APPENDIX I: HAS THERE BEEN A BREAK IN ENTERPRISE BEHAVIOR?
26. This appendix tries to establish whether there has been a break in enterprise behavior in the early 1980s. It will first look at corporate investment and corporate saving separately, and then at the corporate saving balance.
APPENDIX II: AN EMPIRICAL ANALYSIS OF THE EFFECT OF EXCHANGE RATE CHANGES ON DUTCH EXPORTS AND IMPORTS8
34. This section will investigate the extent to which exchange rate changes affect Dutch exports and imports. To this end, Marshallian demand functions are specified for exports and imports, under the assumption of imperfect substitution between domestic and foreign goods.
De Haan, L., Corporate Dividend Policy under Asymmetric Information: An Empirical Study for the Netherlands, De Nederlandsche Bank, MEB Series No. 3 (1994).
Deppler, M.C. and D.M. Ripley, 1978, “The World Trade Model: Merchandise Trade,” Staff Papers, International Monetary Fund, Vol. 25 (MONTH), pp. 147–206.
Goldstein, M., and M.S. Khan, 1985, “Income and Price Effects in Foreign Trade,” in Handbook of International Economics, (eds by R.W. Jones and P. B. Kenen (Elsevier).
Halikias, Ioannis, 1996, “Long-Term Trends in the Saving-Investment Balance and Persistent Current Account Surpluses in a Small Open Economy: The Case of the Netherlands,” IMF Working Paper 96/42 (Washington: International Monetary Fund).
Prepared by Bas Bakker.
Securities are usually valued at market prices; direct investment, on the other hand, is typically valued at historic prices.
The capital income share is the complement of the labor income share.
This is in accordance with previous analysis of the staff, which attributed the increase in the saving-investment balance to the slowdown of real wage growth.
Tax treatment of contractual saving is typically more favorable than tax treatment of other forms of saving. While pension benefits are taxed, pension premiums are deductible, and investment income of pension fund is untaxed. Since pensions are taxed at a lower rate than at which premiums are deducted, this entails a substantial fiscal subsidy. For savings channeled through banks, no such subsidy exists: premiums are not deductible, and interest income is taxed. Tax treatment of annuities and life insurances can be even more favorable than those of pensions, and fiscal constructions abound that combine borrowing of funds with the purchase of life insurance.
Prepared by Meral Karasulu.
Goldstein and Khan (1985) report a selection of long-run price elasticities between 0.59 and 2.72 for total Dutch exports.
Statistical properties of the data enable the estimation of a stable relationship only for total exports and exports of goods when logarithmic levels of the data were used. The equation for manufacturing exports appears to represent a spurious relationship based on Augmented-Dickey Fuller test results. However, due to power problems of these tests, caution should be exercised in interpreting these results.
Deppler-Ripley, (1978) report a long-run activity elasticity of 0.65 for manufacturing goods. Goldstein and Khan (ibid) recount estimates ranging from 0.85 to 1.91 for total Dutch exports.
The estimated response of relative export prices to changes in cost competitiveness (Box 2) is slightly lower than ½, but the restriction of a 0.5 coefficient can not be rejected.
Regression results obtained from first differences of the data confirm that none of the relative price terms have economically meaningful coefficient estimates.