlated but there is no causal link from volatility to growth. This joint endogeneity is illustrated by working out the effects through which economies with different tax levels differ both in their volatility and growth. Using a continuous-time DSGE model with plausible parametric restrictions, we obtain closedform measures of macro volatility based on cyclical components and output growth rates. Given our results, empirical volatility-growth analysis should include controls in the conditional variance equation. Otherwise an omitted variable bias is likely.Tax effects, Volatility measures, Poisson uncertainty, Endogenous cycles and growth, Continuous-time DSGE models

Money makes the world go round ... about the necessity of nonlinear techniques in interest rate forecasting

One of the key variables for a bank's management is the development of the "risk-free interest rate", which is the reference for all bond and loan rates as well as an indicator for the state of the economy and therefore the bank"s future perspectives. Turning towards long-term analysis, the risk-free rate is usually supposed to be the return of a superior-rated government bond (in most cases the return of the German 10-year Government Bond). Due to the importance of this risk-free rate, nearly all large economic and financial institutions deal with the analysis of its future development. In this paper we try to find out whether modelling non-linear relationships between variables can enhance forecast ability. We apply multi-layer perceptrons (MLP) as non-linear modelling tool beside an error correction model and a basic structural model with ARMA terms. Using seasonally unadjusted monthly data from 1960-2003, we forecast the interest rate for a two year hold-out sample. The obtained results give evidence of the underlying non-linearity of the problem. The MLP outperform the classical tools with regard to different error measures.Neural Networks, Interest Rate Forecasting

German Perception Verbs: Automatic Classification of Prototypical and Multiple Non-literal Meanings

This paper presents a token-based automatic classification of German perception verbs into literal vs. multiple non-literal senses. Based on a corpus-based dataset of German perception verbs and their systematic meaning shifts, we identify one verb of each of the four perception classes optical, acoustic, olfactory, haptic, and use Decision Trees relying on syntactic and semantic corpus-based features to classify the verb uses into 3-4 senses each. Our classifier reaches accuracies between 45.5% and 69.4%, in comparison to baselines between 27.5% and 39.0%. In three out of four cases analyzed our classifier’s accuracy is significantly higher than the according baseline