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on Macroeconomics |
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Issue of 2013‒11‒09
73 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Richhild Moessner |
| Abstract: | We study the impact of forward guidance used as an unconventional monetary policy tool at the zero lower bound of the policy rate on real and breakeven US Treasury yield curves. We find that explicit FOMC policy rate guidance announcements led to a significant reduction in real yields. By contrast, breakeven inflation rates were barely affected, if at all, suggesting that inflation expectations have remained well-anchored, and that explicit FOMC policy rate guidance has not adversely affected central bank credibility. |
| Keywords: | Monetary policy; central bank communication; policy rate guidance; real yields; inflation expectations |
| JEL: | E52 E58 G15 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:398&r=mac |
| By: | Hilberg, Björn; Hollmayr, Josef |
| Abstract: | In this paper we set up a New-Keynesian model with a heterogenous banking sector to analyze liquidity problems on the interbank market. The presence of an interbank market is essential to consider a situation where an increased liquidity supply by the central bank is only partially passed on to the interbank market. Moreover, this framework allows us to examine the implications of an unconventional monetary policy tool modeled as a haircut rule applied to eligible assets in repurchase agreements ('Repos') on the interbank market. We can show that this tool is suited to bring down the interest rate charged among banks on the interbank market. Furthermore an exogenous bubble process is modeled to evaluate the effects of the haircut rule for a central bank which decides to implement a 'leaning-against-the- wind'-policy. Finally, we analyze the long-run consequences of reacting to asset price movements and examine the effects of different exit strategies. We find that the central bank can stabilize all variables at the cost of higher inflation and that macroeconomic volatility is smallest if the central bank communicates the exit date in advance and credibly commits to it. -- |
| Keywords: | New-Keynesian Model,Monetary Policy,Business Cycle,Collateral,Haircuts |
| JEL: | E4 E5 E61 G21 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:362013&r=mac |
| By: | Camille Cornand (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure [ENS] - Lyon); Cheick Kader M'Baye (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure [ENS] - Lyon) |
| Abstract: | We use laboratory experiments with human subjects to test the relevance of di-fferent inflation targeting regimes. In particular and within the standard New Keynesian model, we evaluate to what extent communication of the inflation target is relevant to the success of inflation targeting. We -find that if the central bank only cares about inflation stabilization, announcing the inflation target does not make a difference in terms of macroeconomic performances compared to a standard active monetary policy. However, if the central bank also cares about the stabilization of the economic activity, communicating the target helps to reduce the volatility of inflation, interest rate, and output gap although their average levels are not aff-ected. This finding is consistent with those of the theoretical literature and provides a rationale for the adoption of a flexible inflation targeting regime. |
| Keywords: | Inflation targeting; inflation expectations; monetary policy; New Keynesian model; laboratory experiments |
| Date: | 2013–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00877409&r=mac |
| By: | Olivier Coibion; Yuriy Gorodnichenko |
| Abstract: | We evaluate possible explanations for the absence of a persistent decline in inflation during the Great Recession and find commonly suggested explanations to be insufficient. We propose a new explanation for this puzzle within the context of a standard Phillips curve. If firms’ inflation expectations track those of households, then the missing disinflation can be explained by the rise in their inflation expectations between 2009 and 2011. We present new econometric and survey evidence consistent with firms having similar expectations as households. The rise in household inflation expectations from 2009 to 2011 can be explained by the increase in oil prices over this time period. |
| JEL: | E3 E5 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19598&r=mac |
| By: | Punnoose Jacob |
| Abstract: | This paper presents the novel implications of introducing price rigidities into a model of good-specific habit formation, for the response of private consumption following a positive government spending shock. With ’deep’ habits in demand, the price elasticity of demand rises after the fiscal expansion and it is optimal for the firm to lower the mark-up while increasing production. This in turn raises the demand for labor and the real wage rises. Consequently, agents raise consumption at the expense of leisure and overcome the negative wealth effect of the fiscal shock. We show that increasing price stickiness in a model with deep habits hinders the crowding-in of consumption. If the degree of price stickiness is high enough, consumption is crowded out by government spending. These dynamics are in stark contrast to those in traditional models where price rigidities are known to weaken the crowding-out of consumption. |
| Keywords: | Deep Habits, Sticky Prices, Government Spending, Crowding-out |
| JEL: | E21 E31 E62 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2013-72&r=mac |
| By: | Pedro Brinca (Department of Economics, Stockholm University, Sweden) |
| Abstract: | This paper investigates the properties of distortions that manifest themselves as wedges in the equilibrium conditions of the neoclassical growth model across a sample of OECD countries for the 1970-2011 period. The quantitative relevance of each wedge and its robustness in generating fluctuations in macroeconomic aggregates is assessed. The efficiency wedge proves to be determinant in enabling models to replicate movements in output and investment, while the labor wedge is important to predict fluctuations in hours worked. Modeling distortions to the savings decision holds little quantitative or qualitative relevance. Also, investment seems to be the hardest aggregate to replicate, as prediction errors concerning output and hours worked are typically one order of magnitude smaller. These conclusions are statistically significant across the countries in the sample and are not limited to output drops. Finally, the geographical distance between countries and their degree of openness to trade are shown to contain information with regard to the wedges, stressing the importance of international mechanisms of transmission between distortions to the equilibrium conditions of the neoclassical growth model. |
| Keywords: | Business cycle accounting, Frictions, Economic fluctuations. |
| JEL: | E27 E30 E32 E37 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:gmf:wpaper:2013-24.&r=mac |
| By: | Francesco Lippi; Stefania Ragni; Nicholas Trachter |
| Abstract: | We study the optimal anticipated monetary policy in a flexible-price economy featuring heterogenous agents and incomplete markets, which give rise to a business cycle. In this setting money policy has distributional effects that depend on the state of the cycle. We parsimoniously characterize the dynamics of the economy and study the optimal regulation of the money supply as a function of the state. The optimal policy prescribes monetary expansions in recessions, when insurance is most needed by cash-poor unproductive agents. To minimize the inflationary effect of these expansions, the policy prescribes monetary contractions in good times. Although the optimal money growth rate varies greatly through the business cycle, this policy "echoes" Friedman's principle in the sense that the expected real return of money approaches the rate of time preference. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:13-17&r=mac |
| By: | William C. Dudley |
| Abstract: | Remarks at the Andrew Crockett Memorial Lecture, Bank for International Settlements 2013 Annual General Meeting, Basel, Switzerland. |
| Keywords: | Financial stability ; Monetary policy ; Banks and banking, Central ; Federal funds rate ; Interest rates ; Credit ; Demand for money ; Financial leverage ; Bank capital ; Bank of Japan ; Taylor's rule |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsp:108&r=mac |
| By: | Regis Barnichon; Andrew Figura |
| Abstract: | The matching function - a key building block in models of labor market frictions - implies that the job finding rate depends only on labor market tightness. We estimate such a matching function and …find that the relation, although remarkably stable over 1967-2007, broke down spectacularly after 2007. We argue that labor market heterogeneities are not fully captured by the standard matching function, but that a generalized matching function that explicitly takes into account worker heterogeneity and market segmentation is fully consistent with the behavior of the job finding rate. The standard matching function can break down when, as in the Great Recession, the average characteristics of the unemployed change too much, or when dispersion in labor market conditions - the extent to which some labor markets fare worse than others–increases too much. |
