Ahearne, Alan G. and others, (2005), “House Prices and Monetary Policy: A Cross-Country Study,” International Finance Discussion Papers No. 841, Board of Governors of the Federal Reserve System.
Helbling, Thomas, (2005), “Housing price bubbles a tale based on Booms and Busts”, in BIS Paper No. 21, “Real Estate Indicators and Financial Stability”, BIS.
Lamont, Owen and Jeremy Stein, 1999, “Leverage and House Price Dynamics in U.S. cities.” Rand Journal of Economics, Vol. 30 (Autumn), pp. 498 –514
Scanlon, Kathleen and Christine Whitehead, (2004a). “Housing tenure and mortgage systems: How the UK compares,” Council of Mortgage lenders, Winter 2004
Scanlon, Kathleen and Christine, (2004b). “International trends in housing tenure and mortgage finance,” Council of Mortgage lenders.
Prepared by Sibel Yelten
WEO, September 2004, Box 2.1
According to the completeness index of the European Mortgage Federation the UK receives a perfect score (100 percent) for information and advice on mortgage related products. Belgium is not included in the study, however the same index is 70 and 80 in France and Netherlands, respectively.
Calculations by Belgium authorities.
See also World Economic Outlook, September 2005, Chapter I; World Economic Outlook, April 2003, Chapter II; and BIS paper number 21 (2005), for details.
Alessandria, G., Delacroix, A. 2004, Trade and the (Dis) Incentive to Reform Labor Markets: The Case of Reform in the European Union, FRB of Philadelphia WP 04–18.
Avonds, L., 2005, Een vergelijkende analyse van de Input-Outputtabellen van 1995 en 2000, Federal Planning Bureau, Working paper 4–05.
Bayoumi, T., Laxton, D. and Pesenti, P. 2004, Benefits and Spillovers of Greater Competition in Europe: A Macroeconomic Assessment, ECB Working Paper 341.
Biatour, B, Fiers, J. Gilis, S. Kegels, C. Thiery, F. 2005, European R&D Strategy: Impact and Feasibility Study for Belgium, Federal Planning Bureau Working Paper 3–05.
Bean, C.R., 1998, The Interaction of Aggregate-demand Policies and Labour Market Reform, Swedish Economic Policy Review, pp. 353 –88.
Blanchard, O., and Giavazzi, F. 2003, Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets, The Quarterly Journal of Economics, pp. 879 –907.
Clark, A.E., and Senik, C. 2004, The (Unexpected) Structure of ‘Rents’ on the French and British Labour Markets, IZA Discussion Paper 1438.
Conway, P, Janod, V. and Nicoletti, G. 2005, Product Market Regulation in OECD Countries: 1998 to 2003, OECD, Economics Department Working Paper 419.
Crepon, B., Desplatz, R. and Mairesse, J. 2002, Price-Cost Margins and Rent Sharing: Evidence from a Panel of French Manufacturing Firms, mimeo.
Dobbelaere, S, 2005, Joint Estimation of Price-Cost Margins and Union Bargaining Power for Belgian Manufacturing, IZA Discussion Paper 1466.
Duval, R. and Elmeskov, J. 2005, The Effects of EMU on Structural Reforms in Labour and Product Markets, paper prepared for the conference on What effects is EMU having on the euro area and its member countries?” organized by the ECB.
Gali, J., Gertler, M. and Lopez-Salido, J. D. 2002, Markups, Gaps, and the Welfare Costs of Business Fluctuations, NBER WP 8850.
Jean, S., and Nicoletti, G. 2002, Product Market Regulation and Wage Premia In Europe and North America: An Empirical Investigation, OECD, Economics Department Working Paper 419.
Kahn, H., 2004, Price-setting Behaviour, Competition, and Markup Shocks in the New Keynesian Model, Bank of England Working Paper 240.
Konings, J., Cayseele, P. Van and Warzynski, F. 2001, The Dynamics of Industrial Markups in Two Small Open Economies: Does National Competition Policy Matter?, International Journal of Industrial Organization, pp 841 –59.
