This paper develops a macro-finance term structure model based on the expectations hypothesis extended to include a time-varying term premium. The model establishes inter alia the link between quantitative easing and the term premium, allowing us to measure the total impact on the bond yield of all phases of the Fed’s unconventional monetary policy implementation, including balance sheet expansion and normalization. Furthermore, by focusing on the long-run behavior of the model, an estimate of the equilibrium real interest rate is derived capturing longer-run macroeconomic trends, including the Fed’s, pre-financial crisis, balance-sheet trend.
{"title":"The effects of Federal Reserve's quantitative easing and balance sheet normalization policies on long-term interest rates","authors":"Sophocles N. Brissimis, Eva Georgiou","doi":"10.52903/wp2022299","DOIUrl":"https://doi.org/10.52903/wp2022299","url":null,"abstract":"This paper develops a macro-finance term structure model based on the expectations hypothesis extended to include a time-varying term premium. The model establishes inter alia the link between quantitative easing and the term premium, allowing us to measure the total impact on the bond yield of all phases of the Fed’s unconventional monetary policy implementation, including balance sheet expansion and normalization. Furthermore, by focusing on the long-run behavior of the model, an estimate of the equilibrium real interest rate is derived capturing longer-run macroeconomic trends, including the Fed’s, pre-financial crisis, balance-sheet trend.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2022-06-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81418152","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
P. Konstantinou, Andromachi Partheniou, Athanasios Tagkalakis
Using a panel of 33 OECD countries we estimate government spending multipliers for 11 different categories (functions) of spending: General Public Services, Defense, Public Or- der and Safety, Transport & Communication, Economic Services, Environment Protection, Housing and Community Amenities, Health, Education, Recreation, Culture and Religion, and Social Protection. We also account for variations in the state of the business cycle (recession vs expansion). Our results suggest that Public Services, Defense, Public Or- der, Transport & Communication, Health, Recreation and Education produce positive and high multipliers, whereas multipliers for Economic Services are negative, and multipliers for Environmental Protection, Housing and Social Protection are insignificant. In addi- tion, multipliers for Public Services, Defense, Public Order, Transport & Communication, Health, Recreation and Education are higher in recession than in expansion.
{"title":"A functional classification analysis of government spending multipliers","authors":"P. Konstantinou, Andromachi Partheniou, Athanasios Tagkalakis","doi":"10.52903/wp2022298","DOIUrl":"https://doi.org/10.52903/wp2022298","url":null,"abstract":"Using a panel of 33 OECD countries we estimate government spending multipliers for 11 different categories (functions) of spending: General Public Services, Defense, Public Or- der and Safety, Transport & Communication, Economic Services, Environment Protection, Housing and Community Amenities, Health, Education, Recreation, Culture and Religion, and Social Protection. We also account for variations in the state of the business cycle (recession vs expansion). Our results suggest that Public Services, Defense, Public Or- der, Transport & Communication, Health, Recreation and Education produce positive and high multipliers, whereas multipliers for Economic Services are negative, and multipliers for Environmental Protection, Housing and Social Protection are insignificant. In addi- tion, multipliers for Public Services, Defense, Public Order, Transport & Communication, Health, Recreation and Education are higher in recession than in expansion.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2022-06-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84644735","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Sophocles N. Brissimis, Michalis-Panayiotis Papafilis
We develop a theoretical framework that extends the Bernanke and Blinder (1988) model to incorporate imperfect substitution between internal and external finance of firms in order to study the operation of both the bank lending and the balance sheet channels of monetary transmission in the US. Our model is used to quantify the financial accelerator effects due to the operation of these channels. Empirically, we employ multivariate cointegration techniques to identify the equilibrium relationships included in our model, and we provide evidence that only the balance sheet channel is operational for the period before and after the global financial crisis.
