nep-mac New Economics Papers
on Macroeconomics
Issue of 2016‒04‒30
sixty-nine papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. How Monetary Policy Changes Bank Liability Structure and Funding Cost. By M. Girotti
  2. One EMU Fiscal Policy for the EURO By Alexandre Lucas Cole; Chiara Guerello; Guido Traficante
  3. Real and Nominal Equilibrium Yield Curves: Wage Rigidities and Permanent Shocks By Hsu, Alex; Li, Erica X. N.; Palomino, Francisco J.
  4. Volatility effects of news shocks in New Keynesian models with optimal monetary policy: Updated version By Offick, Sven; Wohltmann, Hans-Werner
  5. The Bhaduri/Marglin post-Kaleckian model in the history of distribution and growth theories: An assessment by means of model closures By Hein, Eckhard
  6. De-dollarization of credit in Peru: the role of unconventional monetary policy tools By Castillo, Paul; Vega, Hugo; Serrano, Enrique; Burga, Carlos
  7. The impact of monetary strategies on inflation persistence By Evzen Kocenda; Balazs Varga
  8. Zero Lower Bound (ZLB) Economics By Thomas I. Palley
  9. On the limits of macroprudential policy By Marcin Kolasa
  10. Macroprudential theory: advances and challenges By Henrique S. Basso; James Costain
  11. Financialisation, debt and inequality: Scenarios based on a stock flow consistent model By Detzer, Daniel
  12. Government Spending Shocks and Private Activity: The Role of Sentiments By Bijie Jia; Hyeongwoo Kim
  13. Spurious periodicities in cliometric series: Simultaneous testing By Kufenko, Vadim
  14. Business cycle asymmetries and the labor market By Kohlbrecher, Britta; Merkl, Christian
  15. Are Low Interest Rates Deflationary? A Paradox of Perfect- Foresight Analysis By Mariana Garcıa-Schmidt; Michael Woodford
  16. Monetary policy, market structure and the income shares in the U.S By Bitros, George C.
  17. Japan's Inflation Dynamics and Agents' Behavior By Research and Statistics Department
  18. How to stabilize the currency exchange rate By BLINOV, Sergey
  19. Empirical Analysis of Labor Markets over Business Cycles: An International Comparison By Jan Bruha; Jiri Polansky
  20. The impact of monetary policy on household consumption in South Africa. Evidence from Vector Autoregressive Techniques By Emmanuel Owusu-Sekyere
  21. Macroeconomic and Financial Effects of Oil Price Shocks: Evidence for the Euro Area By Morana, Claudio
  22. Debt Servicing, Aggregate Consumption, and Growth By Mark Setterfield; Yun K. Kim
  23. Dynamic Debt Deleveraging and Optimal Monetary Policy By Benigno, Pierpaolo; Eggertsson, Gauti; Romei, Federica
  24. Search and matching frictions and business cycle fluctuations in Bulgaria: Technical Appendix By Vasilev, Aleksandar
  25. Forecast Disagreement and the Inflation Outlook: New International Evidence By Pierre L. Siklos
  26. Unemployment and Innovation By Joseph Stiglitz
  27. Financial Frictions in Production Networks By Saki Bigio; Jennifer La’O
  28. Evaluation of unconventional monetary policy in a small open economy By Martin Pietrzak
  29. Demand effects of fiscal policy since 2008 By Engelbert Stockhammer; Walid Qazizada; Sebastian Gechert
  30. Inflation in South Africa: An Assessment of Alternative Inflation Models By Johannes W. Fedderke and Yang Liu
  31. Modelling Overnight RRP Participation By Anderson, Alyssa G.; Huther, Jeff W.
  32. The Mechanism of Inflation Expectation Formation among Consumers By Naohito Abe; Yuko Ueno
  33. Real-Time Forecasting for Monetary Policy Analysis: The Case of Sveriges Riksbank By Iversen, Jens; Laséen, Stefan; Lundvall, Henrik; Söderström, Ulf
  34. The State Level Impact of Uncertainty Shocks By Haroon Mumtaz; Laura Sunder-Plassmann; Angeliki Theophilopoulou
  35. Verification of Monetary Policy Effect through Corporate Debt: Empirical analysis using Japanese firm-level data (Japanese) By SHOJI Keishi
  36. Monetary aggregates in Italy since 1861: evidence from a new dataset By Federico Barbiellini Amidei; Riccardo De Bonis; Miria Rocchelli; Alessandra Salvio; Massimiliano Stacchini
  37. Household Income, Demand, and Saving: Deriving Macro Data with Micro Data Concepts By Barry Z. Cynamon; Steven M. Fazzari
  38. The deep historical roots of macroeconomic volatility By Tang, Sam Hak Kan; Leung, Charles Ka Yui
  39. Towards a Stock-Flow Consistent Ecological Macroeconomics By Tim Jackson; Peter Victor; Asjad Naqvi
  40. Petroleum Products Prices and Inflationary Dynamics in Nigeria. By Eregha, Bright; Mesagan, Ekundayo; Ayoola, Olawale
  41. Does banknote quality affect counterfeit detection? Experimental evidence from Germany and the Netherlands By van der Horst, Frank; Eschelbach, Martina; Sieber, Susann; Miedema, Jelle
  42. Notas para una politica fiscal en la salida de la crisis By Javier Andres; Angel De la Fuente; Rafael Domenech
  43. Nonlinear expectation formation in the U.S. stock market: Empirical evidence from the Livingston survey By Pierdzioch, Christian; Reitz, Stefan; Ruelke, Jan-Christoph
  44. Inflation at the Household Level: Web Appendix By Schulhofer-Wohl, Sam; Kaplan, Greg
  45. Common Shocks, Uncommon Effects: Food Price Inflation across the EU By Lloyd, Tim; McCorriston, Steve; Zvogu, Evious
  46. Local and Aggregate Fiscal Policy Multipliers By Dupor, William D.
  47. Discussion of “Language after liftoff: Fed communication away from the zero lower bound” By Williams, John C.
  48. Testing for pro-poorness of growth through the tax system: The Mexican case By Luis Huesca; Linda Llamas
  49. 地域DSGEモデルの応用可能性:家計の異質性を考慮して By Daisuke IDA; Yoichi MATSUBAYASHI
  50. Series enlazadas de Contabilidad Regional para Espana (1980-2014) By Angel De la Fuente
  51. The National and Local Economic Outlook: An Update--Remarks at the University of Bridgeport, Bridgeport, Connecticut. By Dudley, William
  52. Cálculo de la divergencia relativa de precios como medida de presión inflacionaria By Ramos, Maria Gracia
  53. Historical Overview of Japan's Trade and Industrial Policy around 2000 (Japanese) By TAKEDA Haruhito
  54. Noisy Fiscal Policy By Fève, Patrick; Pietrunti, Mario
  57. Неоклассическая экономическая теория и экономическая действительность By Bukvić, Rajko
  58. Funding Liquidity, Market Liquidity and the Cross-Section of Stock Returns By Jean-Sébastien Fontaine; René Garcia; Sermin Gungor
  59. Arbitrage and nonlinear tax scales By Becker, Marcus; Löffler, Andreas
  60. Monetary Policy and the Current Account: Theory and Evidence By Hjortsoe, Ida; Weale, Martin; Wieladek, Tomasz
  61. Spillover effects of global liquidity’s expansion on emerging countries: evidences from a Panel VAR approach By Nady Rapelanoro
  62. Uncertainty, rationality and complexity in a multi sectoral dynamic model: the Dynamic Stochastic Generalized Aggregation approach By Michele Catalano; Corrado Di Guilmi
  63. Inertia of the U.S. Dollar as a Key Currency through the Two Crises By OGAWA Eiji; MUTO Makoto
  64. Debt deflation, financial market stress and regime change: Evidence from Europe using MRVAR By Ernst, Ekkehard; Semmler, Willi; Haider, Alexander
  65. Divergence in the Socioeconomic Development Paths of Hungary and Slovakia By Bartha, Zoltán; Tóthné Szita, Klára
  66. Learning, Career Paths, and the Distribution of Wages By Santiago Caicedo; Robert E. Lucas, Jr.; Esteban Rossi-Hansberg
  67. Elasticity and Discipline in the Global Swap Network By Perry Mehrling
  68. Growth without scale effects due to entropy By Tiago Neves Sequeira; Pedro Mazeda Gil; Oscar Afonso
  69. Remittances over the business cycle: theory and evidence By Supriyo De; Ergys Islamaj; M. Ayhan Kose; S. Reza Yousefi

  1. By: M. Girotti
    Abstract: U.S. banks obtain most of their funding from a combination of zero-interest deposits and interest-bearing deposits. Using local demographic variations as instruments for banks' liability composition, I show that when monetary policy tightens, banks with a larger proportion of zero-interest deposits on their balance sheet experience larger increases in their interest-bearing deposit rate. This happens because tight monetary policy reduces the quantity of zero-interest deposits available to banks. Banks react issuing more interest-bearing deposits, but pay an interest rate that increases with the quantity being borrowed. This new evidence supports the existence of the bank lending channel of monetary policy.
    Keywords: Banks, Deposits, Lending Channel, Monetary Policy.
