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on Macroeconomics |
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Issue of 2014‒05‒17
105 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Jing Cynthia Wu; Fan Dora Xia |
| Abstract: | This paper employs an approximation that makes a nonlinear term structure model extremely tractable for analysis of an economy operating near the zero lower bound for interest rates. We show that such a model offers an excellent description of the data and can be used to summarize the macroeconomic effects of unconventional monetary policy at the zero lower bound. Our estimates imply that the efforts by the Federal Reserve to stimulate the economy since 2009 succeeded in making the unemployment rate in December 2013 0.13% lower than it otherwise would have been. |
| JEL: | E43 E44 E52 E58 G12 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20117&r=mac |
| By: | Marco Del Negro; Marc P. Giannoni; Frank Schorfheide |
| Abstract: | It has been argued that existing DSGE models cannot properly account for the evolution of key macroeconomic variables during and following the recent great recession. We challenge this argument by showing that a standard DSGE model with financial frictions available prior to the recent crisis successfully predicts a sharp contraction in economic activity along with a modest and protracted decline in inflation, following the rise in financial stress in 2008Q4. The model does so even though inflation remains very dependent on the evolution of economic activity and of monetary policy. |
| JEL: | C52 E31 E32 E37 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20055&r=mac |
| By: | Franz Hamann; Marc Hofstetter; Miguel Urrutia |
| Abstract: | Abstract After decades using monetary aggregates as the main instrument of monetary policy and having different varieties of crawling peg exchange rate regimes, Colombia adopted a full-fledged inflation-targeting (IT) regime in 1999, with inflation as the nominal anchor, a floating exchange rate, and the short-term interest rate as the main instrument. We examine the experience of the Colombian Central Bank over the last decade, a period of consolidation and innovation of its IT strategy. We study the increasing number of instruments used by the CB, including systematic foreign exchange interventions, announcements, and, sporadically, macro-prudential policies, capital controls, and changes in reserve requirements, among others. The study also examines some political economy dimensions that help explain the behavior of the CB during this period. To guide the discussion, we estimate a small-scale open-economy-policy-model. |
| Keywords: | Inflation Targeting, Monetary Policy, Exchange Rate, Taylor Rule, Colombia. |
| JEL: | E02 E32 E42 E43 E52 E58 E61 F31 F33 F42 |
| Date: | 2014–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:011007&r=mac |
| By: | Paolo Gelain (Norges Bank); Pelin Ilbas (National Bank of Belgium, Research Department) |
| Abstract: | We estimate the Smets and Wouters (2007) model augmented with the Gertler and Karadi (2011) financial intermediation sector on US data by using real and financial observables. Given the framework of the estimated model, we address the question whether and how standard monetary policy should interact with macroprudential policy in order to safeguard real and financial stability. For this purpose, monetary policy is described by a flexible inflation targeting regime using the interest rate as instrument, while the macroprudential regulator adopts a tax/subsidy on bank capital in a countercyclical manner in order to stabilize nominal credit growth and the output gap. We look at the gains from coordination between the central bank and the macroprudential regulator under alternative assumptions regarding the degree of importance assigned to output gap fluctuations in the macroprudential mandate. The results suggest that there can be considerable gains from coordination if the macroprudential regulator has been assigned a sufficiently high weight on output gap stabilization, i.e. the common objective with monetary policy. If, on the other hand, the main focus of the macroprudential mandate is on credit growth, the macroprudential policy maker can reach better outcomes, while the central bank does worse, in the absence of coordination. Therefore, whether and to which extent monetary policy gains from coordination with the macroprudential regulator depends on the relative weight assigned to output fluctuations in the macroprudential mandate. Our counterfactual analysis further confirms the effectiveness of the countercyclical macroprudential tax/subsidy in containing the amplification effects triggered by a financial shock, and suggests that having a macroprudential regulatory tool at work could have successfully avoided the massive drop in credit such as the one observed at the onset of the Great Recession. |
| Keywords: | Monetary policy, financial frictions, macroprudential policy, policy coordination, capital tax/subsidy |
| JEL: | E42 E44 E52 E58 E61 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:201405-258&r=mac |
| By: | Samuel Wills |
| Abstract: | This paper studies how monetary policy should respond to news about an oil discovery, using a workhorse New Keynesian model. Good news about future production can create a recession today under exchange rate pegs and a simple Taylor rule, as seen in practice. This is explained by forward-looking inflation. Recession is avoided by a Taylor rule that accommodates changes in the natural level of output, which closely approximates optimal policy. Central banks have an incentive to exploit oil revenues by appreciating the terms of trade, creating “Dutch disease” and a deflationary bias which is overcome by committing to future policy. |
| Keywords: | Natural resources, oil, optimal monetary policy, small open economy, news shock. |
| JEL: | E52 E62 F41 O13 Q30 Q33 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2014-37&r=mac |
| By: | Andersen, Thomas Barnebeck (Department of Business and Economics); Malchow-Møller, Nikolaj (Department of Business and Economics) |
| Abstract: | This paper compares Denmark’s growth performance to that of the other 18 non-Eurozone OECD economies during 2008-12. Denmark is the only country with a fixed exchange rate regime; the other 18 countries all have flexible exchange rates, mostly as part of an inflation-targeting framework. At the same time, Denmark is one of the worst growth performers during 2008-12. Our analysis indicates that the lack of monetary policy independence is central to understanding the meager Danish performance. Aggressive monetary policy during 2008-09 is an important predictor of economic growth during 2008-12; and Denmark, having outsourced monetary policy to the ECB, did not pursue monetary easing as aggressively as most other countries. Overall, the analysis suggests that had Denmark been able to follow Sweden in aggressively cutting interest rates in the wake of the Global Financial Crisis, it would have added three quarters of a percentage point to average annual real GDP growth during 2008-12. |
| Keywords: | Exchange rate regimes; monetary policy; financial crisis; economic growth |
| JEL: | E52 E62 E65 F33 O57 |
| Date: | 2014–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sdueko:2014_010&r=mac |
| By: | Dumitriu, Ramona; Stefanescu, Razvan |
| Abstract: | This paper explores some recent challenges for the inflation targeting. The circumstances are different for the emerging market countries and for the industrialized ones. In many emerging market countries the central banks adopted more or less formally the inflation targeting, in order to gain appreciation from the international financial institutions. Most of these central banks announced the applying of a flexible inflation targeting which could mask the time-inconsistent monetary policy. The vulnerability of the financial systems from emerging market countries undermines the inflation targeting credibility. In the new circumstances of the global crisis, a relaxed form of exchange rate targeting could be, for many of these countries, more adequate than the inflation targeting. For most of the industrialized countries the years of explicit or implicit inflation targeting coincided with a period of price stability. However, the recent global crisis revealed the danger of neglecting the financial stability. Moreover, the raise of unemployment could determine the governments of some industrialized countries to abandon the monetarist principles, which offered a favorable framework to inflation targeting, in the favor of Keynesian principles. |
| Keywords: | Monetary Policy Strategies, Central Bank, Inflation Expectations. |
| JEL: | E31 E52 E58 |
| Date: | 2014–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:52943&r=mac |
| By: | John Y. Campbell; Carolin Pflueger; Luis M. Viceira |
| Abstract: | The exposure of US Treasury bonds to the stock market has moved considerably over time. While it was slightly positive on average in the period 1960-2011, it was unusually high in the 1980s and negative in the 2000s, a period during which Treasury bonds enabled investors to hedge macroeconomic risks. This paper explores the effects of monetary policy parameters and macroeconomic shocks on nominal bond risks, using a New Keynesian model with habit formation and discrete regime shifts in 1979 and 1997. The increase in bond risks after 1979 is attributed primarily to a shift in monetary policy towards a more anti-inflationary stance, while the more recent decrease in bond risks after 1997 is attributed primarily to a renewed emphasis on output stabilization and an increase in the persistence of monetary policy. Endogenous responses of bond risk premia amplify these effects of monetary policy on bond risks. |
| JEL: | E43 E44 E52 G12 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20070&r=mac |
| By: | Cebula, Richard |
| Abstract: | This study provides new empirical evidence on the impact of the budget deficit on the nominal interest rate yield on intermediate-term debt issues of the U.S. Treasury, represented in this study by the nominal interest rate yield on ten-year Treasury notes. The study is couched within an open-economy loanable funds model that includes an ex ante real short-term real interest rate yield, an ex ante real long-term interest rate yield, the monetary base as a percent of GDP, expected future inflation, the percentage growth rate of real GDP, net financial capital inflows, and other variables. This study uses annual data and then uses quarterly data for the periods 1971-2008 and 1971-2012. The latter of these two study periods includes “quantitative easing” monetary policies by the Federal Reserve. Two-stage least squares estimations reveal that the federal budget deficit, expressed as a percent of GDP, has exercised a positive and statistically significant impact on the nominal interest rate yield on ten-year Treasury notes, even after allowing for quantitative easing and other factors. Robustness tests are provided in an Appendix. |
| Keywords: | nominal interest rate yield; ten-year Treasury notes; budget deficits |
| JEL: | E43 E52 E62 H62 H68 |
| Date: | 2014–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55923&r=mac |
| By: | Simon Gilchrist; David López-Salido; Egon Zakrajšek |
| Abstract: | This paper compares the effects of conventional monetary policy on real borrowing costs with those of the unconventional measures employed after the target federal funds rate hit the zero lower bound (ZLB). For the ZLB period, we identify two policy surprises: changes in the 2-year Treasury yield around policy announcements and changes in the 10-year Treasury yield that are orthogonal to those in the 2-year yield. The efficacy of unconventional policy in lowering real borrowing costs is comparable to that of conventional policy, in that it implies a complete pass-through of policy-induced movements in Treasury yields to comparable-maturity private yields. |
| JEL: | E43 E52 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20094&r=mac |
| By: | Davis, J. Scott (Federal Reserve Bank of Dallas); Presno, Ignacio (Federal Reserve Bank of Boston) |
| Abstract: | Using survey data of inflation expectations across a 36 developed and developing countries, this paper examines whether the adoption of inflation targeting has helped to anchor inflation expectations. We examine the response of inflation expectations following a shock to inflation, inflation expectations, and oil prices. For the 13 countries that adopted inflation targeting midway through the time period used in this study, there is a significant difference in the responses between the earlier and the later subperiods. A shock leads to a positive, significant, and persistent increase inflation expectations in the earlier, pre-targeting subperiod, but the same response is much less significant and persistent in the later, posttargeting subperiod. For the control group of 23 countries that did not adopt inflation targeting during this time period, there is no difference between responses in the earlier and the later sub-periods. |
| Keywords: | price levels; inflation; deflation; monetary policy |
| JEL: | D80 E31 E50 |
| Date: | 2014–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:174&r=mac |
| By: | Eric Tymoigne |
| Abstract: | This paper develops the framework of analysis of monetary systems put together by authors such as Macleod, Keynes, Innes, and Knapp. This framework does not focus on the functions performed by an object but rather on its financial characteristics. Anything issued by anybody can be a monetary instrument and any type of material can be used to make a monetary instrument, as these are unimportant determinants of what a monetary instrument is. What matters is the existence of specific financial characteristics. These characteristics lead to a stable nominal value (parity) in the proper financial environment. This framework of analysis leads the researcher to study how the fair value of a monetary instrument changes and how that change differs from changes in the value of the unit of account. It also provides a road map to understanding monetary history and why monetary instruments are held. |
| Keywords: | Monetary Instrument; Money; Fair Value; Unit of Account |
| JEL: | E5 E42 E44 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_799&r=mac |
| By: | Jan in'tVeld; Robert Kollmann; Beatrice Pataracchia; Marco Ratto; Werner Roeger |
| Abstract: | We study the joint dynamics of foreign capital flows and real activity during the recent boom-bust cycle of the Spanish economy, using a three-country New Keynesian model with credit-constrained households and firms, a construction sector and a government. We estimate the model using 1995Q1-2013Q2 data for Spain, the rest of the Euro Area (REA) and the rest of the world. We show that falling risk premia on Spanish housing and non-residential capital, a loosening of collateral constraints for Spanish households and firms, as well as a fall in the interest rate spread between Spain and the REA fuelled the Spanish output boom and the persistent rise in foreign capital flows to Spain, before the global financial crisis. During and after the global financial crisis, falling house prices, and a tightening of collateral constraints for Spanish borrowers contributed to a sharp reduction in capital inflows, and to the persistent slump in Spanish real activity. The credit crunch was especially pronounced for Spanish households; firm credit constraints tightened later and more gradually, and contributed much less to the slump. |
| Keywords: | international capital flows; boom-bust cycle; sudden stop; housing market; financial frictions; spain; european monetary union |
| JEL: | C11 E21 E32 E62 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/160267&r=mac |
| By: | Manjong Lee (Department of Economics, Korea University, Seoul, Republic of Korea); Sung Guan Yun (Payment and Settlement Systems Department, Bank of Korea, Republic of Korea) |