| Keywords: | job finding, aggregate, composition, dispersion |
| JEL: | J6 E24 E32 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:727&r=mac |
| By: | bao, haisong |
| Abstract: | Based on the savings glut argument, proposed a new point of view that unlike the neoclassical and Keynesian, and on this basis, shows the current plight of the Chinese economy is heavily reliant on the root cause of the investment. Since 2008 the world financial crisis, reflections on macroeconomics and questions have been constantly. This paper argues that the economic disconnection between theory and reality is rooted in not distinguish the difference between real investment demand and monetary investment demand. There is the savings glut, from the real economy,this is the main cause for the emergence of economic difficulties.The fundamental way of China to resolve the current difficulties is not a big increase in investment, but the expansion of consumption through the reform of income distribution.. |
| Keywords: | Savings glut ; Say's law ; Walrasian equilibrium; Economic cycle |
| JEL: | E12 E13 E20 E24 |
| Date: | 2013–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:50931&r=mac |
| By: | Lawrence J. Christiano; Martin S. Eichenbaum; Mathias Trabandt |
| Abstract: | We develop and estimate a general equilibrium model that accounts for key business cycle properties of macroeconomic aggregates, including labor market variables. In sharp contrast to leading New Keynesian models, wages are not subject to exogenous nominal rigidities. Instead we derive wage inertia from our specification of how firms and workers interact when negotiating wages. Our model outperforms the standard Diamond-Mortensen-Pissarides model both statistically and in terms of the plausibility of the estimated structural parameter values. Our model also outperforms an estimated sticky wage model. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1089&r=mac |
| By: | Dave Reifschneider; William Wascher; David Wilcox |
| Abstract: | The recent financial crisis and ensuing recession appear to have put the productive capacity of the economy on a lower and shallower trajectory than the one that seemed to be in place prior to 2007. Using a version of an unobserved components model introduced by Fleischman and Roberts (2011), we estimate that potential GDP is currently about 7 percent below the trajectory it appeared to be on prior to 2007. We also examine the recent performance of the labor market. While the available indicators are still inconclusive, some indicators suggest that hysteresis should be a more present concern now than it has been during previous periods of economic recovery in the United States. We go on to argue that a significant portion of the recent damage to the supply side of the economy plausibly was endogenous to the weakness in aggregate demand—contrary to the conventional view that policymakers must simply accommodate themselves to aggregate supply conditions. Endogeneity of supply with respect to demand provides a strong motivation for a vigorous policy response to a weakening in aggregate demand, and we present optimal-control simulations showing how monetary policy might respond to such endogeneity in the absence of other considerations. We then discuss how other considerations--such as increased risks of financial instability or inflation instability--could cause policymakers to exercise restraint in their response to cyclical weakness. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2013-77&r=mac |
| By: | Bo Young Chang; Bruno Feunou |
| Abstract: | We measure uncertainty surrounding the central bank’s future policy rates using implied volatility computed from interest rate option prices and realized volatility computed from intraday prices of interest rate futures. Both volatility measures show that uncertainty decreased following the most important policy actions taken by the Bank of Canada as a response to the financial crisis of 2007-08, such as the conditional commitment of 2009-10, the unscheduled cut in the target rate coordinated with other major central banks, and the introduction of term purchase and resale agreements. We also find that, on average, uncertainty decreases following the Bank of Canada’s policy rate announcements. Furthermore, our measures of policy rate uncertainty improve the estimation of policy rate expectations from overnight index swap (OIS) rates by predicting the risk premium in the OIS market. |
| Keywords: | Credit and credit aggregates; Financial markets |
| JEL: | E4 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:13-37&r=mac |
| By: | Kliem, Martin; Uhlig, Harald |
| Abstract: | This paper presents a novel Bayesian method for estimating dynamic stochastic general equilibrium (DSGE) models subject to a constrained posterior distribution of the implied Sharpe ratio. We apply our methodology to a DSGE model with habit formation in consumption and leisure, using an estimate of the Sharpe ratio to construct the constraint. We show that the constrained estimation produces a quantitative model with both reasonable asset-pricing as well as business-cycle implications. -- |
| Keywords: | Bayesian estimation,stochastic steady-state,prior choice,Sharpe ratio |
| JEL: | C11 E32 E44 G12 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:372013&r=mac |
| By: | Zheng Liu; Mark M. Spiegel |
| Abstract: | The recent financial crisis has led to large declines in world interest rates and surges of capital flows to emerging market economies. We examine the effectiveness and welfare implications of capital control policies in the face of such external shocks in a monetary DSGE model of a small open economy. We consider both optimal, time-varying restrictions on capital inflows and a simple capital account restriction, such as a constant tax on foreign debt holdings. We then compare the effectiveness of such capital account restrictions under alternative monetary regimes. We find that the optimal time-varying capital control policy is very effective in mitigating foreign interest rate shocks, but less effective for insulating the economy from export demand shocks; in the presence of export demand shocks, an exchange-rate stabilizing monetary policy regime can enhance macroeconomic stability and improve welfare. Under a simple and more practical capital control policy, a monetary policy regime that places larger weight on inflation fluctuations leads to additional gains in macroeconomic stability, although an exchange-rate stabilizing regime leads to even greater gains. Our findings suggest that, with either type of capital control policies, stabilizing the real exchange rate is a robust and effective monetary policy to help weather external shocks. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2013-33&r=mac |
| By: | Alejandro Justiniano; Giorgio E. Primiceri; Andrea Tambalotti |
| Abstract: | This paper proposes a theory of the fiscal foundations of inflation based on imperfect knowledge and learning. The theory is similar in spirit to, but distinct from, unpleasant monetarist arithmetic and the fiscal theory of the price level. Because the assumption of imperfect knowledge breaks Ricardian equivalence, details of fiscal policy, such as the average scale and composition of the public debt, matter for inflation. As a result, fiscal policy constrains the efficacy of monetary policy. Heavily indebted economies with debt maturity structures observed in many countries require aggressive monetary policy to anchor inflation expectations. The model predicts that the Great Moderation period would not have been so moderate had fiscal policy been characterized by a scale and composition of public debt now witnessed in some advanced economies in the aftermath of the 2007-09 global recession. |
| Keywords: | Balance of trade ; Economic conditions ; Housing - Prices ; Debt ; Capital movements |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:648&r=mac |
| By: | Farley Grubb (Department of Economics,University of Delaware) |
| Abstract: | The purpose of Chapter 3 is to convince the reader that the Continental dollar was a zero-interest bearer bond and not a fiat currency—thereby overturning 230 years of scholarly interpretation; to show that the public and leading Americans knew and acted on this fact, and to illustrate the ideal performance of the Continental dollar as a zero-interest bearer bond. The purpose of establishing the ideal performance is to create a benchmark against which empirical measures of depreciation can be evaluated. |
| Keywords: | Bearer Bonds, Continental Congress, Credible Commitment, Depreciation, Discounting, Legal Tender Laws, Paper Money, War Finance |
| JEL: | E51 E52 E61 E63 H56 H63 N11 N21 N41 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:dlw:wpaper:13-10.&r=mac |
