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Working Paper Series in Economics
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No. 2009-5
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- Paolo Gelain and Dmitry Kulikov
- An estimated dynamic stochastic general equilibrium model for Estonia
This paper presents an estimated open economy dynamic stochastic general equilibrium model for Estonia. The model is designed to highlight the main driving forces behind the Estonian business cycle and to understand how euro area economic shocks and its monetary policy affect the small open economy of Estonia. The model described in this paper is a two-area DSGE model incorporating New Keynesian features such as nominal price and wage rigidity, variable capital utilization, investment adjustment costs, as well as other typical features - both for the domestic and euro area part of the model. It is rich in structural shocks such as technology, consumption preference, mark-up, etc. The model is estimated by Bayesian techniques using a quarterly data sample that covers main macroeconomic aggregates of Estonia and the euro area. The ultimate goal of the new model is for it to be used in simulation exercises, policy advice and forecasting at the Bank of Estonia
- JEL-Codes: E4, E5
- Keywords: monetary policy, New Keynesian models, small open economy, Bayesian statistical inference
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No. 2009-3
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- Jan Babecky, Philip Du Caju, Theodora Kosma, Martina Lawless, Julian Messina and Tairi Room
- Downward nominal and real wage rigidity :survey evidence from European firms
Firms have multiple options at the time of adjusting their wage bills. However, previous literature has mainly focused on base wages. We broaden the analysis beyond downward rigidity in base wages by investigating the use of other margins of labour cost adjustment at the firm level. Using data from a unique survey, we find that firms make frequent use of other, more flexible, components of compensation to adjust the cost of labour. Changes in bonuses and non-pay benefits are some of the potential margins firms use to reduce costs. We also show how the margins of adjustment chosen are affected by firm and worker characteristics
- JEL-Codes: J30, C81, P5
- Keywords: labour costs, wage rigidity, firm survey, European Union
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No. 2009-2
(Download at EconPapers)
- Andrew Hughes Hallett, Rasmus Kattai and John Lewis
- Can we rely on real time figures for cyclically adjusted budget balances?
This paper analyses the reliability of real time estimates of cyclically adjust budget balances (CABs). We find that real time CABs are not better at forecasting the ex post figures than simpler benchmarks. Further, we find that real time CABs have low power in detecting fiscal slippages, and in correctly identifying fiscal improvements. Around half of the real time errors in CABs can be attributed to revisions in the cyclical component of the budget balance, and around one half to revisions in the deficit to GDP ratio across vintages. That means it will be difficult to use them to reliably monitor the health of public finances. Lastly, we find that CABs are systematically less reliable under conditions of poor or deteriorating public finances, which means they are at their most unreliable precisely when they are needed most
- JEL-Codes: H62, H87
- Keywords: real time data, cylically adjusted budget deficits, measurement error
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No. 2009-01
(Download at EconPapers)
- Martti Randveer and Tairi Room
- The structure of migration in Estonia: survey-based evidence
This paper presents new evidence from a unique survey of firm managers on migration patterns in Estonia in 2007. An average emigrant from Estonia was most likely a young person between 15-34 years of age, a blue-collar worker and male. Contrary to evidence from other countries and/or earlier time periods, employees with a low level of education were more likely to emigrate than highly educated workers. We assessed which enterprises were more exposed to the crossborder movement of workers. The vast majority (97%) of emigrants left from private sector enterprises. Most immigrant workers were employed by private sector companies as well. Firms hiring a larger share of low-skilled blue-collar workers were more exposed to the mobility of international labour. The regression results indicated that the tendency to emigrate was the strongest among construction sector employees, whereas immigrant workers were most likely hired by manufacturing companies
- JEL-Codes: F22, J61, J62
- Keywords: immigration, emigration, survey
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