Everyone is painfully aware that we have just gone through a major economic and financial crisis which touched all parts of the global economy. Output levels fell sharply and unemployment and poverty rose commensurately. Many financial markets became dysfunctional and important financial institutions had to be merged or recapitalized by governments. Nor is it at all clear that the current “gree...

This paper studies corporatism as the outcome of bargaining between the government and a representative labor union. We show that if negotiations between these two parties only relate to macroeconomic stabilization, corporatism can never be beneficial to both parties. As corporatist policies are nevertheless commonly observed in this context, we discuss possible explanations that reconcile the ...

The session focused upon several issues raised by Mr Anand Sinha in the context of both advanced and emerging market economies (EMEs). Keeping in view, broader interlinkages between the financial sector and the real sector, the need for better coordination between financial regulation and macroeconomic policies for sustaining growth was emphasized. Given the nature and origin of the recent cris...

The paper analyses the relationship between within-country income inequality and policies of domestic liberalization and external globalization. The models used to provide the rationale for such reforms—such as the Hecksher-Ohlin model—usually predict a decline in inequality. However, the evidence shows that inequality often rose with the introduction of such reforms. The paper tries to explain...

In most studies of the impact of ethnic diversity on economic growth, diversity is hypothesized to affect growth through its effect on macroeconomic policies. This article shows that most measures of ethnic diversity (including the commonly used ELF measure) are inappropriate for testing this hypothesis. This is because they are constructed from enumerations of ethnic groups that include all of...

Macroeconomic Volatilities and the Labor Market: First Results from the Euro Experiment This paper analyzes the effects of different labor market institutions on inflation and output volatility. The eurozone offers an unprecedented experiment for this exercise: since 1999, no national monetary policies have been implemented that could account for volatility differences across member states, but...

Using migration data of a rating agency, this paper attempts to quantify the impact of macroeconomic conditions on credit-rating migrations. The migrations are modeled as a coupled Markov chain, where the macroeconomic factors are represented by unobserved tendency variables. In the simplest case, these binary random variables are static and credit-class-specific. A generalization treats tenden...

This paper reviews evidence of the gender effects of globalization in developing economies. It then outlines a set of macroeconomic and trade policies to promote gender equity. The evidence suggests that while liberalization has expanded women’s access to employment, the long-term goal of transforming gender inequalities remains unmet and appears unattainable without state intervention in marke...

M any central banks have long used a short-term nominal interest rate as the main instrument through which monetary policy actions are implemented. Some monetary authorities have even viewed their main job as managing nominal interest rates, by using an interest rate rule for monetary policy. It is therefore important to understand the consequences of such monetary policies for the behavior of ...