    JEL: E44 E50 G21 L16
    Date: 2016
  2. By: Alexandre Lucas Cole (LUISS "Guido Carli" University); Chiara Guerello (LUISS "Guido Carli" University); Guido Traficante (European University of Rome)
    Abstract: We build a Two-Country Open-Economy New-Keynesian DSGE model of a Currency Union to study the effects of fiscal policy coordination, by evaluating the stabilization properties of different degrees of fiscal policy coordination, in a setting where the union-wide monetary policy affects fiscal policies and viceversa, because of price rigidities and distortionary taxation. We calibrate the model to represent two groups of countries in the European Economic and Monetary Union and run numerical simulations of the model under a range of alternative shocks and under alternative scenarios for fiscal policy. We also compare welfare under the different scenarios, bringing to policy conclusions for the proper macroeconomic management of a Currency Union. We find that: a) coordinating fiscal policy by targeting net exports, rather than output, produces more stable dynamics, b) consolidating government budget constraints across countries and moving tax rates jointly provides greater stabilization, c) taxes on wage income are exponentially more distortionary than taxes on firm sales. Our policy prescriptions for the Eurozone are then to use fiscal policy to reduce international demand imbalances, either by stabilizing trade fl ows across countries or by creating some form of fiscal union or both, while avoiding the excessive use of labour taxes, in favour of sales taxes.
    Keywords: Fiscal Policy, International Policy Coordination, Monetary Union, New Keynesian.
    JEL: E62 E63 F42 F45 E12
    Date: 2016
  3. By: Hsu, Alex; Li, Erica X. N.; Palomino, Francisco J.
    Abstract: The links between real and nominal bond risk premia and macroeconomic dynamics are explored quantitatively in a model with nominal rigidities and monetary policy. The estimated model captures macroeconomic and yield curve properties of the U.S. economy, implying significantly positive real term and inflation risk bond premia. In contrast to previous literature, both premia are positive and generated by wage rigidities as a compensation for permanent productivity shocks. Stronger policy-rule responses to inflation (output) increase (decrease) both premia, while policy surprises generate negligible risk premia. Empirical evidence of the economic mechanism is provided.
    Keywords: Term structure of interest rates ; bond risk premia ; monetary policy ; nominal rigidities
    JEL: D51 E43 E44 E52 G12
    Date: 2016–04–12
  4. By: Offick, Sven; Wohltmann, Hans-Werner
    Abstract: This paper studies the volatility implications of anticipated cost-push shocks (i.e. news shocks) in a New Keynesian model with hybrid price setting both under optimal unrestricted and discretionary monetary policy with flexible inflation targeting. If the degree of backward-looking price setting behavior is sufficiently small (large), anticipated cost-push shocks lead in both policy regimes to a higher (lower) volatility in the output gap and in the central bank's loss than an unanticipated shock of the same size. This inversion of the volatility effects of news shocks follows from the inverse relation between the price-setting behavior and the optimal monetary policy. Under a fully microfounded hybrid New Keynesian Phillips curve with price indexation, this inversion of volatility results is not possible since the Phillips curve remains hybrid even in the limit case of full price indexation.
    Keywords: Anticipated shocks,Optimal monetary policy,Volatility
    JEL: E32 E52
    Date: 2016
  5. By: Hein, Eckhard
    Abstract: Starting from a review of the main strands of orthodox and heterodox distribution and growth models and their distinguishing features, with the post-Kaleckian Bhaduri/Marglin (1990) (and Kurz 1990) model as a specific, but highly flexible variant of heterodox distribution and growth theories, we develop a simple modelling framework in which we can treat these different theories as different variants of model closure. In a simple closed private one-good economy model, each theory is presented drawing on the relationship between the rate of profit and the rate of growth, as well as on the consideration of one major adjusting variable allowing for the convergence of the endogenous variables of the model to their equilibrium values. This allows for a systematic comparison of exogenous and endogenous variables, of the 'logic' or the chain of causalities in each of the approaches, and of the generation of the long-run equilibrium positions of the system. It is finally shown that the post-Kaleckian model is able to cover many, but not all of the results generated by the old neoclassical growth model, new neoclassical growth theories, classical/Marxian distribution and growth approaches, and post-Keynesian Kaldor-Robinson and Kalecki-Steindl distribution and growth theories.
    Keywords: distribution,growth,model comparison,Bhaduri/Marglin model
    JEL: E21 E22 E25 O41
    Date: 2016
  6. By: Castillo, Paul (Banco Central de Reserva del Perú); Vega, Hugo (Banco Central de Reserva del Perú); Serrano, Enrique (Banco Central de Reserva del Perú); Burga, Carlos (Banco Central de Reserva del Perú)
    Abstract: In this paper we document and empirically evaluate the use of unconventional monetary policy tools in Peru to reduce credit dollarization. Our empirical analysis uses the counter-factual test proposed by Pesaran and Smith (2012) and shows that both high reserve requirements, used counter cyclically since 2010, and the de-dollarization program put in place by the Central Reserve Bank of Peru (BCRP) since 2013 had statistically significant effects on reducing credit dollarization in Peru. The paper also discusses the impact on bank’s balance sheet of the complementary tools created as part of the de-dollarization program to inject domestic currency liquidity.
    Keywords: Unconventional policy tools, reserve requirements, Monetary Policy, Dollarization, and Peru.
    JEL: E52 E58 E61 G38
    Date: 2016–04
  7. By: Evzen Kocenda (Institute of Economic Studies, Charles University); Balazs Varga (Corvinus University of Budapest)
    Abstract: We analyze the impact of price stability-oriented monetary strategies (inflation targeting - IT - and constraining exchange rate arrangements) on inflation persistence using a timevarying coefficients framework in a panel of 68 countries (1993-2013). We show that explicit IT has a stronger effect on taming inflation persistence than implicit IT and is effective even during and after the financial crisis. Regimes with the U.S. dollar as a reserve currency are less effective than those using the Euro; this effect correlates with the level of the reserve currency's inflation persistence. Further, we document the existence of structure in inflation persistence data. Our results are robust to differences in four well established inflation persistence measures and are not affected by existing structural breaks or the endogeneity of monetary strategies.
    Keywords: Inflation persistence; inflation targeting; exchange rate regime; flexible least squares; structural breaks
    JEL: C22 C32 E31 E52 F31
    Date: 2016–04
  8. By: Thomas I. Palley
    Abstract: This paper explores zero lower bound (ZLB) economics. The ZLB is widely invoked to explain stagnation and it fits with the long tradition that argues Keynesian economics is a special case based on nominal rigidities. The ZLB represents the newest rigidity. Contrary to ZLB economics, not only does a laissez-faire monetary economy lack a mechanism for delivering the natural rate of interest, it may also lack such an interest rate. Moreover, the ZLB can be a stabilizing rigidity that prevents negative nominal interest rates exacerbating excess supply conditions.
    Keywords: zero lower bound (ZLB), stagnation, New Keynesianism, normal rigidities
    JEL: E0 E10 E12 E20 E40 E50
    Date: 2016
  9. By: Marcin Kolasa
    Abstract: This paper studies how macroprudential policy tools can complement the interest rate-based monetary policy in achieving a selection of dual stabilization objectives. We show analytically in a canonical New Keynesian model with collateral constraints that using the loan-to-value ratio as an additional policy instrument does not resolve the in flation-output volatility tradeoff. Perfect targeting of in ation and either credit or house prices with monetary and macroprudential policy is possible only if the role of credit in the economy is suciently small. Any of these three dual stabilization objectives can be achieved with the monetary-fiscal policy mix. The identifed limits to the LTV ratio-based policy are related to its predominantly intertemporal effect on decisions made by financially constrained agents.
    Keywords: macroprudential policy, monetary policy, stabilization tradeoffs
    JEL: E32 E58 E63 G21 G28
    Date: 2016–03
  10. By: Henrique S. Basso (Banco de España); James Costain (Banco de España)
    Abstract: This note discusses recent theoretical work analyzing the causes of financial instability, its consequences for the macroeconomy, and thus the potential role for macroprudential policy. After discussing how information asymmetries and strategic complementarities can cause balance sheet losses to propagate through the financial system and over time, we discuss the role of the major classes of macroprudential instruments in preventing instability ex ante and containing it ex post. We conclude with a discussion of current challenges for macroeconomic modeling and for the design of regulation and policy.
    Keywords: banks, financial stability, financial regulation, macroeconomic policy.
    JEL: E44 E6 G2 G28
    Date: 2016–03
  11. By: Detzer, Daniel
    Abstract: In the era of financialisation, increasing income inequality could be observed in most developed and many developing countries. Despite these similar developments in inequality, the growth performance and drivers for growth differed markedly among countries, allowing clusters of different growth regimes to be identified. Among them two extreme types: the debt-led private-demand boom type and the export-led mercantilist type. Whereas the former relies mainly on creditfinanced household consumption in order to compensate for the potential lack of demand (associated with the depressing effect of financialisation), the latter relies on net exports as the main driver of aggregate demand. After a short review of the different channels through which financialisation is expected to affect a countries development, a theoretical discussion on the conditions that tend to support the occurrence of either of the two regimes will build the base for the following model exercise. With the help of a stock-flow consistent model it will be demonstrated then how increasing inequality, depending on a countries institutional structure and regulatory framework, affects growth differently, explaining the occurrence of both regime types. Based on the insights of the theoretical discussion and the model results, a foresight exercise will be performed examining how further increase in inequality might affect development of economies around the world but particularly of the Euro area.
    Keywords: Euro area,finance-dominate capitalism,financialisation,foresight,household debt,international imbalances,consumption emulation
    JEL: E02 E12 E21 E25 E44 E65 F40 F41 F43
    Date: 2016
  12. By: Bijie Jia; Hyeongwoo Kim
    Abstract: This paper studies the dynamic effects of the fiscal policy shock on private activity using an array of vector autoregressive models for the post-war US data. We are particularly interested in the role of consumer sentiment in the transmission of the government spending shock. Our major findings are as follows. Private consumption and investment fail to rise persistently in response to positive spending shocks especially when shocks are anticipated, while they exhibit persistent and significant increases when the sentiment shock occurs. Employment and real wages in the private sector also respond significantly positively only to the sentiment shock. Consumer sentiment responds negatively to a positive fiscal shock, resulting in subsequent decreases in private activity. That is, our empirical findings imply that the government spending shock generates consumer pessimism, which then weakens the effectiveness of the fiscal policy.
