|
on Macroeconomics |
|
Issue of 2017‒03‒26
ninety papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Nuno Coimbra; Hélène Rey |
| Abstract: | This paper develops a dynamic macroeconomic model with heterogeneous financial intermediaries and endogenous entry. It features time-varying endogenous macroeconomic risk that arises from the risk-shifting behaviour of financial intermediaries combined with entry and exit. We show that when interest rates are high, a decrease in interest rates stimulates investment and increases financial stability. In contrast, when interest rates are low, further stimulus can increase systemic risk and induce a fall in the risk premium through increased risk-shifting. In this case, the monetary authority faces a trade-off between stimulating the economy and financial stability. |
| JEL: | E32 E44 G21 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23245&r=mac |
| By: | Shubhasis Dey (Indian Institute of Management Kozhikode) |
| Abstract: | As a commodity, gold occupies a special place in Indian psyche. With formal capital markets still out of reach for a large section of the Indian population, gold, beyond its traditional use as jewellery, also acts as a store of value, especially under an environment of moderately high inflation. In this paper, we further explore the asset price channel of monetary transmission by endogenizing gold price inflation within the Indian macroeconomic system. Supported by empirical tests in favor of such an inclusion, a linear VAR model results indicate that gold seems to act as a shock absorber by way of shielding other macroeconomic variables, especially GDP growth, from the influence monetary policy shocks. In India, the demand for gold is primarily met by imports. Thus, the dynamics of gold, real exchange rate and inflation are likely to be interlinked in a nonlinear manner. Based on estimation of a TVAR model and simulation methods of inference, we find that there are significant differences in the macroeconomic dynamics of the Indian economy under high and low inflation regimes. Moreover, the TVAR model results suggest that gold seems to matter more in the Indian macroeconomic system during episodes of high inflation. |
| Keywords: | Inflation regime; gold price; hedge; TVAR |
| JEL: | E31 E44 E47 E52 C32 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:iik:wpaper:202&r=mac |
| By: | Balázs Égert; Peter Gal |
| Abstract: | This document describes and discusses a new supply side framework that quantifies the impact of structural reforms on per capita income in OECD countries. It presents the overall macroeconomic impacts of reforms by aggregating over the effects on physical capital, employment and productivity through a production function. On the basis of reforms defined as observed changes in policies, the paper finds that product market regulation has the largest overall single policy impact five years after the reforms. But the combined impact of all labour market policies is considerably larger than that of product market regulation. The paper also shows that policy impacts can differ at different horizons. The overall long-term effects on GDP per capita of policies transiting through capital deepening can be considerably larger than the 5- to 10- year impacts. By contrast, the long-term impact of policies coming only via the employment rate channel materialises at shorter horizon. |
| Keywords: | structural reforms, product markets, labour markets, regulation, simulation, multi-factor productivity, investment, employment, per capita impact, OECD. |
| JEL: | D24 E17 E22 E24 J08 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2017-15&r=mac |
| By: | HOHBERGER, Stefan; PRIFTIS, Romanos; VOGEL, Lukas |
| Abstract: | This paper analyses the macroeconomic effects of the ECB's quantitative easing programme using an open-economy DSGE model estimated with Bayesian techniques. Using data on government debt stocks and yields across maturities we identify the parameter governing portfolio adjustment in the private sector. Shock decompositions suggest a positive contribution of ECB QE to EA year-on-year output growth and inflation of up to 0.4 and 0.5 pp in the standard linearized version of the model. Allowing for an occasionally binding zero-bound constraint by using piecewise linear solution techniques raises the positive impact up to 1.0 and 0.7 pp, respectively. |
| Keywords: | Quantitative easing; Portfolio rebalancing; Bayesian estimation; Open-economy DSGE model; Real GDP |
| JEL: | E44 E52 E53 F41 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2017/04&r=mac |
| By: | Vasilev, Aleksandar |
| Abstract: | In this paper we introduce reciprocity in labor relations and government sector to investigate how well the real wage rigidity that results out of that arrangement ex- plains business cycle fluctuations in Bulgaria. The reciprocity mechanism described in this paper follows Danthine and Kurmann (2010) and is generally consistent with micro-studies, e.g. Lozev et all. (2011) and Paskaleva (2016), while at the same time comes into contrast with models with efficiency wages of no-shirking type that empha- size the importance of aggregate labor market conditions as the main determinant in wage setting, e.g. Vasilev (2017). Rent-sharing considerations, and worker's own past wages turn out to be the most important aspects of how labor contracting happens. In contrast, aggregate economic conditions, as captured by the employment rate, are not found to be quantitatively important for wage dynamics. Overall, the model with reciprocity and fiscal policy performs well vis-a-vis data, especially along the labor market dimension, and in addition dominates the market-clearing labor market frame- work featured in the standard RBC model, e.g Vasilev (2009). |
| Keywords: | reciprocity,efficiency wages,general equilibrium,gift exchange,fiscal policy,Bulgaria |
| JEL: | E24 E32 J41 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:156164&r=mac |
| By: | Rohit Azad (Department of Economics, New School for Social Research); Prasenjit Bose |
| Abstract: | This paper seeks to theoretically analyse the change in growth patterns in post-reform India. While 1991 marks a break in the Indian economy in terms of its opening up, it was not the 1990s which saw spectacular rates of growth such as those seen in the 2000s. Our attempt here is to situate two signi cant booms that the post-reform period has witnessed so far, 2003-04 to 2007-08 and 2009-10 to 2010-11, in a macrotheoretic model. |
| Keywords: | Indian Corporate Sector, Bad Loans, Public Sector Banks |
| JEL: | E12 E22 E32 E44 E52 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:1712&r=mac |
| By: | Gianluca Benigno; Luca Fornaro |
| Abstract: | We provide a Keynesian growth theory in which pessimistic expectations can lead to very persistent, or even permanent, slumps characterized by unemployment and weak growth. We refer to these episodes as stagnation traps, because they consist in the joint occurrence of a liquidity and a growth trap. In a stagnation trap, the central bank is unable to restore full employment because weak growth depresses aggregate demand and pushes the interest rate against the zero lower bound, while growth is weak because low aggregate demand results in low profits, limiting firms’ investment in innovation. Policies aiming at restoring growth can successfully lead the economy out of a stagnation trap, thus rationalizing the notion of job creating growth. |
| Keywords: | Secular Stagnation, Liquidity Traps, Growth Traps, Endogenous Growth, Multiple Equilibria |
| JEL: | E32 E43 E52 O42 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2017-22&r=mac |
| By: | Daniel Villar Vallenas; Shaowen Luo |
| Abstract: | We present a new way of empirically evaluating various sticky price models used to assess the degree of monetary non-neutrality. While menu cost models uniformly predict that price change skewness and dispersion fall with inflation, in the Calvo model both rise. However, CPI price data from the late 1970's onwards shows that skewness does not fall with inflation, while dispersion does. We develop a random menu cost model that, with a menu cost distribution that has a strong Calvo feature, can match the empirical patterns found. The model therefore exhibits much more monetary non-neutrality than existing menu cost models. |