| By: | Christine Garnier; Elmar Mertens; Edward Nelson |
| Abstract: | We derive estimates of trend inflation for fourteen advanced economies from a framework in which trend shocks exhibit stochastic volatility. The estimated specification allows for time-variation in the degree to which longer-term inflation expectations are well anchored in each economy. Our results bring out the effect of changes in monetary regime (such as the adoption of inflation targeting in several countries) on the behavior of trend inflation. Our estimates expand on the previous literature in several dimensions: For each country, we employ a multivariate approach that pools different inflation series in order to identify their common trend. In addition, our estimates of the inflation gap—defined as the difference between trend and observed inflation—are allowed to exhibit considerable persistence. Consequently, the fluctuations in estimates of trend inflation are much lower than those reported in studies that use stochastic volatility models in which inflation gaps are serially uncorrelated. This specification also makes our estimates less sensitive than trend estimates in the literature to the effect of distortions to inflation arising from non-market influences on prices, such as tax changes. A forecast evaluation based on pseudo-real-time estimates documents improvements in inflation forecasts, even though it remains hard to outperform simple random walk forecasts to a statistically significant degree. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2013-74&r=mac |
| By: | James Bullard |
| Abstract: | July 12, 2013. Presentation. "Recent Developments in Monetary Policy." Global Interdependence Center's 5th Annual Rocky Mountain Economic Summit, Jackson Hole, Wyoming. |
| Keywords: | Monetary policy ; Economic conditions |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:218&r=mac |
| By: | James Bullard |
| Abstract: | September 20, 2013. Presentation. "Four Questions for Current Monetary Policy." New York Association for Business Economics, New York, N.Y. |
| Keywords: | Monetary policy |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:221&r=mac |
| By: | William C. Dudley |
| Abstract: | Remarks at the Central Bank Independence Conference—Progress and Challenges in Mexico, Mexico City, Mexico. |
| Keywords: | Monetary policy ; Banks and banking, Central ; Federal Reserve banks - Costs ; Federal Reserve banks - Profits ; Federal funds rate ; Federal Reserve System |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsp:119&r=mac |
| By: | Yoske Igarashi (Department of Economics, University of Exeter) |
| Abstract: | How would a policy that bans the use of networks in hiring (e.g., anti-old boy network laws) affect welfare? To answer this question, we examine a variant of Galenianos (2013), a version of a random search model with two matching technologies: a standard matching function and worker networks. Our model has two types of workers, networked workers and non-networked workers. It is shown that the effects of such a policy on non-networked workers can be either positive or negative, depending on model parameters. In our calibration such a policy would make non-networked workers slightly worse off and networked workers substantially worse off. |
| Keywords: | random search, network, referral, policy analysis, welfare, dynamics. |
| JEL: | C78 E24 E60 I3 J20 J30 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:exe:wpaper:1309&r=mac |
| By: | William C. Dudley |
| Abstract: | Remarks at the Economic Club of New York, New York City. |
| Keywords: | Monetary policy ; Fiscal policy ; Economic conditions ; Housing - Prices ; International economic relations ; Corporate profits ; Labor market ; Federal Open Market Committee ; Federal funds rate ; Gross domestic product |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsp:99&r=mac |
| By: | Adelaido García–Andrés y Leonardo Torre Cepeda (Universidad Autónoma de Nuevo León) |
| Abstract: | The purpose of the paper is to analyze the impact of short-term monetary shocks on output and the price level in Mexico. We follow the Structural Vector Autoregressive (SVAR) methodology of Bernanke and Mihov (1998) to identify specific monetary policy shocks consistent with the operating procedures followed by Mexico's monetary authorities during the study period. Our findings suggest that the funds rate regime provides a good approximation to the process by which the monetary authority offsets the monetary shocks, decreases the demand for money and maintains stability in the price level. |
| Keywords: | monetary policy, structural autoregressive model, impulse-response functions. |
| JEL: | E42 E52 |
| Date: | 2013–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:cjz:ca41cj:18&r=mac |
| By: | James Bullard |
| Abstract: | February 21, 2013. Presentation. "Perspectives on the Current Stance of Monetary Policy." NYU Stern Center for Global Economy and Business, New York, N.Y. |
| Keywords: | Monetary policy - United States |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:212&r=mac |
| By: | Zaman, Rubaiya; Carannate, Maria; Ferra, Emi |
| Abstract: | In this master thesis we attempted to investigate the role of economic uncertainty in driving the behavior of household savings for six European countries: Germany, France, Finland, United Kingdom (UK), Portugal and Italy. We focused on three main sources of economic uncertainty: Unemployment Risk, Fiscal Policy Uncertainty and Financial Crisis-Investment risk. We used Unemployment rate as a proxy for labor income uncertainty and the risk of an income loss. We computed the volatility of financial stock prices for each country as an indicator for the presence of a financial crisis. With regard to policy uncertainty, we employed three different measures: a Policy Uncertainty Index constructed by Baker, Bloom, and Davis; Debt to GDP ratio and Government Surplus / Deficit over GDP. We estimated first a Structural Vector Autoregressive (SVAR) model, separately for each country, using quarterly data from 1999 to 2012 and we compared country-specific impulse responses on savings rates. We found that household savings rate reacts in response to fiscal and unemployment shocks differently in each country, whereas we didn’t find any significant response to financial stock price volatility. We then proceeded with the Bayesian estimation of the reduced form VARs for the panel of countries mentioned above as a Hierarchical Linear Model. We focused our analysis on the Average Impulse Responses with the aim of analyzing the aggregate effect on household savings of shocks shared by all countries. |
| Keywords: | Household saving rate, uncertainty, fiscal, financial, unemplyoment |
| JEL: | E2 E29 |
| Date: | 2013–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:51208&r=mac |
| By: | Richard W. Fisher |
| Abstract: | Remarks before the Causes & Macroeconomic Consequences of Uncertainty Conference, Dallas, Texas, October 3, 2013 ; "A policy that takes a longer-term perspective and is properly communicated and executed—so as to instill confidence that monetary policy will hew to a 2 percent inflation target rather than fixate on the run-rate of the past four quarters or the outlook for the next four—may better supply the longer-term comfort that households and businesses need to plan and budget." |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddsp:137&r=mac |
| By: | John C. Williams |
| Abstract: | Presentation to The Forecasters Club, New York, New York, February 21, 2013 |
| Keywords: | Economic conditions ; Monetary policy |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfsp:116&r=mac |
| By: | John Duca; John Muellbauer |
| Abstract: | After the global financial crisis, there is greater awareness of the need to understand the interactions between the financial sector and the real economy and hence the potential for financial instability. Data from the financial flow of funds, previously relatively neglected, are now seen as crucial to the data monitoring carried out by central banks. This paper revisits earlier efforts to understand financial-real linkages, such those of Tobin and the Yale School, and proposes a modeling framework for analysing the household flow of funds jointly with consumption. The consumption function incorporates household income, portfolios of assets and debt held at the end of the previous period, credit availability, and asset prices and interest rates. In a general equilibrium setting, these all have to be endogenised and since households make consumption and housing purchase decisions jointly with portfolio decisions, there is much to be gained in modeling a household sub-system of equations. Major evolutionary structural change – namely the evolving credit architecture facing households – is handled by our ‘Latent Interactive Variable Equation System’. A by-product is improved understanding of the secular decline in US saving rate, as well as of the household financial accelerator. Moreover, the models discussed in this paper offer new ways of interpreting data on credit, money and asset prices, which are crucial for central banks. |