    Keywords: Government Spending; Consumer Sentiment; Private Activity; Sentiment Channel; Vector Autoregressive; Expectational VAR; Survey of Professional Forecasters; Threshold VAR; Counterfactual Simulations
    JEL: E32 E62
    Date: 2016–03
  13. By: Kufenko, Vadim
    Abstract: In this paper we revisit the methodological aspects of the issue of spurious cycles: using the well-established clinometric data, we apply an empirical strategy to identify spurious periodicities and cross-validate the results. The analysis of cyclical fluctuations involves numerous challenges, including data preparation and detrending. As a result, there is a risk of statistical artifacts to arise: it is known that summation operators and filtering yield a red noise alike spectral signature, amplifying lower frequencies and thus, longer periodicity, whereas detrending using differencing yields a blue noise alike spectral signature, amplifying higher frequencies and thus, shorter periodicity. In our paper we explicitly address this issue. In order to derive the stationary signals to be tested, we perform outlier adjustment, derive cycles from the series with the asymmetric band pass Christiano-Fitzgerald filter using the upper bands of the Kuznets and the Juglar cycles as cut-offs, and obtain detrended prefiltered signals by differencing the series in the absence of fractional integration. Afterwards, we simultaneously test whether the spectral densities of filtered and detrended prefiltered signals are significantly different from the spectral density of the related noise. The periodicities from the Kuznets range were not simultaneously significant, and thus are likely to be spurious; whereas ones of the Juglar and Kitchin ranges were simultaneously significant. The simultaneous significance test helps to identify spurious periodicities and the results, in general, accord with the durations of the business cycles found in other works.
    Keywords: business cycles,spectral analysis,spurious cycles,fractional integration,simultaneous testing
    JEL: E02 E32 E39 F44
    Date: 2016–03
  14. By: Kohlbrecher, Britta; Merkl, Christian
    Abstract: This paper shows that the matching function and the Beveridge curve in the United States exhibit strong nonlinearities over the business cycle. These patterns can be replicated by enhancing a search and matching model with idiosyncratic productivity shocks for new contacts. Large negative aggregate shocks move the hiring cutoff point into a part of the idiosyncratic density function with higher density and thereby generate large, asymmetric job-finding rate and unemployment reactions. Our proposed mechanism is of high relevance as it leads to time varying effects of certain policy interventions.
    Keywords: business cycle asymmetries,matching function,Beverdige curve,job-finding rate,unemployment,effectiveness of policy
    JEL: E24 E32 J63 J64
    Date: 2016
  15. By: Mariana Garcıa-Schmidt (Columbia University); Michael Woodford (Columbia University)
    Abstract: A prolonged period of extremely low nominal interest rates has not resulted in high inflation. This has led to increased interest in the “Neo-Fisherian†proposition according to which low nominal interest rates may themselves cause inflation to be lower. The fact that standard models of the effects of monetary policy have the property that perfect foresight equilibria in which the nominal interest rate remains low forever necessarily involve low inflation (at least eventually) might seem to support such a view. Here, however, we argue that such a conclusion depends on a misunderstanding of the circumstances under which it makes sense to predict the effects of a monetary policy commitment by calculating the perfect foresight equilibrium consistent with the policy. We propose an explicit cognitive process by which agents may form their expectations of future endogenous variables. Under some circumstances, such as a commitment to follow a Taylor rule, a perfect foresight equilibrium (PFE) can arise as a limiting case of our more general concept of reflective equilibrium, when the process of reflection is pursued sufficiently far. But we show that an announced intention to fix the nominal interest rate for a long enough period of time creates a situation in which reflective equilibrium need not resemble any PFE. In our view, this makes PFE predictions not plausible outcomes in the case of policies of the latter sort. According to the alternative approach that we recommend, a commitment to maintain a low nominal interest rate for longer should always be expansionary and inflationary, rather than causing deflation; but the effects of such “forward guidance†are likely, in the case of a long horizon commitment, to be much less expansionary or inflationary than the usual PFE analysis would imply.
    JEL: E31 E43 E52
  16. By: Bitros, George C.
    Abstract: This paper investigates whether the monetary policy and the market structure have anything to do with the declining share of labor in the U.S in recent decades. For this purpose: (a) a dynamic general equilibrium model is constructed and used in conjunction with data over the 2000-2014 period to compute the income shares; (b) the latter are compared to those reported from various sources for significant differences, and (c) the influence of monetary policy is subjected to several statistical tests. With comfortable margins of confidence it is found that the interest rate the Federal Open Market Committee charges for providing liquidity to the economy is related positively with the shares of labor and profits and negatively with the share of interest. What these findings imply is that, by moving opposite to the equilibrium real interest rate, the relentless reduction of the federal funds rate since the 1980s may have contributed to the decline in the equilibrium share of labor, whereas the division of the equilibrium non-labor income between interest and profits has been evolving in favor of the former, because according to all indications the stock of producers’ goods in the U.S has been aging. As for the market structure, it is found that even if firms had and attempted to exercise monopoly power, it would be exceedingly difficult to exploit it because the demand of consumers’ goods is significantly price elastic. Should these results be confirmed by further research, they would go a long way towards explaining the deceleration of investment and economic growth.
    Keywords: Useful life of capital, equilibrium real interest, federal funds rate, income shares
    JEL: E19 E25 E40 E50
    Date: 2016–04–15
  17. By: Research and Statistics Department (Bank of Japan)
    Abstract: On November 26, 2015, the Research and Statistics Department of the Bank of Japan (BOJ) and the Center for Advanced Research in Finance (CARF) of the University of Tokyo held a joint conference titled "Japan's Inflation Dynamics and Agents' Behavior." This document is a staff translation of the conference minutes. All contributions submitted to the conference are available from the Bank of Japan website as working papers or research papers (some are available only in Japanese). The main takeaways of the conference can be summarized in the following four points. First, there was a broad consensus among conference participants that inflation dynamics in Japan have recently changed along with a gradual shift in inflation expectations. As a result, Japan seems to have started escaping from a deflationary equilibrium. However, there remains considerable dispersion in inflation expectations and aggregate inflation expectations have not yet reached 2 percent, the inflation rate that the Bank of Japan aims to attain under its Quantitative and Qualitative Monetary Easing policy. How to best model expectations formation remains an important challenge for academia as well as policy makers. Second, conference participants highlighted the importance of the "norm" as a key determinant of firms' price-setting behavior. The norm can be regarded as a variant of inflation expectations, but carries the connotation of fairness and shared values in society. During the deflation era, zero inflation was the strong social norm in Japan and hence an overwhelming majority of firms did not change their prices. Although not yet conclusive, there have recently been indications of a change in the norm and firms' price-setting behavior. Third, many conference participants pointed out that firms have remained very cautious in terms of raising wages and increasing investment, even if their price-setting may have become a little more aggressive. A possible reason is that they are not sufficiently confident regarding future prospects of the domestic economy and their competitiveness at the global level. Another possible reason is that Japan's labor market for regular workers has remained very rigid due to existing practices such as lifetime employment. At the same time, the bargaining power of trade unions has diminished substantially and there has been an increase in temporary workers, who are paid lower wages. There was a strong sense among participants that, under these circumstances, the government needs to steadily implement its growth strategy in order to raise growth expectations. Monetary easing plays a complementary role to that growth strategy. Fourth, it was pointed out that, along with the change in inflation dynamics, Japanese households' behavior seems to have changed in that they are taking more risks in terms of their portfolio choices.
    Date: 2016–04–27
  18. By: BLINOV, Sergey
    Abstract: In 2015, many countries had to deal with the weakening of their currencies. Issues regarding exchange rate management by the Central Banks have again become the focal point of heated debate. For example, the Russian Ruble exchange rate has been fluctuating hugely. The problem now is not so much the Ruble's weakness as instability of its exchange rate, volatility. The management of the Central Bank claims that stabilization of the Ruble exchange rate is not possible though it is the responsibility of the Bank of Russia under the Constitution. As a matter of fact, any country's Central Bank has two methods of stabilizing the exchange rate available to it. Firstly, «adaptive» approach to stabilization may be adopted. In this case, the Central Bank, as it were, «adjusts itself» to the tendencies unfolding in the market, without being active in trying to influence them. Secondly, the Central Bank may use an «active» way of stabilizing the exchange rate. In such a case, it needs to influence the exchange rate without resorting to foreign exchange interventions. Both methods, the adaptive one and the active one, do not require gold or foreign exchange reserves to be spent. It is even the other way round, - the reserves become replenished, while economy gets an impetus for growth.
    Keywords: Monetary Policy, Central Banking, Business Cycles, International Finance, Foreign Exchange
    JEL: E30 E52 E58 E65 F30 F31
    Date: 2016–04–11
  19. By: Jan Bruha; Jiri Polansky
    Abstract: The goal of this paper is to document and summarize the main cyclical features of labor market macroeconomic data in advanced countries. We report the second moments (correlations, coherences and volatility) of labor market variables for various data transformations (growth rates and cycles). Then we use dynamic factor models to inquire about the number of orthogonal shocks that drives labor market data dynamics. We also investigate the time-varying nature of these features: we ask whether they are stable over time, especially at times of severe crises such as the Great Recession. Finally, we compare these features across countries to see whether there are groups of countries characterized by similar features, such as labor market institutions. We find that certain features are stable over time and across countries (such as Okun's Law), while others are not. We also confirm that labor market institutions influence selected characteristics, but to a limited degree only. We find that one or at most two orthogonal shocks seem to drive the cyclical dynamics of labor market variables in most countries. The paper concludes with our interpretation of these findings for structural macroeconomic models.
