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on Macroeconomics |
| By: | Sophia Cho; Thomas M. Mertens; John C. Williams |
| Abstract: | Interest rates have fluctuated significantly over time. After a period of high inflation in the late 1970s and early 1980s, interest rates entered a decline that lasted for nearly four decades. The federal funds rate—the primary tool for monetary policy in the United States—followed this trend, while also varying with cycles of economic recessions and expansions. |
| Keywords: | zero lower bound (ZLB); ZLB; risk; Financial derivatives |
| JEL: | E52 |
| Date: | 2025–07–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:101205 |
| By: | Francesco Morelli (Link Campus University) |
| Abstract: | This paper examines the effectiveness of public spending in different phases of the business cycle through a state-dependent macroeconomic model. We estimate a two-agent New-Keynesian (TANK) model with sticky wages in a Markov-switching framework for the U.S. economy (1960–2013). The model extends Gali, L´opez-Salido, and Vall´es 2007 by incorporating wage rigidity as in Colciago 2011. Our findings indicate that the share of hand-to-mouth agents (?) plays a crucial role in determining fiscal multipliers, with higher ? values associated with recessions and stronger public spending effects. While monetary policy regime shifts influence outcomes, ? remains the key driver of multiplier heterogeneity. Our results suggest that temporary fiscal interventions during downturns yield the highest impact, reconciling elements of both neoclassical and New-Keynesian perspectives. These insights have important policy implications for the design of countercyclical fiscal policies. |
| Keywords: | Fiscal multipliers, New-Keynesian model, Markov-Switching estimation, Hand-tomouth consumers, Sticky wages |
| JEL: | E32 E62 E12 C32 E52 |
| Date: | 2025–06–26 |
| URL: | https://d.repec.org/n?u=RePEc:rtv:ceisrp:606 |
| By: | Daniel H. Cooper; Giovanni P. Olivei; Hannah Rhodenhiser |
| Abstract: | We provide a parsimonious setup for forecasting U.S. GDP growth and the unemployment rate based on a few fundamental drivers. This setup yields forecasts that are reasonably accurate compared with private-sector and Federal Reserve forecasts over the 1984–2019 and post COVID-19 pandemic periods. This result is achieved by jointly estimating the processes for GDP growth and the unemployment rate, with the constraint that GDP and unemployment follow Okun’s law in first differences. This setup can be easily extended to replace the variables in the information set with factors that might better capture the underlying fundamentals. |
| Keywords: | macroeconomic forecasting; small information set; forecast accuracy |
| JEL: | E27 E37 |
| Date: | 2025–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedbwp:101183 |
| By: | Hornstein, Andreas; Karabarbounis, Marios; Kurmann, André; Lalé, Etienne; Ta, Lien |
| Abstract: | Unemployment insurance (UI) acts both as a disincentive for labor supply and as a demand stimulus, which may explain why empirical studies often find limited effects of UI on employment. This paper provides independent estimates of the disincentive effects arising from the largest expansion of UI in U.S. history, the pandemic unemployment benefits. Using high-frequency data on small restaurants and retailers from Homebase, we control for demand effects by comparing neighboring businesses that largely share the positive impact of UI stimulus. We find that employment in low-wage businesses recovered more slowly than employment in neighboring high-wage businesses in labor markets with larger differences in the relative generosity of pandemic UI benefits. According to a labor search model that replicates the estimated employment differences between low- and high-wage businesses, the disincentive effects from the pandemic UI programs held back the aggregate employment recovery by 3.4 percentage points between April and December 2020. |
| Keywords: | Unemployment Insurance, Disincentive Effects, Search and Matching Models |
| JEL: | E24 E32 J64 J65 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:clefwp:319878 |
| By: | Martin Feldkircher; Petr Korab; Viktoriya Teliha |
