Gil Mehrez - Academia.edu (original) (raw)

Papers by Gil Mehrez

This paper argues that labor markets across Europe vary dramatically in their fundamentals featur... more This paper argues that labor markets across Europe vary dramatically in their fundamentals features and rigidities across Europe. Thus, any discussion of an optimum currency area should focus on the differences and the idiosyncratic changes in the labor markets. After demonstrating the vast differences and changes in the labor markets across Europe, we construct a model with differential goods, monopolistic

Conceptual ambiguities and statistical weaknesses hamper the assessment of external competitivene... more Conceptual ambiguities and statistical weaknesses hamper the assessment of external competitiveness. The term competitiveness, while applied extensively, is often imprecisely defined, which can result in analytical errors and mistaken policy advice. Furthermore, aggregate statistical measures of competitiveness in terms of exchange rate misalignment can be biased. To address these issues, this paper makes two contributions. First, it clarifies the external competitiveness concept, highlighting the dichotomy between productivity-driven long-run growth and short-run deviations from the underlying growth trajectory, which can be related to exchange rate misalignment. Second, it develops a disaggregated statistical approach for examining competitiveness based on unit labor costs at the three digit industry level in a group of comparable countries. The case of Slovakia is used to illustrate these concepts, but the analytical insights have general application.

This paper investigates the dynamics of output, employment and prices in an economy with costs of... more This paper investigates the dynamics of output, employment and prices in an economy with costs of adjusting labor and prices. In an economy with non convex adjustments costs, firms do not adjust labor and prices continuously to accommodate every shift in demand. Rather, firms adjust employment and prices discontinuously. Employment and prices are adjusted only after demand has shifted beyond a predetermined thresholds. When adjustment is discontinuous, the dynamics of the aggregate economy is very different from the behavior of a single firm. The dynamics of the price level, aggregate employment and output depend in a crucial way on the firms' distribution along the inaction intervals. This paper develops a model with infrequent price and labor adjustments. The firms' multivariate distribution of prices and employment deviation from their optimal level is derived and is used to determine the dynamics of the price level, aggregate employment and aggregate output. It is show...

Much research on the dynamics of the aggregate economy concerns the adjustment policy of the micr... more Much research on the dynamics of the aggregate economy concerns the adjustment policy of the microeconomic units. This paper investigates the optimal adjustment policy when there are seasonal fluctuations and fixed adjustment costs. The optimal policy in this case can be described in terms of three parameters: the thresholds where adjustment occurs during the high season; the thresholds where adjustment occurs during the low season; and the deviation at the end of each season. Since the optimal level of the control variable (e.g., price, employment, stock of capital) decreases during the low season and increases during the high season, the optimal policy is such that at the end of the high season the control variable is below its optimal level and at the end of the low season the control variable is above its optimal level. As a result, the observed seasonal fluctuations are smaller than the underlying seasonal fluctuations. This damping effect depends on the trend of the process. W...

Ssrn Electronic Journal, 2002

Drawing on an in-depth governance micro-survey of public officials within a country, we address e... more Drawing on an in-depth governance micro-survey of public officials within a country, we address empirically the question of the relative importance of the various determinants of governance. We investigate the causes of poor governance, and show that commonly made inferences about policy based on simple correlation can be highly misleading, because the high correlation between the various governance (and public sector management) determinants, as well as the endogeneity in these variables. We find that undue emphasis may have been given in previous work to a number of conventional public sector management variables (such as civil servant wages, internal enforcement of rules, autonomy of agency by fiat, etc.), while undermining the priority due to more 'external' (to public sector management) variables, such as external voice, transparency, and politicization. The latter set of 'voice'-related variables has larger affect on the quality of service and corruption than the more traditional public sector management type of variables. Further work drawing in depth on country-specific surveys in other settings is warranted to ascertain with more confidence whether a shift towards more prominence to transparency and 'voice'-type of variables is needed, backstopping the results for Bolivia in this paper.

Macroeconomics, Jun 6, 1997

Rand Journal of Economics, 1994

RAND Journal of Economics Vol. 25, No. 2, Summer 1994 ... Optional time-of-use prices for electri... more RAND Journal of Economics Vol. 25, No. 2, Summer 1994 ... Optional time-of-use prices for electricity: ... We estimate a model of time-of-use (TOU) consumption and choice among optional TOU tariffs in which the customer's ...

International Trade, Sep 25, 1998

Finance, Aug 26, 2003

We investigate the effect of financial liberalization on the probability of a banking crises in e... more We investigate the effect of financial liberalization on the probability of a banking crises in economies with poor transparency We construct a model with imperfect information where banks cannot distinguish between aggregate shocks on the one hand, and government's policy and firms' quality, on the other. Thus, a sequence of positive shocks or non-transparent policy causes banks to increase their credit above the optimal level given the underlying value of the firms. Once banks discover their large exposure, they are likely to roll-over bad loans rather than declare their losses. This delays the crisis, but increasing its magnitude. Empirical investigation using data on 56 countries from 1977 to 1997 supports the theoretical model. We find that the probability of a crisis is higher in the period following financial liberalization, significantly so in countries with poor transparency.

Policy Research Working Paper Series, Feb 29, 2000

The RAND Journal of Economics, 1994

SSRN Electronic Journal, 2000

Policy Research Working Papers, 2000

The paper develops a Romer-type growth model with a research sector, a manufacturing sector, and ... more The paper develops a Romer-type growth model with a research sector, a manufacturing sector, and a financial sector and shows that inflation has an adverse effect on economic growth. Higher inflation increases the incentives for agents to use money substitutes through financial services in an attempt to reduce inflation tax. This increases the size of the financial sector and shifts resources out of other sectors of the economy including research, the engine of growth, into the financial sector. As a consequence, the economy-wide growth rate declines. The paper examines the empirical evidence using panel data of 17 countries which have experienced medium or high inflation. The results strongly support the hypothesis of the expansionary effect of inflation on the size of the financial sector and the negative effect of inflation on growth.

Journal of International Money and Finance, 2005

Energy and Buildings, 1995

We examine customers' time-of-use (TOU) demand for electricity and their choice between stan... more We examine customers' time-of-use (TOU) demand for electricity and their choice between standard and TOU rate schedules. We specify an econometric model in which the customer's demand curves determine the customer's choice of rate schedule. We estimate the model on data from Pacific Gas and Electric Company's experiment with optional TOU prices in the residential sector. With the model, we

Economic Inquiry, 2000

This paper analyzes the effects of inflation on the resource allocation between the financial sec... more This paper analyzes the effects of inflation on the resource allocation between the financial sector and the manufacturing sector. We develop a model with heterogeneous workers who can be employed either in the manufacturing sector, which produces a consumption good, or the financial sector, which provides liquidity services. A rise in inflation reduces the demand for labor in the manufacturing

World, 1999