    Keywords: Dynamic factor models, Great Recession, labor market institutions, Okun's Law
    JEL: E24 J21 J30
    Date: 2015–12
  20. By: Emmanuel Owusu-Sekyere
    Abstract: This paper investigates the “cost of credit effect†of monetary policy on household consumption of final goods and services in South Africa, testing the hypotheses of the Keynesian interest rate channel of monetary policy transmission. We focus on three periods; post transition from apartheid, during inflation targeting and during the global financial crisis. Quarterly data from 1994Q1 to 2012Q4, constant parameter vector autoregressive techniques (VAR) by Sims (1980) and time varying parameter VAR by Primicieri (1995) are used in this study. The results show that household credit and consumption declined and stayed negative post transition and after inflation targeting - periods of monetary tightening in South Africa, but turned positive during the global financial crisis which saw passive or quasi expansionary monetary policy measures aimed at mitigating the negative output gap in South Africa. These changes in household credit and consumption across the different time periods show evidence of the cost of credit effect of monetary policy on household consumption in South Africa. They further reflect the impact of different structural changes and exogenous shocks on monetary policy conduct in South Africa and its pass through effect on household consumption in South Africa.
    Keywords: Bayesian inference, Household consumption, Monetary policy, Household credit, Time-varying parameter VAR
    JEL: C11 C32 E51 E52
    Date: 2016
  21. By: Morana, Claudio
    Abstract: The paper investigates the macroeconomic and financial effects of oil prices shocks in the euro area since its creation in 1999, with a special focus on the recent slump. The analysis is carried out episode by episode, within a time-varying parameter framework, consistent with the view that "not all the oil price shocks are alike", yet without imposing any a priori identification assumption. We find evidence of recessionary effects triggered not only by oil price hikes, but also by oil price slumps in some cases, likewise for the most recent episode, which is also rising deflation risk and financial distress. In addition through uncertainty effects, the current slump might then be depressing aggregate demand by increasing the real interest rate, as ECB monetary policy is already conducted at the zero lower bound. The increase in real money balances following the slump points to the accommodation of the shock by the ECB, concurrent with the implementation of the Quantitative Easing policy (Q.E.). Yet, in so far as Q.E failed to generate inflationary expectations within the current and expected environment of soft oil prices, the case for a more expansionary use of fiscal policy than in the past would become compelling, in order to counteract the deflationary and recessionary threats to the euro area.
    Keywords: Oil Price Shocks, Oil Price-macroeconomy Relationship, Risk Factors, Semiparametric Dynamic Conditional Correlation Model, Time-varying Parameter Models, Financial Economics, E30, E50, C32,
    Date: 2016–03–18
  22. By: Mark Setterfield (New School For Social Research,); Yun K. Kim (University of Massachusetts, Boston;)
    Abstract: We develop a neo-Kaleckian growth model that emphasizes the importance of consumption behavior. In our model, workers first make consumption decisions based on their gross income, and then treat debt servicing commitments as a substitute for saving. Workers’ borrowing is induced by their desire to keep up with the consumption standard set by rentiers’ consumption, reflecting an aspect of the relative income hypothesis. As a result of this consumption and debt servicing behavior, consumer debt accumulation and income distribution have effects on aggregate demand, profitability, and economic growth that differ from those found in existing models. We also investigate the financial sustainability of the Golden Age and Neoliberal growth regimes within our framework. It is shown that distributional changes between the Golden Age and the Neoliberal regimes, together with corresponding changes in consumption emulation behavior via expenditure cascades, suffice to make the Neoliberal growth regime unsustainable.
    Keywords: Consumer debt, emulation, income distribution, Golden Age regime, Neoliberal regime, expenditure cascades, growth
    JEL: E12 E44 O41
    Date: 2015–11
  23. By: Benigno, Pierpaolo; Eggertsson, Gauti; Romei, Federica
    Abstract: This paper studies optimal monetary policy under dynamic debt deleveraging once the zero bound is binding. Unlike much of the existing literature, the natural rate of interest is endogenous and depends on macroeconomic policy. We provide microfoundation for debt deleveraging based both on household over accumulation of debt and leverage constraint on banks; and show that they are isomorphic in our proposed post-crisis New Keynesian model, thus integrating two popular narrative for the crisis. Optimal monetary policy successfully raises the natural rate of interest by creating an environment that speeds up deleveraging, thus endogenously shortening the duration of the crisis and a binding zero bound. Inflation should be front loaded. Fiscal-policy multipliers can be even higher than in existing models, but depend on the way in which public spending is financed.
    Date: 2016–03
  24. By: Vasilev, Aleksandar
    Keywords: general equilibrium,unemployment and wages
    JEL: D51 E24
    Date: 2016–02–22
  25. By: Pierre L. Siklos (Lazaridis School of Business and Economics, Balsillie School of International Affairs, Wilfrid Laurier University (E-mail:
    Abstract: Short-term inflation forecast disagreement in nine advanced economies is examined. Domestic versus global determinants are considered. Disagreement is evaluated vis-à-vis several benchmarks. An indicator of central bank communication is added. A quasi-confidence interval for disagreement is also estimated. Disagreement is sensitive to the chosen group of forecasters examined. The GFC led to a spike in inflation forecast disagreement that was short- lived. Forecast disagreement can be reasonably seen as a variable that can change abruptly from high to low disagreement regimes. Furthermore, low and high levels of forecast disagreement can coexist with high levels of uncertainty. There is a global component in forecast disagreement but domestic determinants appear to be of first order importance. There appear to be relatively few indications that forecasts are coordinated with those of central banks with the possible exception of professional forecasters. Finally, central bank communication appears to play an only small role in explaining forecast disagreement.
    Keywords: forecast disagreement, inflation, central bank communication
    JEL: E52 E58 C53
    Date: 2016–03
  26. By: Joseph Stiglitz (Columbia University)
    Abstract: This paper analyzes equilibrium, dynamics, and optimal decisions on the factor bias of innovation in a model of induced innovation. In a model with full employment, we show that (a) if the elasticity of substitution is always less than or greater than unity, there is a unique steady state equilibrium; (b) if the elasticity of substitution is less than unity, the steady state is stable, but convergence is oscillatory; (c) if the elasticity of substitution is greater than unity, the steady state is a saddle point; and (d) if the elasticity of substitution is less than unity for both high and low effective capital labor ratios but greater than unity for intermediate values, then there can be multiple steady states. In a model where efficiency wages lead to equilibrium unemployment, we show that if the elasticity of substitution is less than unity, there will be a bias towards excessive labor augmenting innovation, resulting in too high unemployment, with convergence to the unique steady state being oscillatory, rather than monotonic. Similarly, if the elasticity of substitution between skilled and unskilled labor is less than unity, and there is efficiency wage unemployment for unskilled labor only, there is will be excessively skill-biased innovation. This paper provides an alternative resolution to the Harrod-Domar conundrum of the disparity between the natural and warranted rate of growth to that of Solow, with strong policy implications, for instance, concerning the effects of income distribution and monetary policy both in the short run and the long.
    JEL: E24 O30 O31 O33
    Date: 2015–01
  27. By: Saki Bigio (UCLA and NBER); Jennifer La’O (Columbia University and NBER)
    Abstract: We study how an economy’s production structure determines the response of aggregate output and employment to sectoral financial shocks. In our framework, economic production is organized in an input-output network in which firms face financial constraints on their working capital. We show how sectoral financial shocks propagate through the network and manifest at the aggregate level through two channels: a fall in total factor productivity and an aggregate labor wedge distortion. The strength of each channel depends on the overall network architecture and the location of shocks. Finally, we calibrate our model to the U.S. input-output tables and use it to quantitatively assess the role of the network multiplier within the context of the recent Financial Crisis and the Great Recession.
    Keywords: Production Networks, Financial Frictions, Business Cycles
    JEL: C67 G10 E42
    Date: 2016–04
  28. By: Martin Pietrzak
    Abstract: This paper shows what are the consequences of omitting international dimension issues like international trade and financial channels when modeling the effects of unconventional monetary policy tools. To evaluate the size of discrepancies between consequences of a large-scale asset purchase program in a small open economy and a closed one, we extend one of the existing models analyzing a large-scale asset purchases by adding small open economy features. Finally we compare it with the original version. We find that previous studies might overestimate the extent to what large-scale asset purchases affect real activity. Allowing agents to trade internationally with goods as well as saving via foreign, currency denominated deposits leads to a leakages that result in substantial differences between large-scale asset purchases in a small open economy and an autarky. Moreover, our results show that negative supply side shocks have less severe consequences in a small open economy comparing to an autarky, because they are offset by the real exchange rate depreciation which boosts competitiveness.
    Keywords: unconventional monetary policy, financial frictions, small open economy
    JEL: E52 F41
    Date: 2016–03
  29. By: Engelbert Stockhammer (Kingston University); Walid Qazizada; Sebastian Gechert
    Abstract: The Great Recession 2007-09 has led to controversies around the role of fiscal policy. Academically this has translated into renewed interest in the effects of fiscal policy. Several studies have since suggested that fiscal multipliers are substantially larger in downswings or depressions than in the upswing. In terms of economic policy reactions countries have differed substantially in the fiscal stance. It is an important open question how big the impact of these policies on economic growth has been. The paper uses the regime-dependent multiplier estimates by Qazizada and Stockhammer (2015) and by Gechert and Rannenberg (2014) to calculate the demand effects of fiscal policy for Germany, USA, UK, Greece, Ireland, Italy, Portugal and Spain since 2008. This allows assessing to what extent fiscal policy explains different economic performances across countries. We find expansionary fiscal policy in 2008/09 in all countries, but since 2010 fiscal policies have differed. While the fiscal impact was roughly neutral in Germany, the UK, and the USA, it was large and negative in Greece, Ireland, Italy, Portugal, and Spain.