| Abstract: | The welfare cost of inflation is explored via a search-theoretic model in which along with non-interest-bearing cash, interest-bearing liquid and illiquid assets are available. With inflation, agents are willing to replace higher-return illiquid assets with lower return liquid assets for consumption purchases. The opportunity cost incurred by this adjustment turns out to have quantitatively significant implications on the cost of inflation. A parameterized version of the model suggests that the cost of 10% inflation with liquid and illiquid interest-bearing assets is almost 3 times larger than that in a cash-only model. This implies that most existing measures of inflation cost with narrow money are substantially underestimated. |
| Keywords: | cash, narrow money, broad money, portfolio shift, inflation cost |
| JEL: | E31 E40 E50 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:iek:wpaper:1403&r=mac |
| By: | Fabian Lindner |
| Abstract: | This paper looks at the relation between mortgage credit and housing values. It has become conventional wisdom in policy circles that credit growth led to the housing bubble in the US. However, this statement has not been empirically tested as of yet. The paper uses the Johansen procedure to estimate a long run relationship between mortgage credit and housing prices between 1984 and 2012 and analyzes the interactions between the variables. To this effect, two models with two different housing price variables are estimated. It is found that mortgage credit is weakly exogenous. Impulse-response functions, variance decompositions and out of sample forecast also show that mortgage credit drives housing prices and not vice versa. The paper also looks at the effect of short-term and long-term interest rates and does not find important influences of both on housing prices or mortgage credit. The role of monetary policy is not likely to have been very strong in the built-up of the housing bubble. |
| Keywords: | Housing Prices, Mortgage Markets, Monetary Policy |
| JEL: | E22 E44 E52 G21 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:imk:wpaper:133-2013&r=mac |
| By: | Chun-Hung Kuo (International University of Japan); Hiroaki Miyamoto (The University of Tokyo) |
| Abstract: | Focusing on both hiring and firing margins, this paper revisits effects of fiscal expansion on unemployment. We provide evidence that an increase in government spending increases the job finding rate and reduces the separation rate, lowering unemployment in the U.S. by using a structural VAR model. We then develop a DSGE model with search frictions where job separation is endogenously determined. Our model can capture the empirical pattern of responses of the job finding, separation, and unemployment rates to a government spending shock. We also demonstrate that model's predictions are in contrast with earlier studies that assume exogenous separation. |
| Keywords: | Fiscal Policy, Unemployment, Labor market, Search and matching, Endogenous separation |
| JEL: | E24 E62 J64 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:iuj:wpaper:ems_2014_05&r=mac |
| By: | Andrés Álvarez; Marc Hofstetter |
| Abstract: | Based on the counting of Help-wanted advertisements in print newspapers, we present national vacancy indexes and vacancy rates for Colombia. These series will allow tackling a myriad of questions related to the functioning of the labor markets in emerging economies, where such datasets were not available until now. |
| Keywords: | Vacancies, Help-wanted index, unemployment, Beveridge curve, labor market, Colombia |
| JEL: | E24 E32 J63 J64 |
| Date: | 2013–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011102&r=mac |
| By: | Born, Benjamin; Pfeifer, Johannes |
| Abstract: | Jesús-Fernández-Villaverde, Pablo A. Guerrón-Quintana, Juan F. Rubio-Ramírez and Martín Uribe (2011) find that risk shocks are an important factor in explaining emerging market business cycles. We show that their model needs to be recalibrated because it underpredicts the targeted business cycle moments by a factor of three once a time aggregation error is corrected. Recalibrating the corrected model for the benchmark case of Argentina, the peak response of output after an interest rate risk shock increases by 63 percent and the contribution of interest rate risk shocks to business cycle volatility more than doubles. Hence, risk matters more in the recalibrated model. However, the recalibrated model does worse in capturing the business cycle properties of net exports once an additional error in the computation of net exports is corrected. |
| Keywords: | Interest Rate Risk; Stochastic Volatility |
| JEL: | E32 E43 F32 F44 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpm:dynare:039&r=mac |
| By: | Julian A. Parra-Polania; Carmiña O. Vargas |
| Abstract: | Using a stylized model in which output is measured with error, we derive the optimal policy response to the demand shock signal and to changes in the measurement error volatility from two different perspectives: the minimization of the expected loss (from which we derive the ‘standard’ policy) and the minimization of the maximum possible loss across all potential scenarios (from which we derive the ‘prudent’ or ‘robust’ policy). We find that: 1. the prudent policymaker reacts more aggressively to the shock signal than the standard one and 2. while the standard policymaker always mitigates her reaction if the measurement error volatility rises, the prudent one may even increase her response if her risk aversion is very high. When we incorporate forward-looking expectations, the second result is preserved but, in this case, the prudent policymaker is less aggressive than the standard one in responding to the shock signal. |
| Keywords: | Prudence, robustness, measurement error, optimal monetary policy. |
| JEL: | D81 E52 E58 |
| Date: | 2014–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011146&r=mac |
| By: | Christina D. Romer; David H. Romer |
| Abstract: | From the early 1950s to the early 1990s, increases in Social Security benefits in the United States varied widely in size and timing, and were only rarely undertaken in response to short-run macroeconomic developments. This paper uses these benefit increases to investigate the macroeconomic effects of changes in transfer payments. It finds a large, immediate, and statistically significant response of consumption to permanent changes in transfers. The response appears to decline at longer horizons, however, and there is no clear evidence of effects on industrial production or employment. These effects differ sharply from the effects of relatively exogenous tax changes: the impact of transfers is faster, but much less persistent and dramatically smaller overall. Finally, we find strong statistical and narrative evidence of a sharply contractionary monetary policy response to permanent benefit increases that is not present for tax changes. This may account for the lower persistence of the consumption effects of transfers and their failure to spread to broader indicators of economic activity. |
| JEL: | E21 E62 E63 H31 N12 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20087&r=mac |
| By: | Paul Bergin; Ling Feng; Ching-Yi Lin |
| Abstract: | Firm entry dynamics are an integral part of the propagation of financial shocks to the real economy. A VAR documents that adverse financial shocks in the U.S. postwar period are associated with a fall in new firm creation and a fall in firm equity values. We propose a DSGE model with endogenous firm entry and financial frictions that is able to explain these facts. The model is novel in giving firms a choice of financing up-front entry costs through a combination of debt as well as equity, so that financial shocks directly impact the financing of firm entry. The model is also novel in making use of the asset pricing implications of the firm entry condition to explain the equity price response to a financial shock. The model indicates that free entry of new firms limits the ability of incumbent firms to respond to negative financial shocks through endogenous capital restructuring. Also, allowing the number of firms to fall after an adverse financial shock is a useful margin of macroeconomic adjustment, reducing the overall impact of the shock on aggregate output. This is because the remaining firms become financially stronger and better able to withstand a financial shock. |
| JEL: | E32 E44 G32 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20099&r=mac |
| By: | Ippei Fujiwara, Yoshiyuki Nakazono, Kozo Ueda |
| Abstract: | The policy package known as Abenomics appears to have influenced the Japanese economy drastically, in particular, in the financial markets. In this paper, focusing on the aggressive monetary easing of Abenomics, the first arrow, we evaluate its role in guiding public perceptions on monetary policy stance through the management of expectations. In order to end chronic deflation, such as that which Japan has been suffering over the last two decades, policy regime change must be perceived by economic agents. Analysis using the QUICK survey system (QSS) monthlysurvey data shows that monetary policy reaction to inflation rates has been in a declining trend since the mid 2000s, implying intensified forward guidance well before Abenomics. However, Japan seems to have moved closer to a long-term liquidity trap, where even long-term bond yields are constrained by the zero lower bound. Consequently, no sizable difference in perceptions has been found before and after the introduction of Abenomics. Estimated changes in perceptions are not abrupt enough to satisfy "Sargent's (1982) criteria for regime change" termed by Eggertsson (2008). This poses a serious challenge to central banks: what is an effective policy option left under the long-term liquidity trap? |
| JEL: | E47 E50 E60 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:csg:ajrcwp:1402&r=mac |
| By: | Francesco Bianchi; Cosmin Ilut; Martin Schneider |
| Abstract: | This paper studies a DSGE model with endogenous financial asset supply and ambiguity averse investors. An increase in uncertainty about profits leads firms to substitute away from debt and reduce shareholder payout in bad times when the equity premium is high. Regime shifts in volatility generate large low frequency movements in asset prices due to uncertainty premia that are disconnected from the business cycle. |
| JEL: | D8 E3 E4 G1 G3 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20081&r=mac |
| By: | Afonso, Gara M. (Federal Reserve Bank of New York); Lagos, Ricardo (Federal Reserve Bank of Minneapolis) |
| Abstract: | We present a dynamic over-the-counter model of the fed funds market and use it to study the determination of the fed funds rate, the volume of loans traded, and the intraday evolution of the distribution of reserve balances across banks. We also investigate the implications of changes in the market structure, as well as the effects of central bank policy instruments such as open market operations, the discount window lending rate, and the interest rate on bank reserves. |
| Keywords: | Fed funds market; Search; Bargaining; Over-the-counter market |
| JEL: | C78 D83 E44 G10 |
| Date: | 2014–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmwp:711&r=mac |
| By: | Maria Lucia Florez-Jimenez; Julian A. Parra-Polania |
| Abstract: | We incorporate an escape clause into a model with forward guidance and find that such clause is welfare improving as it allows the monetary authority to avoid cases in which the cost of reduced flexibility is too high. The escape clause provides the central bank with another instrument (additional to the promised policy rate), the announced threshold. Under zero-lower-bound episodes, such threshold is a more suitable instrument to respond to an increase in the size of the recessionary shock. However, in extreme cases (i.e. when the shock is enormous), the optimal response is to make an unconditional promise and further reduce the promised rate. |
| Keywords: | Forward guidance, escape clause, zero lower bound, central bank communication |
| JEL: | E47 E52 E58 |
| Date: | 2014–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011143&r=mac |
| By: | Camilo González; Luisa Silva; Carmiña Vargas; Andrés M. Velasco |
| Abstract: | We set a dynamic stochastic model for the interbank daily market forfunds in Colombia. The framework features exogenous reserve requirements and requirement period, competitive trading among heterogeneouscommercial banks, daily open market operations held by the Central Bank(auctions and window facilities), and idiosyncratic demand shocks anduncertainty in the daily auction. Analytical derivations of their decisionmaking process show that banks involvement in the interbank market andopen market operations depend on their individualrequirement constraintand daily liquid assets. Our results do not show a linkage between theuncertainty in the money supply mechanism and activity in the interbankmarket. Equilibrium interest rate for the interbank market is derived,and is shown that it is distorted by uncertainty at the daily auction heldby the monetary authority. Using data for Colombia, we test the mainresults of the model and corroborate the Martingale hypothesis for theinterbank interest rate. |
| Keywords: | Interbank Market; Overnight Rates; Reserve Demand |
| JEL: | E44 E52 G21 |
| Date: | 2013–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011094&r=mac |
| By: | Jair N. Ojeda; Julián A. Parra-Polanía; Carmiña O. Vargas |
| Abstract: | This document analyzes the macroeconomic effects of a boom in a small-open economy’s natural-resource sector. We study the effects of this shock on the most important macroeconomic variables, the resource reallocation across sectors and on welfare under alternative fiscal rules. We employ a DSGE featuring three productive sectors (non-tradable, manufacturing and commodity goods), government and two types of consumers (Ricardian and non-Ricardian). Our results show that the natural-resource boom leads to an initial reduction of the manufacturing sector’s employment and production. The opposite temporal effect is obtained in the remaining two productive sectors. However, the effect on welfare is positive for all consumers since the boom increases consumption in all households. Finally, we find that a countercyclical fiscal rule leads to a slight increase in welfare compared with a balanced-budget rule. |
| Keywords: | Fiscal rule, Natural-Resource Boom, Consumer Welfare, Equilibrium Model |
| JEL: | E62 F47 H30 H63 |
| Date: | 2014–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011132&r=mac |
| By: | Michael Parkin (University of Western Ontario, Canada) |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:11_14&r=mac |
| By: | Leung, Charles Ka Yui (City University of Hong Kong) |
| Abstract: | Central to recent debates on the "mis-pricing" in the housing market and the proactive policy of central bank is the determination of the "fundamental house price." This paper builds a dynamic stochastic general equilibrium (DSGE) model that produces reduced-form dynamics that are consistent with the error-correction models proposed by Malpezzi (1999) and Capozza et al (2004). The dynamics of equilibrium house prices are tied to the dynamics of the house-price-to-income ratio. This paper also shows that house prices and incomes should be co-integrated, and hence provides a justification of using co-integration tests to detect possible "mis-pricing" in the housing market. |
| Keywords: | prices; business fluctuations; cycles; economic growth; real estate markets |
| JEL: | E30 O40 R30 |
| Date: | 2014–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:177&r=mac |
| By: | George M. Constantinides; Anisha Ghosh |