| Keywords: | Inflation ; Monetary policy ; Prices, business fluctuations, and cycles |
| JEL: | E31 E32 E47 E52 |
| Date: | 2017–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2017-28&r=mac |
| By: | Antonio Claudio Cerqueira (Cedeplar-UFMG); Gilberto Libânio (Cedeplar-UFMG) |
| Abstract: | Using as reference the Extended Post-Keynesian Model (EPKM) – canonical model from this approach to treatment of the relationship between inflation, output dynamic and economic policy – is developed the Structuralist Phillips Curve (CPE), an inflationary equation based on markup rule that establishes inflation as a dynamic path possessing partial inertia and that varies with the output gap, the distributive conflict and the external relations. The CPE is estimated in panels of countries after defining output gap by a formulation where trends are linearly divided into parts, being obtained, as expected, a parameter of past inflation with a value lesser than unity and where the parameters of output gap, distributive conflict and external relations are relevant in most groups of countries and periods. The estimates successfully support the proposed approach on inflation determinants, confirming the relevance of partial inertia theoretical rule of inflationary process and being established the distributive conflict and the external relations as central pivots of this dynamic. |
| Keywords: | Post-Keynesian Macroeconomics, Business Fluctuations, Models and Applications |
| JEL: | E12 E32 E47 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:cdp:texdis:td544&r=mac |
| By: | Hie Joo Ahn; Ling Shao |
| Abstract: | This paper provides new evidence for cyclicality in the job-search effort of employed workers, on-the-job search (OJS) intensity, in the United States using American Time Use Survey and various cyclical indicators. We find that OJS intensity is countercyclical along both the extensive and intensive margins, with the countercyclicality of extensive margin stronger than the other. An increase in the layoffs rate and the deterioration in expectations about future personal financial situation are the primary factors that raise OJS intensity. Our findings suggest that the precautionary motive in the job search is a crucial driver of the countercyclicality in OJS intensity. |
| Keywords: | On-the-job search ; Business cycles ; Labor flows ; Time use |
| JEL: | E24 E32 J22 J63 |
| Date: | 2017–02–24 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2017-25&r=mac |
| By: | Steven M. Fazzari (Washington University in St. Louis); James Morley (University of New South Wales); Irina B. Panovska (Lehigh University) |
| Abstract: | We investigate when discretionary increases and decreases in government spending or taxes have larger effects using a nonlinear vector autoregressive model with fiscal shocks identified via sign restrictions. We confirm previous empirical findings of state dependence in the relationship between fiscal policy and aggregate output, with the nonlinearity related to a broad measure of economic slack that displays strong asymmetry across the business cycle. This state dependence has important implications for the timing of stimulus or austerity measures. We find that tax cuts and spending increases have similarly large stimulative effects in periods of excessive slack, but are much less effective, especially in the case of spending increases, when the economy is close to or above potential. In terms of austerity measures designed to reduce the debt-to-GDP ratio, we find that tax increases and spending cuts are most contractionary and largely self defeating in periods of excessive slack, while only spending cuts lead to any significant reduction in the debt-to-GDP ratio when the economy is close to or above potential. The effectiveness of discretionary spending, including its state dependence, appears to be due almost entirely to the response of aggregate consumption, while the responses of both consumption and investment to discretionary taxes are state dependent, but investment appears to play the larger role in terms of their effectiveness. |
| Keywords: | Government spending; austerity measures; nonlinear dynamics; Bayesian; sign restrictions; vector autoregression |
| JEL: | E32 E62 C32 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:swe:wpaper:2017-04&r=mac |
| By: | Maciej Albinowski |
| Abstract: | I use panel data on 20 countries to analyze the links between savings (defined as time deposits and savings accounts) and credit extended by banks. Credit growth is not related to prior changes in savings, at least not in the short run. This result indicates that the intuition behind the loanable funds theory does not work well in explaining macroeconomic dynamics. I also find that the share of savings in total deposits is positively affected by cyclical upswings in the GDP, which is consistent with the permanent income hypothesis. Most interestingly, however, the share of savings decreases during credit booms. The existence of such an effect is predicted by the Austrian theory of the business cycle. Based on the above results, I infer that an important disadvantage of fractional-reserve banking is a tendency for the market interest rate to diverge from the natural interest rate. In this paper I also propose a new method of credit boom identification that captures the timing of booms more adequately than the procedures commonly used in the literature. |
| Keywords: | loanable funds, deposits, credit booms, fractional-reserve banking |
| JEL: | E51 E32 E41 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:sgh:kaewps:2016024&r=mac |
| By: | Jesus Crespo Cuaresma (Department of Economics, Vienna University of Economics and Business); Florian Huber (Department of Economics, Vienna University of Economics and Business); Luca Onorante (Central Bank of Ireland) |
| Abstract: | We propose a large-scale Bayesian VAR model with factor stochastic volatility to investigate the macroeconomic consequences of international uncertainty shocks on the G7 countries. The factor structure enables us to identify an international uncertainty shock by assuming that it is the factor most correlated with forecast errors related to equity markets and permits fast sampling of the model. Our findings suggest that the estimated uncertainty factor is strongly related to global equity price volatility, closely tracking other prominent measures commonly adopted to assess global uncertainty. The dynamic responses of a set of macroeconomic and financial variables show that an international uncertainty shock exerts a powerful effect on all economies and variables under consideration. |
| Keywords: | Factor stochastic volatility, vector autoregressive models, global propagation of shocks |
| JEL: | C30 E52 F41 E32 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp245&r=mac |
| By: | Antonio Claudio Cerqueira (Cedeplar-UFMG); Gilberto Libânio (Cedeplar-UFMG) |
| Abstract: | Using as reference the Extended Post-Keynesian Model (EPKM) – canonical model from this approach to treatment of the relationship between inflation, output dynamic and economic policy – is developed the Structuralist Output Gap Curve (CHPE), an dynamic output equation based on Principle of Effective Demand and Big Government hypothesis, forming dynamics in which transitory deviations from the stochastic trend are related with accelerators coming from consumption, public sector, financial sector and external sector. The CHPE is estimated in panels of countries after defining output gap by a formulation where trends are linearly divided into parts, being obtained, as expected, a parameter of past output gap with a value lesser than unity and where the accelerators are relevant in most groups of countries and periods, in special the extra spending of consumers. The estimates successfully support the proposed approach on output dynamics determinants, confirming the theoretical rule that there is partial inertia on the stochastic rate of economic growth. |
| Keywords: | Post-Keynesian Macroeconomics, Business Fluctuations, Models and Applications |
| JEL: | E12 E32 E47 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:cdp:texdis:td542&r=mac |