    Keywords: multiplier, fiscal policy, austerity, recession
    JEL: C36 E62
    Date: 2016–04
  30. By: Johannes W. Fedderke and Yang Liu
    Abstract: We consider the relative empirical performance of a range of inflation models for South Africa. Model coverage is of Phillips-curve, New Keynesian Phillips curve, monetarist, and structural models of inflation. Our core findings are that the single most robust covariate of inflation is unit labour cost. We further decompose unit labour cost into changes in the nominal wage and real labour productivity. The principal association is a strong positive relationship between inflation and nominal wages, while improvements in real labour productivity report only a relatively weak negative association with inflation. Supply side shocks also consistently report an association with inflation. As to demand-side shocks, the output gap does not return a robust statistical association with inflation. Instead, it is growth in the money supply and government expenditure which return robust and theoretically consistent associations with inflationary pressure.
    Keywords: Inflation, South Africa
    JEL: E31
    Date: 2016
  31. By: Anderson, Alyssa G.; Huther, Jeff W.
    Abstract: We examine how market participants have used the Federal Reserve’s overnight reverse repurchase (ON RRP) exercise and how short-term interest rates have evolved between December 2013 and November 2014. We show that money market fund (MMF) participation is sensitive to the spread between market repo rates and the ON RRP offering rate as well as Treasury bill issuance, government sponsored enterprise (GSE) participation is more heavily driven by calendar effects, dealers tend to only participate when rate spreads are negative, and banks generally do not participate. We also find that the effect of the ON RRP on overnight interest rates is more significant in the collateralized market than the uncollateralized market.
    Keywords: Federal Reserve System operations ; Monetary policy ; federal funds ; money market funds ; overnight RRP ; repurchase agreements
    JEL: E52 E58 G21 G23
    Date: 2016–02
  32. By: Naohito Abe (Institute of Economic Research Hitotsubashi University); Yuko Ueno (Institute of Economic Research Hitotsubashi University)
    Abstract: How do we determine our expectations of inflation? Because inflation expectations greatly influence the economy, researchers have long considered this question. Using a survey with randomized experiments among 15,000 consumers, we investigate the mechanism of inflation expectation formation. Learning theory predicts that once people obtain new information on future inflation, they change their expectations. In this regard, such expectations are the weighted average of prior belief and information. We confirm that the weight for prior belief is a decreasing function of the degree of uncertainty. Our results also show that monetary authority information affects consumers to a greater extent when expectations are updated. With such information, consumers change their inflation expectations by 32% from the average. This finding supports improvements to monetary policy publicity.
    Keywords: inflation expectations, Bayesian updating, rational expectation, randomized survey experiments.
    JEL: E31 C81 D80
    Date: 2016–03
  33. By: Iversen, Jens (Monetary Policy Department, Central Bank of Sweden); Laséen, Stefan (IMF); Lundvall, Henrik (National Institute of Economic Research (NIER)); Söderström, Ulf (Monetary Policy Department, Central Bank of Sweden)
    Abstract: We evaluate forecasts made in real time to support monetary policy decisions at Sveriges Riksbank (the central bank of Sweden) from 2007 to 2013. We compare forecasts made with a DSGE model and a BVAR model with judgemental forecasts published by the Riksbank, and we evaluate the usefulness of conditioning information for the model-based forecasts. We also study the perceived usefulness of model forecasts for central bank policymakers when producing the judgemental forecasts.
    Keywords: Real-time forecasting; Forecast evaluation; Monetary policy; Inflation targeting
    JEL: E37 E52
    Date: 2016–03–01
  34. By: Haroon Mumtaz (Queen Mary University of London); Laura Sunder-Plassmann (University of Copenhagen); Angeliki Theophilopoulou (University of Westminister)
    Abstract: This paper uses a FAVAR model with stochastic volatility to estimate the impact of uncertainty shocks on real income growth in US states. The results suggest that there is a large degree of heterogeneity in the magnitude and the persistence of the response to uncertainty shocks across states. The response is largest in Michigan, Indiana and Arkansas while the real income in New York, Alaska and New Mexico seems least sensitive to uncertainty. We relate the cross section of responses to state-level characteristics and find that the magnitude of the decline in income is largest in states with a large share of manufacturing, agriculture and construction industries, a high fiscal deficit and a more volatile housing market. In contrast, a higher share of mining industries and larger inter-governmental fiscal transfers ameliorate the impact of uncertainty.
    Keywords: FAVAR, Stochastic volatility, Uncertainty shocks, Regional effects
    JEL: C15 C32 E32
    Date: 2016–04
  35. By: SHOJI Keishi
    Abstract: Monetary policy has benefits such as seigniorage and an economic stimulus effect while government bonds held-appraisal loss, interest payments to current accounts, and increasing reserve deposit rates occur in the exit strategy. In particular, the expanded monetary base and prolonged average life resulting from quantitative and qualitative easing are risks for increasing the cost. In this paper, under such awareness of these problems, in terms of setting a model that takes into account the financial constraints on Tobin's q type capital investment function, the effect of monetary policy on corporate investment is examined using a multi-level analysis on firm-level panel data and macro level data. The following is a summary of this paper's results: (i) Policy interest rates have an effect on corporate investment in theory as expected, (ii) On the other hand, quantitative easing has a limited effect, (iii) However, if quantitative easing lowers the real interest rate, there is an effect on the expected inflation rate, (iv) In the case of a relatively higher debt company and/or a zero-interest-rate policy that was introduced later in 1999, quantitative easing has only a limited stimulus effect on corporate investment through the reduction of debt. Therefore, it is likely that the ripple effects of monetary policy differ depending on firm heterogeneity and differences in nominal interest rates, (v) As in the secular stagnation hypothesis which was proposed by Summers (2014), a lower natural interest rate seems likely to reduce corporate investment demand. Thus, judging its effects cautiously, quantitative easing should be restrained as much as possible from the perspective of its cost. Furthermore, it is important for the government to improve productivity through structural reforms such as deregulation.
    Date: 2016–03
  36. By: Federico Barbiellini Amidei (Bank of Italy); Riccardo De Bonis (Bank of Italy); Miria Rocchelli (Bank of Italy); Alessandra Salvio (Bank of Italy); Massimiliano Stacchini (Bank of Italy)
    Abstract: The paper builds annual time series of Italian monetary aggregates. While previous contributions focused on certain periods in Italy’s economic history, our work covers the years 1861-2014 uninterruptedly; we improve the quality of the existing time series and provide further details on the components of aggregates. The paper also documents the sources and methods used for the estimates. Finally, we discuss the key trends of the aggregates since 1861 and present an econometric analysis of money demand.
    Keywords: moneta, circolante, M1, M2, M3, domanda di moneta
    JEL: E51 E52 G21 N10
    Date: 2016–04
  37. By: Barry Z. Cynamon (Federal Reserve Bank of St. Louis Center for Household Financial Stability); Steven M. Fazzari (Washington University in St. Louis)
    Abstract: We develop adjustments to align the NIPA measures of key household flows with cash flow concepts that better reflect household budgets and demand. The adjustments significantly change important macroeconomic time series and give different perspective on household spending and saving. Furthermore, household income aggregated from micro data sets like the CPS, SCF, and PSID differs significantly from NIPA personal income. But the micro survey data likely reflect cash flow concepts rather than NIPA imputations. Indeed the adjusted cash flow measure of income eliminates most of the shortfall of CPS, SCF, and PSID of CPS income relative to NIPA household income.
    JEL: E01 E21
  38. By: Tang, Sam Hak Kan (University of Western Australia); Leung, Charles Ka Yui (City University of Hong Kong)
    Abstract: We present cross-country evidence that a country’s macroeconomic volatility, measured either by the standard deviation of output growth or the occurrence of trend-growth breaks, is significantly affected by the country’s historical variables. In particular, countries with longer histories of state-level political institutions experience less macroeconomic volatility in post-war periods. Robustness checks reveal that the effect of this historical variable on volatility remains significant and substantial after controlling for a host of structural variables investigated in previous studies. We also find that the state history variable is more important in countries with a higher level of macroeconomic volatility.