| Abstract: | This paper presents evidence that shocks to household consumption growth are negatively skewed, persistent, and countercyclical and play a major role in driving asset prices. We construct a parsimonious model in which heterogeneous households have recursive preferences and a single state variable drives the conditional cross-sectional moments of household consumption growth. We demonstrate, under certain conditions, the existence of equilibrium in such a heterogeneous-household economy. The estimated model provides a good fit for the moments of the cross-sectional distribution of household consumption growth and the unconditional moments of the risk free rate, equity premium, market price-dividend ratio, and aggregate dividend and consumption growth. The explanatory power of the model does not derive from possible predictability of aggregate dividend and consumption growth as these are intentionally modeled as i.i.d. processes. Consistent with empirical evidence, the model implies that the risk free rate and price-dividend ratio are pro-cyclical while the expected market return and the variance of the market return and risk free rate are countercyclical. Household consumption risk also explains the cross-section of excess returns. |
| JEL: | D31 D52 E32 E44 G01 G12 J60 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20110&r=mac |
| By: | Ashima Goyal (Indira Gandhi Institute of Development Research); Akash Kumar Baikar (Indira Gandhi Institute of Development Research) |
| Abstract: | The paper analyzes causes of movements in Indian wages for rural unskilled male laborers, and assesses their impact on inflation. Theoretical priors derived from an analytical framework based on the concepts of fair wages, salience and over-reaction are tested using a State level rural wage data panel. The model predicts that a rise in food price inflation, non-traded wages and productivity, reduction in net labor supply, rise in labor demand and employment in the traded goods sector would raise wages in the traded goods sector, while changes in the exchange rate could have ambiguous effects. In dynamic panel regressions, food price inflation and the fiscal deficit share were two variables that were consistently high and significant, with the effect of the first three times larger. The spread of MGNREGS did not raise wages, but the sharp jump associated with wage indexation, itself a response to high food prices, did. The set of government programs impacted wages, more than a single one. Cyclical or policy variables had a minor impact. The results are in line with the predictions of the model and support psychological and social as compared to cyclical factors. The impact of wages on rural food prices was not as large, indicating some rise in productivity. Since multiple supply shocks impacted food prices and special circumstances drove the unusual rise in real wages, large nominal wage growth may not persist if food inflation and the fiscal deficit moderate. |
| Keywords: | Indian wage growth, food inflation, fair wages, dynamic panel, deficits, MGNREGS |
| JEL: | E24 E31 J31 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2014-014&r=mac |
| By: | Robert Kollmann; Marco Ratto; Werner Roeger; Jan in’t Veld; Lukas Vogel |
| Abstract: | We estimate a three-country model using 1995-2013 data for Germany, the Rest of the Euro Area (REA) and the Rest of the World (ROW) to analyze the determinants of Germany’s current account surplus after the launch of the Euro. The most important factors driving the German surplus were positive shocks to the German saving rate and to ROW demand for German exports, as well as German labour market reforms and other positive German aggregate supply shocks. The convergence of REA interest rates to German rates due to the creation of the Euro only had a modest effect on the German current account and on German real activity. The key shocks that drove the rise in the German current account tended to worsen the REA trade balance, but had a weak effect on REA real activity. Our analysis suggests these driving factors are likely to be slowly eroded, leading to a very gradual reduction of the German current account surplus. An expansion in German government consumption and investment would raise German GDP and reduce the current account surplus, but the effects on the surplus are likely to be weak. |
| Keywords: | Current Account, intra-European imbalances, monetary union, Eurozone crisis, estimated DSGE model. |
| JEL: | F4 F3 F21 E3 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2014-35&r=mac |
| By: | Paul Beaudry; Dana Galizia; Franck Portier |
| Abstract: | Recessions often happen after periods of rapid accumulation of houses, consumer durables and business capital. This observation has led some economists, most notably Friedrich Hayek, to conclude that recessions mainly reflect periods of needed liquidation resulting from past over-investment. According to the main proponents of this view, government spending should not be used to mitigate such a liquidation process, as doing so would simply result in a needed adjustment being postponed. In contrast, ever since the work of Keynes, many economists have viewed recessions as periods of deficient demand that should be countered by activist fiscal policy. In this paper we reexamine the liquidation perspective of recessions in a setup where prices are flexible but where not all trades are coordinated by centralized markets. We show why and how liquidations can produce periods where the economy functions particularly inefficiently, with many socially desirable trades between individuals remaining unexploited when the economy inherits too many capital goods. In this sense, our model illustrates how liquidations can cause recessions characterized by deficient aggregate demand and accordingly suggests that Keynes' and Hayek's views of recessions may be much more closely linked than previously recognized. In our framework, interventions aimed at stimulating aggregate demand face the trade-off emphasized by Hayek whereby current stimulus mainly postpones the adjustment process and therefore prolongs the recessions. However, when examining this trade-off, we find that some stimulative policies may nevertheless remain desirable even if they postpone a recovery. |
| JEL: | E32 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20101&r=mac |
| By: | Julian di Giovanni; Andrei A. Levchenko; Isabelle Mejean |
| Abstract: | This paper uses a database covering the universe of French firms for the period 1990--2007 to provide a forensic account of the role of individual firms in generating aggregate fluctuations. We set up a simple multi-sector model of heterogeneous firms selling to multiple markets to motivate a theoretically-founded decomposition of firms' annual sales growth rate into different components. We find that the firm-specific component contributes substantially to aggregate sales volatility, mattering about as much as the components capturing shocks that are common across firms within a sector or country. We then decompose the firm-specific component to provide evidence on two mechanisms that generate aggregate fluctuations from microeconomic shocks highlighted in the recent literature: (i) when the firm size distribution is fat-tailed, idiosyncratic shocks to large firms directly contribute to aggregate fluctuations; and (ii) aggregate fluctuations can arise from idiosyncratic shocks due to input-output linkages across the economy. Firm linkages are approximately three times as important as the direct effect of firm shocks in driving aggregate fluctuations. |
| JEL: | E32 F12 F41 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20061&r=mac |
| By: | Braxton, John Carter (Federal Reserve Bank of Kansas City); Knotek, Edward S. (Federal Reserve Bank of Kansas City) |
| Abstract: | Consumer debt played a central role in creating the U.S. housing bubble, the ensuing housing downturn, and the Great Recession, and it has been blamed as a factor in the weak subsequent recovery as well. This paper uses micro-level data to decompose consumer debt dynamics by separating the actions of consumer debt increasers and decreasers, and then further decomposing movements into percentage and size margins among the increasers and decreasers. We view such a decomposition as informative for macroeconomic models featuring a central role for consumer debt. Using this framework, we show that variations in borrowing activity among the increasers explain four times as much of the total variation in consumer debt as variations among the decreasers who are shedding debt, whether through paydowns or defaults. We also provide micro-level evidence of a sharp decline in the percentage of increasers during the financial crisis that is qualitatively consistent with a binding zero lower bound on nominal interest rates, and evidence of a cycle in the average size of debt changes among the increasers that is related to rising collateral values pre-crisis coupled with additional financial frictions after the crisis. |
| Keywords: | Consumer debt; Deleveraging; Zero lower bound; Increasers; Decreasers |
| Date: | 2014–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedkrw:rwp14-02&r=mac |
| By: | Plosser, Charles I. (Federal Reserve Bank of Philadelphia) |
| Abstract: | Council on Foreign Relations, May 8, 2014, New York, NY President Charles Plosser outlines his views that monetary policy transparency and forward guidance could be enhanced if the central bank would be more explicit about its reaction function. |
| Keywords: | Monetary policy; Communication; Transparency; |
| Date: | 2014–05–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpsp:98&r=mac |
| By: | Chia-Lin Chang; Hui-Kuang Hsu; Michael McAleer (University of Canterbury) |
| Abstract: | The paper uses monthly data on financial stock index returns, tourism stock sub-index returns, effective exchange rate returns and interest rate differences from April 2005 – August 2013 for Taiwan that applies Chang’s (2014) novel approach for constructing a tourism financial indicator, namely the Tourism Financial Conditions Index (TFCI). The TFCI is an adaptation and extension of the widely-used Monetary Conditions Index (MCI) and Financial Conditions Index (FCI) to tourism stock data. However, the method of calculation of the TFCI is different from existing methods of constructing the MCI and FCI in that the weights are estimated empirically. The empirical findings show that TFCI is estimated quite accurately using the estimated conditional mean of the tourism stock index returns. The new TFCI is straightforward to use and interpret, and provides interesting insights in predicting the current economic and financial environment for tourism stock index returns that are based on publicly available information. In particular, the use of market returns on the tourism stock index as the sole indicator of the tourism sector, as compared with the general activity of economic variables on tourism stocks, is shown to provide an exaggerated and excessively volatile explanation of tourism financial conditions. |
| Keywords: | Monetary Conditions Index, Financial Conditions Index, Model-based Tourism Financial Conditions Index, Unbiased Estimation |
| JEL: | B41 E44 E47 G32 |
| Date: | 2014–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:cbt:econwp:14/13&r=mac |
| By: | Stéphane Dées; Jochen Güntner |
| Abstract: | Building on Beaudry, Nam and Wang (2011) - hereafter BNW -, we use survey data on consumer sentiment in order to identify the causal effects of confidence shocks on real economic activity in a selection of advanced economies. Starting from a set of closed-economy VAR models, we show that these shocks have a significant and persistent impact on domestic consumption and real GDP. In line with BNW, we find that confidence shocks explain a large share of the variance in real economic activity. At the same time, the shocks we identify are significantly correlated across countries. In order to account for common global components in international confidence cycles, we extend the analysis to a FAVAR model. This approach proves effective in removing the correlation in country-specific confidence shocks and in isolating mutually orthogonal idiosyncratic components. As a result, the (domestic and cross-border) impacts of country-specific confidence shocks are smaller and their contribution to business cycle fluctuations is reduced, confirming the global dimension of confidence shocks. Overall, our evidence shows that confidence shocks play some role in business cycle fluctuations. At the same time, we show that confidence shocks have a strong global component, supporting their role in international business cycles. |
| Keywords: | Consumer Confidence, Consumption, International Linkages, Vector Autoregression (VAR), Factor-Augmented VAR (FAVAR). |
| JEL: | C32 E17 E32 F41 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2014_05&r=mac |
| By: | Luis Eduardo Arango; Wilmar Cabrera; Esteban Gómez; Juan Carlos Mendoza |
| Abstract: | Este artículo se pregunta si es oportuno modificar la tasa de interés técnica utilizada para descontar el pasivo pensional del nivel actual de 4% anual, dada, por un lado, la trayectoria reciente que ha tenido la tasa de interés real y, por otro, las circunstancias diferentes que vive la economía en relación con 1994 cuando fue fijada en dicho nivel. Se hacen diferentes pronósticos y simulaciones utilizando distintos enfoques estadísticos y financieros. Así mismo, se toma en cuenta la restricción macroeconómica que impone el crecimiento de muy largo plazo de la economía. Los resultados sugieren que no se debería mover la tasa de descuento del pasivo pensional y que ésta debería continuar en el 4% anual. |
| Keywords: | Tasa de interés real, tasa de interés técnica, pasivo pensional, regla de oro. |
| JEL: | E44 H55 |
| Date: | 2013–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011101&r=mac |
| By: | Franco, Ray John Gabriel; Mapa, Dennis S. |
| Abstract: | Frequency mismatch has been a problem in econometrics for quite some time. Many monthly economic and financial indicators are normally aggregated to match quarterly macroeconomic series such as GDP when analysed in a statistical model. However, temporal aggregation, although widely accepted, is prone to information loss. To address this issue, mixed frequency modelling was employed by using state space models with time-varying parameters. Quarter-on-quarter growth rate of GDP estimates were first treated as a monthly series with missing observation. Using Kalman filter algorithm, state space models were estimated with eleven monthly economic indicators as exogenous variables. A one-step-ahead predicted value for GDP growth rates was generated and as more indicators were included in the equation, the predicted values came closer to the actual data. Further evaluation revealed that among the group competing models, using Consumer Price Index (CPI), growth rates of PSEi, exchange rate, real money supply, WPI and merchandise exports are the more important determinants of GDP growth and generated the most desirable forecasts (lower forecast errors). |
| Keywords: | Multi-frequency models, state space model, Kalman filter, GDP forecast |
| JEL: | C5 C53 E3 E37 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55858&r=mac |
| By: | Davig, Troy A. (Federal Reserve Bank of Kansas City); Foerster, Andrew T. (Federal Reserve Bank of Kansas City) |
| Abstract: | Motivated by the US Fiscal Cliff in 2012, this paper considers the short- and longer- term impact of uncertainty generated by fiscal policy. Empirical evidence shows increases in economic policy uncertainty lower investment and employment. Investment that is longer-lived and subject to a longer planning horizon responds to policy uncertainty with a lag, while capital that depreciates more quickly and can be installed with few costs falls immediately. A DSGE model incorporating uncertainty over future tax regimes produces responses to fiscal uncertainty that match key features of the data. The model features uncertainty over the average tax rate and rational expectations about the resolution of uncertainty with specific outcomes and timing. Uncertainty injects noise into the economy and lowers the level of economic activity. |