| By: | Belke, Ansgar; Domnick, Clemens; Gros, Daniel |
| Abstract: | This paper examines business cycle synchronization in the European Monetary Union with a special focus on the core-periphery pattern in the aftermath of the crisis. Using a quarterly index for business cycle synchronization by Cerqueira (2013), our panel data estimates suggest that it is countries belonging to the core that are faced with increased synchronization among themselves after 2007Q4, whereas peripheral countries decreased synchronization with regards to the core, non-EMU countries and among themselves. Correlation coefficients and nonparametric local polynomial regressions corroborate these findings. The usual focus on co-movements and correlations might be misleading, however, since we also find large differences in the amplitude of national cycles. A strong common cycle can thus lead to large differences in cyclical positions even if national cycles are strongly correlated. |
| Keywords: | Business cycles,core-periphery,EMU,local polynomial regressions,synchronicity |
| JEL: | E32 F15 R23 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:38&r=mac |
| By: | Musa Orak |
| Abstract: | This paper provides evidence that shifts in the occupational composition of the U.S. workforce are the most important factor explaining the trend decline in the labor share over the past four decades. Estimates suggest that while there is unitary elasticity between equipment capital and non-routine tasks, equipment capital and routine tasks are highly substitutable. Through the lenses of a general equilibrium model with occupational choice and the estimated production technology, I document that the fall in relative price of equipment capital alone can explain 72 percent of the observed decline in the U.S. labor share. In addition, I find that differences in labor share trends across sectors can be accounted for by varying sensitivities of cost of production to the price of equipment capital. |
| Keywords: | Labor share ; Technological change ; Capital-task complementarity ; Elasticity of substitution ; Job polarization ; Bayesian estimation |
| JEL: | C11 E22 E23 E25 J24 J31 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1200&r=mac |
| By: | Eric Kemp-Benedict |
| Abstract: | This paper presents a step toward a post-Keynesian dynamic model for long-run policy analysis. It is a multi-sector Harrodian-Kaleckian growth model with locally unstable dynamics contained by a Hicksian floor and ceiling. It adopts a model of biased technological change that links productivity growth with the functional income distribution. The model features endogenous wages, prices, labor and capital productivities, capital utilization, employment, and labor participation. At present it lacks government, financial, and foreign sectors, but despite this it exhibits interesting behavior. The model generates asymmetric business cycles, with a long expansion and a short contraction, as well as long waves and changes in the structure of employment. |
| Keywords: | post-Keynesian, Harrodian-Kaleckian, multiplier-accelerator, technological change |
| JEL: | E11 E17 E22 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp1702&r=mac |
| By: | Andrew Y. Chen; Rebecca Wasyk; Fabian Winkler |
| Abstract: | We estimate asset pricing models with multiple risks: long-run growth, long-run volatility, habit, and a residual. The Bayesian estimation accounts for the entire likelihood of consumption, dividends, and the price-dividend ratio. We find that the residual represents at least 80% of the variance of the price-dividend ratio. Moreover, the residual tracks most recognizable features of stock market history such as the 1990's boom and bust. Long run risks and habit contribute primarily in crises. The dominance of the residual comes from the low correlation between asset prices and consumption growth moments. We discuss theories which are consistent with our results. |
| Keywords: | Bayesian Estimation ; Equity Premium Puzzle ; Excess Volatility ; Habit ; Long run risks ; Particle Filter ; Rare Disasters |
| JEL: | G10 G12 E21 E30 C11 C15 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2017-24&r=mac |
| By: | António Afonso; Jorge Silva |
| Abstract: | We assess the determinants of the 10-year sovereign yield for the period 2000-2015, in Portugal and in Ireland. Results show that the long-term Portuguese sovereign yield increased with the rise of the 10-year Bund yield and during the Securities Markets Programme, but decreased due to financial integration. Additionally, during the period of the economic and financial adjustment programme, there was evidence of additional rises (decreases) due to increases (decreases) in the 3-month Euribor rate, and the level of public debt. EU/IMF funding reduced sovereign yield. Key Words : 10-year sovereign yield, economic and financial adjustment programme, Portugal, Ireland. |
| JEL: | C20 E44 E62 G01 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp062017&r=mac |
| By: | Hafedh Bouakez (Department of Applied Economics and CIRPEE, HEC Montréal); Michel Guillard (EPEE, Université d’Evry Val d’Essonne); Jordan Roulleau-Pasdeloup (DEEP, HEC Lausanne) |
| Abstract: | We study the effectiveness of public investment in stimulating an economy stuck in a liquidity trap. We do so in the context of a tractable new-Keynesian economy in which a fraction of government spending increases the stock of public capital subject to a time-to-build constraint. Public investment projects typically entail significant time-to-build delays, which often span several years from approval to completion. We show that this feature implies that the spending multiplier associated with public investment can be substantially large — nearly twice as large as the multiplier associated with public consumption — in a liquidity trap. Intuitively, when the time to build is sufficiently long, and to the extent that public capital raises the marginal productivity of private inputs, the resulting disinflationary effect will occur after the economy has escaped from the liquidity trap. At the same time, the increase in households’ expected wealth amplifies aggregate demand while the economy is still in the liquidity trap. Using a mediumscale model extended to allow for the accumulation of public capital, we quantify the multiplier associated with the spending component of the 2009’s ARRA, which allocated roughly 40% of the authorized funds to public investment. We find a peak multiplier of 2.31. Our results also indicate that failing to account for the composition of the stimulus by overlooking its investment component would lead one to underestimate the spending multiplier by about 50%. |
| Keywords: | Public spending, Public investment, Time to build, Multiplier, Zero lower bound |
| JEL: | E4 E52 E62 H54 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:eve:wpaper:16-09&r=mac |
| By: | António Afonso; Frederico Silva Leal |
| Abstract: | We use a panel of 11 EMU countries in the period 2000-2014 to assess the importance of political and economic determinants as explanatory factors in sovereign bond yield spreads. According to the results, there is evidence that those spread determinants gained importance after the beginning of the financial crisis. Following the crisis, the debt ratio, fiscal balance, expenditure on pension funds, the level of liquidity, GDP growth rate, and structural reforms have become relevant determinants of sovereign spreads, while fiscal rules have reduced spreads. Key Words : Public Debt, Sovereign Spreads, Fiscal Policy, Financial Crisis, EMU |
| JEL: | E43 E62 G01 H63 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp092017&r=mac |
| By: | Valentina Milano (LUISS "Guido Carli" University) |
| Abstract: | We study risk sharing in the Euro Area (EA) and compare it to the US federation. Using the method of variance decomposition first implemented by Asdrubali et al. (1996), we update and revisit the main channels of risk sharing (net factor income, international transfers and credit markets). We contribute to this literature by splitting the credit market channel into two parts: smoothing achieved through private institutions (markets) and the public sector (national governments and official European institutions). We find that the role played by European institutions (i.e., public lending from the ESFS, ESFM, ESM and the European Commission) has been quite relevant during the recent financial crisis and largely compensated the reduced role of national governments. |
