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on Economic Design |
| By: | Yoshibumi Makabe (Bank of Japan); Yosuke Matsumoto (Bank of Japan); Wataru Hirata (Bank of Japan) |
| Abstract: | This paper considers a vertical production chain in an otherwise canonical sticky price model, and estimates the New Keynesian Phillips Curve with the vertical production stages (PS-NKPC), using the commodity-flow-based U.S. price data. We employ a Bayesian VAR-GMM method and compare the PS-NKPC with the canonical NKPC based on a quasi-marginal likelihood criterion, which is robust under weakly identified parameters. Thus our result adds to the empirical relevance of the so-called ``pipeline price pressures'' incurred by upstream stages of production. Our estimates suggest that (i) the PS-NKPC performs better than the canonical New Keynesian Phillips Curve in terms of quasi-marginal likelihood-based model comparison, and (ii) pipeline price pressures have non-negligible impacts on consumer price inflation as well as producer price inflation. |
| Keywords: | New Keynesian Phillips curve; VAR-GMM; Bayesian method; Production chain; Pipeline pressure |
| JEL: | C11 C26 C52 E31 |
| Date: | 2023–08–21 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojwps:wp23e13&r=des |
| By: | Ginger Zhe Jin; Zhentong Lu; Xiaolu Zhou; Lu Fang |
| Abstract: | In this paper, we empirically study how flagship entry in an online marketplace affects consumers, the platform, and various sellers on the platform. We find flagship entry may benefit consumers by expanding the choice set, by intensifying price competition within the entry brand, and by improving consumer perception for parts of the platform. In the meantime, flagship entry cannibalizes the sales of same-brand sellers, while other brands may gain as the buyer base expands on the platform. Counterfactual simulation suggests that flagship entry improves the gross merchandise value of the platform and overall consumer welfare in most cases. |
| Keywords: | Market structure and pricing; Economic models |
| JEL: | D4 L1 L8 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:23-41&r=des |
| By: | Michl, Thomas R. (Department of Economics, Colgate University) |
| Abstract: | This paper presents a model of inflation and distribution that examines the relationship between the employment of labor and the utilization of capital. It features a structural difference between the wage Phillips curve and the price Phillips curve that gives rise to persistent changes in the real wage whenever the inflation-neutral level of activity fails to utilize the existing capital stock at its normal level. Assuming an inflation-targeting central bank that is obliged to run the system around its inflation-neutral level, these changes will reduce the gap between the inflation-neutral level and normal utilization by moving the system along a stable wage curve. In the end this implies that the inflation-neutral level of employment and full or normal utilization of capital will tendentially coincide, lending some support to the Duménil-Lévy thesis that monetary policy makes normal utilization a long-run center of gravity. |
| JEL: | E11 E12 E24 E31 E52 |
| Date: | 2023–08–23 |
| URL: | http://d.repec.org/n?u=RePEc:cgt:wpaper:2023-03&r=des |
| By: | Jin Cao; Valeriya Dinger; Ragnar E. Juelsrud; Karolis Liaudinskas |
| Abstract: | In this paper, we examine how a trade conflict’s impact on the real economy can be amplified by financial intermediaries. After China’s implicit ban on the imports of Norwegian salmon in response to the decision on 2010 Nobel Peace Prize, we find that banks that are highly exposed to the salmon industry cut back lending to non-salmon firms and households by 3-6 percent more than other banks. Furthermore, we find that the reduction in lending was not driven by the erosion of bank capital, but rather by the shift in expectations about the performance of loans to salmon producers, which drove highly exposed banks to increase their loan loss provisions and reduce risk-taking. |
| Keywords: | Trade shock, Bank lending channel, Expectation shock. |
| JEL: | F14 G21 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:bno:worpap:2023_6&r=des |
| By: | Vidal-Tomás, David; Briola, Antonio; Aste, Tomaso |
| Abstract: | This paper investigates the causes and the consequences of the FTX digital currency exchange's failure in November 2022. Analysing on-chain data, we report that FTX heavily relied on leveraging and misusing its native token, FTT, and we show how this behaviour exacerbated the company's fragile financial situation. To gain further insights into the downfall, we employ state-of-the-art network science instruments to model the evolutionary dependency structures of 199 cryptocurrencies on an hourly basis, and we investigate tick-by-tick public trades at the time of the events. We identify the collapse of the Terra-Luna ecosystem as the pivotal event that triggered a significant decrease in the exchange's liquidity. Results suggest that the crash was actively accelerated by Binance tweets causing a systemic reaction in the cryptocurrency market. Finally, identifying the actors who mostly benefited from the FTX's collapse and highlighting a generalised trend toward centralisation in the crypto space, we emphasise the importance of genuinely decentralised finance for a transparent, future digital economy. |
| Keywords: | binance; cryptocurrency; FTX; network science; Terra-Luna; ES/K002309/1; EP/P031730/1; Horizon 2020; H2020-ICT-2018-2 825215 |
| JEL: | C1 F3 G3 |
| Date: | 2023–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:119902&r=des |
| By: | Seunghoon Na; Yinxi Xie |
| Abstract: | This paper investigates exchange rate dynamics in open economies by incorporating bounded rationality. We develop a small open-economy New Keynesian model with an incomplete asset market, wherein decision-makers possess limited foresight and can plan for only a finite distance into the future. The equilibrium dynamics depend on the degree of foresight and the decision-makers’ belief-updating behaviors that approximate continuation values at the end of their planning horizons. This limited foresight leads to persistent, non-monotonic forecast errors in the real exchange rate across time horizons and distinguishes between short- and long-term expectations. This framework hence provides a micro-foundation for understanding time-horizon variability in uncovered interest parity puzzles. |
| Keywords: | Exchange rates; Monetary policy transmission; International topics; Business fluctuations and cycles |
| JEL: | E43 E70 F31 F41 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:23-44&r=des |
| By: | Mansour, Hani (University of Colorado Denver); Medina, Pamela (University of Toronto); Velasquez, Andrea (University of Colorado Denver) |
| Abstract: | This paper studies the gendered labor market and demographic effects of trade liberalization in Peru. To identify these effects, we use variation in the exposure of local labor markets to import competition from China based on their baseline industrial composition. On average, the increase in Chinese imports during 1998-2008 led to a persistent decline in the employment share of low-educated female workers but had smaller and transitory effects on the employment of low-educated men. In contrast to the predictions of Becker's model of household specialization, we find that the increase in import competition during this period increased the share of single low-educated people and decreased their marriage rates. There is little evidence that import competition affected fertility decisions. The results highlight the role of gains from joint consumption in marriage formation. |
| Keywords: | import competition, marriage formation, fertility |
| JEL: | J16 J12 J13 J23 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16364&r=des |
| By: | Jonas Hennrich; Stefan Sauer; Klaus Wohlrabe |
| Abstract: | The ifo Business Climate Index for Germany is considered as the most important leading indicator for the German economy. Media reports often refer to the mood in German boardrooms. Based on a survey conducted in May 2023, we show that most of the around 9, 000 respondents to the monthly ifo Business Survey are the owners or managers of the companies. The sentiment regarding the state of the German economy thus comes directly from the boardrooms of the companies. |
| Keywords: | ifo business Survey, firms, answering behaviour |
| JEL: | C80 C81 C83 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10571&r=des |