| Keywords: | Financial crises ; Consumption (Economics) ; Credit control ; Households - Finance |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:1307&r=mac |
| By: | David Andolfatto; Aleksander Berentsen; Christopher J. Waller |
| Abstract: | We study the use of intermediated assets as media of exchange in a neo- classical growth model. An intermediary is delegated control over productive capital and finances itself by issuing claims against the revenue generated by its operations. Unlike physical capital, intermediated claims are assumed to be liquid-they constitute a form of asset-backed money. The intermediary is assumed to control 1) the number of claims outstanding, 2) the dividends paid out to claim holders and 3) the fee charged for collecting the dividend. We find that for patient economies, the first-best allocation can always be implemented as a competitive equilibrium through an appropriately designed intermediary policy rule. The optimal policy requires strictly positive inflation. While it is also possible to implement the first-best by introducing at money and a lump- sum tax instrument, our results demonstrate that neither of these interventions are necessary for efficiency. |
| Keywords: | Monetary policy ; Asset-backed financing |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2013-030&r=mac |
| By: | John H. Makin (American Enterprise Institute) |
| Abstract: | The monetary cliff, or US potential to slip into a period of negative inflation (deflation), is more threatening than the fiscal cliff the United States faced earlier this year. Fed Chairman Ben Bernanke and soon-to-be chairman Janet Yellen should make deflation avoidance a more clearly stated Fed objective. |
| Keywords: | the Federal Reserve,Janet Yellen,FOMC,Economic outlook,deflation |
| JEL: | A E |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:aei:rpaper:39269&r=mac |
| By: | Gerald Carlino; Robert P. Inman |
| Abstract: | The American Recovery and Reinvestment Act (ARRA) was the US government’s fiscal response to the Great Recession. An important component of ARRA’s $796 billion proposed budget was $318 billion in fiscal assistance to state and local governments. We examine the historical experience of federal government transfers to state and local governments and their impact on aggregate GDP growth, recognizing that lower-tier governments are their own fiscal agents. The SVAR analysis explicitly incorporates federal intergovernmental transfers, disaggregated into project (e.g., infrastructure) aid and welfare aid, as separate fiscal policies in addition to federal government purchases and federal net taxes on household and firms. A narrative analysis provides an alternative identification strategy. To better understand the estimated aggregate effects of aid on the economy, we also estimate a behavioral model of state responses to such assistance. The analysis reaches three conclusions. First, aggregate federal transfers to state and local governments are less stimulative than are transfers to households and firms. It is important to evaluate the two policies separately. Second, within intergovernmental transfers, matching (price) transfers for welfare spending are more effective for stimulating GDP growth than are unconstrained (income) transfers for project spending. Matching aid is fully spent on welfare services or middle-class tax relief; half of project aid is saved and only slowly spent in future years. Third, simulations using the SVAR specification suggest ARRA assistance would have been 30 percent more effective in stimulating GDP growth had the share spent on government purchases and project aid been fully allocated to private sector tax relief and to matching aid to states for lower-income support. |
| Keywords: | American Recovery and Reinvestment Act of 2009 ; Fiscal policy - United States |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:13-40&r=mac |
| By: | John C. Williams |
| Abstract: | Presentation to Portland community leaders, Portland, Oregon, September 4, 2013 |
| Keywords: | Economic conditions ; Employment ; Monetary policy |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfsp:121&r=mac |
| By: | James Bullard |
| Abstract: | February 14, 2013. Presentation. "U.S. Monetary Policy: Easier Than You Think It Is." Mississippi State University, Starkville, Mississippi |
| Keywords: | Monetary policy - United States |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:211&r=mac |
| By: | William C. Dudley |
| Abstract: | Remarks at the Staten Island Chamber of Commerce, Staten Island, New York. |
| Keywords: | Federal Reserve System ; Federal Reserve District, 2nd ; Economic conditions ; Employment ; Housing - Prices ; Debt ; Households - Economic aspects ; Federal Reserve Bank of New York ; Gross domestic product ; Consumer behavior ; Labor market ; Fiscal policy ; Unemployment ; Federal Open Market Committee ; Inflation (Finance) |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsp:102&r=mac |
| By: | John C. Williams |
| Abstract: | Presentation to Boise business and community leaders’ luncheon, Boise, Idaho, October 10, 2013 |
| Keywords: | Monetary policy |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfsp:124&r=mac |
| By: | James Bullard |
| Abstract: | February 13, 2013. Presentation. "The Recent Reduction in Global Macroeconomic Uncertainty." Arkansas State University Agribusiness Conference, Jonesboro, Arkansas. |
| Keywords: | Macroeconomics ; Uncertainty |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:210&r=mac |
| By: | Eric S. Rosengren |
| Abstract: | Remarks by Eric S. Rosengren, President and Chief Executive Officer, Federal Reserve Bank of Boston, at The Council on Foreign Relations, New York, New York, October 11, 2013. |
| Keywords: | Monetary policy |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbsp:76&r=mac |
| By: | Neville Francis; Laura E. Jackson; Michael T. Owyang |
| Abstract: | The nature of the business cycle appears to have changed. Prior to the 1990s, recoveries from recessions were quick and steep; after the past three recessions, however, recoveries were weak and prolonged. We consider the effect of a number of countercyclical policies intended to shorten recessions and speed recoveries. Our innovation is to analyze the duration of the recoveries of various U.S. states, which gives us a cross-section of both state- and national- level policies. Because we study multiple recessions for the same state and multiple states for the same recession, we can control for differences in the economic conditions preceding the recessions and the causes of the recessions when evaluating various policies. We find that expansionary monetary policy at the national level helps to stimulate the exit of individual states from recession. We also find certain factors extend expected recovery times: other states in the same region suffering from recession around the same time, the length of the preceding recession, and shocks to oil prices at the peak. |
| Keywords: | Business cycles ; Recessions |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2013-032&r=mac |
| By: | Ekaterina V. Peneva |
| Abstract: | Recent empirical research by Olivei and Tenreyro (2007) demonstrates that the effect of monetary policy shocks on output and prices depends on the shock's timing: In the United States, a monetary policy shock that takes place in the first half of the year has a larger effect on output than on prices, while the opposite is true in the second half of the year. Olivei and Tenreyro argue that this finding reflects the fact that a greater fraction of wage rates are re-contracted in the second half of the year, implying that wages (and prices) are less flexible in the first half. In this paper, I assess this explanation in light of several additional empirical results. Most importantly, I demonstrate that within-year differences in the responses of output and prices following a monetary policy shock are not more pronounced in the service-producing sector, where labor costs represent a larger fraction of total production costs. I also find that movements in prices following a monetary shock tend to lead wage changes. These and other empirical results suggest that something other than uneven wage adjustment might be responsible for the differential within-year effect of monetary policy shocks that Olivei and Tenreyro document. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2013-70&r=mac |
| By: | Joao Paulo Pessoa; John Van Reenen |