| Keywords: | Risk sharing, Euro Area, European transfers, income insurance, international financial integration. |
| JEL: | E2 E6 F15 G15 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:lui:celegw:1701&r=mac |
| By: | Belke, Ansgar; Dreger, Christian; Dubova, Irina |
| Abstract: | The financial crisis led to a deep recession in many industrial countries. While large emerging countries recovered relatively quickly from the financial crisis, their performance deteriorated in the recent years, despite the modest recovery in advanced economies. The higher divergence of business cycles is closely linked to the Chinese transformation. During the crisis, the Chinese fiscal stimulus prevented a decline in GDP growth not only in that country, but also in resource‐rich economies. The Chinese shift to consumption‐driven growth led to a decline in commodity demand, and the environment became more challenging for many emerging markets. This view is supported by Bayesian VARs specified for the BRIC (Brazil, Russia, India, and China) countries. The results reveal a strong impact of international variables on GDP growth. In contrast to the other countries, China plays a crucial role in determining global trade and oil prices. Hence, the change in the Chinese growth strategy puts additional reform pressure on countries with abundant natural resources. |
| Keywords: | Business cycle divergence,Chinese transformation,Bayesian VARs |
| JEL: | F44 E32 C32 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:37&r=mac |
| By: | David M. Arseneau |
| Abstract: | This paper uses a unique new data set to empirically examine bank-level expectations regarding the impact of negative short-term interest rates on bank profitability through net interest margins. The results show that banks differ significantly in their views regarding how profits might be affected in a negative interest rate environment and that much of this heterogeneity can be explained by cross-bank differences in the provision of liquidity services. We find that those banks that are more active in providing liquidity to borrowers anticipate suffering reduced profitability through declines in interest income on short-duration assets. The opposite is true of banks that are more active in providing liquidity to depositors as these banks expect to benefit from lower short-term funding costs. However, we find that these distributional effects wash out at the aggregate level, as liquidity provision is sufficiently well diversified across all banks. |
| Keywords: | Banking conditions ; Net interest margins ; Unconventional monetary policy |
| JEL: | E43 E44 G21 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2017-30&r=mac |
| By: | Masaru Inaba; Keisuke Otsu |
| Abstract: | We study the features of regional business cycles and growth in Japan. We find evidence of unconditional convergence over the 1955-2008 period. For the 1975-2008 period, we find evidence of convergence conditional on TFP gap, population growth, private investment rate and TFP growth. We also find that the consumption-output correlation puzzle exists, which implies that the idiosyncratic income shocks are not shared among prefectures and regions. Our analysis implies that frictions in financial markets are responsible for the low consumption risk-sharing among prefectures. |
| Keywords: | Japanese Economy; Regional Convergence; Regional Business Cycle Synchronization |
| JEL: | E01 E32 O47 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:ukc:ukcedp:1705&r=mac |
| By: | Ryan Chahrour (Boston College); Robert Ulbricht (Toulouse School of Economics) |
| Abstract: | We develop a methodology to estimate DSGE models with incomplete information, free of parametric restrictions on information structures. First, we define a “primal” economy in which deviations from full information are captured by wedges in agents’ equilibrium expectations. Second, we provide implementability conditions, which ensure the existence of an information structure that implements these wedges. We apply the approach to estimate a New Keynesian model in which firms, households and the monetary authority have dispersed information about business conditions and productivity is the only aggregate fundamental. The estimated model fits the data remarkably well, with informational shocks able to account for the majority of U.S. business cycles. Output is driven mainly by household sentiments, whereas firm errors largely determine inflation. Our estimation indicates that firms and the central bank learn the aggregate state of the economy quickly, while household confusion about aggregate conditions is sizable and persistent. |
| Keywords: | Business cycles, dispersed information, DSGE models, primal approach, sentiments |
| JEL: | E32 D84 |
| Date: | 2017–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:925&r=mac |
| By: | Eleni Iliopulos (University of Evry and CEPREMAP); François Langot (University of Le Mans (GAINS-TEPP & IRA), Paris School of Economics and IZA); Thepthida Sopraseuth (University of Cergy Pontoise (THEMA) and CEPREMAP) |
| Abstract: | We study the welfare costs of business cycles in a search and matching model with financial frictions à la Kiyotaki & Moore (1997). We investigate the mechanisms that allow the model to replicate the volatility on labor and financial markets. Business cycle costs are sizable and asymmetric. This result is not trivial because the introduction of financial frictions does not per se always dampen welfare. Indeed, when credit costs are counter-cyclical and very responsive to productivity shocks, firms could benefit so much from the fall in hiring costs that the average job finding rate lies above its steady state value. |
| Keywords: | Welfare, business cycle, financial friction, labor market search |
| JEL: | E32 J64 G21 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:eve:wpaper:17-02&r=mac |
| By: | Benoît Campagne; Aurélien Poissonnier |
| Abstract: | The evaluation of fiscal and structural reforms has become not only a standard but indispensable exercise in the DSGE literature and in the policy-making publications and reports. Institutions such as the IMF, the European Commission, the OECD, the ECB, and many central banks have now developed and refined their own tools and are capable of conducting such analyses in different contexts. The effects of structural reforms have been documented by D'Auria et al. (2009) for EU member states and for Italy by Annicchiarico et al. (2013) both in the R&D version of the Quest III model. The IMF or the OECD have also conducted their own evaluations for Europe (Bayoumi et al., 2004; Everaert and Schule, 2006,2008; Cacciatore et al., 2012). Fiscal reforms or consolidation have also been assessed through DSGE models. In the European context some work were conducted on the Quest III model (Vogel, 2012). Coenen et al. (2008) investigate labor tax reforms in the New Area Wide Model (NAWM). Clinton et al. (2011) provide similar insights in the case of an international model (GIMF). Coenen et al. (2012) give an extensive review of the size of fiscal multipliers in the main institutional models. The recurrence and the systematic use of DSGEs today therefore raises the question of their actual capabilities. Whereas their qualitative behaviours have largely improved and now properly describe economic data, their quantitative accuracy is still debated among economists (see for instance Schorfheide (2011) for a summary of current DSGE weaknesses). We use the two country DSGE model of the Euro area MELEZE developed at Insee to shed a new light on two standard exercises: structural and fiscal reforms evaluations. The main features of the model compare with standard tools developed in international institutions and central banks: nominal and wage rigidities, capital adjustment cost, and both Ricardian and non-Ricardian consumers. We study the dependency of fiscal and structural simulations' results to various specifications in our DSGE