Nicoletti, G., Bassanini, A. Ernst, E. Jean, S. Santiago, P. and Swaim, P. 2001, Product and Labor Markets Interaction in OECD Countries, OECD, Economics Department Working Paper 312.
Oliveira Martins, J., Scarpetta, S. and Pilat, D. 1996, Markup Ratios in Manufacturing Industries -Estimates for 14 OECD Countries, OECD, Economics Department Working Paper 162.
Oliveira Martins, J., and Scarpetta, S. 1999, The Levels And Cyclical Behaviour Of Markups Across Countries And Market Structures, OECD, Economics Department Working Paper 213.
Saint-Paul, G., 2004, Did European Labour Markets Become More Competitive in the 1990s? Evidence From Estimated Worker Rents, CEPR Discussion Paper 4327.
Schule, W., 2005, Estimating the Macroeconomic Effects of Higher Competition in Labor and Product Markets, in IMF-France-Selected Issues (forthcoming)
Prepared by Luc Everaert and Werner Schule.
Bayoumi and others (2004) estimate spillovers from the euro area to the rest of the world, which provide a benchmark for the degree of underestimation of spillover effects due to the reduced-openness assumption.
Trade flows are based on the UN COMTRADE statistics. For the sake of simplicity, the commodities sector was excluded from this version of GEM.
This estimate is approximate. It was guided by the observation that according to input-output tables about 45 percent of final domestic demand consists of imports (Avonds, 2005, Table 47).
These items are excluded since they do not represent a true claim on resources by the public sector.
Estimates of sacrifice ratios, the cumulated output costs of reducing inflation permanently by 1 percentage point, are often higher than these values, but they might reflect slow learning by central banks during the transition from a high to a low inflation environment.
For an extensive discussion of the sensitivity of results with respect to these parameters see Bayoumi and others (2004).
Households have good access to credit both through consumer and mortgage credit and have built up large net asset positions from which they can draw to bridge temporary liquidity constraints.
Tax rates on capital income are fixed at 10 percent. More sophisticated scenarios can be run by changing expenditures and taxes discretionary, alleviating the burden that falls on labor taxation.
At this level, the cost of aging is covered by savings of the interest bill, and the public debt-to-GDP ratio is stable. In the model, a higher steady state level of debt would require somewhat higher taxes and result in lower economic efficiency.
See also WEO April 2005, Annex 3.3 to Chapter III.
This simple formula ignores adjustment costs. An elasticity of substitution of 5 translates into a markup of 1.25 (25 percent). The markup goes to zero only if all products are perfect substitutes.
More precisely the OECD measure covers trade and investment restriction, regulatory barriers, discriminatory procedures or ownership barriers; licensing and permits, administrative, sector-specific, and legal burdens, antitrust exemptions; and state influence measured by the size and scope of the public enterprise sector, direct controls over business, and price controls or restrictions on establishment. See Conway and others (2005).
Gali, Gertler, and Lopez-Salido (2002) developed a related model that explains the bulk of output gap fluctuations with price and wage markups (NBER 8850).
Demand reacts sluggishly because of real and nominal rigidities in the model while the gradual implementation of reforms makes sure that potential output does not jump; this time pattern is entirely plausible for Belgium and the EU as a whole.
More competition in the tradables sector lowers tradables prices vis-à-vis nontradables prices and therefore represents a real appreciation of the home currency.
Indexation is to the so-called health index, which excludes prices of motor fuels, tobacco, and alcohol.
Raising competition represents an asymmetric positive supply shock, when implemented in one country only.
Modifying some key calibration parameters does not alter the thrust of the conclusions but widens the range of outcomes. Under the alternatives considered, the effect of stand-alone reforms would range from 7 to 13.3 percent of GDP.
Uncertainty leads to caution, including on the side of monetary policy-makers. As a result, monetary conditions may be less than fully accommodative, even in the case of synchronized euro area-wide reform.