{"title":"The credit channel of monetary transmission in the US: is it a bank lending channel, a balance sheet channel, or both, or neither?","authors":"Sophocles N. Brissimis, Michalis-Panayiotis Papafilis","doi":"10.52903/wp2022300","DOIUrl":"https://doi.org/10.52903/wp2022300","url":null,"abstract":"We develop a theoretical framework that extends the Bernanke and Blinder (1988) model to incorporate imperfect substitution between internal and external finance of firms in order to study the operation of both the bank lending and the balance sheet channels of monetary transmission in the US. Our model is used to quantify the financial accelerator effects due to the operation of these channels. Empirically, we employ multivariate cointegration techniques to identify the equilibrium relationships included in our model, and we provide evidence that only the balance sheet channel is operational for the period before and after the global financial crisis.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2022-06-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89959829","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We document the existence of a global monetary policy factor in sovereign bond yields, related to the size of the aggregate balance sheet of nine major central banks of developed economies that have implemented programs of large-scale asset purchases. Balance sheet policies of these central banks reduced the net supply of safe assets in the global economy, triggering a decline in global yields as investors rebalanced their portfolios towards more risky assets. We find that central banks’ large-scale asset purchases have contributed to significant and permanent declines in long-term yields globally, ranging from around 330 bps for AAA-rated sovereigns to 800 bps for non-investment grade sovereigns. The stronger decline in yields of high-risk sovereigns can be partly attributed to the decline in the foreign exchange risk premium as their currencies appreciated. Global central bank asset purchases during the Covid-19 crisis have more than counterbalanced the effects of expanding fiscal deficits on global bond yields, driving them to even lower levels. Our findings have important policy implications: normalizing monetary policy by scaling down central bank balance sheets to pre-crisis levels may lead to sharp increases in sovereign bond yields globally, widening spreads and currency depreciations of vulnerable sovereigns with severe consequences for financial stability and the global economy.
{"title":"A global monetary policy factor in sovereign bond yields","authors":"Dimitris Malliaropulos, P. Migiakis","doi":"10.52903/wp2022301","DOIUrl":"https://doi.org/10.52903/wp2022301","url":null,"abstract":"We document the existence of a global monetary policy factor in sovereign bond yields, related to the size of the aggregate balance sheet of nine major central banks of developed economies that have implemented programs of large-scale asset purchases. Balance sheet policies of these central banks reduced the net supply of safe assets in the global economy, triggering a decline in global yields as investors rebalanced their portfolios towards more risky assets. We find that central banks’ large-scale asset purchases have contributed to significant and permanent declines in long-term yields globally, ranging from around 330 bps for AAA-rated sovereigns to 800 bps for non-investment grade sovereigns. The stronger decline in yields of high-risk sovereigns can be partly attributed to the decline in the foreign exchange risk premium as their currencies appreciated. Global central bank asset purchases during the Covid-19 crisis have more than counterbalanced the effects of expanding fiscal deficits on global bond yields, driving them to even lower levels. Our findings have important policy implications: normalizing monetary policy by scaling down central bank balance sheets to pre-crisis levels may lead to sharp increases in sovereign bond yields globally, widening spreads and currency depreciations of vulnerable sovereigns with severe consequences for financial stability and the global economy.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2022-06-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84239514","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Recent research has argued that the COVID-19 shock has also brought about a real- location shock. We examine the evidence for such an occurrence in the United States, taking a broad perspective. We first consider micro data from CPS and JOLTS; there is no noticeable uptick in occupation or sector switches, nor churn, either at the aggregate level or the cross-section, or when broken down by firms’ size. We then examine whether mismatch unemployment has risen as a result of the pandemic; using an off-the-shelf multisector search and matching model, there is little evidence for an important role for mismatch in driving the elevated unemployment rate. Finally, we employ a novel Bayesian SVAR framework with sign restrictions to identify a reallocation shock; we find that it has played a relatively minor role in explaining labor market patterns in the pandemic, at least relative to its importance in earlier episodes.