| Abstract: | It is widely believed that in the US wage growth has fallen massively behind productivity growth. Recently, it has also been suggested that the UK is starting to follow the same path. Analysts point to the much faster growth of GDP per hour than median wages. We distinguish between "net decoupling" - the difference in growth of GDP per hour deflated by the GDP deflator and average compensation deflated by the same index - and "gross decoupling" - the difference in growth of GDP per hour deflated by the GDP deflator and median wages deflated by a measure of consumer price inflation. We would expect that over the long-run real compensation growth deflated by the producer price (the labour costs that employers face) should track real labour productivity growth (value added per hour), so net decoupling should only occur if labour's share falls as a proportion of gross GDP, something that rarely happens over sustained periods. We show that over the past 40 years that there is almost no net decoupling in the UK, although there is evidence of substantial gross decoupling in the US and, to a lesser extent, in the UK. This difference between gross and net decoupling can be accounted for essentially three factors (i) compensation inequality (which means the average compensation is growing faster than the median compensation), (ii) the wedge between compensation (which includes employer-provided benefits like pensions and health insurance) and wages which do not and (iii) differences in the GDP deflator and the consumer price deflator (i.e. producer wages and consumption wages). These three factors explain basically ALL of the gross decoupling leaving only a small amount of "net decoupling". The first two factors are important in both countries, whereas the difference in price deflators is only important in the US. |
| Keywords: | Decoupling, Wages, Productivity, Compensation, Labour Income Share. |
| JEL: | E24 J20 J30 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1246&r=mac |
| By: | Greene, William H.; Gillman, Max; Harris, Mark N.; Spencer, Christopher |
| Abstract: | We propose a Tempered Ordered Probit (TOP) model. Our contribution lies not only in explicitly accounting for an excessive number of observations in a given choice category - as is the case in the standard literature on inflated models; rather, we introduce a new econometric model which nests the recently developed Middle Inflated Ordered Probit (MIOP) models of Bagozzi and Mukherjee (2012) and Brooks, Harris, and Spencer (2012) as a special case, and further, can be used as a specification test of the MIOP, where the implicit test is described as being one of symmetry versus asymmetry. In our application, which exploits a panel data-set containing the votes of Bank of England Monetary Policy Committee (MPC) members, we show that the TOP model affords the econometrician considerable flexibility with respect to modeling the impact of different forms of uncertainty on interest rate decisions. Our findings, we argue, reveal MPC members. asymmetric attitudes towards uncertainty and the changeability of interest rates. |
| Keywords: | Monetary policy committee, voting, discrete data, uncertainty, tempered equations |
| JEL: | C3 E50 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hitcei:2013-04&r=mac |
| By: | Katherine Femia; Steven Friedman; Brian Sack |
| Abstract: | In the past few years, the Federal Open Market Committee (FOMC) has been using forward guidance about the federal funds rate in a more explicit way than ever before. This paper explores the market reaction to the forward guidance, with particular focus on the use of calendar dates and economic thresholds in the FOMC statement. The results show that market participants interpreted the FOMC’s policy guidance as conveying important information about the Committee’s policy reaction function. In particular, market participants came to expect the FOMC to wait for lower levels of unemployment for a given level of inflation before beginning to raise the target federal funds rate, thereby shifting to a more accommodative policy approach aimed at supporting the economic recovery. |
| Keywords: | Federal Open Market Committee ; Monetary policy ; Federal funds rate ; Economic conditions |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:652&r=mac |
| By: | William C. Dudley |
| Abstract: | Remarks at the Whitman School of Management at Syracuse University, Syracuse, New York. |
| Keywords: | Economic conditions ; Federal Reserve District, 2nd ; Recessions ; Federal Reserve Bank of New York ; Labor market ; Households - Economic aspects ; Interest rates ; Fiscal policy ; International finance ; Inflation (Finance) ; Federal funds ; Federal Open Market Committee ; Economic development ; Universities and colleges ; Education - Economic aspects |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsp:117&r=mac |
| By: | Xiangrong Yu (Hong Kong Institute for Monetary Research) |
| Abstract: | This paper explores frequency-specific implications of measurement error for the design of stabilization policy rules. Policy evaluation in the frequency domain is interesting because the characterization of policy effects frequency by frequency gives the policymaker additional information about the effects of a given policy. Further, some important aspects of policy analysis can be better understood in the frequency domain than in the time domain. In this paper, I develop a rich set of design limits that describe fundamental restrictions on how a policymaker can alter variance at different frequencies. I also examine the interaction of measurement error and model uncertainty to understand the effects of different sources of informational limit on optimal policymaking. In a linear feedback model with noisy state observations, measurement error seriously distorts the performance of the policy rule that is optimal for the noise-free system. Adjusting the policy to appropriately account for measurement error means that the policymaker becomes less responsive to the raw data. For a parameterized example which corresponds to the choice of monetary policy rules in a simple AR (1) environment, I show that an additive white noise process of measurement error has little impact at low frequencies but induces less active control at high frequencies, and even may lead to more aggressive policy actions at medium frequencies. Local robustness analysis indicates that measurement error reduces the policymaker's reaction to model uncertainty, especially at medium and high frequencies. |
| Keywords: | Policy Evaluation, Measurement Error, Spectral Analysis, Design Limits, Model Uncertainty, Monetary Policy Rules |
| JEL: | C52 E52 E58 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:172013&r=mac |
| By: | Jesús Crespo Cuaresma (Vienna University of Economics and Business); Stephan Klasen (Georg-August-University Göttingen); Konstantin M. Wacker (The World Bank Group) |
| Abstract: | Martin Ravallion ("Why Don't We See Poverty Convergence?" American Economic Review, 102(1): 504-23; 2012) presents evidence against the existence of poverty convergence in aggregate data despite the conditional convergence of per capita income levels and the close linkage between growth and poverty reduction in standard neoclassic growth theory and associated empirics. In this contribution we address this puzzle. After showing some evidence of regional convergence, we demonstrate that macroeconomic volatility prevents countries with a higher incidence of poverty from converging in poverty levels to those with less poverty on a global scale. Once volatility is controlled for, the relevant convergence parameter shows the expected negative sign and is robust to various estimation techniques and model specifications. Only if a country’s volatility exceeds a relatively high threshold level, it no longer converges. Similarly, initial poverty only exercises a negative impact on mean (income) convergence in countries where macroeconomic volatility is high. |
| Keywords: | poverty convergence; macroeconomic volatility |
| JEL: | I32 D31 E32 |
| Date: | 2013–11–05 |
| URL: | http://d.repec.org/n?u=RePEc:got:gotcrc:153&r=mac |
| By: | John C. Williams |
| Abstract: | Presentation to UC San Diego Economic Roundtable, San Diego, California, October 3, 2013 |
| Keywords: | Monetary policy |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfsp:123&r=mac |
| By: | Savina Princen; Gilles Mourre |
| Abstract: | The paper consists in the proceedings of the workshop organised by the Directorate General for Economic and Financial Affairs held in Brussels on 18 October 2012. Against the background of severe consolidation needs in many EU Member States, the workshop addressed the macroeconomic impact and redistributive effects of consolidation measures on the revenue side, two topics ranking high on the current taxation policy agenda. The proceedings gather together the views of academics, national policy-makers and international institutions expressed during the conference. The presentations and discussions in the first session touched upon the balance between current consolidation measures and their medium-term effects. It also provided insights from macroeconomic modelling to design tax consolidation policy and looked into ways to measure consolidation efforts on the tax side. The second session discussed the best tax bases to be used to safeguard social equity and considered income and capital tax options to make the richest contribute to meeting fiscal adjustment needs. Country-specific presentations showed how tax measures were used for consolidation purposes and looked into various experiences in distributing income through the tax system. |
| JEL: | E62 H24 H26 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecopap:0502&r=mac |
| By: | Hott, Christian |