    Date: 2016–04–19
  39. By: Tim Jackson; Peter Victor; Asjad Naqvi
    Abstract: Modern western economies (in the Eurozone and elsewhere) face a number of challenges over the coming decades. Achieving full employment, meeting climate change and other key environmental targets, and reducing inequality rank amongst the highest of these. The conventional route to achieving these goals has been to pursue economic growth. But this route has created two critical problems for modern economies. The first is that higher growth leads (ceteris parabis) to higher environmental impact. The second is that fragility in financial balances has accompanied relentless demand expansion. The prevailing global response to the first problem has been to encourage a decoupling of output from impacts by investing in green technologies (green growth). But this response runs the risk of exacerbating problems associated with the over-leveraging of households, firms and governments and places undue confidence in unproven and imagined technologies. An alternative approach is to reduce the pace of growth and to restructure economies around green services (post-growth). But the potential dangers of declining growth rates lie in increased inequality and in rising unemployment. Some more fundamental arguments have also been made against the feasibility of interest-bearing debt within a post-growth economy. The work described in this paper was motivated by the need to address these fundamental dilemmas and to inform the debate that has emerged in recent years about the relative merits of green growth and post-growth scenarios. In pursuit of this aim we have developed a suite of macroeconomic models based on the methodology of Post-Keynesian Stock Flow Consistent (SFC) system dynamics. Taken together these models represent the first steps in constructing a new macroeconomic synthesis capable of exploring the economic and financial dimensions of an economy confronting resource or environmental constraints. Such an ecological macroeconomics includes an account of basic macroeconomic variables such as the GDP, consumption, investment, saving, public spending, employment, and productivity. It also accounts for the performance of the economy in terms of financial balances, net lending positions, money supply, distributional equity and financial stability. This report illustrates the utility of this new approach through a number of specific analyses and scenario explorations. These include an assessment of the Piketty hypothesis (that slow growth increases inequality), an analysis of the ‘growth imperative’ hypothesis (that interest bearing debt requires economic growth for stability), and an analysis of the financial and monetary implications of green investment policies. The work also assesses the scope for fiscal policy to improve social and environmental outcomes.
    Date: 2016–03
  40. By: Eregha, Bright; Mesagan, Ekundayo; Ayoola, Olawale
    Abstract: It is well documented in the literature that there exists a positive relationship between oil price and inflation. In this study, we found that the price of Premium Motor Spirit (PMS) remained stable until the entry of the military into the administration of the country when the then military heads of state arbitrarily increased the prices of petroleum products. We also found that there exists high positive relationship between the prices of PMS and AGO and inflation in Nigeria. We therefore conclude that rises in petroleum products prices, especially PMS and AGO, significantly impact inflation in Nigeria. With this result, we recommend that government should shelve the idea of removing subsidy on PMS for now and should focus on deregulating the downstream sector to attract private investment with the aim of encouraging local refining of petroleum products instead of importing them. This will in turn reduce domestic prices for petroleum products and consequently inflation.
    Keywords: Premium Motor Spirit, Automotive Gas Oil, Dual Purpose Kerosene, Inflation, Nigeria.
    JEL: E31 Q4 Q43
    Date: 2015–12
  41. By: van der Horst, Frank; Eschelbach, Martina; Sieber, Susann; Miedema, Jelle
    Abstract: Counterfeit prevention is a major task for central banks, as it helps to maintain public confidence in the currency. It is often maintained that a high quality of the banknotes in circulation helps the public detect counterfeits. However, there has not been any scientific evidence in support of this assertion so far. The present study is a first attempt to fill this research gap. To investigate whether banknote quality affects counterfeit detection, De Nederlandsche Bank (DNB) and the Deutsche Bundesbank (DBB) conducted a field study in 2014 and 2015 amongst 250 consumers and 261 cashiers in the Netherlands and Germany. Participants received a set of 200 banknotes with either a high or a low average soil level, based on the actual circulation in two different countries. Real-life circulation in both Germany and the Netherlands is in between these values. Each set contained 20 counterfeit notes, which testees were asked to detect. On average, untrained consumers detect 79% of the counterfeits, whereas retail cashiers detect 88%. Cashiers are found to detect more counterfeits when the set is clean, even after controlling for a wide range of personal characteristics in a regression. The estimated effect of cleanliness on the cashiers' detection rate is an additional 0.87 out of 20 counterfeits (4.4%) For consumers, the quality of the sets does not change the hit rate in a statistically significant way.
    Keywords: banknotes,counterfeits,banknote quality,signal detection theory
    JEL: E40 E41 E50 E58
    Date: 2016
  42. By: Javier Andres; Angel De la Fuente; Rafael Domenech
    Abstract: ¿Que politica fiscal deberia adoptar Espana durante los proximos años, ahora que finalmente parece que lo peor de la crisis ya ha pasado?
    Keywords: Analisis Macroeconomico , Documento de Trabajo , Espana , Investigacion
    JEL: E62
    Date: 2016–02
  43. By: Pierdzioch, Christian; Reitz, Stefan; Ruelke, Jan-Christoph
    Abstract: We use a Panel Smooth Transition Regression (STR) model to study nonlinearities in the expectation-formation process in the U.S. stock market. To this end, we use data from the Livingston survey to investigate how the importance of regressive and extrapolative expectations fluctuates over time as market conditions summarized by stock-market misalignments and recent returns change. We find that survey participants form stabilizing expectations in the long run. Short-run expectations, in contrast, are consistent with weak mean reversion of stock prices.
    Keywords: Non-linear expectation formation,Survey data,Stock market,Heterogeneous agents
    JEL: G17 E47 C53
    Date: 2015
  44. By: Schulhofer-Wohl, Sam (Federal Reserve Bank of Minneapolis); Kaplan, Greg (Princeton University)
    Abstract: This appendix contains additional results on using scanner data to estimate inflation rates at the household level. There are three sections. Section 1 shows cross-sectional distributions of Fisher and Paasche inflation rates. Section 2 shows the evolution over time of measures of dispersion of Fisher and Paasche inflation rates. Section 3 shows cross-sectional distributions of two-year inflation rates measured with Fisher and Paasche indexes.
    Keywords: Inflation; Heterogeneity
    JEL: D12 D30 E31
    Date: 2016–04–11
  45. By: Lloyd, Tim; McCorriston, Steve; Zvogu, Evious
    Abstract: Against the backdrop of recent price spikes on world commodity markets, retail food inflation has varied considerably across EU Member States despite the existence of a range of common policies and, for some Member States, a common currency. In this paper, we investigate the extent and potential causes of the differences in the experience of food inflation through the lens of a single welldefined product chain in 11 EU Member States. Using a structural VAR framework, we find that the contribution of world prices to the behaviour of retail bread prices shows significant differences across the EU Member States we cover. Differences in the functioning of the food sector (particularly barriers to competition and vertical control) appear to be correlated with the role played world prices, highlighting the importance of such structural features in commodity price transmission.
    Keywords: Food Inflation, Structural Vector Autoregressive Models, Commodity Pass-Through, Food Consumption/Nutrition/Food Safety, Food Security and Poverty, C32, E31, Q02,
    Date: 2015
  46. By: Dupor, William D. (Federal Reserve Bank of St. Louis)
    Abstract: In this paper, I estimate the effect of defense spending on the U.S. macroeconomy since World War II. First, I construct a new panel dataset of state-level federal defense contracts. Second, I sum observations across states and, using the resulting time series, estimate the aggregate effect of defense spending on national income and employment via instrumental variables. Third, I estimate local multipliers using the state-level data, which measures the relative effect on economic activity due to relative differences in defense spending across states. Comparing the aggregate and local multiplier estimates, I find that the two differ dramatically. I infer that the local multiplier estimates alone do not provide useful information about the aggregate effects of policy. Finally, I use the panel aspect of the data to dramatically increase the precision of estimates of the aggregate multiplier (relative to using the aggregate data alone) by including a spillover term in the panel regressions. My baseline aggregate findings are a long-run multiplier on income equal to 1.6, a moderate long-run effect on employment, and no effect on income or employment effect in the short run. The results suggest that lags in the effects of defense spending are so long that they render countercyclical spending policies ineffective. In addition, I find negative short-run spillovers on employment of spending across state borders.
    Date: 2016–03–29
  47. By: Williams, John C. (Federal Reserve Bank of San Francisco)
    Abstract: Presentation at U.S. Monetary Policy Forum, New York, New York, February 26, 2016
    Date: 2016–02–26
  48. By: Luis Huesca; Linda Llamas
    Abstract: This research provides a detailed examination of the redistributive effect achieved by the tax system including total taxes and cash transfers targeting the contributors and households in the period 2002-2008-2014 for the Mexican regions and the country. We measure the impact on income growth through the tax system according to each fiscal rules for the corresponding years using pre and post fiscal conditions. We answer the next question: considering the economic growth on per capita incomes in the Mexican States, will the impact of the Mexican tax system improve income distribution? That is, by all means pro-poor?. Our methodology allows to detect if taxes and benefits can really induce an improvement of income growth on the regions captured by its wellbeing and economic growth conditions. We outlined relevant theoretical issues on public fiscal policies concerning this work and lastly, we proceed with an empirical application.
    Keywords: Fiscal policy; pro-poor regional growth; redistribution; progressivity.
    JEL: E62 D63 I32 O12
    Date: 2016
  49. By: Daisuke IDA (Asia Pacific Institute of Research); Yoichi MATSUBAYASHI (Asia Pacific Institute of Research)
    Abstract: 本稿の目的は、Okano et al. (2015)の地域版の動学的一般均衡(DSGE)モデルにGali et al. (2007)の流動性制約家計を考慮することで地域DSGEの応用可能性を探ることである。本稿の分析からは以下のことが確認された。まず、政府支出の増大は実質金利の上昇を通じて非耐久財投資を減少させるが(クラウディング・アウト効果)、一方で、政府支出増の耐久財投資増加の効果によって耐久財需要が増大する。総需要はこの両者の相対関係で決定されるが、ベンチマーク経済では、政府支出増の耐久財投資増の効果がクラウディング・アウト効果を上回るので、政府支出は総需要の拡大を促す。流動性制約家計の導入に加え、Blanchard (1985)の「視野の有限性」を考慮すると、関西と関東の住宅投資の違いを上手く説 明することができた。よって、関西と関東の住宅投資の違いをみるには、流動性家計の存 在に加えて、視野の有限性を考慮することが必要であることが示唆された。
    Keywords: DSGEモデル, 関西経済, 住宅投資, 視野の有限性
    JEL: E27 E32 O18 R13
    Date: 2015–02
  50. By: Angel De la Fuente
    Abstract: En este trabajo se elaboran series homogeneas de distintos agregados de empleo, output y rentas del trabajo a precios corrientes y constantes para las comunidades autonomas espanolas mediante el enlace de las diversas bases de la Contabilidad Regional de Espana (CRE).
