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Friday 20 December 2013

€ liquidity is getting more valuable: what can be done about it?

It is a recurrent phenomenon that liquidity gets more valuable at the end of the year: this is seen in the fact that, notwithstanding the higher amount outstanding, the overnight money market rate (EONIA) increases in the last weeks of the year. While the phenomenon was suppressed during the crisis by the overabundant liquidity provision, before the crisis, the average increase between the beginning of December and the end of the year, was of the order of 36 basis points, concentrated in the last few days of the month (see table 1). 

Monday 16 December 2013

Should German workers be paid more? Or, Do we have an omitted variable bias?

A recurrent problem in regression analysis is the omitted variable bias: if you estimate a regression and you do not include on the right side a variable that belongs to the model and is correlated with some included variables, the OLS estimates will be biased. The gist of this post is whether we have something of an analogous problem in addressing the current macroeconomic problems in the €-area, namely by not considering the possible influence of income distribution.