model. Within a range of feasible calibrations for the elasticities in the utility function, the share of non Ricardian consumers, and among other sensitivity tests, the analysis focuses on short and long term multipliers of both fiscal and structural reforms. We also rank policy schemes based on welfare analyses along the transitional paths. The model MELEZE used in this paper features the standard modeling choices of the two country monetary union literature. The core of the model for each country is inspired by Christiano et al. (2005) and Smets and Wouter (2003, 2005, 2007): firms and consumers maximize their objective (utility or profit) by interacting on the goods, labor and capital markets with both prices and wages rigidities introducing neo-Keynesian features in the model à la Erceg et al. (2000). The model also integrates risk free assets to ensure an intertemporal trade-off and real rigidities on the capital market. In addition, our model builds on academic works studying monetary and fiscal policies in monetary unions Gali and Monacelli (2008), Benigno (2004) by introducing capital markets. We also introduce non Ricardian households as advocated by Mankiw (2000), a feature which is crucial for the reaction of private consumption to public spending (Gali et al. 2007), and therefore a priori crucial to the size of fiscal multipliers. We compare this mechanism with Edgeworth complementarity as advocated by Fève and Sahuc (2013). Moreover, we introduce in our model public and private debts exchanged on a union wide financial market both at steady state and out of equilibrium. Holding debt or asset is motivated by agents' preferences for the present and comes at a financial intermediation cost embodied through a debt elastic premium. We explicit and micro-found this financial intermediation service by introducing a financial intermediation sector. Beyond public debt, the government uses public spending to stimulate and monitor economic activity. It can also exogenously modify its fiscal policy along different axes: lump-sum transfers and taxes on consumption, labor, capital income or dividends. As detailed below, we depart from traditional budget rules behaviors used in the literature, and derive a forward-looking optimizing behavior for the government. All these modeling elements are generally embedded in large scale models developed in central banks and international institutions among which are GEM at the IMF (Bayoumi et al., 2004), NAWM at the ECB (Coenen et al., 2008) or in open economy EAGLE (Gomes et al., 2012), QUEST III at the European Commission (Ratto et al., 2009) and its R&D version (Roeger et al., 2008). Whereas these models sometimes also consider both tradable and non-tradable goods, heterogeneous agents on the labor market, or endogenous growth, we choose to simplify our model and do not consider these additions. The outcome is a model tractable enough to be fully linearized by hand. We are also able to solve for the steady state for the real variables in levels and carefully account for all the steady state restrictions imposed on the parameters of the model. We replicate three different settings: France against the rest of the Eurozone, Italy against the rest of the Eurozone, and a symmetric calibration for the Euro area as a closed economy. In a first section, we study the long-term impact of mark-up reforms in both the labor and goods markets. Even in the absence of entry costs, wage bargaining and an endogenous determination of the number of firms as in Blanchard and Giavazzi (2003), our results compare with stylized facts obtained in their model. Moreover and numerically, reforms simulation as conducted in Everaert and Schule (2006) indicates that the absence of additional rigidities and of a distinction between tradable and non-tradable goods may overestimate the long-term gains from pro-competitive reforms. More importantly, even though the stylized facts behind such reforms are robust, they increase output level at steady state, their quantification is uncertain. Within a range of feasible calibrations for the elasticities in the utility function, the effect of a structural reform can be magnified threefold. Similarly, the introduction of non Ricardian agents amplifies the gains from deregulation up to a doubling factor. In a second section, we study the effect of temporary or permanent fiscal reforms. We simulate increases in public spending, transfers or decreases in various tax rates calibrated to 1% of pre-stimulus output. The resulting fiscal multipliers are compared to the main existing DSGE models based on the results provided in Coenen et al. (2012), and to the French macroeconometric model Mésange developed at Insee (Klein and Simon, 2010). We find that our model gives comparable multipliers for temporary shocks but highlight that these measures of the fiscal multipliers crucially depend on their timing and the way both fiscal and monetary authorities commit or react to the stimulus. In particular, the modeling of government spending, usually introduced through an ad hoc spending rule, can imply fiscal multipliers larger or smaller than one. We compare these results with an alternative modeling of governments' behavior. Actually, we depart from ad hoc fiscal or budget rules traditionally introduced in quantitative models to endogenise public spending and tax rates to ensure governments' solvency (Bayoumi et al., 2004; Coenen et al., 2008; Ratto et al. 2009 ; Corsetti et al., 2009). We consider governments that maximize their stream of spending in a forward-looking way, closely equivalent to a Euler equation for households. In the end, public spending fiscal multipliers can range from 0.7 to 1.3 depending on the specification of the governments' spending rule and of the monetary environment. Cuts on distorting tax rates provides lower multipliers, that turn out to be even negative in the absence of government commitment for cuts in corporate income taxes and labor income taxes. Coordination across countries leads to increased fiscal multipliers. In response to permanent spending shocks financed though lump-sum transfers, our model provides weaker long-term multipliers yet comparable to Coenen et al. (2012) results. This weaker response stems from the negative wealth effect implied by the necessary financing fall in transfers. In all, our results raise questions on the ability for current quantitative DSGE models to provide accurate quantitative estimates for economic policies. In the conduct of policy analysis, one should therefore be very cautious to properly assess the dependency of the results to the specification of the model, and provide detailed sensitivity tests. Ongoing developments to be included in this paper include: a. Studying the transitional dynamic of structural reforms b. Ranking policy schemes based on welfare analyses along the transitional paths c. Stronger justification of the government’s behavior by the introduction of government spending in households’ utility function. |
| Keywords: | Euro Area, France, Italy, General equilibrium modeling, Impact and scenario analysis |
| Date: | 2015–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:ekd:008007:8482&r=mac |
| By: | Guido Ascari (Department of Economics, University of Oxford); Anna Florio (Department of Management, Economics and Industrial Engineering, Politecnico di Milano); Alessandro Gobbi (Department of Economics and Management, University of Pavia) |
| Keywords: | trend inflation, monetary-fiscal policy interactions, Markov-switching, determinacy |
| JEL: | E5 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:pav:demwpp:demwp0135&r=mac |
| By: | Jordi Galí |
| Abstract: | I develop an extension of the basic New Keynesian model with overlapping generations of finitely-lived agents. In contrast with the standard model, the proposed framework allows for the existence of rational expectations equilibria featuring asset price bubbles. I examine the conditions under which bubbly equilibria may emerge and the implications for the design of monetary policy. |
| Keywords: | monetary policy rules, stabilization policies, asset price volatility |
| JEL: | E44 E52 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:959&r=mac |
| By: | Jordi Galí |