| Abstract: | This paper analyzes the evolution of central bank topics using a corpus of over 20, 000 speeches spanning nearly three decades and a range of topic models. We identify thirteen themes, including monetary policy, financial stability, digital payments, and climate-related finance. Examining their development over time, we classify these themes as "evergreens", "waning threads", or emergent "rising stars", and show that early adoption and topic leadership are nearly equally shared between emerging and advanced economies' central banks. In the aftermath of the Global Financial Crisis, topic focus converged worldwide, with a renewed emphasis on financial stability. Finally, static covariate regressions link topic prevalence to inflation regimes, central bank independence, and speech format, highlighting the impact of macroeconomic and institutional factors on communication priorities. |
| Keywords: | monetary policy, financial stability, digital payments, climate-related finance |
| JEL: | C55 C88 E52 E58 D83 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-35 |
| By: | Stefano Di Bucchianico; Mario Di Serio; Matteo Fragetta; Giovanni Melina |
| Abstract: | A Bayesian factor-augmented interacted vector autoregression framework purified of expectations is employed to analyze how government spending shocks have impacted CO2 emissions in the United States from the 1980s to the pre-pandemic period. Consumption-generated emissions are found to have generally risen following fiscal expansions, although their elasticity to government spending has declined substantially over time—with the five-year elasticity dropping from about 0.5 in the early 1980s to 0.1 by 2019. In contrast, positive government spending shocks increased production-generated emissions in the early 1980s—with a five-year elasticity near 0.4—but reversed course by the 1990s, eventually reaching an elasticity of –0.5 by the end of the sample. Examination of time-varying interaction variables suggests that environmental regulation, tertiarization, and a larger share of spending on public goods can mitigate—or even reverse—the emissions growth associated with economic expansions driven by government spending. Furthermore, government consumption, rather than investment, is chiefly responsible for these shifts in emissions elasticities. |
| Keywords: | government spending, fiscal policy, CO2 emissions |
| JEL: | C32 C38 E62 Q54 Q58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11960 |
| By: | de la Fonteijne, Marcel R. |
| Abstract: | For several decades, it has been recognized that the implementation of capital and labor augmented technical progress, as is done to date, leads to a theoretical paradox: either the CES production function has to be Cobb-Douglas or there exists labor augmented technical progress only. This so-called “Cobb-Douglas or labor augmented technical progress only paradox” continues to appear in economic models despite its inconsistency. In this paper, we reject the conventional approach, i.e., all kind of neutral and non-neutral capital and labor augmented technical progress and propose a revised implementation of technical progress that resolves the paradox. Economic growth is modeled as partly exogenous, driven by technical change, and partly endogenous, driven by capital accumulation. We provide formulas to translate total factor productivity (TFP) into economic growth to show the connection, thereby clarifying the link between TFP and output dynamics. This approach offers a new perspective on the Solow model and opens alternative paths for investigating endogenous growth mechanisms. |
| Keywords: | Capital and Labor Augmented Technical Progress; Growth Model; Maximum Profit Condition; Production Function; General Technological Progress; Capital-Labor-mix; Elasticity of Substitution; DSGE; Total Factor Productivity; Solow model; Hicks; Harrod |
| JEL: | E00 E20 E23 E24 |
| Date: | 2025–06–24 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125134 |
| By: | Christophe Blot (Sciences Po, OFCE); Paul Hubert (Banque de France, OFCE); Fabien Labondance (Université Marie et Louis Pasteur, CRESE (UR3190), F-25000 Besançon, France) |
| Abstract: | We investigate whether dissent in monetary policy committees affects asset prices. We exploit a feature of the ECB communication for identification: the revelation of dissent during press conferences is separated from policy decision announcements. Follow- ing a narrative approach, we compute a novel granular index of ECB dissent for each instrument and identify the dissent direction. Using tick data, we isolate asset price changes exactly when dissent is revealed. Dissent has a strong negative effect on stock prices, that operates specifically around status quo decisions. Dissent is a key driver of stock prices on these days, explaining one-third of their variation. |
| Keywords: | Asset prices, Disagreement, Monetary Policy Committee, Bad news, European Central Bank |
| JEL: | G14 E43 E52 D70 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:crb:wpaper:2025-07 |