| Keywords: | Fiscal policy; Uncertainty; Distorting taxation |
| Date: | 2014–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedkrw:rwp14-04&r=mac |
| By: | Philippe Bacchetta (University of Lausanne and Centre for Economic Policy Research and Hong Kong Institute for Monetary Research); Kenza Benhima (University of Lausanne and Centre for Economic Policy Research); Yannick Kalantzis (Banque de France) |
| Abstract: | In this paper, we consider an alternative perspective to China's exchange rate policy. We study a semi-open economy where the private sector has no access to international capital markets but the central bank has full access. Moreover, we assume limited financial development generating a large demand for saving instruments by the private sector. We analyze the optimal exchange rate policy by modelling the central bank as a Ramsey planner. Our main result is that in a growth acceleration episode it is optimal to have an initial real depreciation of the currency combined with an accumulation of reserves, which is consistent with the Chinese experience. This depreciation is followed by an appreciation in the long run. We also show that the optimal exchange rate path is close to the one that would result in an economy with full capital mobility and no central bank intervention. |
| JEL: | E58 F31 F32 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:092014&r=mac |
| By: | Deborah Mabbett; Waltraud Schelkle |
| Abstract: | Fiscal surveillance was developed as a supranational regulatory process to counteract short-termism and deficit biases in government decision-making. With effective monetary policy to stabilize the economy, restraint on the fiscal discretion of national governments was seen as the key to macroeconomic stability. The financial crisis and its aftermath challenge this paradigm. Private debt caused the crisis and monetary policy is so weak that pro-cyclical fiscal retrenchment could worsen fiscal outturns. We argue, contrary to the ‘disciplinarian’ interpretation of the Stability and Growth Pact, that the regulatory process of fiscal surveillance is strongly affected by the potential perversities of fiscal restraint and is therefore resistant to the prescription of austerity. This claim is developed by tracing the technical difficulties encountered by fiscal surveillance since the financial crisis. The crisis has so destabilized expectations of the performance of the economy and the proper scope of government that the statistical and economic norms of surveillance have been undermined. We conclude that the problem with fiscal surveillance is not that the EU inflicts undue fiscal discipline on member states, but rather that the EU institutions are unable to protect member states against bond market panic, and therefore cannot coordinate stabilizing fiscal policies. |
| Keywords: | economic governance, financial crisis, Stability and Growth Pact |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:eiq:eileqs:75&r=mac |
| By: | Fonseca, Marcelo Gonçalves da Silva; Pereira, Pedro L. Valls |
| Abstract: | This paper investigates the implications of the credit channel of the monetary policy transmission mechanism in the case of Brazil, using a structural FAVAR (SFAVAR) approach. The term structural comes from the estimation strategy, which generates factors that have a clear economic interpretation. The results show that unexpected shocks in the proxies for the external nance premium and the bank balance sheetchannel produce large and persistent uctuations in in ation and economic activity accounting for more than 30% of the error forecast variance of the latter in a three-year horizon. The central bank seems to incorporate developments in credit markets especially variations in credit spreads into its reaction function, as impulse-response exercises show the Selic rate is declining in response to wider credit spreads and acontraction in the volume of new loans. Counterfactual simulations also demonstrate that the credit channel ampli ed the economic contraction in Brazil during the acute phase of the global nancial crisis in the last quarter of 2008, thus gave an important impulse to the recovery period that followed. |
| Date: | 2014–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:eesptd:358&r=mac |
| By: | Ayako Saiki; Jon Frost |
| Abstract: | Inequality has been largely ignored in the literature and practice of monetary policy, but is gaining more attention recently. We look at how a decade of unconventional monetary policy (UMP) in Japan affected inequality among households using survey data. Our vector auto regression (VAR) results show that UMP widened income inequality, especially after 2008 when quantitative easing became more aggressive. This is largely due to the portfolio channel. To the best of our knowledge, this is the first study to empirically analyze the distributional impact of UMP. Japan's extensive experience with UMP may hold important policy implications for other countries. |
| Keywords: | Monetary Policy; Central Banking; Stabilization Policy; Inequality |
| JEL: | E52 E63 D63 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:423&r=mac |
| By: | Georgescu, George |
| Abstract: | In the case of Romania, a sharp deterioration of the fiscal framework strength has been observed during post-crisis period, the public debt-to-GDP ratio currently reaching around 40%, thus doubling as compared to 2008. The structural analysis of government debt portfolio highlighted the main drivers of excessive public indebtedness and the increase in refinancing (rollover) risk on short term, which is supposed to overlap with the exchange rate and interest rate risks on medium and long term. Several indicators of Romania’s debt sustainability are already on the warning levels edge which requires appropriate policies focusing on economic growth recovery, fiscal consolidation ongoing, increasing capacity of generating budgetary revenues, public debt management improvement. |
| Keywords: | public debt; debt sustainability; sovereign risk; sustainable development; financial stability |
| JEL: | E62 F34 G01 H63 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:52957&r=mac |
| By: | Takami, Norikazu |
| Abstract: | The aim of this essay is to examine how cost-push inflation theories, which highlight autonomous increases of wages and other production costs as a cause of inflation, played their decisive role in the policy debate to interpret the price movements in the second half of the 1950s. In late 1956, economic experts including politicians and journalists as well as economists started to observe a peculiarity accompanying the ongoing inflation, namely, the apparent lack of excess aggregate demand, and they placed great emphasis on cost-push inflation theories to interpret this peculiar phenomenon. When the recession of 1958 entailed a steady increase of general prices, some experts considered this as another supporting evidence of cost push inflation. Against the background of this atypical inflation, the United States Congress, then ruled by the opposition Democratic party, engaged in large-scale inquiries of inflation. These investigations produced one report among others that emphasized cost-push theories, which was called the Eckstein Report after the technical director and Harvard economist Otto Eckstein. This essay concludes that the controversy on the inflation of the late 1950s created various processes that shaped and propagated cost-push inflation theories. |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hituec:604&r=mac |
| By: | Dwyer, Gerald P |
| Abstract: | Recent innovations have made it feasible to transfer private digital currency without the intervention of an institution. A digital currency must prevent users from spending their balances more than once, which is easier said than done with purely digital currencies. Current digital currencies such as Bitcoin use peer-to-peer networks and open-source software to stop double spending and create finality of transactions. This paper explains how the use of these technologies and limitation of the quantity produced can create an equilibrium in which a digital currency has a positive value. This paper also summarizes the rise of 24/7 trading on computerized markets in Bitcoin in which there are no brokers or other agents, a remarkable innovation in financial markets. I conclude that exchanges of foreign currency may be the obvious way in which use of digital currencies can become widespread and that Bitcoin is likely to limit governments’ revenue from inflation. |
| Keywords: | digital currency, private currency, bitcoin, litecoin |
| JEL: | E4 E41 E42 |
| Date: | 2014–05–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55824&r=mac |
| By: | Greg Kaplan; Giovanni L. Violante; Justin Weidner |
| Abstract: | The wealthy hand-to-mouth are households who hold little or no liquid wealth (cash, checking, and savings accounts), despite owning sizable amounts of illiquid assets (assets that carry a transaction cost, such as housing or retirement accounts). We use survey data on household portfolios for the U.S., Canada, Australia, the U.K., Germany, France, Italy, and Spain to document the share of such households across countries, their demographic characteristics, the composition of their balance sheets, and the persistence of hand-to-mouth status over the life cycle. The portfolio configuration of the wealthy hand-to-mouth suggests that these households may have a high marginal propensity to consume out of transitory income changes, a prediction for which we find empirical support in PSID data. We explain the implications of this group of consumers for macroeconomic modeling and fiscal policy analysis. |
| JEL: | D1 D3 D9 E2 E6 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20073&r=mac |
| By: | Frédéric Gonand |
| Abstract: | A rising share of renewables in the energy mix pushes up the average price of energy - and so does a carbon tax. However the former bolsters the accumulation of capital whereas the latter, if fully recycled, does not. Thus, in general equilibrium, the effects on growth and intertemporal welfare of these two environmental policies differ. The present article assesses and compares these effects. It relies on a computable general equilibrium model with overlapping generations, an energy module and a public finance module. The main result is that an increasing share of renewables in the energy mix and a fully recycled carbon tax have opposite (though limited) impacts on activity and individuals’ intertemporal welfare in the long run. The recycling of a carbon tax fosters consumption and labour supply, and thus growth and welfare, whereas an increasing share of renewables does not. Results also suggest that a higher share of renewables and a recycled carbon tax trigger intergenerational redistributive effects, with the former being relatively detrimental for young generations and the latter being pro-youth. The policy implication is that a social planner seeking to modify the structure of the energy mix while achieving some neutrality as concerns the GDP and triggering some proyouth intergenerational equity, could usefully contemplate the joint implementation of higher quantitative targets for the future development of renewables and a carbon tax fully recycled through lower proportional taxes. |
| Keywords: | Energy transition, intergenerational redistribution, overlapping generations, carbon tax, general equilibrium |
| JEL: | D58 D63 E62 L7 Q28 Q43 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:cec:wpaper:1408&r=mac |
| By: | Grégory Claeys; Zsolt Darvas; Silvia Merler; Guntram B. Wolff |
| Abstract: | See comments by the authors 'Addressing weak inflation: The ECBâ??s Shopping List' and by Ashoka Mody 'The ECB must - and can - act' Euro-area inflation has been below 1 percent since October 2013, and medium-term inflation expectations are well below 2 percent. Forecasts of the return to target inflation have proved wrong. The European Central Bank should act forcefully, but should undermine neither the major relative price adjustments between the euro-area core and the periphery that are needed, nor the ongoing process of addressing weaknesses in Europeâ??s banking system. Reducing the deposit rate or introducing another long-term refinancing operation could be beneficial, but would be unlikely to change substantially inflation expectations. Government bond purchases would be significantly beneficial, but in a monetary union with 18 different treasuries, such purchases are difficult for economic, political and legal reasons. We recommend a monthly asset-purchase programme of â?¬35 billion with a review of the amount after three months. EFSF/ESM/EU/EIB bonds, corporate bonds and assetbacked securities should be purchased, of which at least â?¬490 billion, â?¬900 billion and â?¬330 billion respectively are suitables. Bonds of sound banks could be considered after the completion of the ECBâ??s assessment of bank balance sheets. While bond purchases distort incentives and make the ECB subject to private and public sector pressure, with potential consequences for inflation, such risks need to be weighed against the risk of persistently low inflation. |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:826&r=mac |
| By: | Mewael F. Tesfaselassie |
| Abstract: | The paper studies the effects of credible disinflation in the presence of real wage rigidity, comparing the Calvo and Rotemberg price setting mechanisms (the two popular variants of the New-Keynesian model). In both types of models, a credible, gradual disinflation is shown to lead to a delayed slump in output along the transition path. The delayed-slump result is novel and owes to negative real wage growth along the transition path, whose effect is amplified by the degree of real wage rigidity |
| Keywords: | sticky prices, real wage rigidity, disinflation, nonlinear dynamics |
| JEL: | E31 E50 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1923&r=mac |
| By: | Jacek Rothert (United States Naval Academy); Mohammad Rahmati (Sharif University of Technology) |
| Abstract: | Building on Chari et al. (2007), we develop a method to assess theories of business cycles in small open economies. We build a diagnostic economy with time-varying distortions (wedges), which measure the gap between model generated aggregates and the data. We introduce two new wedges, which allow us to fully account for the movements in the trade balance and the current account: (i) the trend-shock wedge and (ii) the debt price wedge. We show how various detailed models with frictions map to economy with new wedges. Finally, we empirically evaluate dierent theories of uctuations in emerging economies. |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:usn:usnawp:46&r=mac |
| By: | Heng-fu Zou (CEMA, Central University of Finance and Economics) |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:cuf:wpaper:598&r=mac |
| By: | Benjamin Käfer (University of Kassel) |
| Abstract: | The question of whether central banks should bear responsibility for financial stability is still unan-swered. Regarding interest rate implementation, it is thus not clear if and how the Taylor rule should be augmented by an additional financial stability term. This paper reviews the normative and positive literature on Taylor rules augmented with exchange rates, asset prices, credit, and spreads. These measures have developed as common indicators of financial (in)stability in the Taylor rule literature. In addition, our own analysis describes the development of these indicators for the core and the periphery of the Eurozone. Given the large degree of heterogeneity between euro area countries, the conclusion here is that an interest rate reaction to instability by the European Central Bank would be inappropriate in times of crisis. However, this conclusion is somewhat weakened if there is no crisis. |
