OECD Journal: Economic Studies

Frequency :
1995-2856 (online)
1995-2848 (print)
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OECD Journal: Economic Studies publishes articles in the area of economic policy analysis, applied economics and statistical analysis, generally with an international or cross-country dimension. While it draws significantly on economic papers produced by the Economics Department and other parts of the OECD Secretariat for the Organisation’s intergovernmental committees, the submission of articles produced by non-OECD authors is encouraged. We also welcome comments on articles previously published in the journal. Now published as part of the OECD Journal package.


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Mark Number Date Article Volume and Issue Click to Access
  19 Dec 2014 Rescuing the Phillips curve
OECD, Elena Rusticelli

Despite the increased importance of cyclically-adjusted measures of labour market slack for policymaking, estimates of the NAIRU have become increasingly fragile. Particularly for euro area countries, NAIRU estimates represent a crucial input to compute cyclically-adjusted budget balances adopted to formulate medium-term fiscal objectives under the EU fiscal surveillance framework. However, the apparent reduced sensitivity of inflation to labour market dynamics and unemployment gaps seriously undermines the use of Phillips curve equations in estimating the NAIRU. Estimates of the NAIRU are particularly problematic when changes in unemployment are both very large and rapid as in the aftermath of the global crisis. This paper proposes a refinement to the standard OECD approach of using a Kalman filter to estimate the NAIRU in the context of the Phillips curve. The proposed refinement strengthens the relationship between inflation and labour market developments by considering the risk of hysteresis effects associated with changes in long-term unemployment. Testing the revised methodology on a broad selection of OECD countries gives mixed results. For a group of countries in the euro area periphery (Greece, Ireland, Italy, Portugal and Spain) there is an increase in the magnitude and statistical significance of the unemployment gap, with the NAIRU revised upward by on average 1¾ percentage points. However, the revised methodology provides less improvement to the standard OECD methodology for a second set of countries considered, namely the G7 excluding Italy. The United States is an interesting intermediate case as the statistical evidence for the proposed methodology is marginal, but the policy implications of the revised point estimate of the NAIRU are major.

JEL classification: C32, E24, E31, E32, J64.
Keywords: Long-term unemployment, flattening Phillips curve, NAIRU, euro area periphery, Kalman filter.

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  • http://www.keepeek.com/Digital-Asset-Management/oecd/economics/rescuing-the-phillips-curve_eco_studies-2014-5jxrcm2cdff6
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  19 Dec 2014 Lessons from OECD forecasts during and after the financial crisis
Christine Lewis, Nigel Pain

This paper assesses the OECD’s projections for GDP growth and inflation during the global financial crisis and recovery, focusing on lessons that can be learned. Growth was repeatedly overestimated in the projections, which failed to anticipate the extent of the slowdown and later the weak pace of the recovery. Similar errors were made by many other forecasters. At the same time, inflation was stronger than expected on average. Analysis of the growth errors shows that the OECD projections in the crisis years were larger in countries with more international trade openness and greater presence of foreign banks. In the recovery, there is little evidence that an underestimate of the impact of fiscal consolidation contributed significantly to forecast errors. Instead, the repeated conditioning assumption that the euro area crisis would stabilise or ease played an important role, with growth weaker than projected in European countries where bond spreads were higher than had been assumed. But placing these errors in a historical context illustrates that the errors were not without precedent: similar-sized errors were made in the first oil price shock of the 1970s. In response to the challenges encountered in forecasting in recent years and the lessons learnt, the OECD and other international organisations have sought to improve their forecasting techniques and procedures, to improve their ability to monitor near-term developments and to better account for international linkages and financial market developments.

JEL classification: E17, E27, E32, E37, E62, E66, F47, G01
Keywords: Forecasting, economic outlook, economic fluctuations, fiscal policy

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  • http://www.keepeek.com/Digital-Asset-Management/oecd/economics/lessons-from-oecd-forecasts-during-and-after-the-financial-crisis_eco_studies-2014-5jxrcm2glc7j
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  24 Oct 2014 Japan's challenging debt dynamics
Yvan Guillemette, Jan Stráský

A small simulation model is used to evaluate the contribution that the three arrows of the government’s strategy – bold monetary policy to achieve higher inflation, flexible fiscal policy and growth-boosting structural reforms – could make to reversing the rise in Japan’s public debt ratio, currently about 230% of GDP. The findings indicate that with fiscal consolidation amounting to around 7½ percentage points of GDP by 2020, modestly higher growth coming from increased female labour force participation and higher productivity growth, as well as inflation gradually rising to 2% thanks to unconventional monetary policy measures, the debt ratio could be put on a downward trajectory by the end of this decade, although it is likely to remain above 200% of GDP in 2035. Among the many uncertainties surrounding this scenario, the risk of a larger-than-projected increase in interest rates stands prominently and could prevent the turnaround in debt dynamics.