    Keywords: Analisis Macroeconomico , Analisis Regional , Documento de Trabajo , Espana , Investigacion
    JEL: E01 R1
    Date: 2016–03
  51. By: Dudley, William (Federal Reserve Bank of New York)
    Abstract: Remarks at the University of Bridgeport, Bridgeport, Connecticut.
    Keywords: Fairfield County; Survey of Consumer Expectations; inflation expectations; normalization; urbanization; Bridgeport; Stamford
    Date: 2016–04–08
  52. By: Ramos, Maria Gracia (Banco Central de Reserva del Perú)
    Abstract: El presente trabajo tiene como objetivo analizar la divergencia de precios en Perú utilizando un modelo no lineal de coeficientes que varían en el tiempo (Phillips y Sul 2007) e identificar las tendencias comunes en precios por agrupaciones de los rubros de la canasta básica de consumo, así como sus componentes. Una divergencia de precios significante con tendencias persistentemente al alza de mayor peso en los principales rubros subyacentes podría ser indicio de la existencia de choques reales persistentes en la demanda y oferta relativas.
    Keywords: Test de convergencia, descomposición de inflación, cluster
    JEL: E30 E31
    Date: 2016–04
  53. By: TAKEDA Haruhito
    Abstract: This study focuses on the change in the principles of the Ministry of International Trade and Industry (MITI)'s policy around 2000 with the establishment of the Ministry of Economy, Trade and Industry (METI), looking back at policy development during 1970-2000. Corresponding to the change in the international economy, MITI's policy takes an important role in establishing a national macroeconomic policies framework, which was required to coordinate the balance between domestic economic problems and trade friction with the United States and the European Union. Moreover, paying attention continually to coordination between the freedom of business activity and macroeconomic policies, MITI tried to respond to the mission expected. The adopted policy has the same characteristic in that MITI materialized it through the promotion of deregulation. In doing so, MITI selected the policy means to cut deeply into structural problems such as trade conflict, environment problems, and energy problems, which resulted in MITI's policy to control government intervention and entrust the private sector and market coordination. When the Japanese economy faced a recession in the 1990s, reforming the country's economic structure became the main political issue to restore economic vitality. MITI took on this issue as its own subjective mission and strived to tackle economic recovery and restore economic growth. MITI's measures taken showed flexibility in finding out the solutions for newly emerging issues, which extended to its previous policy making process. Although there was a decisive change of policy subject, deregulation and the limitation of government control were strengthened as the basic principle of policy.
    Date: 2016–03
  54. By: Fève, Patrick; Pietrunti, Mario
    Abstract: This paper investigates the macroeconomic effects of fiscal policy in a setting in which private agents receive noisy signals about future shocks to government expenditures. We show how to empirically identify the relative weight of news and noise shocks to government spending and compute the level of noise for Canada, the UK and the US.We then investigate the quantitative implications of imperfect fiscal policy information using a medium-scale DSGE model. We find that when the government seeks to implement a persistent change in expected public spending, the existence of noise (as estimated using actual data) implies a sizable difference in fiscal multipliers compared to the perfect fiscal foresight case.
    Keywords: Government spending, Noisy Information, DSGE Models
    Date: 2016–03
  55. By: Holmes, Madilyn; Dharmasena, Senarath
    Abstract: Monthly national U.S. data for the period 1997-2012 associated with macroeconomic shocks and participation in food assistance programs were used to model dynamics using polynomial distributed lags and vector autoregression approaches. Contemporaneous causal flows of macroeconomic shocks and participation in food assistance programs were modeled using directed acyclic graphs. With a more accurate set of predictions associated with participation rates in food assistance programs based on macroeconomic drivers or shocks, policy makers will be in better position to assess program costs and to minimize errors in the budgetary process.
    Keywords: Supplemental nutrition assistance program, SNAP, causality, directed acyclic graphs, macroeconomic shocks, distributed lags, vector-autoregression, Agricultural and Food Policy, Public Economics, Research Methods/ Statistical Methods, E66, C18, I18,
    Date: 2016–02
  56. By: Dhaoui, Elwardi
    Abstract: Oil prices have fallen by about half since September 2014. The Organization of Petroleum Exporting Countries (OPEC) decided not to reduce production. The euro zone, China, Japan and Russia recorded slower rates of economic growth than expected. All combine to keep a sharp decline of oil prices which can be persistent. This new situation has profoundly changed the economic environment of the country. The impact will vary depending on the countries if they are exporters or importers of oil. For Tunisia, this new situation offers the opportunity to reform energy subsidies and accelerate structural reforms to support growth and employment.
    Keywords: oil, budget balance, external account, subsidies, growth, employment, Tunisia.
    JEL: E62 F62 F66 J50 Q31
    Date: 2015–05
  57. By: Bukvić, Rajko
    Abstract: Paper considers the presumptions of dominant, neoclassical economic theory. On one side, there are the presumptions on rational individuum (homo oeconomicus), separated from the social world, that trends to maximize self utility, with the relations with other acteurs established through market: “hypothesis of nomenclature”, postulat of stable order of preferences and independent from others individual, and “the principle of the decreasing marginal utility”. This approach beliefs in ability of the market to self-regulation through flexibility of prices. On the other side, the neoclassical economics, with presumptions of the same value and significance of all economic activities, and borderless power of selfregulated market, not have possibilities and force to explain factors of economic development, genesis and widening of poverty, as in one separate country as in international relations. As new paradigm, that should to change neoclassical, it is emphasized Other canon, that is on many centuries tradition and biological metaphors grounded. Contrary to neoclassical policies, realized in (neo)liberal politics of Washington consensus, that lead to deindustrialization, policies of the Other canon, on policies like Marshall plan grounded, lead contrary to industrialization as the condition to leave the underdeveloped countries from crisis and poverty. В работе анализируются предпосылки, на которых основана господствующая неоклассическая экономическая теория. С обной стороны, это предпосылки рационального индивида (homo oeconomicus), отделенного от внешнего, социального мира, который стремится к максимализации своей полезности, вступая в отношения с другими экономическими акторами при посредстве рынка: «гипотеза номенклатуры», постулат стабильного и независимого от других индивидов порядка преференций, и «принцип падающей предельной полезности». Этот подход основан на вере в способность рынка к саморегуляции посредством флексибильности цен. С другой стороны, выясняется, что неоклассическая экономика, с предпосылками равной ценности и значения всех видов деятельности, и всесилия саморегулируемого рынка, не имеет возможности и сил объяснить факторы экономического развития, появления и распространения бедности – как в одной отдельно взятой стране, так и в международных отношениях. Как новая парадигма, способная заменить неоклассическую, в этом смысле выделяется Другой канон, который основывается на многовековой традиции и биологических метафорах. В отличие от неоклассических политик, воплощенных в (нео)либеральной политике Вашингтонского договора, которые приводят к деиндустриализации, политики Другого канона, основанные на политиках образца плана Маршалла, приводят, наоборот, к индустриализации как предпосылки выхода неразвитых стран из кризиса и бедности.
    Keywords: neoclassical economy, Other canon, neo-liberalism, Washington consensus, Marshall plan неоклассическая экономика, Другой канон, неолиберализм, Вашингтонский консенсус, план Маршалла
    JEL: E01 E13 F60 N14 O10 P27
    Date: 2015
  58. By: Jean-Sébastien Fontaine; René Garcia; Sermin Gungor
    Abstract: Following theory, we check that funding risk connects illiquidity, volatility and returns in the cross-section of stocks. We show that the illiquidity and volatility of stocks increase with funding shocks, while contemporaneous returns decrease with funding shocks. The dispersions of illiquidity, volatility and returns widen following funding shocks. Funding risk is priced, generating a returns spread of 4.25 percent (annually) between the most and least illiquid portfolios, and of 5.30 percent between the most and least volatile portfolios. Estimates are robust using mimicking portfolio returns, alternative portfolio sorts, traditional test assets, other risk factors, monthly returns or quarterly returns.
    Keywords: Funding risk, Stock returns, Limits to arbitrage, Market liquidity, Volatility,
    JEL: E43 H12
    Date: 2016–04–25
  59. By: Becker, Marcus; Löffler, Andreas
    Abstract: We look at the theory of arbitrage with taxation under certainty. The tax scale in our model is not linear. Under the premise that tax scale is convex, we analyze prices that do not exhibit arbitrage opportunities. It turns out that there are two kinds of arbitrage: unbounded as well as bounded arbitrage. With bounded arbitrage, the gain from forming an arbitrage portfolio is bounded from above and cannot increase infinitely. In a model with a linear tax scale such a bounded arbitrage cannot exist, all arbitrage portfolios will generate an infinite gain from trade. In contrast to earlier research, we are able to give a complete characterization (i.e., if and only if) whether bounded as well as unbounded arbitrage opportunities will occur only relying on market prices and properties of the tax scale. This characterization relies on so-called implicit tax rates that are defined by a simple relation copied from the case of linear tax scales.