| Keywords: | Taylor rule, financial stability, sovereign debt crisis, Eurozone heterogeneity, exchange rates, asset prices, credit spreads |
| JEL: | E52 F33 F42 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201430&r=mac |
| By: | Monica Gomez |
| Abstract: | Resumen: En este trabajo se construye un modelo de Equilibrio General Dinámico Estocástico (DSGE por su siglas en inglés) con sector informal y rigideces en precios, usando como marco de análisis la teoría de búsqueda y emparejamiento del mercado de trabajo. El objetivo principal es analizar el efecto de los diferentes tipos de choques económicos sobre las principales variables del mercado laboral, en una economía con presencia importante del sector informal. Igualmente se estudia el efecto de la política monetaria, ya que la presencia de este sector afecta la dinámica del ciclo económico, y por ende los mecanismos de transmisión de la política monetaria. |
| Keywords: | Política monetaria, trabajo informal, rigideces nominales, búsqueda y emparejamiento |
| JEL: | E52 E32 J64 |
| Date: | 2013–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:010996&r=mac |
| By: | Liu, Xiaochun |
| Abstract: | This paper considers the location-scale quantile autoregression in which the location and scale parameters are subject to regime shifts. The regime changes are determined by the outcome of a latent, discrete-state Markov process. The new method provides direct inference and estimate for different parts of a nonstationary time series distribution. Bayesian inference for switching regimes within a quantile,via a three-parameter asymmetric-Laplace distribution, is adapted and designed for parameter estimation. The simulation study shows reasonable accuracy and precision in model estimation. From a distribution point of view, rather than from a mean point of view, the potential of this new approach is illustrated in the empirical applications to reveal the countercyclical risk pattern of stock markets and the asymmetric persistence of real GDP growth rates and real trade-weighted exchange rates. |
| Keywords: | Asymmetric-Laplace Distribution, Metropolis-Hastings, Block-at-a-Time, Asymmetric Dynamics, Transition Probability |
| JEL: | C51 C58 E0 E3 E32 G1 |
| Date: | 2013–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55800&r=mac |
| By: | Auer, Raphael (Swiss National Bank); Mehrotra, Aaron (Bank for International Settlements) |
| Abstract: | Some observers argue that increased real integration has led to greater co-movement of prices internationally. We examine the evidence for cross-border price spillovers among economies participating in the pan-Asian cross-border production networks. Starting with country-level data, we find that both producer price and consumer price inflation rates move more closely together between those Asian economies that trade more with one another, ie that share a higher degree of trade intensity. Next, using a novel data set based on the World Input-Output Database (WIOD), we examine the importance of the supply chain for cross-border price spillovers at the sectoral level. We document the increasing importance of imported intermediate inputs for economies in the Asia-Pacific region and examine the impact on domestic producer prices of changes in costs of imported intermediate inputs. Our results suggest that real integration through the supply chain matters for domestic price dynamics in the Asia-Pacific region. |
| Keywords: | price level; inflation; deflation; international trade |
| JEL: | E31 F14 F15 F40 |
| Date: | 2014–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:172&r=mac |
| By: | Alessandria, George (Federal Reserve Bank of Philadelphia); Choi, Horag (Monash University); Ruhl, Kim J. (NYU Stern School of Business) |
| Abstract: | We build a micro-founded two-country dynamic general equilibrium model in which trade responds more to a cut in tariffs in the long run than in the short run. The model introduces a time element to the fixed-variable cost trade-off in a heterogeneous producer trade model. Thus, the dynamics of aggregate trade adjustment arise from producer-level decisions to invest in lowering their future variable export costs. The model is calibrated to match salient features of new exporter growth and provides a new estimate of the exporting technology. At the micro level, we find that new exporters commonly incur substantial losses in the first three years in the export market and that export profits are backloaded. At the macro level, the slow export expansion at the producer level leads to sluggishness in the aggregate response of exports to a change in tariffs, with a long-run trade elasticity that is 2.9 times the short-run trade elasticity. We estimate the welfare gains from trade from a cut in tariffs, taking into account the transition period. While the intensity of trade expands slowly, consumption overshoots its new steady-state level, so the welfare gains are almost 15 times larger than the long-run change in consumption. Models without this dynamic export decision underestimate the gains to lowering tariffs, particularly when constrained to also match the gradual expansion of aggregate trade flows. |
| Keywords: | Sunk cost; Fixed cost; Establishment heterogeneity; Tariffs; Welfare; DSGE |
| JEL: | E31 F12 |
| Date: | 2014–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:14-14&r=mac |
| By: | Kosuke Aoki (The University of Tokyo); Tomoyuki Nakajima (Kyoto University and CIGS); Kalin Nikolov (European Central Bank) |
| Abstract: | We build a model economy in which a shortage of safe assets can create conditions for intrinsically useless 'safe' bubble assets to circulate at a positive price. Our environment features in nitely lived individuals who are not subject to credit constraints but who face uninsurable idiosyncratic production risk. Bubbly equilibria exist when safe assets offer real returns below the growth rate of the economy. Bubble assets circulate at a positive price only if they o er returns which are safe relative to production returns. These 'safe' bubbles reduce consumption volatility but exert a contractionary effect on the economy. |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf344&r=mac |
| By: | Heng-fu Zou (CEMA, Central University of Finance and Economics) |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:cuf:wpaper:596&r=mac |
| By: | Wilman Gomez |
| Abstract: | Abstract: In this paper, an asymmetric DSGE model is built in order to account for asymmetries in business cycles. One of the most important contributions of this work is the construcion of a general utility function which nests loss aversion, risk aversion and habits formation, by means of a smooth transition function. The main idea behind this asymmetric utility funcion is that under a recession, the agents over-smooth consumption and leisure choices in order to avoid a huge departure of them from the reference level of the utility; while under a boom, the agents simply smooth consumption and leisure but trying to be as far as possible from the reference level of utility. The simulations of this model by means of Perturbations Method show that it is possible to reproduce asymmetrical business cycles where recession (on shock) are stronger than booms and booms are more long lasting than recession. One additional and unexpected result is a downward stickyness shown by real wages and as consequence of this, a more persistente fall in employment in recession than in boom. Thus the model reproduces not only asymmetrical business cycles but also real stickyness and hysteresis. |
| Date: | 2014–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:011100&r=mac |
| By: | Kashiwabara, Chie |
| Abstract: | Based on the consolidated statements data of the universal/commercial banks (UKbank) and non-bank financial institutions with quasi-banking licenses, this paper presents a keen necessity of obtaining data in detail on both sides (assets and liabilities) of their financial conditions and further analyses. Those would bring more adequate assessments on the Philippine financial system, especially with regard to each financial subsector's financing/lending preferences and behavior. The paper also presents a possibility that the skewed locational and operational distribution exists in the non-UKbank financial subsectors. It suggests there may be a significant deviation from the authorities' (the BSP, SEC and others) intended/anticipated financial system in the banking/non-bank financial institutions' real operations. |
| Keywords: | Philippines, Financial institutions, Banks, Non-banking, Credit, Monetary policy, Credit channel, Financial intermediaries, Non-bank financial institutions |
| JEL: | E42 E52 G21 G38 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper468&r=mac |
| By: | Heng-fu Zou (CEMA, Central University of Finance and Economics) |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:cuf:wpaper:597&r=mac |
| By: | Carlos León; Clara Machado; Andrés Murcia |
| Abstract: | This document presents an enhanced and condensed version of preceding proposals for identifying systemically important financial institutions in Colombia. Three systemic importance metrics are implemented: (i) money market net exposures network hub centrality; (ii) large-value payment system network hub centrality; and (iii) an adjusted assets measure. Two complementary aggregation methods for those metrics are implemented: fuzzy logic and principal component analysis. The two resulting indexes concur in several features: (i) the ranking and remoteness of the top-two most systemically important financial institutions; (ii) the preeminence of credit institutions in the indexes; (iii) the appearance of a brokerage firm in the top-six; (iv) the skewed nature of the indexes, which match the skewed (i.e. inhomogeneous) nature of the three metrics and their approximate scale-free distribution. The indexes are non-redundant and provide a comprehensive relative assessment of each financial institution’s systemic importance, in which the choice of metrics pursues the macro-prudential perspective of financial stability. The indexes may serve financial authorities as quantitative tools for focusing their attention and resources where the severity resulting from an institution failing or near-failing is estimated to be the greatest. They may also serve them for enhanced policy and decision-making. |
| Keywords: | Systemic Importance, Systemic Risk, Fuzzy Logic, Principal Component Analysis, Financial Stability, Macro-prudential |
| JEL: | D85 C63 E58 G28 |
| Date: | 2013–12–26 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011105&r=mac |
| By: | Maito, Esteban Ezequiel |
| Abstract: | In Capital in 21st century, Thomas Piketty criticizes Marxian theory and the law of the tendency of the rate of profit to fall in the long term. His main argument, asserted by other authors since decades, is related to the capacity of increases in productivity to counterweight the tendency. The French author establishes a stable “rate of return” too, but this rate and his critics on Marx are founded on a neoclassical perspective. Thus Piketty denies the validity of the law but changing its determinations as a result of the labor theory of value and the valorization process. When a proper definition of the matter in Marxian terms is done, Piketty´s data itself confirm the law of the tendency of the rate of profit to fall. |
| Keywords: | Piketty – Capital – Marx – Rate of profit – United Kingdom - Germany |
| JEL: | E21 E22 P1 P16 Y1 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55839&r=mac |
| By: | Davis, J. Scott (Federal Reserve Bank of Dallas); Mack, Adrienne (Federal Reserve Bank of Dallas); Phoa, Wesley (The Capital Group Companies); Vandenabeele, Anne (The Capital Group Companies) |
| Abstract: | What is the marginal effect of an increase in the private sector debt-to-GDP ratio on the probability of a banking crisis? This paper shows that the marginal effect of rising debt levels depends on an economy's external position. When the current account is in surplus or in balance, the marginal effect of an increase in debt is rather small; a 10 percentage point increase in the private sector debt-to-GDP ratio increases the probability of a crisis by about 1 to 2 percentage points. However, when the economy is running a sizable current account deficit, implying that any increase in the debt ratio is financed through foreign borrowing, this marginal effect can be large. When a country has a current account deficit of 10% of GDP (which is similar to the value in the Eurozone periphery on the eve of the recent crisis) a 10 percentage point increase in the private sector debt ratio leads to a 10 percentage point increase in the probability of a crisis. |
| Keywords: | money supply; credit; financial economics |
| JEL: | E51 F32 G01 |
| Date: | 2014–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:178&r=mac |
| By: | Pidong Huang (Department of Economics, Korea University, Seoul, Republic of Korea); Young Sik Kim (Department of Economics, Seoul National University, Seoul, Republic of Korea); Manjong Lee (Department of Economics, Korea University, Seoul, Republic of Korea) |
| Abstract: | Using a standard Ramsey approach, we examine an optimal allocation of the social cost for electronic payment system in the context of a dynamic general equilibrium model where money is essential. The benevolent government provides electronic payment services and allocates the relevant social cost through taxation on the beneficiaries¡¯ labor and consumption. A higher tax rate on labor yields the following desirable allocations. First, it implies a lower welfare loss due to the distortionary consumption taxation. It also enhances economy of scale in the use of electronic payment technology, reducing per transaction cost of electronic payment. Finally, it saves the cost of withdrawing and carrying around cash by reducing the frequency of cash trades. All these channels together imply optimality of the unity tax rate on labor. |
| Keywords: | cash, electronic payment, social cost, Ramsey problem |
| JEL: | E40 E60 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:iek:wpaper:1402&r=mac |
| By: | Dimitri B. Papadimitriou; Michalis Nikiforos; Gennaro Zezza; Greg Hannsgen |
| Abstract: | The US economy has been expanding moderately since the official end of the Great Recession in 2009. The budget deficit has been steadily decreasing, inflation has remained in check, and the unemployment rate has fallen to 6.7 percent. The restrictive fiscal policy stance of the past three years has exerted a negative influence on aggregate demand and growth, which has been offset by rising domestic private demand; net exports have had only a negligible (positive) effect on growth. As Wynne Godley noted in 1999, in the Strategic Analysis Seven Unsustainable Processes, if an economy faces sluggish net export demand and fiscal policy is restrictive, economic growth becomes dependent on the private sector's continuing to spend in excess of its income. However, this continuous excess is not sustainable in the medium and long run. Therefore, if spending were to stop rising relative to income, without either fiscal relaxation or a sharp recovery in net exports, the impetus driving the expansion would evaporate and output could not grow fast enough to stop unemployment from rising. Moreover, because growth is so dependent on "rising private borrowing," the real economy "is at the mercy of the stock market to an unusual extent." As proved by the crisis of 2001 and the Great Recession of 2007-09, Godley's analysis turned out to be correct. Fifteen years later, the US economy appears to be going down the same road again. Postrecession, foreign demand is still weak and the government is maintaining its tight fiscal stance. Once again, the recovery predicted in the latest Congressional Budget Office report relies on excessive private sector borrowing, and once again, the recovery is at the mercy of the stock market. Given that the income distribution has worsened since the crisis--continuing a 35-year trend--the burden of indebtedness will again fall disproportionally on the middle class and the poor. In order for the CBO projections to materialize, households in the bottom 90 percent of the distribution would have to start accumulating debt again in line with the prerecession trend while the stock of debt of the top 10 percent remained at its present level. Clearly, this process is unsustainable. The United States now faces a choice between two undesirable outcomes: a prolonged period of low growth—secular stagnation--or a bubble-fueled expansion that will end with a serious financial and economic crisis. The only way out of this dilemma is a reversal of the trend toward greater income inequality. |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levysa:sa_apr_14&r=mac |