{"title":"Did COVID-19 induce a reallocation wave?","authors":"Agostino Consolo, Filippos Petroulakis","doi":"10.52903/wp2022295","DOIUrl":"https://doi.org/10.52903/wp2022295","url":null,"abstract":"Recent research has argued that the COVID-19 shock has also brought about a real- location shock. We examine the evidence for such an occurrence in the United States, taking a broad perspective. We first consider micro data from CPS and JOLTS; there is no noticeable uptick in occupation or sector switches, nor churn, either at the aggregate level or the cross-section, or when broken down by firms’ size. We then examine whether mismatch unemployment has risen as a result of the pandemic; using an off-the-shelf multisector search and matching model, there is little evidence for an important role for mismatch in driving the elevated unemployment rate. Finally, we employ a novel Bayesian SVAR framework with sign restrictions to identify a reallocation shock; we find that it has played a relatively minor role in explaining labor market patterns in the pandemic, at least relative to its importance in earlier episodes.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2022-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77650233","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pavlos Petroulas, E. Gautier, B. Fabo, Jan-Oliver Menz, Pau Roldan-Blanco, Elisabeth Wieland, C. Conflitti, Ludmila Fadejeva, T. Messner, F. Rumler, Hélène Zimmer, Riemer P. Faber, Valentin Jouvanceau, Sergio Santoro
Using CPI micro data for 11 euro area countries covering about 60% of the euro area consumption basket over the period 2010-2019, we document new findings on consumer price rigidity in the euro area: (i) each month on average 12.3% of prices change, which compares with 19.3% in the United States; when we exclude price changes due to sales, however, the proportion of prices adjusted each month is 8.5% in the euro area versus 10% in the United States; (ii) differences in price rigidity are rather limited across euro area countries but much larger across sectors; (iii) the median price increase (resp. decrease) is 9.6% (13%) when including sales and 6.7% (8.7%) when excluding sales; cross-country heterogeneity is more pronounced for the size than for the frequency of price changes; (iv) the distribution of price changes is highly dispersed: 14% of price changes in absolute values are lower than 2% whereas 10% are above 20%; (v) the overall frequency of price changes does not change much with inflation and does not react much to aggregate shocks; (vi) changes in inflation are mostly driven by movements in the overall size; when decomposing the overall size, changes in the share of price increases among all changes matter more than movements in the size of price increases or the size of price decreases. These findings are consistent with the predictions of a menu cost model in a low inflation environment where idiosyncratic shocks are a more relevant driver of price adjustment than aggregate shocks.
{"title":"New facts on consumer price rigidity in the euro area","authors":"Pavlos Petroulas, E. Gautier, B. Fabo, Jan-Oliver Menz, Pau Roldan-Blanco, Elisabeth Wieland, C. Conflitti, Ludmila Fadejeva, T. Messner, F. Rumler, Hélène Zimmer, Riemer P. Faber, Valentin Jouvanceau, Sergio Santoro","doi":"10.52903/wp2022296","DOIUrl":"https://doi.org/10.52903/wp2022296","url":null,"abstract":"Using CPI micro data for 11 euro area countries covering about 60% of the euro area consumption basket over the period 2010-2019, we document new findings on consumer price rigidity in the euro area: (i) each month on average 12.3% of prices change, which compares with 19.3% in the United States; when we exclude price changes due to sales, however, the proportion of prices adjusted each month is 8.5% in the euro area versus 10% in the United States; (ii) differences in price rigidity are rather limited across euro area countries but much larger across sectors; (iii) the median price increase (resp. decrease) is 9.6% (13%) when including sales and 6.7% (8.7%) when excluding sales; cross-country heterogeneity is more pronounced for the size than for the frequency of price changes; (iv) the distribution of price changes is highly dispersed: 14% of price changes in absolute values are lower than 2% whereas 10% are above 20%; (v) the overall frequency of price changes does not change much with inflation and does not react much to aggregate shocks; (vi) changes in inflation are mostly driven by movements in the overall size; when decomposing the overall size, changes in the share of price increases among all changes matter more than movements in the size of price increases or the size of price decreases. These findings are consistent with the predictions of a menu cost model in a low inflation environment where idiosyncratic shocks are a more relevant driver of price adjustment than aggregate shocks.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2022-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76643963","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper we exploit properties of the likelihood function of the stochastic volatility model to show that it can be approximated accurately and efficiently using a response surface methodology. The approximation is across the plausible range of parameter values and all possible data and is found to be highly accurate. The methods extend easily to multivariate models and are applied to artificial data as well as ten exchange rates and all stocks of FTSE100 using daily data. Formal comparisons with multivariate GARCH models are undertaken using a special prior for the GARCH parameters. The comparisons are based on marginal likelihood and the Bayes factors.