    Keywords: No-Arbitrage with Taxation,Fundamental Theorem of Asset Pricing,Non-Linear Tax Codes,Application of Convex Optimization Problems
    JEL: C61 E62 G12 H24
    Date: 2016
  60. By: Hjortsoe, Ida; Weale, Martin; Wieladek, Tomasz
    Abstract: Does the current account improve or deteriorate following a monetary policy expansion? We examine this issue theoretically and empirically. We show that a standard open economy DSGE model predicts that the current account response to a monetary policy shock depends on the degree of economic regulation in different markets. In particular, financial (product market) liberalisation makes it more likely that the current account deteriorates (improves) following a monetary expansion. We test these theoretical predictions with a varying coefficient Bayesian panel VAR model, where the coefficients are allowed to vary as a function of the degree of financial, product and labour market regulation on data from 1976Q1-2006Q4 for 19 OECD countries. Our empirical results support the theory. We therefore conclude that following a monetary policy expansion, the current account is more likely to go into deficit (surplus) in countries with more liberalised financial (product) markets.
    Keywords: Balance of Payments; Current Account; Bayesian Panel VAR; Economic Liberalisation; Monetary Policy. JEL classification: F32; E52
    JEL: C11 C23 E52 F32
    Date: 2016–03
  61. By: Nady Rapelanoro
    Abstract: The attention for the global liquidity concept has grown over the recent years insofar as its dramatic increase is considered among regulators and economists as one of the possible determinants of the last global financial crisis. Although global liquidity remains without a generally accepted definition in the literature, the destabilizing effects of its expansion are widely studied, especially for the advanced economies. However, empirical studies regarding the consequences in the emerging countries are scarcer and this paper is related to this topic. We rely on a Panel VAR approach to investigate those effects on emerging economies and we find that the consequences are in line with the results of the literature on advanced countries. Nevertheless, contrary to previous empirical studies, we find that the choice of the exchange rate regimes is not important, as the exchange rate regime does not fully isolate the countries from a surge of global liquidity in the issuing countries.
    Keywords: Global liquidity, emerging countries, international spillovers, Panel VAR model.
    JEL: C33 E5
    Date: 2016
  62. By: Michele Catalano; Corrado Di Guilmi
    Abstract: The paper proposes an innovative approach for the analytical solution of agent-based models. The approach is termed Dynamic Stochastic Generalized Aggregation (DSG-A) and is tested on a macroeconomic model articulated in a job and in a goods markets with a large number of heterogeneous and interacting agents (namely firms and workers). The agents heuristically adapt their expectations by interpreting the signals from the market and give rise to macroeconomic regularities. The model is analytically solved in two different scenarios. In the first, the emergent proper- ties of the system are determined uniquely by the myopic behavior of the agents while, in the second, a social planner quantifies the optimal number of agents adopting a particular strategy. The integration of the DSG-A approach with intertemporal optimal control allows the identification of multiple equilibria and their qualitative classification.
    Keywords: aggregation, uncertainty, opinion dynamics, master equation, optimal control
    JEL: C61 E32
    Date: 2016–04
  63. By: OGAWA Eiji; MUTO Makoto
    Abstract: The current international monetary system with the U.S. dollar as a key currency is considered as the background of the U.S. dollar liquidity shortage during the global financial crisis. However, once facing a U.S. dollar liquidity shortage or crisis, financial institutions are likely to avoid their overdependence on the U.S. dollar. This implies that the international monetary system with the U.S. dollar as a key currency may be changed, especially during the global financial crisis even though key currencies show inertia due to network externalities in using international currencies. In this paper, we focus on the effects of both the global financial crisis and the euro zone crisis on the position of the U.S. dollar as a key currency in the current international monetary system. We base this on a theoretical framework in Ogawa and Sasaki (1998) in which a money-in-the-utility model is used to take into account the U.S. dollar's functions as both a medium of exchange and a store of value in the international currency competition. A parameter on the real balance of the U.S. dollar or its contribution to utility in the model is focused on, analyzing empirically whether both the global financial crisis and the euro zone crisis have changed its contribution to utility. One of the main empirical results from our models is that the contribution of the U.S. dollar to utility decreased during the global financial crisis. This corresponds to a period when financial institutions faced liquidity shortages from mid 2007 to late 2008. U.S. dollar liquidity shortage may have decreased the contribution of the U.S. dollar to utility.
    Date: 2016–03
  64. By: Ernst, Ekkehard; Semmler, Willi; Haider, Alexander
    Abstract: The economic meltdown since 2008-9 has created disinflation, and even deflation in some countries in the Euro-area, in a period with large debt overhang, creating the condition for a continuing financial market stress in the Euro-area. As disinflation and deflation push up the real interest rate, while growth and income declines, the leveraging problem becomes more severe and the economy risks shifting into a regime with high insolvency risk, high financial stress, rising credit spreads, possibly accompanied by strong adverse macroeconomic feedback loops. Investigating the consequences of those magnifying feedback loops, given the debt deflation, we demonstrate the possibility of unstable dynamics and downward spirals in the presence of regime-dependent macro feedback loops, using a theoretical model with decentralized matching mechanisms on both labor and financial markets. To explore the amplifying linkages between deflation, output, labor and financial markets, we employ a new solution procedure called NMPC to solve our models variants for out-of-steady-state dynamics. We empirically explore deflationary trends in Europe and employ a Global VAR (GVAR) model for a large euro area macro data set to estimate the impact of deflation on output. Moreover, we use a four variable Multi-Regime VAR (MRVAR) model with regime dependent IRs to study deflationary as well as well as the financial risk drivers in a MRVAR setting. New measures for financial risk drivers are employed and multi-regime IRs for output, inflation rates, interest rates and financial stress are explored. We also study regime changes in central macro relationships such as regime change in the credit - output link, the Phillips curve and in Okun's law.
    Date: 2016
  65. By: Bartha, Zoltán; Tóthné Szita, Klára
    Abstract: This study aims to provide a comparative analysis of socioeconomic development in Slovakia and Hungary. For this purpose, we use the State of the Future Index (SOFI) to measure and forecast the socioeconomic well-being of both the countries from 1995 to 2015. The SOFI methodology has many characteristics that are in line with the 2009 Stiglitz-Sen-Fitoussi report. We find that during 1995–1999, Slovakia had a higher overall SOFI total, signifying a higher level of well-being; subsequently, however, Hungary pulled ahead between 1999 and 2005, after which Slovakia overtook Hungary yet again. Our predictions suggest that Slovakia will continue to pull ahead in the 2015–2025 period. The areas where Hungary has scope for considerable improvement are life expectancy, GDP per capita, renewable energy resources and CO2 emission and government debt. In some areas, both countries perform poorly: level of corruption and demographic trend. However, Hungary seems to have an advantage in R&D expenditure, unemployment level and voter turnout.
    Keywords: development path; Hungary; State of the Future Index; Slovakia
    JEL: E01 O11 O57
    Date: 2015–12–31
  66. By: Santiago Caicedo; Robert E. Lucas, Jr.; Esteban Rossi-Hansberg
    Abstract: We develop a theory of career paths and earnings in an economy in which agents organize in production hierarchies. Agents climb these organizational hierarchies as they learn stochastically from other individuals. Earnings grow over time as agents acquire knowledge and occupy positions with larger numbers of subordinates. We contrast these and other implications of the theory with U.S. census data for the period 1990 to 2010. The model matches well the Lorenz curve of earnings as well as the observed mean experience-earnings profiles. We show that the increase in wage inequality over this period can be rationalized with a shift in the distribution of the complexity and profitability of technologies relative to the distribution of knowledge in the population.
    JEL: E25 J24 J31 O3 O4
    Date: 2016–04
  67. By: Perry Mehrling (Barnard College)
    Abstract: This paper sketches the outlines of the new international monetary system that has emerged in the aftermath of the global financial crisis. At the center of the system, a network of central bank swaps between the six major central banks serves as an elastic backstop for private foreign exchange operations. Farther out on the periphery, a further network of central bank swaps operates to economize on scarce reserves of the major currencies. Meanwhile, in the private foreign exchange market, basis swaps are emerging as the central location where liquidity is explicitly priced, inside the bounds set by central bank swaps.
    JEL: E58 F33 G15
    Date: 2015–11
  68. By: Tiago Neves Sequeira (Departamento de Gesta˜o e Economia and CEFAGE-UBI. Universidade da Beira Interior.); Pedro Mazeda Gil (University of Porto, Faculty of Economics, and CEF.UP); Oscar Afonso (University of Porto, Faculty of Economics)
    Abstract: We eliminate scale effects in the Balanced Growth Path of an expanding-variety endogenous growth model using the concept of entropy as a complexity effect. This allows us to gradually diminish scale effects as the economy develops along the transitional dynamics, which conciliates evidence of the existence of scale effects long ago in history with evidence for no scale effects in today’s economies. We show that empirical evidence supports entropy as a stylized form of the complexity effect. Then we show that the model can replicate well the take-off after the industrial revolution. Finally, we show that a model with both network effects (as spillovers in R&D) and entropy (as complexity effects) can replicate the main facts of the very long-run evolution of the economy since A.D. 1. Future scenarios may help to explain (part of) the growth crises affecting the current generation.
    Keywords: Endogenous economic growth, network effects, complexity effects, entropy.
    JEL: O10 O30 O40 E22
    Date: 2016–04
  69. By: Supriyo De; Ergys Islamaj; M. Ayhan Kose; S. Reza Yousefi
    Abstract: This paper examines the behavior of remittances over the business cycle and their potential to act as a stabilizer during periods of high business cycle volatility. Four main findings are reported. First, in theory, the cyclical behavior of remittances depends on the motives to remit. Second, remittances are less volatile than other foreign currency flows but do not appear to systemically co-move with business cycle fluctuations. Third, remittances are relatively stable even during episodes of sharp business cycle volatility, such as those associated with sudden stops and financial crises. Finally, remittances can help support consumption stability over the business cycle.
    Keywords: Remittances, business cycles, acyclical, sudden stops, risk sharing
    JEL: F24 F36 F41 F44
    Date: 2016–03

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