| Abstract: | I develop an extension of the basic New Keynesian model with overlapping generations of finitely-lived agents. In contrast with the standard model, the proposed framework allows for the existence of rational expectations equilibria featuring asset price bubbles. I examine the conditions under which bubbly equilibria may emerge and the implications for the design of monetary policy. |
| Keywords: | Monetary policy rules, stabilization policies, asset price volatility |
| JEL: | E44 E52 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1561&r=mac |
| By: | Daniel Eduardo Heredia Carrillo; Jonathan Pena Castaneda |
| Abstract: | El presente ensayo analiza las interacciones entre los ciclos financieros de Colombia y Estados Unidos. Para los dos países, los ciclos se calculan a partir de la información de endeudamiento y precios de la propiedad durante el periodo 2002-2016. Los resultados de esta operación demuestran que, hay una fuerte relación entre el comportamiento de los mercados financieros en torno a los momentos de crisis y auge, la cual se explica por el contagio de las burbujas especulativas y el ciclo de los commodities en los países emergentes. En consecuencia, la moderada correlación es persistente durante el ciclo, acentuándose en la crisis de 2008 y disminuyendo en los últimos 5 años debido a la rápida recuperación de Colombia. Por lo anterior, se comparte el pico asociado con la detonación de la crisis financiera, mientras que el valle de su recuperación es diferente para los dos países debido a las diferentes amplitudes de los ciclos. Estos hallazgos permiten construir un entendimiento global de los fenómenos que atañen a un país periférico como Colombia. |
| Keywords: | ciclo financiero, sincronización de ciclos, crédito, precio de los activos, Colombia |
| JEL: | E32 E44 F42 |
| Date: | 2017–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:col:000176:015451&r=mac |
| By: | Kevin x.d. Huang (Vanderbilt University); Qinglai Meng (Oregon State University); Jianpo Xue (Renmin University of China) |
| Abstract: | Schmitt-Grohe and Uribe (1997) demonstrate that a balanced-budget fiscal policy can induce aggregate instability unrelated to economic fundamentals. The empirical relevance of this result has been challenged by subsequent studies. In this paper we show, both analytically and numerically, that such extrinsic instability is an empirically robust plausibility associated with a balanced-budget rule once endogenous capital utilization is taken into consideration. This suggests that the design or operation of a balanced-budget fiscal policy must recognize that it may constitute a practical source of self-fulfilling prophecies and belief-driven fluctuations. |
| Keywords: | Balanced-budget rules, Income taxes, Public debt, Capital utilization, Consumption taxes, Sunspots, Self-fulfilling expectations, Indeterminacy |
| JEL: | E3 E6 |
| Date: | 2017–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:vuecon-sub-17-00005&r=mac |
| By: | David-Jan Jansen; Matthias Neuenkirch |
| Abstract: | Using three waves of a customised survey among Dutch households, this paper studies the variation in people's views on inflation. Based on a range of panel regressions, we find that accurate perceptions of recent price changes are an important determinant of the accuracy of next-year inflation expectations. The realism of inflation perceptions is, in turn, related to the intensity of newspaper consumption and also affected by the broadness of a person's political preferences. However, more frequent newspaper usage does not necessarily reduce errors in inflation perceptions. |
| Keywords: | inflation expectations; inflation perceptions; newspaper readership; political preferences; household survey data |
| JEL: | D12 D83 D84 E31 E58 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:549&r=mac |
| By: | Amat Adarov (The Vienna Institute for International Economic Studies, wiiw); Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Rumen Dobrinsky (The Vienna Institute for International Economic Studies, wiiw); Vladimir Gligorov (The Vienna Institute for International Economic Studies, wiiw); Richard Grieveson (The Vienna Institute for International Economic Studies, wiiw); Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Peter Havlik (The Vienna Institute for International Economic Studies, wiiw); Mario Holzner (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); Isilda Mara (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (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: | Summary Growth in the CESEE economies will strengthen gradually, surpassing on average 3% by 2019. This growth will be driven by consumption and increasing investment, amid a largely supportive international economic environment. Despite a rise in ULCs, competitiveness will not be endangered. Although the size of labour forces in CESEE is stagnating, data indicate an improvement in educational levels of workers. Meanwhile the tightness of labour markets will propel wage growth. The CESEE region as a whole is back on a convergence track, with an average positive growth differential of 1.2 pp vis-à-vis the euro area over the forecast horizon. Downside risks are significant, mostly stemming from political factors. The CESEE countries and Europe more broadly, together with the rest of the world, will be haunted by the spectre of political uncertainty; it is only to be hoped that, once fully roused, the ‘animal spirits’ of economic agents will shrug off the gloom. For the economies of CESEE, the international economic environment appears generally positive. In 2017-2018, GDP growth in the euro area is expected to hover around 1.7%. The international financial markets have stabilised and the current economic mood is improving. Because of the global recovery, the US Fed is expected to increase interest rates further in 2017, while oil prices are likely to rise. In the EU, disbursements from the payments cycle of the European Structural and Investment Funds are only just beginning, indicating higher co-financed investments in the EU‑CEE countries from this year onwards. Over recent quarters, GDP growth throughout almost the entire CESEE region has stabilised in positive territory. The only exception is Belarus, where growth is still in negative territory (albeit less so than was the case in 2015). The country is going through a painful adjustment process triggered by accumulated macroeconomic imbalances and its excessive dependence on Russia. Current wiiw CESEE GDP growth forecasts for 2017-2019 point to growth of around 3% for most of the region, with a slightly upward trend. The EU-CEE sub-region and the Western Balkan economies in particular should manage to attain average GDP growth rates of up to 3% and in some countries, such as Hungary, Romania, Slovakia, Albania and Kosovo, the levels may be even higher. In Turkey, where growth slowed down markedly in 2016 to below 2% (down from around 6% in prior years) on account of the domestic political turmoil and deterioration in foreign relations, we also expect growth to be closer to 3% by the end of the forecast horizon. The CIS-3 economies will record increasing GDP growth rates, rising from more than 1% in 2017 to over 2% in 2019, given the higher oil prices. Over the same forecast period, economic growth in Ukraine is projected to accelerate gradually to 3% by 2018-2019 – barring all-out warfare in Donbas and abortion of the IMF programme. Private consumption and increasing investment will continue to be the main growth drivers over the forecast horizon. After the investment slump in 2016 attributable to the switch from the previous to the current EU (co-) financing period, investment in the EU-CEE economies will recover in the years ahead. Meanwhile the mood among consumers is improving and, due to changing spending patterns in the EU-CEE sub-region, this trend should prove durable. Tightening labour markets are conducive to major wage increases. Despite the general rise in unit labour costs, competitiveness does not seem to be endangered. Most of the latest industrial production figures for the CESEE countries are encouraging; they point to an ongoing improvement in industry structure and, in several cases, to re-industrialisation. Longer-term