| By: | Xin Sheng (Lord Ashcroft International Business School, Anglia Ruskin University, Chelmsford, United Kingdom); Oguzhan Cepni (Ostim Technical University, Ankara, Turkiye; University of Edinburgh Business School, Centre for Business, Climate Change, and Sustainability; Department of Economics, Copenhagen Business School, Denmark); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Minko Markovski (Department of Economics, University of Reading, Reading, United Kingdom) |
| Abstract: | We forecast quarterly growth rate of real gross fixed capital formation of the United States using the information content of a monthly metric of extreme weather conditions, while controlling for a set of principal components derived from a large data set of economic and financial indicators. In this regard, we utilize a Mixed Frequency Machine Learning framework over the period of 1974:Q1 to 2022:Q1. Our results show that incorporating monthly data on severe climatic conditions significantly, especially information contained in relatively higher (above the mean) extreme weather values, outperforms not only the benchmark autoregressive model, but also the econometric framework that includes the macro-finance factors when forecasting the growth rate of quarterly real gross fixed capital formation. |
| Keywords: | Gross fixed capital formation, Extreme weather conditions, Mixed frequency, Machine learning, Forecasting |
| JEL: | C22 C53 E22 Q54 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:pre:wpaper:202520 |
| By: | Angelos Athanasopoulos; Donato Masciandaro; Davide Romelli |
| Abstract: | This paper provides novel evidence of the long-run effects of central bank independence on inflation. We show that improvements in central bank independence have a much larger impact on inflation in the long run compared to the short run. Contrary to most of the previous literature, our results also show that the long-run effects of central bank independence on inflation are larger in developing countries. We find similar effects using linear and instrumental variable local projection methods. Finally, we show that central bank independence also reduces inflation persistence, reinforcing the effectiveness of monetary policy. |
| Keywords: | central bank design, central bank independence, inflation, persistence |
| JEL: | E5 E31 E52 E58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp25237 |
| By: | Emmanuel Caiazzo (Department of Economics and Statistics, University of Naples Federico II, CSEF, and MoFiR); Alberto Zazzaro (University of Naples Federico II, CSEF and MoFiR) |
| Abstract: | This paper presents a model in which the policy rate set by the central bank affects decisions about bank rescue policies when liquidity crises hit the banking system. We highlight a trade-off: maintaining an interest rate ensuring effective control over inflation escalates the costs of rescue interventions. We delve into this trade-off and determine the circumstances under which deviating from the target interest rate, thereby reducing intervention costs, enhances overall welfare. From a normative standpoint, our analysis indicates where liquidity risk is either low or high, the central bank should prioritize achieving the inflation target. |
| Keywords: | Central Banking, Financial stability, Rescue Policies |
| JEL: | G01 G21 G28 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:anc:wmofir:191 |
| By: | Daniel Reiter (University of Graz, Austria); Stefania Rossi (University of Graz, Austria); Leonita Mazrekaj (Haxhi Zeka University, Kosovo) |
| Abstract: | Despite ongoing progress, women continue to show lower entrepreneurial activity compared to men, highlighting the need for further efforts to close the gender gap and enhance women's economic participation. This study examines the drivers of gender differences in Total Early-Stage Entrepreneurial Activity (TEA), with a focus on the roles of self-perceived abilities and educational attainment. Using a unique dataset of 399, 114 observations from 64 countries (2013-2017), we employ Partial Least Squares Structural Equation Modeling (PLS-SEM) to explore how an entrepreneurial mindset - defined as self-perceived entrepreneurial abilities - mediates the gender gap in entrepreneurship. The analysis incorporates the moderating effect of educational attainment and controls for micro-level characteristics as well as economic and socio-political variables. Our results confirm that women engage in TEA at lower rates than men. However, this gap narrows significantly when accounting for an entrepreneurial mindset, particularly among individuals with lower educational attainment. Among the highly educated, the mediating effect is weaker, suggesting that structural factors - such as access to networks and resources - may play a more prominent role. These findings deepen our understanding of gender disparities in entrepreneurship and offer valuable implications for policy interventions aimed at promoting more inclusive entrepreneurial environments and greater female economic participation. |