| Abstract: | We develop a theoretical model of mortgage loss rates that evaluates their main underlying risk factors. Following the model, loss rates are positively influenced by the house price level, the loan-to-value of mortgages, interest rates, and the unemployment rate. They are negatively influenced by the growth of house prices and the income level. The calibration of the model for the US and Switzerland demonstrates that it is able to describe the overall development of actual mortgage loss rates. In addition, we show potential applications of the model for different macroprudential instruments: stress tests, countercyclical buffer, and setting risk weights for mortgages with different loan-to-value and loan-to-income ratios. -- |
| Keywords: | Mortgage Market,Credit Risk,Macroprudential Instruments |
| JEL: | E5 G21 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:342013&r=mac |
| By: | James McAndrews |
| Abstract: | Remarks at the Household Debt and Credit Press Briefing, New York City. |
| Keywords: | Economic conditions ; Recessions ; Gross domestic product ; Labor market ; Unemployment ; Housing - Finance ; Risk ; Households - Economic aspects ; Debt ; Consumer credit ; Federal Reserve Bank of New York ; Student loans |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsp:97&r=mac |
| By: | Floro, Danvee; Tesfaselassie, Mewael |
| Abstract: | [Concluding remarks] The financial crisis has rendered conventional monetary policy (of major central banks) powerless. Unconventional monetary policy, in the form of forward guidance and quantitative easing, has taken center stage. Recent moves in financial markets have challenged the notion that forward guidance can be separated from the unwinding of quantitative easing and also shown that forward guidance can have perverse effects on market expectations. Nonetheless, forward guidance, as is currently formulated in practice, may be ineffective in managing market expectations not because central banks are powerless, but because they are too cautious, resulting in ambiguity in policy communication. Vagueness in communication is manifested by the insertion of conditionality and/or by the expression of intent, belief etc., to maintain accommodative policy on a certain course. Setting aside whether caution is warranted or not, the fact is that such vagueness is driven mainly by central banks unwavering commitment to price stability, a commitment which is credible owing to their hard-won reputation. Financial markets are aware of this commitment. Saying that, the remark in January 2000 by Ben Bernanke that 'far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution,' is still relevant now, as it was back then. -- |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkpb:65&r=mac |
| By: | Christopher F. Baum; Margarita Karpava; Dorothea Schäfer; Andreas Schäfer |
| Abstract: | This paper studies the impact of credit rating agency (CRA) announcements on the value of the Euro and the yields of French, Italian, German and Spanish long-term sovereign bonds during the culmination of the Eurozone debt crisis in 2011-2012. The employed GARCH models show that CRA downgrade announcements negatively affected the value of the Euro currency and also increased its volatility. Downgrading increased the yields of French, Italian and Spanish bonds but lowered the German bond's yields, although Germany's rating status was never touched by CRA. There is no evidence for Granger causality from bond yields to rating announcements. We infer from these findings that CRA announcements significantly influenced crisis-time capital allocation in the Eurozone. Their downgradings caused investors to rebalance their portfolios across member countries, out of ailing states' debt into more stable borrowers' securities. |
| Keywords: | : Credit Rating Agencies, Euro Crisis, Sovereign Debt, Euro Exchange Rate |
| JEL: | G24 G01 G12 G14 E42 E43 E44 F31 F42 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1333&r=mac |
| By: | Brun , Matthieu; Fraisse , Henri; Thesmar , David |
| Abstract: | We measure the impact of bank capital requirements on corporate borrowing and expansion. We use French loan-level data and take advantage of the transition from Basel I to Basel II. While under Basel I the capital charge was the same for all firms, under Basel II, it depends in a predictable way on both the bank's model and the firm's risk. We exploit this two-way variation to empirically estimate the sensitivity of bank lending to capital requirement. This rich identification allows us to control for firm-level credit demand shocks and bank-level credit supply shocks. We find very large effects of capital requirements on bank lending: A 1 percentage point decrease in capital requirement leads to an increase in loan size by about 5%. At the firm level, borrowing also responds strongly although a bit less, consistent with some limited between-bank substitutability. Investment and employment also increase strongly. Overall, because the transition to Basel II led to an average reduction by 2 percentage points of capital requirements, we estimate that the new regulation led, in France, to an increase in average loan size by 10%, an increase in aggregate corporate lending by 1.5%, an increase in aggregate investment by 0.5%, and the creation or preservation of 235,000 jobs. |
| Keywords: | Bank capital ratios; Bank regulation; Credit supply |
| JEL: | E51 G21 G28 |
| Date: | 2013–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:0988&r=mac |
| By: | Charles Y. Horioka; Takaaki Nomoto; Akiko Terada-Hagiwara |
| Abstract: | In this paper, we present data on trends over time in government debt financing in Japan since 2010 with emphasis on the importance of foreign holders and speculate about the determinants of those trends. We find that Japanese government securities were held primarily by domestic holders until recently because robust domestic saving (combined with strong home bias) made it possible for domestic investors to absorb most of the government debt but that foreign holdings of Japanese government securities have increased sharply in recent years, especially in the case of short-term government securities. We show that trends in foreign holdings of Japanese government securities can be explained by conventional economic factors such returns and risks and that the recent surge in foreign holdings of short-term Japanese government securities is attributable to foreign investors in search of a safe haven for their funds in the face of the Global Financial Crisis of 2008-09 precipitated by the Lehman crisis. Our analysis suggests that the surge in foreign holdings of Japanese government securities will subside (in fact, it already has), and this, combined with the projected decline in domestic saving (especially household saving) caused by population aging, will create increasing pressures for fiscal adjustment to reduce her massive government debt. Thus, Japan’s massive government debt has not resulted in high economic costs in the past because of robust domestic saving and a temporary inflow of foreign capital caused by the Global Financial Crisis, but it may have substantial costs in the future as both of these factors become less applicable unless the government debt can be brought under control. |
| JEL: | E21 F32 F34 G15 H63 O53 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19596&r=mac |
| By: | Chen, Yongmin; Gu, Dingwei; Yao, Zhiyong |
| Abstract: | Credit rating agencies play a crucial role in financial markets. There are two competing views regarding their behavior: some argue that they engage in rating inflation, while others suggest that they deflate ratings. This article offers a rationale that reconciles the two opposite arguments. We find that both rating inflation and rating deflation can occur in equilibrium. Furthermore, we show that credit rating is procyclical: rating inflation is more likely to happen in a boom while rating deflation is more likely to happen in a recession. |
| Keywords: | rating inflation, rating deflation, procyclical rating |
| JEL: | D82 G10 G24 |
| Date: | 2013–11–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:51159&r=mac |
| By: | James Bullard |
| Abstract: | April 3, 2013. Opening Remarks. Given at the Homer Jones Memorial Lecture, Federal Reserve Bank of St. Louis. |
| Keywords: | Monetary policy - United States |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:213&r=mac |
| By: | van Suntum, Ulrich |