FDI trends hold particular promise for the Western Balkans. In Romania and Slovakia the prospects for future FDI increases are also quite good, especially in the automotive sector. Although the size of the labour force in CESEE countries is more or less stagnating, a marked improvement in education levels is evident, as a younger and better educated generation enters the work force. This hints at a potential general increase in labour quality across the region’s economies. Nevertheless, heightened uncertainties following the UK referendum on Brexit in June 2016 and the US presidential elections in November have cast a cloud over the improved economic conditions noted above. A number of worrying scenarios are quite conceivable that could ultimately make our forecasts appear upbeat and overoptimistic. Thanks to US President Donald Trump, a rise in global protectionism is possible, which would harm industry in the region. Mr Trump has also questioned post-war European security arrangements, thus causing consternation in some EU-CEE countries. Meanwhile, the growing irritation with the EU-CEE sub-region among some older EU Member States and the fallout from Brexit could possibly pose a threat to west-east fiscal transfers and the free movement of labour in their current forms. In the Western Balkans, any confrontational interventions by Russia and uncertainties as to developments in Turkey could prove quite disruptive, were the influence of the EU and USA in the region to decline. Increasing uncertainties in the CIS and Ukraine are mostly related to future commodity price developments (most importantly oil prices) and heightened geopolitical tensions. Three special sections of the forecast report shed more light on the issue of heightened uncertainties in the EU-CEE, the Western Balkans and the CIS+UA regions. |
| Keywords: | CESEE, economic forecast, Europe, Central and East Europe, Southeast Europe, Western Balkans, new EU Member States, CIS, Belarus, Russia, Ukraine, Kazakhstan, Turkey, growth convergence, political uncertainties, external risks, EU funds, investment, consumption-led growth, unemployment, employment, wage growth, inflation, competitiveness, industrial production |
| JEL: | E20 O47 O52 O57 P24 P27 P33 P52 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:wii:fpaper:fc:spring2017&r=mac |
| By: | Chu, Angus C.; Cozzi, Guido; Furukawa, Yuichi; Liao, Chih-Hsing |
| Abstract: | This study develops a Schumpeterian growth model with endogenous entry of heterogeneous firms to analyze the effects of monetary policy on economic growth via a cash-in-advance constraint on R&D investment. Our results can be summarized as follows. In the special case of a zero entry cost, an increase in the nominal interest rate decreases R&D, the arrival rate of innovations and economic growth as in previous studies. However, in the general case of a positive entry cost, an increase in the nominal interest rate affects the distribution of innovations that are implemented and would have an inverted-U effect on economic growth if the entry cost is sufficiently large. We also calibrate the model to aggregate data of the US economy and find that the growth-maximizing inflation rate is about 3%, which is consistent with recent empirical estimates. |
| Keywords: | monetary policy, inflation, economic growth, heterogeneous firms |
| JEL: | E41 O3 O4 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:77543&r=mac |
| By: | Christian Matthes (Federal Reserve Bank of Richmond, Richmond, VA); Francesca Rondina (Department of Economics, University of Ottawa, Ottawa, ON) |
| Abstract: | We investigate the role of asymmetric information and learning in a New Keynesian framework in which private agents and the central bank have imperfect knowledge of the economy. We assume that agents employ the data that they observe to form beliefs about the relationships that they do not know, use their beliefs to decide on actions, and revise these beliefs through a statistical learning algorithm as new information becomes available. Using simulations, we show that asymmetric information and learning can significantly change the dynamics of the variables of the model. |
| Keywords: | Asymmetric Information, Learning, Expectations, Monetary Policy |
| JEL: | E37 E47 E52 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ott:wpaper:1705e&r=mac |
| By: | Filippo Ippolito; Ali K. Ozdagli; Ander Perez |
| Abstract: | We describe and test a mechanism through which outstanding bank loans affect the firm balance sheet channel of monetary policy transmission. Unlike other debt, most bank loans have floating rates mechanically tied to monetary policy rates. Hence, monetary policy-induced changes to floating rates affect the liquidity, balance sheet strength, and investment of financially constrained firms that use bank debt. We show that firms---especially financially constrained firms---with more unhedged bank debt display stronger sensitivity of their stock price, cash holdings, sales, inventory, and fixed capital investment to monetary policy. This effect disappears when policy rates are at the zero lower bound, which further supports the floating rate mechanism and reveals a new limitation of unconventional monetary policy. We argue that the floating rate channel can have a significant macroeconomic effect due to the large size of the aggregate stock of unhedged floating-rate business debt, an effect at least as important as the bank lending channel through new loans. |
| Keywords: | Bank debt ; Financial constraints ; Firm balance sheet channel ; Floating interest rates ; Hedging ; Monetary policy transmission |
| JEL: | G21 G32 E52 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2017-26&r=mac |
| By: | Petrella, Ivan (Warwick Business School and CEPR); Rossi, Rafaelle (University of Manchester); Santoro, Emilio (University of Copenhagen) |
| Abstract: | We formulate a two-sector New Keynesian economy that features sectoral heterogeneity along three main dimensions: price stickiness, consumption goods durability, and the inter-sectoral trade of input materials. The combination of these factors deeply a§ects inter-sectoral and intra-sectoralstabilization. In this context, we examine the welfare properties of simple rules that adjust thepolicy rate in response to the output gap and alternative measures of final goods price inflation. Aggregating durable and non-durable goods prices depending on the relative frequency of sectoral price-setting may induce a severe bias. Due to factor demand linkages, the cost of production in one sector is ináuenced by price-setting in the other sector of the economy. As a result, measures of aggregate inflation that weigh sectoral price dynamics based on the relative degree of price rigidity do not allow the central bank to keep track of the effective speeds of sectoral price adjustment |
| Keywords: | durable goods ; input-output interactions ; monetary policy ; interest rate rules JEL Classification Numbers: E23 ; E32 ; E52 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:wrkemf:14&r=mac |
| By: | Arpita Chatterjee (UNSW Business School, UNSW); James Morley (UNSW Business School, UNSW); Aarti Singh (University of Sydney) |
| Abstract: | We develop a panel unobserved components model of household income and consumption that can be estimated using full information methods. Maximum likelihood estimates for a simple version of this model suggests similar income risk, but higher consumption insurance relative to the partial information moments-based estimates in Blundell, Pistaferri, and Preston (2008) for the same panel dataset. Bayesian model comparison supports this simple version of the model that only allows a spillover from permanent income to permanent consumption, but assumes no cointegration and no persistence in transitory components. However, consumption insurance and income risk estimates are highly robust across different specifications. |
| Keywords: | panel unobserved components; Bayesian model comparison; permanent income; household consumption behavior |
| JEL: | E32 E22 C32 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:swe:wpaper:2017-07&r=mac |
| By: | Munechika Katayama; Kwang Hwan Kim |