| By: | Emmanuel Farhi; Iván Werning |
| Abstract: | We study the effects of labor mobility within a currency union suffering from nominal rigidities. When the demand shortfall in depressed region is mostly internal, migration may not help regional macroeconomic adjustment. When external demand is also at the root of the problem, migration out of depressed regions may produce a positive spillover for stayers. We consider a planning problem and compare its solution to the equilibrium. We find that the equilibrium is generally constrained inefficient, although the welfare losses may be small if the economy suffers mainly from internal demand imbalances. |
| JEL: | E0 F0 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20105&r=mac |
| By: | Quaas, Georg |
| Abstract: | Profit as rent: Some remarks about a pro-capitalist theory of development This study discusses several of the economic cornerstones of the contribution made by Hartmut Elsenhans to the so-called Global Keynesianism. Included are his unique definition of profits and rents; the thesis of net investments as a prerequisite to the acquisition of profits, including the systematic and historic background of this thesis; the exploitation of a simple neoclassical production function by ignoring conceptually ill-fitting consequences; the stabilization of investors’ expectations of rising mass consumption on the base of rising real income; the author's over- and under-interpretation of Ricardo’s theory on international trade based on comparative cost advantages; and the role of mass democracy in the acquisition and redistribution of rents to empower the underprivileged in negotiations with entrepreneurs. |
| Keywords: | Global Keynesianism, rent-seeking, mass consumption, comparative cost advantages |
| JEL: | E12 E24 F11 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55912&r=mac |
| By: | MAEOKA Kenichiro; KANDA Yusuke; NAKANO Takeshi; KUME Koichi; FUJII Satoshi |
| Abstract: | Currently, the world faces a vast number of risks such as cyber attacks, energy crises, food crises, pandemics, terror, and war. According to a report issued by the World Economic Forum, "systemic financial crisis" was pointed out as the greatest risk to impact the world and the probability of such occurrence also tends to increase. In order to find a way to build a resilient economy for Japan and an early recovery from external shocks, this paper analyzes the characteristics of the nations which recovered earlier from the collapse of Lehman Brothers, and shows what national economy types are stronger and resilient. As a result, expansion of public works investment significantly affects the earlier recovery of the gross domestic product (GDP), and development of the manufacturing industry and expansion of public works investment significantly affect the earlier recovery of the unemployment rate. This paper concludes that increasing public spending such as on public works investment is a rather effective macroeconomic policy for the resilient recovery of the GDP and unemployment rate from global risks. |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:eti:rdpsjp:14027&r=mac |
| By: | Dawn Holland |
| Abstract: | Our monthly estimates of GDP suggest that output grew by 0.1 per cent in the three months ending in May after declining by 0.1 per cent in the three months ending in April 2012. The UK economy has ceased to contract, but economic activity remains very weak. With the economy stagnant, the negative output gap is likely to widen further. We expect the UK economy to remain broadly ‘flat’ over the next 6 months. While significant downside risks persist, we expect economic recovery to begin to take hold in 2013. The National Institute interprets the term “recession” to mean a period when output is falling or receding, while “depression” is a period when output is depressed below its previous peak. Thus, unless output turns down again, the recession is over, while the period of depression is likely to continue for some time. We do not expect output to pass its peak in early 2008 until 2014. Our track record in producing early estimates of GDP suggests that our projection for the most recent three-month period has a standard error of 0.1-0.2% point when compared to the first estimate produced by the Office for National Statistics. This comparison can be made only for complete calendar quarters. Outside calendar quarters the figures are less reliable than this and they are also likely to be less accurate in the current disturbed economic circumstances. A paper describing the methodology used to produce the data was published in the February 2005 volume of the Economic Journal. From April until October 2006 our estimates were computed using the Index of Services published by ONS. However this monthly series shows considerable volatility which has caused us some problems in estimating GDP. From our November 2006 press release we have therefore reverted to using a model of private services output based on indicator variables. This means that, while all our figures for calendar quarters are fully coherent with ONS data, our estimates of monthly private service output are not. The series can be thought of as indicating the underlying value of the ONS series. For more information please telephone Dawn Holland on 020 7654 1921 or Katerina Lisenkova on 020 7654 1951. Contents of Press Release Table 1, Page 3: Summary Table of Quarterly Growth Rates showing Monthly Data, 3 months ending in that month, and Quarterly Growth (% per quarter). All contain Figures for Industry & GDP. Table 2, Page 4: Output by Sector (Industry, Agriculture, Construction, Private Services, Public Services, GDP(B) (calculated at prices excluding taxes and subsidies), GDP Table 3, Page 5: Output in Quarter Ending in Month Shown by sector (as above) Table 4, Page 6: Growth in Quarter Ending in Month Shown over Previous Quarter (% at annual Rate) by sector (as above) |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:3279&r=mac |
| By: | Wilmar Alexander Cabrera Rodríguez; Luis Fernando Melo Velandia; Daniel Parra Amado |
| Abstract: | Este documento estima los efectos de choques de origen financiero y real sobre un conjunto de variables de la economía colombiana. Para ello, se utiliza un modelo FAVAR que incorpora dos factores no observados, los cuales recogen la dinámica de 111 variables de la economía colombiana entre el primer trimestre de 2003 y el primer trimestre de 2013. El modelo FAVAR desarrollado en este trabajo corresponde a una extensión del modelo propuesto por Bernanke et al. [2005], que supone que las series, además de ser explicadas por el componente común, también son modeladas por un componente idiosincrático. Con dicha estimación se realizan dos ejercicios: (i) Análisis de impulso respuesta de las variables económicas frente a choques en los factores real y financiero y (ii) cuantificar el efecto que tiene un evento de estrés en el sector financiero sobre el sector real y viceversa; para ello se propone el CoFaR, medida alterna al CoVaR que recientemente ha sido utilizada en la literatura económica (Adrian y Brunnermeier [2011]). Los resultados obtenidos sugieren que los estrechos vínculos entre los dos sectores propagan los choques en ambas direcciones. En particular, el sector financiero reacciona de manera más rápida ante un choque en la actividad real, en comparación con el efecto de un choque financiero al sector real. |
| Keywords: | Riesgo Sistémico, Modelo FAVAR, CoVaR |
| JEL: | C50 G28 E60 |
| Date: | 2014–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011142&r=mac |
| By: | Mariacristina De Nardi; Fang Yang |
| Abstract: | Households hold vastly heterogenous amounts of wealth when they reach retirement, and differences in lifetime earnings explain only part of this variation. This paper studies the role of intergenerational transmission of ability, voluntary bequest motives, and the recipiency of accidental and intended bequests (both in terms of timing and size), in generating wealth dispersion at retirement, in the context of a rich quantitative model. Modeling voluntary bequests, and realistically calibrating them, not only generates more wealth dispersion at retirement and reduces the correlation between retirement wealth and lifetime income, but also generates a skewed bequest distribution that is close to the one in the observed data. |
| JEL: | E21 J14 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20058&r=mac |
| By: | Carlos León; Clara Machado; Miguel Sarmiento |
| Abstract: | Evidence suggests that the Colombian interbank funds market is an inhomogeneous and hierarchical network in which a few financial institutions fulfill the role of “super-spreaders” of central bank liquidity among market participants. Results concur with evidence from other interbank markets and other financial networks regarding the flaws of traditional direct financial contagion models based on homogeneous and non-hierarchical networks, and provide further evidence about financial networks’ self-organization emerging from complex adaptive financial systems. Our research work contributes to central bank’s efforts by (i) examining and characterizing the actual connective structure of interbank funds networks; (ii) identifying those financial institutions that may be considered as the most important conduits for monetary policy transmission, and the main drivers of contagion risk within the interbank funds market; (iii) providing new elements for the implementation of monetary policy and for safeguarding financial stability. |
| Keywords: | Interbank, monetary policy, contagion, networks, super-spreader, central bank. |
| JEL: | E5 G2 L14 |
| Date: | 2014–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011187&r=mac |
| By: | Charles F. Manski |
| Abstract: | Federal statistical agencies in the United States and analogous agencies elsewhere commonly report official economic statistics as point estimates, without accompanying measures of error. Users of the statistics may incorrectly view them as error-free or may incorrectly conjecture error magnitudes. This paper discusses strategies to mitigate misinterpretation of official statistics by communicating uncertainty to the public. Sampling error can be measured using established statistical principles. The challenge is to satisfactorily measure the various forms of non-sampling error. I find it useful to distinguish transitory statistical uncertainty, permanent statistical uncertainty, and conceptual uncertainty. I illustrate how each arises as the Bureau of Economic Analysis periodically revises GDP estimates, the Census Bureau generates household income statistics from surveys with non-response, and the Bureau of Labor Statistics seasonally adjusts employment statistics. |
| JEL: | C82 E01 I32 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20098&r=mac |
| By: | Mario Alejandro Acosta R. |
| Abstract: | Resumen Este documento evalúa el impacto de incluir acciones en el portafolio de reservas internacionales administrado por el banco central de Colombia (Banco de la República). El objetivo es realizar una propuesta de inversión con relación a las acciones que sea acorde a las políticas de inversión del banco central, sus objetivos y las restricciones que enfrenta como inversionista. Utilizando la teoría de portafolios como marco teórico y modelos estocásticos como metodología empírica, se analizará si es óptimo para un inversionista con las características del Banco de la República incluir acciones como activo de reserva. Se argumenta que bajo unas condiciones específicas puede ser óptimo para el Banco de la República incluir acciones en el portafolio. Al ser activos que se correlacionan negativamente con los activos de renta fija que actualmente posee el portafolio, el aumento en el riesgo generado por la inclusión acciones se ve mitigado por los beneficios de diversificación y el mayor retorno esperado. |
| Keywords: | Banco central, reservas internacionales, teoría de portafolios, acciones. |
| JEL: | C14 C61 E58 G11 G17 G18 G23 |
| Date: | 2014–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:011004&r=mac |
| By: | Carlos Arango; Yassine Bouhdaoui; David Bounie; Martina Eschelbach |
| Abstract: | Despite various payment innovations, today, cash is still heavily used to pay for low-value purchases. This paper develops a simulation model to test whether standard implications of the theory on cash management and payment choices can explain the use of payment instruments by transaction size. In particular, using diary survey data from Canada, France, Germany and the Netherlands, we test the assumption that cash is still the most efficient payment instrument, and the idea that people hold cash for precautionary reasons when facing uncertainty about their future purchases. The results of the simulations show that these two factors are significant determinants of the high shares of low-value cash payments in Canada, France and Germany. Yet, they are not so crucial in the Netherlands, which exhibits a significant share of low-value card transactions. We discuss how the differences in payment markets across countries may explain the performance of the model. |
| Keywords: | Cash management, Payment Choices. |
| JEL: | C61 E41 E47 |
| Date: | 2014–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011124&r=mac |
| By: | Fernando Arias Rodríguez; Celina Gaitán Maldonado; Johanna López Velandia |
| Abstract: | A partir de estados financieros de bancos y entidades asociadas se propone una cronología del ciclo financiero para Colombia, desde 1990 hasta mediados del año 2013, y se evalúa su interacción con el ciclo de negocios propuesto por Alfonso et al. (2012). Se usan dos acercamientos: el primero basado en reglas (Bry y Boschan, (1971) e Índices de Difusión) y el segundo fundamentado en la información contenida en los datos (Novelty Detection). Se encuentra evidencia que apoya la idea de una sincronización entre el ciclo financiero y el de negocios aunque las cronologías y demás características de cada uno dependen directamente de la definición y enfoque del ciclo que se adopte. |
| Keywords: | Ciclo de Negocios, Ciclos Financieros, Bry Boschan, Novelty Detection, Indicadores Financieros. |
| JEL: | E32 G21 C38 C43 |
| Date: | 2014–04–08 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011147&r=mac |