| Abstract: | It is argued that the stronger member states of the European Monetary Union should find their way out of the Euro in order to avoid being dragged into a disastrous course of inflation and over-indebtedness by the weaker members. A sudden exit would presumably cause financial turmoil as well as political damage and is, thus, no realistic option. However, by creating a parallel currency called Hard-Euro as an intermediate solution, there would indeed be a way of separating the EMU into two parts, with a weaker Euro in the southern countries and a stronger Euro in the northern countries. Using a small macro-model, the paper discusses this idea and its economic consequences in more detail. Following the early idea of separating the functions of money by Eisler (1932), the Hard-Euro is invented in the form of a pure book-money, while the Euro is still the only cash money until further notice. The Hard-Euro is designed as an index-currency such that its exchange rate exactly compensates for the inflation rate of the common Euro. Hence, it is absolutely stable in terms of consumer prices, and at the same time the exchange rate can never overshoot. By this means, savers in the stronger member states are protected from both inflation and financial repression, while the weaker member states can improve their competitiveness by inflating the Euro. It is shown, that this approach is likely to increase both investment and total output in the EMU. Later on, this intermediate regime could be substituted by the definite separation of the Euro-Zone into a stronger northern and a weaker southern part. -- |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cawmdp:64n&r=mac |
| By: | James Bullard |
| Abstract: | January 10, 2013. Presentation. "The Fed's New Regime and the 2013 Outlook." Wisconsin Economic Forecast Luncheon, Wisconsin Bankers Association. Madison, Wisconsin. |
| Keywords: | Federal Reserve System ; Economic forecasting ; Monetary policy |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:209&r=mac |
| By: | Marco Del Negro; Stefano Eusepi; Marc Giannoni; Argia Sbordone; Andrea Tambalotti; Matthew Cocci; Raiden Hasegawa; M. Henry Linder |
| Abstract: | The goal of this paper is to present the dynamic stochastic general equilibrium (DSGE) model developed and used at the Federal Reserve Bank of New York. The paper describes how the model works, how it is estimated, how it rationalizes past history, including the Great Recession, and how it is used for forecasting and policy analysis. |
| Keywords: | Econometric models ; Equilibrium (Economics) ; Stochastic analysis ; Federal Reserve Bank of New York |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:647&r=mac |
| By: | Eric S. Rosengren |
| Abstract: | Remarks by Eric S. Rosengren, President and Chief Executive Officer, Federal Reserve Bank of Boston, to the Lake Champlain Regional Chamber of Commerce, Burlington, Vermont, October 2, 2013. |
| Keywords: | Economic conditions ; Monetary policy |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbsp:75&r=mac |
| By: | Thomas C. Baxter, Jr. |
| Abstract: | Remarks at the Committee on International Monetary Law of the International Law Association Meeting, Madrid, Spain. |
| Keywords: | Lenders of last resort ; Banks and banking, Central ; Bank liquidity ; Recessions ; European Central Bank ; Federal Reserve System ; Federal Reserve Bank of New York ; Systemic risk ; Public welfare ; Investment banking ; Bank supervision |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsp:114&r=mac |
| By: | Estelle P. Dauchy (New Economic School) |
| Abstract: | This paper comprehensively calculates corporate intangible assets by industry from 1998 to 2009, and evaluates the impact of expensing intangible assets on the cost of capital, the METR, and the welfare cost of inter-asset taxation, under current law and alternative tax policy including recent policy proposals. It also estimates the welfare cost of `leveling the playing field’. I find that capitalizing intangible assets can reduce the METR by up to 28 percentage points in finance. The intangible-inclusive welfare cost of inter-asset taxation is twice as large as a conventional measure under current law, and can be much larger than the tax revenue loss of alternative policy. Leveling the playing field may reduce or increase the deadweight loss of inter-asset taxation. The results provide a valuable input for research estimating the impact of investment tax incentives. |
| Keywords: | Intangible Assets, Cost of Capital, Welfare Cost, Inter-asset Taxation, Bonus Depreciation |
| JEL: | H25 E01 E22 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:cfr:cefirw:w0199&r=mac |
| By: | Jean-François FAGNART (Facultés Universitaires Saint Louis, CEREC and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)²); Marc GERMAIN (Université de Lille 3, EQUIPPE and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Alphonse MAGNUS (UNIVERSITE CATHOLIQUE DE LOUVAIN, IRMP) |
| Abstract: | Dans un modèle de croissance endogène reposant sur le concept de soutenabilité forte et intégrant une ressource de matière (naturellement recyclable) dont la productivité marginale est bornée, cet article reconsidère la "conjecture de Ricardo", à savoir l'éventualité d'une hausse tendancielle de la part de la rente dans la valeur ajoutée au cours du temps. Dans l'économie du modèle, une croissance quantitative (en termes du nombre de biens) ne peut être que transitoire et seule une croissance qualitative (en termes de qualité des biens) peut subsister à long terme. Nous étudions l'impact de la rareté de la ressource sur les caractéristiques du sentier de croissance stationnaire, sur le niveau de la rente et le partage de la valeur ajoutée le long de celui-ci. La part stationnaire de la rente dans la valeur ajoutée est une fonction décroissante de l'abondance de la ressource et du potentiel de dématérialisation des productions. De plus, la rareté de la ressource oppose généralement le facteur travail aux deux autres (ressource et capital), une ressource moins abondante (en termes relatifs) impliquant une part plus faibledu travail dans la valeur ajoutée et une part plus élevée de chacun des deux autres facteurs. Nous analysons ensuite numériquement la dynamique transitoire de l'économie, partant d'un état initial caractérisé par un faible stock de capital, un potentiel de progrès technique important. Même si la part de la rente dans la valeur ajoutée peut initialement évoluer de façon non monotone, les simulations tendent à montrer que la "conjecture de Ricardo" se confirme tôt ou tard le long de la dynamique transitoire: le ralentissement de la croissance quantitative s'accompagne d'une hausse de la part de la rente dans la valeur ajoutée jusqu'à sa valeur stationnaire. La tendance historique d'une baisse de la part de la rente pourrait donc s'inverser dans le futur, dès lors que les processus de découvertes de nouvelles réserves et de dématérialisation de la production sont limitées. |
| Keywords: | croissance endogène, soutenabilité forte, rente, partage fonctionnel de la valeur ajoutée |
| JEL: | E25 D9 O44 Q0 Q56 |
| Date: | 2013–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2013021&r=mac |
| By: | Keith R. Phillips; Jianguo Wang |
| Abstract: | State level unemployment statistics are some of the most important and widely used data sources for local analysts and public officials to gauge the health of their state’s economy. We find statistically significant seasonal patterns in the state level seasonally adjusted Local Area Unemployment Statistics (LAUS) released by the U.S. Bureau of Labor Statistics (BLS). We find that the pro-rata factors used in the benchmarking process can invoke spurious seasonal patterns in this data. We also find that the Henderson 13 filter used by the BLS to smooth the seasonally adjusted data may reduce monthly volatility too much in the sense that the aggregated state data is much smoother than the independently estimated national data. To reduce these problems, we suggest that the BLS use seasonally adjusted data when benchmarking regions to national totals. |
| Keywords: | Business cycles |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:1305&r=mac |
| By: | Peter Fuleky (UHERO and Department of Economics, University of Hawaii at Manoa); L Ventura (Department of Economics and Law, Sapienza, University of Rome); Qianxue Zhao (Department of Economics, University of Hawaii at Manoa) |
| Abstract: | Existing studies of risk pooling among groups of countries are predicated upon the highly restrictive assumption that all countries have symmetric responses to aggregate shocks. We show that the conventional risk sharing test fails to isolate idiosyncratic fluctuations within countries and produces spurious results. To avoid these problems, we propose an alternative form of the risk sharing test that is robust to heterogeneous country characteristics. In our empirical example, we provide estimates using the pro- posed approach for various groupings of 158 countries. |
| Keywords: | Panel data, Cross-sectional dependence, International risk sharing, Consumption insurance |
| JEL: | C23 C51 E21 F36 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:201315&r=mac |
| By: | Hutter, Christian (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Weber, Enzo (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]) |