| Keywords: | Total Early-Stage Entrepreneurial Activity (TEA), Gender, Self-Perceived Abilities, Educational Attainment, Partial Least Squares Structural Equation Modeling (PLS-SEM), Moderated Mediation Analysis |
| JEL: | L26 E24 J24 J16 C30 J28 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2025-09 |
| By: | Matteo Crosignani; Martin Hiti |
| Abstract: | The Federal Reserve’s mission and regional structure ask that it always work to better understand local and regional economic activity. This requires gauging the economic impact of localized events, including natural disasters. Despite the economic significance of natural disasters—flowing often from their human toll—there are currently no publicly available data on the damages they cause in the United States at the county level. |
| Keywords: | natural disasters; economic activity |
| JEL: | E32 Q54 |
| Date: | 2025–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:101188 |
| By: | Benjamin Lockwood; Francesco Porcelli; James Rockey |
| Abstract: | This paper uses an instrumental variable approach based on close elections to evaluate the effects of political parties on local fiscal policy in England from 1998 to 2015. Our main finding is that when we condition on the central government grant, political control of the council by Labour or Conservative parties has no effect on total service expenditure, the composition of that expenditure, and the property tax rate (council tax per band D property). We find the same null results for capital expenditure, debt, and authorized debt limits. Using data on the distribution of income within local authorities, we find no evidence that this null result is being driven by homogeneous electorates rather than fiscal constraints. Thus, our results confirm the widely expressed belief that centrally imposed constraints on local government fiscal policy (rate-capping, and more recently, compulsory referenda, and the Prudential Code for borrowing) hold local government fiscal policy in a tight grip. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:not:notnic:2025-06 |
| By: | Bill Martin |
| Abstract: | Eleven years ago, the Office for National Statistics, Britain's main statistics agency, attempted to merge 2 sets of time series data in order to backcast a long history of the country's capital investment. The restored investment figures became the series for total investment in the official 'historic' national accounts between 1948 and 1996. The ONS chose to merge old investment data with new national accounts data using splicing, a common technique, and did so 'bottom up': by adding up detailed backcast figures to derive the total. This paper, a sequel to one published in September 2024, argues that the ONS methodology was a mistake. Extraordinary differences between some of the old and new data series should have alerted the ONS to the deficiency of its approach. And the agency failed comprehensively to sense check its results. The implausible rewrite of Britain’s economic past that resulted is still embedded in the national accounts, but might be corrected as a result of a new ONS investigation begun in response to the earlier paper. Official correction is not assured, however. As matters stand, those wishing to draw lessons from Britain’s economic past are still advised not to rely on the 'historic' national accounts. |
| Keywords: | National accounts, capital investment, UK post-war economic history, backcasting, splicing |
| JEL: | C82 E01 N1 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cbr:cbrwps:wp543 |
| By: | Christophe Blot; Paul Hubert; Fabien Labondance |
| Abstract: | We investigate whether dissent in monetary policy committees affect asset prices. We exploit a feature of the ECB communication for identification: the revelation of dissent during press conferences is separated from policy decision announcements. Following a narrative approach, we compute a novel granular index of ECB dissent for each instrument and identify the dissent direction. Using tick data, we isolate asset price changes exactly when dissent is revealed. Dissent has a strong negative effect on stock prices, that operates specifically around status quo decisions. Dissent is a key driver of stock prices on these days, explaining one-third of their variation. |