| By: | Diana Zigraiova (Czech National Bank and Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Petr Jakubik (European Insurance and Occupational Pensions Authority (EIOPA) and Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | This work develops an early warning system framework for assessing systemic risks and for predicting systemic events, i.e. periods of extreme financial instability with potential real costs, over the short horizon of six quarters and the long horizon of twelve quarters on the panel of 14 countries, both advanced and developing. First, we build Financial Stress Index to identify starting dates of systemic financial crises for each country in the panel. Second, early warning indicators for assessment and prediction of systemic risks are selected in a two-step approach; relevant prediction horizons for each indicator are found by the univariate logit model followed by the application of Bayesian model averaging method to identify the most useful indicators. Next, we validate early warning model, containing only useful indicators, for both horizons on the panel. Finally, the in-sample performance of the constructed EWS over both horizons is assessed for the Czech Republic. We find that the model over the 3 years’ horizon slightly outperforms the EWS with the horizon of 1.5 years on the Czech data. The long model attains the maximum utility in crises detection as well as it maximizes area under Receiver Operating Characteristics curve which measures the quality of the forecast. |
| Keywords: | Systemic risk, Financial stress, Financial crisis, Early warning indicators, Bayesian model averaging, Early warning system |
| JEL: | C33 E44 F47 G01 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2014_01&r=mac |
| By: | Bernard Herskovic; Bryan T. Kelly; Hanno Lustig; Stijn Van Nieuwerburgh |
| Abstract: | We show that firms’ idiosyncratic volatility obeys a strong factor structure and that shocks to the common factor in idiosyncratic volatility (CIV) are priced. Stocks in the lowest CIV-beta quintile earn average returns 6.4% per year higher than those in the highest quintile. We provide evidence that the CIV factor is correlated with income risk faced by households. These three facts are consistent with a canonical incomplete markets heterogeneous-agent model. In the model, CIV is a priced state variable because an increase in idiosyncratic firm volatility raises the typical investor’s marginal utility when markets are incomplete. The calibrated model matches the high degree of comovement in idiosyncratic volatilities, the CIV-beta return spread, and several other asset price moments. |
| JEL: | E44 G12 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20076&r=mac |
| By: | Goran Stankov; Simon Kirby |
| Abstract: | Our monthly estimates of GDP suggest that output grew by 0.7 per cent in the three months ending in December after growth of 0.8 per cent in the three months ending in November 2013. These estimates suggest the economy expanded by 1.9 per cent in 2013, up from 0.3 per cent in 2012. The level of GDP is now just 1.2 per cent below its pre-recession peak (January 2008). The economy is expected to expand at a reasonable pace in 2014. The National Institute interprets the term “recession†to mean a period when output is falling or receding, while “depression†is a period when output is depressed below its previous peak. Thus, unless output turns down again, the recession is over, while the period of depression is likely to continue for some time. We do not expect output to pass its peak in early 2008 until 2014. Our track record in producing early estimates of GDP suggests that our projection for the most recent three-month period has a root mean squared error (RMSE) of 0.238% point (for the full sample period 1999Q3-2012Q4) when compared to the first estimate produced by the ONS. For the period 2008Q1 to 2012Q4 the RMSE is 0.360% point. The impact of the adverse weather in 2010Q4 is a noticeable outlier. Excluding 2010Q4 from the analysis, the RMSE for the full sample period is 0.198% point, and for 2008Q1 to 2012Q4 the RMSE is 0.274% point. These comparisons can be made only for complete calendar quarters. Outside calendar quarters the figures are less reliable than this. A paper describing the methodology used to produce the data was published in the February 2005 volume of the Economic Journal: Mitchell, J. Smith, R. J., Weale, M. R., Wright, S. and Salazar, E. L. (2005) ‘An Indicator of Monthly GDP and an Early Estimate of Quarterly GDP Growth’, Economic Journal, No. 551, pp. F108-F129. Available from: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1468-0297 A paper describing the methodology used to produce the data for the inter-war period was published in the October 2012 volume of Explorations in Economic History: Mitchell, J., Solomou, S. and Weale, M. (2012) ‘Monthly GDP estimates for inter-war Britain’, Explorations in Economic History, Vol. 49, No. 4, pp. 543-556. Available from: http://www.journals.elsevier.com/explorations-in-economic-history/ From April until October 2006 our estimates were computed using the Index of Services published by ONS. However this monthly series shows considerable volatility which has caused us some problems in estimating GDP. From our November 2006 press release we have therefore reverted to using a model of private services output based on indicator variables. This means that, while all our figures for calendar quarters are fully coherent with ONS data, our estimates of monthly private service output are not. The series can be thought of as indicating the underlying value of the ONS series. For more information please telephone Simon Kirby (NIESR, Centre For Macroeconomics) on 020 7222 7665. |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:11742&r=mac |
| By: | Daron Acemoglu |
| Abstract: | This paper revisits the important ideas proposed by Atkinson and Stiglitz’s seminal 1969 paper on technological change. After linking these ideas to the induced innovation literature of the 1960s and the more recent directed technological change literature, it explains how these three complementary but different approaches are useful in the study of a range of current research areas though they may also yield different answers to important questions. It concludes by highlighting several important areas where these ideas can be fruitfully applied in future work. |
| JEL: | E25 J31 O30 O31 O33 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20060&r=mac |
| By: | Pierre-Cyrille Hautcoeur; Angelo Riva; Eugene N. White |
| Abstract: | When faced with a run on a “systemically important” but insolvent bank in 1889, the Banque de France pre-emptively organized a lifeboat to ensure that depositors were protected and an orderly liquidation could proceed. To protect the Banque from losses on its lifeboat loan, a guarantee syndicate was formed, penalizing those who had participated in the copper speculation that had caused the crisis bringing the bank down. Creation of the syndicate and other actions were consistent with mitigating the moral hazard from such an intervention. This episode contrasts the advice given by Bagehot to the Bank of England to counter a panic by lending freely at a high rate on good collateral, allowing insolvent institutions to fail. |
| JEL: | E58 G01 N13 N23 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20083&r=mac |
| By: | Michèle A. Weynandt |
| Abstract: | This paper uses the Austrian Social Security Register (ASSD) to explore what information firms infer from the three common types of displacement: individual layoffs, individuals displaced due to a closure and individuals displaced due to a mass layoff. I bring together two strands of the literature, namely signaling and sorting and contribute to it in three ways. First I test whether the individual layoffs are the least productive, second I investigate whether individual layoffs are perceived as “lemons” (with a specific focus on the high ability individuals) and third I raise the question whether the “lemon” exists in the resulting matching pattern. Using the Abowd et al. (1999) model I show that the individual layoffs are the least productive measured by the person fixed effect. I confirm the signaling argument of Gibbons and Katz (1991) that individual layoffs are perceived as “lemons” also for high ability individuals, but I reject the argument of Gibbons and Katz (1991) against the matching model (Becker, 1973). Using three different measures of sorting, I find that the matching changes differentially for the different layoff groups. This leads to the tentative conclusion that both sorting and signaling take place after an individual job loss. |
| Keywords: | Labor Markets, Employment, Wages, Displacement |
| JEL: | E24 J40 J63 J65 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:jku:nrnwps:2014_05&r=mac |
| By: | Jaroslav Borovička; Lars Peter Hansen; José A. Scheinkman |
| Abstract: | We construct shock elasticities that are pricing counterparts to impulse response functions. Recall that impulse response functions measure the importance of next-period shocks for future values of a time series. Shock elasticities measure the contributions to the price and to the expected future cash flow from changes in the exposure to a shock in the next period. They are elasticities because their measurements compute proportionate changes. We show a particularly close link between these objects in environments with Brownian information structures. |
| JEL: | E0 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20104&r=mac |
| By: | Maito, Esteban Ezequiel |
| Abstract: | This paper presents estimates of the rate of profit on fourteen countries in the long run. The performance shows a clear downward trend, although there are periods of partial recovery in both core and peripheral countries. The behavior of the profit rate confirms the predictions made by Marx, about the historical trend of the mode of production. Finally, an estimate of the global rate of profit for the last six decades is done, also highlighting the particular role of China in systemic profitability. |
| Keywords: | rate of profit - Marx - mode of production – core/periphery – world rate of profit |
| JEL: | E30 F21 N0 P10 P16 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55894&r=mac |
| By: | G. Camera; M. Casari; S. Bortolotti |
| Abstract: | We study the behavioral underpinnings of adopting cash versus electronic payments in retail transactions. A novel theoretical and experimental framework is developed to primarily assess the impact of sellers’ service fees and buyers’ rewards from using electronic payments. Buyers and sellers face a coordination problem, independently choosing a payment method before trading. In the experiment, sellers readily adopt electronic payments but buyers do not. Eliminating service fees or introducing rewards significantly boosts the adoption of electronic payments. Hence, buyers’ incentives play a pivotal role in the diffusion of electronic payments but monetary incentives cannot fully explain their adoption choices. Findings from this experiment complement empirical findings based on surveys and field data. |
| JEL: | E1 E4 E5 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp942&r=mac |
| By: | Simon Kirby |
| Abstract: | Our monthly estimates of GDP suggest that output grew by 0.8 per cent in the three months ending in November after growth of 0.7 per cent in the three months ending in October 2013. Our estimates suggest that the recent pattern of broad based sectoral growth has continued. These robust rates of growth are consistent with a gradual narrowing of the UK’s negative output gap. |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:11730&r=mac |
| By: | Anyadike-Danes, Michael (Aston Business School and Enterprise Research Centre, UK); Bjuggren, Carl Magnus (Research Institute of Industrial Economics (IFN)); Gottschalk, Sandra (ZEW, Germany); Hölzl, Werner (WIFO, Austria); Johansson, Dan (HUI Research); Maliranta, Mika (ETLA); Myrann, Anja (Ragnar Frisch Centre for Economic Research, Norway) |
| Abstract: | The contribution of different-sized businesses to job creation continues to attract policymakers’ attention, however, it has recently been recognized that conclusions about size were confounded with the effect of age. We probe the role of size, controlling for age, by comparing the cohorts of firms born in 1998 over their first decade of life, using variation across half a dozen northern European countries Austria, Finland, Germany, Norway, Sweden, and the UK to pin down size effects. We find that a very small proportion of the smallest firms play a crucial role in accounting for cross-country differences in job growth. A closer analysis reveals that the initial size distribution and survival rates do not seem to explain job growth differences between countries, rather it is a small number of rapidly growing firms that are driving this result. |
| Keywords: | Birth cohort; Firm age; Firm size; Firm survival; Firm growth |
| JEL: | E24 L25 M13 |
| Date: | 2014–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1019&r=mac |
| By: | Simon Kirby |
| Abstract: | Our monthly estimates of GDP suggest that output grew by 0.8 per cent in the three months ending in September after growth of 0.9 per cent in the three months ending in August 2013. We estimate that the production sector provided a positive contribution to GDP growth in the third quarter of this year, despite the drop in the sector’s output between July and August. The current level of GDP is 2.5 per cent below its pre-recession peak (January 2008). The National Institute interprets the term “recession” to mean a period when output is falling or receding, while “depression” is a period when output is depressed below its previous peak. Thus, unless output turns down again, the recession is over, while the period of depression is likely to continue for some time. We do not expect output to pass its peak in early 2008 until 2015. Our track record in producing early estimates of GDP suggests that our projection for the most recent three-month period has a root mean squared error (RMSE) of 0.238% point (for the full sample period 1999Q3-2012Q4) when compared to the first estimate produced by the ONS. For the period 2008Q1 to 2012Q4 the RMSE is 0.360% point. The impact of the adverse weather in 2010Q4 is a noticeable outlier. Excluding 2010Q4 from the analysis, the RMSE for the full sample period is 0.198% point, and for 2008Q1 to 2012Q4 the RMSE is 0.274% point. These comparisons can be made only for complete calendar quarters. Outside calendar quarters the figures are less reliable than this and they are also likely to be less accurate in the current disturbed economic circumstances. A paper describing the methodology used to produce the data was published in the February 2005 volume of the Economic Journal: Mitchell, J. Smith, R. J., Weale, M. R., Wright, S. and Salazar, E. L. (2005) ‘An Indicator of Monthly GDP and an Early Estimate of Quarterly GDP Growth’, Economic Journal, No. 551, pp. F108-F129. Available from: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1468-0297 A paper describing the methodology used to produce the data for the inter-war period was published in the October 2012 volume of Explorations in Economic History: Mitchell, J., Solomou, S. and Weale, M. (2012) ‘Monthly GDP estimates for inter-war Britain’, Explorations in Economic History, Vol. 49, No. 4, pp. 543-556. Available from: http://www.journals.elsevier.com/explorations-in-economic-history/ From April until October 2006 our estimates were computed using the Index of Services published by ONS. However this monthly series shows considerable volatility which has caused us some problems in estimating GDP. From our November 2006 press release we have therefore reverted to using a model of private services output based on indicator variables. This means that, while all our figures for calendar quarters are fully coherent with ONS data, our estimates of monthly private service output are not. The series can be thought of as indicating the underlying value of the ONS series. |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:11609&r=mac |
| By: | Simon Kirby |