JEL classification codes: E63; H68.
Keywords: Japan; debt; deficit; fiscal; budget; projection; simulation; arrow; consolidation; growth; inflation; reform.

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  • http://www.keepeek.com/Digital-Asset-Management/oecd/economics/japan-s-challenging-debt-dynamics_eco_studies-2014-5jxvbssqsvmv
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  05 Sep 2014 Foreign direct investment and reverse technology spillovers
Edmund Amann, Swati Virmani

The paper analyses the "feedback effect" of Foreign Direct Investment (FDI) on Total Factor Productivity (TFP) growth in emerging economies via technology spillovers across borders. We study the effect of R–D spillovers resulting from outward FDI flows from 18 emerging economies into 34 OECD countries over the 1990-2010 period, comparing the impact with that of spillovers resulting from inward FDI flows. The result confirms that FDI enhances productivity growth; however the impact is much larger when R-D-intensive developed countries invest in the emerging economies than the other way round. Country-specific bilateral elasticities also support this outcome.

JEL classification: F210, F430, F620, O470.
Keywords: Outward FDI, Inward FDI, Reverse technology spillovers, Total factor productivity.

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  • http://www.keepeek.com/Digital-Asset-Management/oecd/economics/foreign-direct-investment-and-reverse-technology-spillovers_eco_studies-2014-5jxx56vcxn0n
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  28 July 2014 The future of health and long-term care spending
Christine de la Maisonneuve, Joaquim Oliveira Martins

This paper proposes a new set of public health and long-term care expenditure projections until 2060, following up on the previous set of projections published in 2006. It disentangles health from long-term care expenditure as well as the demographic from the non-demographic drivers, and refines the previous methodology, in particular by better identifying the underlying determinants of health and long-term care spending and by extending the country coverage to include BRIICS countries. A cost-containment and a cost-pressure scenario are provided together with sensitivity analysis. On average across OECD countries, total health and long-term care expenditure is projected to increase by 3.3 and 7.7 percentage points of GDP between 2010 and 2060 in the cost-containment and the cost-pressure scenarios, respectively. For the BRIICS over the same period, it is projected to increase by 2.8 and 7.3 percentage points of GDP in the costcontainment and the cost-pressure scenarios, respectively.

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  • http://www.keepeek.com/Digital-Asset-Management/oecd/economics/the-future-of-health-and-long-term-care-spending_eco_studies-2014-5jz0v44s66nw
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  26 June 2014 Environmental policies and productivity growth
Tomasz Kozluk, Vera Zipperer

The economic effects of environmental policies are of central interest to policymakers. The traditional approach sees environmental policies as a burden on economic activity, at least in the short to medium term, as they raise costs without increasing output and restrict the set of production technologies and outputs. At the same time, the Porter Hypothesis claims that well-designed environmental policies can provide a "free lunch" – encouraging innovation, bringing about gains in profitability and productivity that can outweigh the costs of the policy. This paper reviews the empirical evidence on the link between environmental policy stringency and productivity growth, and the various channels through which such effects can take place. The results are ambiguous, in particular as many of the studies are fragile and context-specific, impeding the generalisation of conclusions. Practical problems related to data, measurement and estimation strategies are discussed, leading to suggestions as to how they can be addressed in future research. These include: improving the measurement of environmental policy stringency; investigating effects of different types of instruments and details of instrument design; exploiting cross-country variation; and the complementary use of different levels of aggregation.

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  • http://www.keepeek.com/Digital-Asset-Management/oecd/economics/environmental-policies-and-productivity-growth_eco_studies-2014-5jz2drqml75j
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  05 Feb 2014 Grade repetition
Miyako Ikeda, Emma García

This article explores country-by-country differences in academic performance and attitudes towards school between students who repeated a grade in primary school, in secondary school or never repeated a grade. The analyses use PISA 2009 for 30 countries in which a relatively high proportion of students repeated a grade before the age of 15. The comparisons across countries and the examination of models of both academic and non-academic performance contribute to shed some light on the consequences of repeating a grade for students. The estimated associations suggest that in most countries examined, at the age of 15, students who repeated a grade in secondary school tend to perform better academically than do students who repeated a grade in primary school, but worse than non-repeaters. In terms of the measure of behavioural performance chosen for this analysis, attitudes towards school, in the majority of countries, non-repeaters tend to report more positive attitudes towards schools than primary and secondary-school repeaters, but the comparison between repeaters in primary and secondary schools shows less consistent patterns across countries. These differences are observed after accounting for background characteristics of the students and exploring some differential relationships between grade repetition and education outcomes according to student characteristics. The achievement and behavioural gaps among groups of repeaters may reflect differences in the development of academic and behavioural skills over the school years, as well as differences in the way these groups of students are treated across different educational systems.

Volume 2013 Issue 1 Click to Access: 
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  • http://www.keepeek.com/Digital-Asset-Management/oecd/economics/grade-repetition_eco_studies-2013-5k3w65mx3hnx
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