{"title":"Novel techniques for Bayesian inference in univariate and multivariate stochastic volatility models","authors":"Tsionas Mike G.","doi":"10.52903/wp2022294","DOIUrl":"https://doi.org/10.52903/wp2022294","url":null,"abstract":"In this paper we exploit properties of the likelihood function of the stochastic volatility model to show that it can be approximated accurately and efficiently using a response surface methodology. The approximation is across the plausible range of parameter values and all possible data and is found to be highly accurate. The methods extend easily to multivariate models and are applied to artificial data as well as ten exchange rates and all stocks of FTSE100 using daily data. Formal comparisons with multivariate GARCH models are undertaken using a special prior for the GARCH parameters. The comparisons are based on marginal likelihood and the Bayes factors.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2022-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74811909","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Working Paper Series disseminates research papers of high quality and often of a more technical nature relevant to the various areas of interest to the Bank.They constitute "work in progress" and are published to stimulate discussion and contribute to the advancement of knowledge of economic matters. They are addressed to experts, so readers should be knowledgeable in economics.Working Papers are available in electronic format only (pdf).
{"title":"Disaggregate income and wealth effects on private consumption in Greece","authors":"D. Sideris, Georgia Pavlou","doi":"10.52903/wp2021293","DOIUrl":"https://doi.org/10.52903/wp2021293","url":null,"abstract":"The Working Paper Series disseminates research papers of high quality and often of a more technical nature relevant to the various areas of interest to the Bank.They constitute \"work in progress\" and are published to stimulate discussion and contribute to the advancement of knowledge of economic matters. They are addressed to experts, so readers should be knowledgeable in economics.Working Papers are available in electronic format only (pdf).","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2021-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81482538","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Neither history nor economic historians have been kind to Greece’s central bank in the interwar years. Born at the behest of the League of Nations to help the country secure a new international loan, the Bank of Greece was treated with a mixture of suspicion and hostility. The onset of the Great Depression pitted its statutory objective to defend the exchange rate against the incentive to reflate the domestic economy. Its policy response has generally been criticized as either ineffectual or detrimental: the Bank is accused of having pursued an unduly orthodox and restrictive policy, both during but also after the country’s exit from the gold exchange standard, some going as far as to argue that the 1932 devaluation failed to produce genuine recovery. Relying primarily on archival material, this paper combines qualitative and quantitative sources to revisit the Bank of Greece’s birth and operation during the Great Depression. In doing so, it hopes to put Greece on the map of international comparisons of the Great Depression and debates on the role of the League of Nations, the effectiveness of money doctoring and foreign policy interventions more generally. What is more, the paper seeks to revise several aspects of the conventional narrative surrounding the Bank’s role. First, it argues that monetary policy was neither as ineffective nor as restrictive as critics suggest; this was largely thanks to a continued trickle of foreign lending, but also to the Bank’s own decision to sterilize foreign exchange outflows, thus breaking the ‘rules of the game’. Second, it revisits Greece’s attempt to cling to gold after sterling’s devaluation, a decision routinely denounced as a critical policy mistake. Last but not least, it challenges the notion that Greece constitutes an exception to the rule that wants countries who shed their ‘golden fetters’ recovering faster.