| Keywords: | Asset prices, Monetary Policy Committee, European Central Bank, Disagreement, Bad news. |
| JEL: | G14 E43 E52 D70 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:drm:wpaper:2025-31 |
| By: | Jules Ducept (EU Tax Observatory, EPEE-CEPS UniversitéParis-Saclay); Sarah Godar (EU Tax Observatory, DIW Berlin) |
| Abstract: | This paper documents the rise of corporate tax-base narrowing measures in the EU using a novel dataset covering both tax rate and tax base reforms implemented between 2014 and 2022. Our findings indicate a shift away from the ’cut rate – broaden base’ approach, as governments increasingly align corporate taxation with industrial policy objectives. We show that EU tax competition exerts downward pressure on high-tax countries, while the likelihood of tax cuts also varies with the political orientation of governments. Using financial accounts from more than 40, 000 affiliates, we find that the average effective tax rate of multinational enterprises in the EU has declined more rapidly than the statutory rate and estimate that tax base reforms account for 24% of this decline. The estimated revenue cost of all reforms combined amounts to 3.5% of total corporate tax revenue collected from the sample firms. These revenue losses should be carefully weighed against the anticipated benefits of tax reforms. |
| Keywords: | Effective Tax Rates, Multinationals, Tax Competition, Corporate Income Tax, Tax Reform, Political Orientation, European Union |
| JEL: | F23 H25 H26 P11 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:030 |
| By: | Hoogland, Kelly PhD; Hardman, Scott PhD |
| Abstract: | Battery-electric vehicles (BEVs) are central to California’s strategy to reduce transportation-related emissions; however, low-income households face significant structural barriers to adoption. These barriers include the high upfront purchase costs of new BEVs, limited supply of used BEVs, limited access to home charging, and low awareness of BEVs. To better understand these obstacles and identify effective policy responses, our research team analyzed survey data collected from 2, 051 priority population households throughout California between December 2023 and June 2024. The survey asked households about their vehicle purchasing behavior, ownership costs, and socio-demographics. |
| Keywords: | Engineering |
| Date: | 2025–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:cdl:itsdav:qt5996v4gn |
| By: | Guglielmo Maria Caporale; Luis Alberiko Gil-Alana; Nieves Carmona-González |
| Abstract: | This paper analyses trends and persistence in atmospheric pollution in ten US cities over the period from January 2014 to January 2024 using fractional integration methods. The results support the hypothesis of long memory and mean reversion in atmospheric pollution in all cities examined. They also indicate that Boston is the only city in the sample where atmospheric pollution exhibits a significant positive linear trend, though it is also characterised by the lowest degree of integration, which implies that shocks have transitory effects and mean reversion occurs at a fast rate. |
| Keywords: | atmospheric pollution, particular matter (PM2.5), fractional integration, long memory, persistence |
| JEL: | C22 Q53 Q58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11957 |
| By: | Elona Dushku (Bank of Albania) |
| Abstract: | Small and medium-sized enterprises (SMEs) are vital to Albania’s economy but face significant financing challenges amid monetary tightening. Utilizing firm-level data from 2022–2023, this study documents that the abrupt interest rate increases in 2022 prompted a rise in alternative financing use, particularly among younger and smaller firms, alongside greater reliance on internal funds as an immediate coping mechanism. In contrast, the more gradual tightening in 2023 led to a broad-based decline in both alternative and internal financing, indicative of constrained liquidity and persistent financial pressures across firms. Notably, heterogeneity in internal financing adjustments was limited, with younger firms showing no statistically significant difference from older firms, except for those experiencing tighter bank credit conditions, who further curtailed internal funding. These findings underscore the varied responses of SMEs to phased monetary tightening and emphasize the need for targeted policy measures to support firm resilience over time. |
| Keywords: | SMEs; Access to Finance; Monetary Tightening; Firm Characteristics |
| JEL: | E52 G21 G32 L25 |
| Date: | 2025–07–04 |
| URL: | https://d.repec.org/n?u=RePEc:gii:giihei:heidwp09-2025 |