| Abstract: | "The paper investigates the predictive power of a new survey implemented by the Federal Employment Agency (FEA) for forecasting German unemployment in the short run. Every month, the CEOs of the FEA's regional agencies are asked about their expectations of future labor market developments. We generate an aggregate unemployment leading indicator that exploits serial correlation in response behavior through identifying and adjusting temporarily unreliable predictions. We use out-of-sample tests suitable in nested model environments to compare forecasting performance of models including the new indicator to that of purely autoregressive benchmarks. For all investigated forecast horizons (1, 2, 3 and 6 months), test results show that models enhanced by the new leading indicator significantly outperform their benchmark counterparts. To compare our indicator to potential competitors we employ the model confidence set. Results reveal that models including the new indicator perform very well." (Author's abstract, IAB-Doku) ((en)) |
| JEL: | C22 C52 C53 E24 |
| Date: | 2013–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:201317&r=mac |
| By: | Kovachev, Goran |
| Abstract: | In countries where agriculture has substantial role in generating domestic product, sustainable agro-finance can seriously increase economic development. It is well known that agriculture is perceived as risky to be financed by commercial banks. Therefore, creating specific agro-credit lines within state development banks is key element in enhancing agricultural activities. These state development banks, operating in close collaboration with the Government have a significant role in accelerating economic welfare of farmers and rural poor. This study tends to emphasize the importance of creating special lending products targeted towards agriculture. The focus will be put on comparison between the first pillar – direct lending to agriculture and second pillar – lending to agriculture through commercial banks showing the better viability of the later. |
| Keywords: | sustainable agro-finance; agriculture; risky; economic welfare; rural development; state development banks; agribusiness; direct lending; indirect lending |
| JEL: | E5 G2 H8 Q1 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:51094&r=mac |
| By: | A. Bagnai (Department of Economics, University ‘Gabriele D’Annunzio’, Chieti, Italy); A. Rieber (Department of Economics, University of Rouen, France); T.A.D. Tran (DIAL, Institute of Research for Development, Vietnam) |
| Abstract: | Our paper examines the long run relationship in Vietnam between economic growth and the current account balance equilibrium by relying on the BoP constrained growth model. We find that Vietnam grew less than the rate predicted when the period 1985 to 2010 as a whole is considered, but with different behavior for the 1998-2010 sub-period. The relative price effect is neutral, allowing the volume effects to dominate in setting the BoP constraint. The high income elasticities of exports enable growth in the advanced countries to have a multiplier effect on the Vietnamese economy. However, this effect is hindered by a high ‘appetite’ for imports coming from Asia. We also assess the impact of the current crisis on Vietnam’s growth for the period 2011 to 2017. |
| Keywords: | Economic growth, BoP constrained growth model, Multi country model, Asia, Vietnam |
| JEL: | E12 F43 O11 O53 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:dpc:wpaper:1313&r=mac |
| By: | Gerlach, Petra; O'Connell, Brian; O'Toole, Conor |
| Abstract: | This research attempts to answer two particular questions: a) what factors drive SME credit constraints in the Irish economy and b) what is the impact of such constraints on the macro-economy, in particular on employment and investment. We find that constraints decrease with firm size while there is variation by sector. Our results indicate that firms applying to foreign-owned banks are more likely to be constrained. We also identify a direct effect of debt overhang on access to credit. Linking constraints to the macro-economy, we find a negative and significant effect of SME credit constraints on employment, while no effect is evident on firm investment. |
| Keywords: | employment/investment |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp467&r=mac |
| By: | Gabriela Medeiros (University of the Republic, Uruguay) |
| Abstract: | Implementing a Culture Satellite Account (CSA) is a pioneering feature to measure the economic impact of the cultural sector. The first countries to have one were Chile and Colombia, followed by Finland and Spain in 2009.Uruguay has completed its CSA through a research done by the University of the Republic, upon the request of the Ministry of Education and Culture. This paper shows the estimation of the Visual and Plastic Arts sector included in the CSA. The estimated variables are production and generation of income accounts, the exports and employment, using as a main theoretical framework the Methodological Manual for the implementation of the CSA of the agreement AndrŽs Bello (CAB, 2009). This sector is one of the most complex ones, since the primary market (formed by the first transaction of the work) operates with a high level of informality, specially regarding sales done by the artists themselves. However, with a systematic methodology in which the results are obtained considering both offer and demand, it is possible to estimate a peculiar and interesting sector such as the Visual and Plastic Arts. |
| Keywords: | National Accounts, Culture, Satellite Accounts, Visual and Plastic Arts |
| JEL: | E20 Z19 |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:cue:wpaper:awp-08-2013&r=mac |
| By: | SALERNO, Nicola Carmine |
| Abstract: | Mid-long term projections of the Stability Programs (SP) are elaborated to simulate the burden each active citizen or each worker will have to bear for financing, via pay-as-you-go, public health care provisions and public pensions. It is worth mentioning that projections in the (SP) are those developed by the Ageing Working Group (Awg), a task force Ecofin created in purpose to investigate the effects of population ageing on the sustainability of public finances across Europe. This paper is self standing but, at the same time, is part of the broader project "Present and Future of PayGo in Italy, Europe and Us". All chapters will be collected in a book by Nicola C. Salerno. |
| Keywords: | paygo; pay-as-you-go; pay as you go; multipillar; multipillar system; accumulation; pension fund; pension funds; health care; ltc; long term care; long-term care; sustainability, burden; paygo burden; workers; employed; active; sistema multipilastro; diversificazione multipilastro; diversifying financing; diversifying welfare institutions; structural reforms; reforming welfare; welfare reforming; awg; ageing working group; ecofin; European Commission; IMF; OECD; projections; long term projections; mid-long term; simulations; Stability Program; Stability Programs; adequacy; accountability; transparency; demography; dependency |
| JEL: | E60 H0 H22 H30 H31 H32 H50 H51 H53 H55 H60 H68 I13 J10 J11 |
| Date: | 2013–11–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:51195&r=mac |
| By: | Pia M. Orrenius; Madeline Zavodny |
| Abstract: | Immigrants supply skills that are in relatively short supply in the U.S. labor market and account for almost half of labor force growth since the mid-1990s. Migrant inflows have been concentrated at the low and high ends of the skill distribution. Large-scale unauthorized immigration has fueled growth of the low-skill labor force, which has had modest adverse fiscal and labor market effects on taxpayers and U.S.-born workers. High-skilled immigration has been beneficial in most every way, fueling innovation and spurring entrepreneurship in the high tech sector. Highly skilled immigrants have had a positive fiscal impact, contributing more in tax payments than they use in public services. Immigration reform appears to be on the horizon, and policies such as a legalization initiative, a guest-worker program and more permanent visas for high-skilled workers would likely be an improvement over the status quo. |
| Keywords: | Business cycles ; Minorities - Employment ; Public policy |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:1306&r=mac |
| By: | Peter Fuleky (UHERO and Department of Economics, University of Hawaii at Manoa); Carl S. Bonham (Department of Economics, University of Hawaii at Manoa) |
| Abstract: | We analyze the forecasting performance of small mixed frequency factor models when the observed variables share stochastic trends. The indicators are observed at various frequencies and are tied together by cointegration so that valuable high frequency information is passed to low frequency series through the common factors. Differencing the data breaks the cointegrating link among the series and some of the signal leaks out to the idiosyncratic components, which do not contribute to the transfer of information among indicators. We find that allowing for common trends improves forecasting performance over a stationary factor model based on differenced data. The "common-trends factor model" outperforms the stationary factor model at all analyzed forecast horizons. Our results demonstrate that when mixed frequency vari- ables are cointegrated, modeling common stochastic trends improves forecasts. |
| Keywords: | Dynamic Factor Model, Mixed Frequency Samples, Common Trends, Forecasting |
| JEL: | E37 C32 C53 L83 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:201316&r=mac |