在两次世界大战之间的岁月里，无论是历史学家还是经济史学家都对希腊央行不友好。希腊银行是应国际联盟(League of Nations)的要求而成立的，目的是帮助该国获得一笔新的国际贷款，但它受到了怀疑和敌意的双重对待。大萧条(Great Depression)的爆发使其捍卫汇率的法定目标与刺激国内经济再膨胀的动机相矛盾。它的政策反应通常被批评为无效或有害:央行被指责在该国退出金本位制期间和之后都奉行了过度正统和限制性的政策，有些人甚至认为，1932年的货币贬值未能带来真正的复苏。本文主要依靠档案资料，结合定性和定量来源，重新审视希腊银行在大萧条时期的诞生和运作。通过这样做，它希望将希腊置于与大萧条(Great Depression)进行国际比较的地图上，并讨论国际联盟(League of Nations)的作用、货币操纵的有效性以及更普遍的外交政策干预。此外，本文还试图修正围绕世行作用的传统叙述的几个方面。首先，它认为货币政策既不像批评者所说的那样无效，也不像批评者所说的那样具有限制性;这在很大程度上要归功于外国贷款的持续涓涓细流，但也要归功于央行自己决定冲销外汇流出，从而打破了“游戏规则”。其次，它回顾了希腊在英镑贬值后试图坚持持有黄金的做法，这一决定经常被谴责为一个严重的政策错误。最后但并非最不重要的一点是，它挑战了这样一种观点，即希腊是希望摆脱“金镣铐”的国家更快复苏的规则的例外。
{"title":"Nobody's child: the Bank of Greece in the interwar years","authors":"Andreas Kakridis","doi":"10.52903/wp2021290","DOIUrl":"https://doi.org/10.52903/wp2021290","url":null,"abstract":"Neither history nor economic historians have been kind to Greece’s central bank in the interwar years. Born at the behest of the League of Nations to help the country secure a new international loan, the Bank of Greece was treated with a mixture of suspicion and hostility. The onset of the Great Depression pitted its statutory objective to defend the exchange rate against the incentive to reflate the domestic economy. Its policy response has generally been criticized as either ineffectual or detrimental: the Bank is accused of having pursued an unduly orthodox and restrictive policy, both during but also after the country’s exit from the gold exchange standard, some going as far as to argue that the 1932 devaluation failed to produce genuine recovery. Relying primarily on archival material, this paper combines qualitative and quantitative sources to revisit the Bank of Greece’s birth and operation during the Great Depression. In doing so, it hopes to put Greece on the map of international comparisons of the Great Depression and debates on the role of the League of Nations, the effectiveness of money doctoring and foreign policy interventions more generally. What is more, the paper seeks to revise several aspects of the conventional narrative surrounding the Bank’s role. First, it argues that monetary policy was neither as ineffective nor as restrictive as critics suggest; this was largely thanks to a continued trickle of foreign lending, but also to the Bank’s own decision to sterilize foreign exchange outflows, thus breaking the ‘rules of the game’. Second, it revisits Greece’s attempt to cling to gold after sterling’s devaluation, a decision routinely denounced as a critical policy mistake. Last but not least, it challenges the notion that Greece constitutes an exception to the rule that wants countries who shed their ‘golden fetters’ recovering faster.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2021-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73068171","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The paper investigates empirically the tourism-growth relationship in Greece, over the period 1960-2020. We find that the long-run relationship between tourism and output is positive and is characterized by a substantially faster convergence of output after a negative shock than after a positive one. Using asymmetric error-correction model analysis the results show that the short-term adjustment path occurs through the level of output for negative deviations from the long-run equilibrium, thus supporting the tourism-led growth hypothesis. Linear quantile regression analysis indicates that while the impact of tourism remains positive and significant across the output distribution it is stronger at lower quantiles of output than at higher ones. Our results have important policy implications, since the tourism-led growth hypothesis is a useful policy recommendation, but it should not be considered a cure-all policy.
{"title":"The Greek tourism-led growth revisited: insights and prospects","authors":"Sarantis Lolos, Panagiotis Palaios, Evangelia Papapetrou","doi":"10.52903/wp2021289","DOIUrl":"https://doi.org/10.52903/wp2021289","url":null,"abstract":"The paper investigates empirically the tourism-growth relationship in Greece, over the period 1960-2020. We find that the long-run relationship between tourism and output is positive and is characterized by a substantially faster convergence of output after a negative shock than after a positive one. Using asymmetric error-correction model analysis the results show that the short-term adjustment path occurs through the level of output for negative deviations from the long-run equilibrium, thus supporting the tourism-led growth hypothesis. Linear quantile regression analysis indicates that while the impact of tourism remains positive and significant across the output distribution it is stronger at lower quantiles of output than at higher ones. Our results have important policy implications, since the tourism-led growth hypothesis is a useful policy recommendation, but it should not be considered a cure-all policy.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86398432","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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