| Abstract: | Our monthly estimates of GDP suggest that output grew by 0.6 per cent in the three months ending in May after growth of 1.0 per cent in the three months ending in April 2013. Our estimates suggest that both the production and private services sectors provided significant positive contributions to GDP growth in the recent three month period. NIESR’s latest quarterly forecast (published 2nd May 2013) projects growth of 0.9 per cent per annum this year and 1.5 per cent in 2014. The private services sector is likely to drive economic growth through the remainder of this year. The National Institute interprets the term “recession” to mean a period when output is falling or receding, while “depression” is a period when output is depressed below its previous peak. Thus, unless output turns down again, the recession is over, while the period of depression is likely to continue for some time. We do not expect output to pass its peak in early 2008 until 2015. Our track record in producing early estimates of GDP suggests that our projection for the most recent three-month period has a root mean squared error (RMSE) of 0.238% point (for the full sample period 1999Q3-2012Q4) when compared to the first estimate produced by the Office for National Statistics. For the period 2008Q1 to 2012Q4 the RMSE is 0.360% point. The impact of the adverse weather in 2010Q4 is a noticeable outlier. Excluding 2010Q4 from the analysis and the RMSE for the full sample period is 0.198% point, and for 2008Q1 to 2012Q4 the RMSE is 0.274% point. These comparisons can be made only for complete calendar quarters. Outside calendar quarters the figures are less reliable than this and they are also likely to be less accurate in the current disturbed economic circumstances. A paper describing the methodology used to produce the data was published in the February 2005 volume of the Economic Journal: Mitchell, J. Smith, R. J., Weale, M. R., Wright, S. and Salazar, E. L. (2005) ‘An Indicator of Monthly GDP and an Early Estimate of Quarterly GDP Growth’, Economic Journal, No. 551, pp. F108-F129. Available from: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1468-0297 A paper describing the methodology used to produce the data for the inter-war period was published in the October 2012 volume of Explorations in Economic History: Mitchell, J., Solomou, S. and Weale, M. (2012) ‘Monthly GDP estimates for inter-war Britain’, Explorations in Economic History, Vol. 49, No. 4, pp. 543-556. Available from: http://www.journals.elsevier.com/explorations-in-economic-history/ From April until October 2006 our estimates were computed using the Index of Services published by ONS. However this monthly series shows considerable volatility which has caused us some problems in estimating GDP. From our November 2006 press release we have therefore reverted to using a model of private services output based on indicator variables. This means that, while all our figures for calendar quarters are fully coherent with ONS data, our estimates of monthly private service output are not. The series can be thought of as indicating the underlying value of the ONS series. For more information please telephone NIESR on 020 7222 7665. |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:11462&r=mac |
| By: | Wilman Gómez |
| Date: | 2014–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:011163&r=mac |
| By: | Rumen Dobrinsky (The Vienna Institute for International Economic Studies, wiiw); Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Gabor Hunya (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Leon Podkaminer (The Vienna Institute for International Economic Studies, wiiw); Sandor Richter (The Vienna Institute for International Economic Studies, wiiw); Hermine Vidovic (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | Bulgaria negative economic sentiment prevails (by Rumen Dobrinsky) Croatia no upturn yet (by Hermine Vidovic) Czech Republic heading for a change (by Leon Podkaminer) Estonia consumers keep growth alive (by Sebastian Leitner) Hungary the well-known pre-election tunes are played again (by Sándor Richter) Latvia households push up domestic activity (by Sebastian Leitner) Lithuania aiming for euro adoption in 2015 (by Sebastian Leitner) Poland keeping afloat (by Leon Podkaminer) Romania growth driven only by exports (by Gábor Hunya) Slovakia export-led growth continues (by Doris Hanzl-Weiss) Slovenia recovery not in sight (by Hermine Vidovic) Statistical Annex Selected monthly data on the economic situation in Central, East and Southeast Europe |
| Keywords: | economic forecasts, GDP growth, inflation |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:wii:mpaper:mr:2013-10&r=mac |
| By: | Ana María Iregui B.; Luis Fernando Melo V.; María Teresa Ramírez G.; Carmen Cecilia Delgado R. |
| Abstract: | En este artículo se explora empíricamente el vínculo entre la volatilidad y el desalineamiento de la tasa de cambio real (TCR) con la actividad de las empresas en Colombia durante el período 2000-2011. Se analiza su efecto sobre las ventas externas, la productividad, la inversión y las ganancias de 4.871 empresas. Los resultados sugieren que el efecto de la volatilidad de la tasa de cambio real sobre el desempeño de las firmas es mixto. En particular, este efecto es negativo en el caso de las ganancias, mientras que no tiene efecto sobre las ventas externas, el crecimiento de la productividad y la tasa de inversión de las empresas. Por otro lado, el desalineamiento tiene un efecto negativo y significativo sobre las ventas externas y las ganancias, lo que podría sugerir que desequilibrios macroeconómicos de largo plazo afectan la actividad económica de las firmas. |
| Keywords: | Volatilidad de la tasa de cambio real, desalineamiento de la tasa de cambio real, inversión, productividad. |
| JEL: | D22 E22 F31 |
| Date: | 2013–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011106&r=mac |
| By: | Juan Esteban Carranza; Alejandra González; Natalia Serna |
| Abstract: | En este documento estudiamos la interacción entre la producción y el comercio exterior de la industria manufacturera colombiana durante la última década. Nuestro estudio descriptivo se basa en un panel detallado de producción y valor agregado a nivel de producto industrial, con información adicional del volumen, valor y tasa de cambio bilateral por producto y por país de destino/origen de las exportaciones e importaciones. La riqueza del panel permite la estimación de correlaciones condicionales en un conjunto amplio de controles, incluyendo efectos fijos a nivel de producto, tiempo y país de destino/origen, que por lo tanto absorbe patrones complejos de heterogeneidad no observada. Nuestros resultados muestran una correlación positiva y robusta entre el valor agregado y las exportaciones industriales, la cual es consistente con nociones convencionales sobre el comportamiento de las firmas industriales en economías abiertas. Encontramos además que las importaciones y el valor agregado de la producción nacional de cada producto tienen una correlación nula o positiva que contradice los temores de una posible sustitución sistemática entre producción doméstica e importaciones. Nuestros resultados muestran además patrones de correlación entre comercio exterior y algunas otras variables relevantes como la tasa de cambio real y nominal. Caracterizamos además los efectos del comercio con Venezuela y mostramos que este ha tenido poco efecto sobre el desempeño de largo plazo de la industria. |
| Keywords: | Industria, comercio exterior, valor agregado, tasa de cambio. |
| JEL: | E23 F40 |
| Date: | 2014–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011129&r=mac |
| By: | Francesco Bosello (Fondazione Eni Enrico Mattei, Euro-Mediterranean Center on Climate Change and University of Milan); Lorenza Campagnolo (Fondazione Eni Enrico Mattei and University of Venice Ca’ Foscari); Fabio Eboli (Fondazione Eni Enrico Mattei, Euro-Mediterranean Center on Climate Change and University of Venice Ca’ Foscari); Ramiro Parrado (Fondazione Eni Enrico Mattei, Euro-Mediterranean Center on Climate Change and University of Venice Ca’ Foscari) |
| Abstract: | The present research proposes a macroeconomic assessment of the role of waste incineration with energy recovery (WtE) and controlled landfill biogas to electricity generation and their potential contribution to a CO2 emission reduction policy, within a recursive-dynamic computable general equilibrium model. From the modelling viewpoint, introducing these energy sectors in such a framework required both the extension of the GTAP7 database and the improvement of the ICES production nested function. We focus our analysis on Italy as a signatory of the GHG reduction commitment of 20% by 2020 wrt 1990 levels proposed by the European Community; the rest of the world is represented by 21 geo-political countries/regions. It is shown that albeit in the near future WtE and landfill biogas will continue to represent a limited share of energy inputs in electricity sector (in Italy, around 2% for WtE and 0.6% for biogas in 2020) they could play a role in a mitigation policy context. The GDP cost of the EU emission reduction target for the Italian economy can indeed be reduced by 1% when the two energy generating options are available. In absolute terms, this translates into an annuitized value of 87-122 million €. |
| Keywords: | Climate Change, Mitigation, Energy From Waste |
| JEL: | C68 E27 Q42 Q43 Q54 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.38&r=mac |
| By: | Simon Kirby |
| Abstract: | � Our monthly estimates of GDP suggest that output grew by 0.8 per cent in the three months ending in April after growth of 0.3 per cent in the three months ending in March 2013. The base effect from the weak level of output in the January 2013 has inflated the quarterly rate of growth in both the production sector and broader economy in the three months to April 2013.Underlying growth is weaker than the headline figure suggests. |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:11305&r=mac |
| By: | Simon Kirby |
| Abstract: | Our monthly estimates of�GDP�suggest that output grew by 0.7 per cent in the three months ending in October after growth of 0.8 per cent in the three months ending in September 2013. Our estimates suggest the current level of�GDP�is now 5.6 per cent above the trough of the 2008-9 recession (April 2009), but is still 2.3 per cent below its pre-recession peak (January 2008). |
| Date: | 2013–11 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:11645&r=mac |
| By: | Erce, Aitor (Bank of Spain) |
| Abstract: | The programs designed by the International Monetary Fund during the Global Financial Crisis have shown more awareness of the importance of domestic demand for the prospects of economic recovery. Yet, the IMF has continued to do little about the late payments made by governments to domestic creditors and suppliers. In contrast, the greater protection historically awarded by the IMF to foreign creditors has endured throughout the recent crisis. The paper suggests that, in order to adequately balance foreign creditor seniority and growth objectives, the IMF may sometimes need to emphasize equitable burden-sharing across categories of creditors rather than privilege the interests of international bond markets. |
| Keywords: | credit; economic recovery |
| JEL: | E60 F50 |
| Date: | 2014–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:175&r=mac |
| By: | Mapa, Dennis S.; Paz, Nino Joseph I.; Eustaquio, John D.; Mindanao, Miguel Antonio C. |
| Abstract: | Hedging strategies have become more and more complicated as assets being traded have become more interrelated to each other. Thus, the estimation of risks for optimal hedging does not involve only the quantification of individual volatilities but also include their pairwise correlations. Therefore a model to capture the dynamic relationships is necessary to estimate and forecast correlations of returns through time. Engle’s dynamic conditional correlation (DCC) model is compared with other models of correlation. Performance of the correlation models are evaluated in this paper using only the daily log returns of the closing prices of the Peso-Dollar Exchange Rate and Philippine Stock Exchange index. Ultimately, Engle’s DCC model is adopted because of its consistency with expectations. Though generally negative, correlation between these two returns is not really constant as the results indicated. The forecast evaluation of the models was divided into in-sample and out-of-sample forecast performance with short-term (i.e., 22-day, 60-day, and 125-day) and medium-term (250-day and 500-day) rolling window correlations, or realized correlations, as proxies for the actual correlation. Based on the root mean squared error and mean absolute error, the integrated DCC model showed optimal forecast performance for the in-sample correlation patterns while the mean-reverting DCC model had the most desirable forecast properties for dynamic long-run forecasts. Also, the Diebold-Mariano tests showed that the integrated DCC has greater predictive accuracy in terms of the 3-month realized correlations than the rest of the models. |
| Keywords: | dynamic conditional correlation, Peso-Dollar exchange rate, PSE index, hedging |
| JEL: | C5 C52 C58 E47 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55861&r=mac |
| By: | Carlos León; Ron J. Berndsen |
| Abstract: | Scale-free (inhomogeneous) connective structures with modular (highly clustered) hierarchies are ubiquitous in real–world networks. Evidence from the main Colombian payment and settlement systems verifies that local financial networks have self-organized into a modular scale-free architecture that favors everyday robustness and performance in exchange for rare episodes of fragility but rapid evolution. Results provide new elements for understanding and modeling the formation and structure of financial networks, and suggest new insights and challenges for authorities contributing to their stability. For instance, (i) the observed architecture suggests that financial systems are complex adaptive systems; (ii) complex adaptive features invalidate traditional reductionist assumptions for modeling financial systems (e.g. homogeneity, normality, static equilibrium, linearity); (iii) the observed modular scale-free architecture tends to limit cascades and isolate feedbacks; and (iv) with financial stability in view, authorities should understand and take advantage of the existing architecture by means of designing and implementing macro-prudential regulation and system-calibrated requirements. Yet, the quest for discovering, explaining and handling the emerging structure of financial systems is an enduring task. |
| Keywords: | Networks, complex adaptive systems, self-organization, financial system, scale-free, financial stability |
| JEL: | D85 E42 C38 D53 G20 L14 |
| Date: | 2013–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:011104&r=mac |
| By: | Nicholas Bloom; Renata Lemos; Raffaella Sadun; Daniela Scur; John Van Reenen |
| Abstract: | Over the last decade the World Management Survey (WMS) has collected firm-level management practices data across multiple sectors and countries. We developed the survey to try to explain the large and persistent TFP differences across firms and countries. This review paper discusses what has been learned empirically and theoretically from the WMS and other recent work on management practices. Our preliminary results suggest that about a quarter of cross-country and within-country TFP gaps can be accounted for by management practices. Management seems to matter both qualitatively and quantitatively. Competition, governance, human capital and informational frictions help account for the variation in management. |
| JEL: | E23 M1 M11 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20102&r=mac |
| By: | Simon Kirby |
| Abstract: | Our monthly estimates of�GDP�suggest that output grew by 0.6 per cent in the three months ending in June after growth of 0.6 per cent in the three months ending in May 2013. These estimates suggest that economic growth accelerated from 0.3 per cent per quarter in�2013Q1�to 0.6 per cent in�2013Q2, largely due to the performance of the private service sector. Production sector output has been flat since the rebound in February 2013. Nevertheless, this translates into a modest positive contribution to�GDP�growth in�2013Q2. |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:11487&r=mac |