| Abstract: | This study empirically shows that higher uncertainty leads to not only a simultaneous drop in consumption and investment, but also a rise in the relative price of investment goods. This negative relationship between the relative price and quantity of investment suggests that heightened uncertainty depresses investment as an adverse supply shock to the investment sector. We demonstrate that a two-sector sticky price model with realistic asymmetric sectoral price rigidity can successfully account for our empirical findings. In particular, the underlying mechanism behind the negative relationship between the price and quantity of investment is limited intersectoral factor mobility. By contrast, the standard two-sector model featuring perfect factor mobility causes a negative co-movement between consumption and investment, contradicting the business cycle phenomenon. |
| Keywords: | Uncertainty shocks; Sticky prices; Factor mobility; Relative price of investmentgoods. |
| JEL: | E32 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:kue:epaper:e-16-015&r=mac |
| By: | Pascal Seppecher (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique); Isabelle Salle (Utrecht School of Economics - Utrecht University [Utrecht]); Marc Lavoie (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper studies coordination between firms in a multi-sectoral macroeconomic model with endogenous business cycles. Firms are both in competition and interdependent, and set their prices with a markup over unit costs. Markups are heterogeneous and evolve under market pressure. We observe a systematic coordination within firms in each sector, and between each sector. The resulting pattern of relative prices are consistent with the labor theory of value. Those emerging features are robust to technology shocks. |
| Keywords: | General interdependence, Pricing, Agent-based modeling |
| Date: | 2017–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cepnwp:hal-01486597&r=mac |
| By: | Florian Huber (Department of Economics, Vienna University of Economics and Business); Maria Teresa Punzi (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | This paper develops a Bayesian Global VAR (GVAR) model to track the international transmission dynamics of two stylized shocks, namely a supply and demand shock to US-based safe assets. Our main findings can be summarized as follows. First, we find that (positive) supply-sided shocks lead to pronounced increases in economic activity which spills over to foreign countries. The impact of supply-sided shocks can also be seen for other quantities of interest, most notably equity prices and exchange rates in Europe. Second, a demand-sided shock leads to an appreciation of the US dollar and generally lower yields on US securities, forcing investors to shift their portfolios towards foreign fixed income securities. This yields sizable positive effects on US output, equity prices and a general decrease in financial market volatility. |
| Keywords: | Safe Assets, Zero Lower Bound, Treasury Bonds, Shortage, GlobalVAR |
| JEL: | C32 E23 E32 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp243&r=mac |
| By: | Ivan Petrella; Raffaele Rossi; Emiliano Santoro |
| Abstract: | We formulate a two-sector New Keynesian economy that features sectoral heterogeneity along three main dimensions: price stickiness, consumption goods durability, and the inter-sectoral trade of input materials. The combination of these factors deeply affects inter-sectoral and intra-sectoral stabilization. In this context, we examine the welfare properties of simple rules that adjust the policy rate in response to the output gap and alternative measures of final goods price inflation. Aggregating durable and non-durable goods prices depending on the relative frequency of sectoral price-setting may induce a severe bias. Due to factor demand linkages, the cost of production in one sector is influenced by price-setting in the other sector of the economy. As a result, measures of aggregate inflation that weigh sectoral price dynamics based on the relative degree of price rigidity do not allow the central bank to keep track of the effective speeds of sectoral price adjustment. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:man:cgbcrp:233&r=mac |
| By: | José Alves; Rita Pereira |
| Abstract: | Since the 2008's nancial crisis authorities have been particularly aware about the necessity of being provided with early warning indicators regarding nancial stability. In fact, the Basel Committee on Banking Supervision suggests the analysis of the di erence between the private sector credit-to-GDP ratio and its own long-term trend. For the past two decades Portugal, has witnessed a dramatic indebtedness increase among household. Our objective is to examine the reasons for this increase by analysing the ratio of domestic credit to the private sector to GDP between 1961 and 2011. The main conclusions are the non-suitability of the Basel Committee on Banking Supervision approach for Portugal and the break of the link between deposits and credit from 1992 onwards. Key Words : Households Indebtedness, Early Warning Indicators, Credit. |
| JEL: | C24 E44 E51 H31 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp072017&r=mac |
| By: | Andreas Hanl (Universität Kassel); Jochen Michaelis (Universität Kassel) |
| Abstract: | Cryptocurrencies such as Bitcoins may revolutionize the financial system by at least partially replacing intermediaries such as central banks and commercial banks. The blockchain technology enables users to transact on a peer-to-peer basis. This imposes a serious threat on the financial intermediaries as well as on monetary policy authorities. In this paper, we examine how well cryptocurrencies fulfill the functions of a fiat money and discuss the comparative advantages of cryptocurrencies. We proceed by exploring the implications of digital currencies for the concept and conduct of monetary policy. |
| Keywords: | Bitcoin, Kryptowährung, Geldpolitik |
| JEL: | E42 E52 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201715&r=mac |
| By: | Daniele Tavani (Department of Economics, Colorado State University); Luca Zamparelli (Department of Social Sciences and Economics, Sapienza University of Rome) |
| Abstract: | In this paper, we introduce a twofold role for the public sector in the Goodwin (1967) model of the growth cycle. The government collects income taxes in order to: (a) invest in infrastructure capital, which directly affects the production possibilities of the economy; (b) finance publicly funded research and development (R&D), which augments the growth rate of labor productivity. We study two versions of the model: with and without induced technical change, that is with or without a feedback from the labor share to labor productivity growth. In both cases we show that: (i) provided that the output-elasticity of infrastructure is greater than the elasticity of labor productivity growth to public R&D, there exists a tax rate that maximizes the long-run labor share, and it is smaller than the growth-maximizing tax rate; (ii) the longrun share of labor is always increasing in the share of public spending in infrastructure; (iii) different taxation schemes have an impact on the stability of growth cycles. |
| Keywords: | Public R&D, Goodwin growth cycle, fiscal policy |
| JEL: | D33 E11 O38 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:1711&r=mac |
| By: | Florian Huber (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | In this note we develop a Taylor rule based empirical exchange rate model for eleven major currencies that endogenously determines the number of structural breaks in the coefficients. Using a constant parameter specification and a standard time-varying parametermodel as competitors reveals that our flexible modeling framework yields more precise density forecasts for all major currencies under scrutiny over the last 24 years. |
| Keywords: | Stochastic volatility, mixture innovation models, time-varying parameters |
| JEL: | E52 F31 F42 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp244&r=mac |
| By: | International Monetary Fund. |
| Abstract: | Papua New Guinea (PNG) is a resource-rich economy, but low commodity prices and a major drought have weighed on economic growth and created fiscal challenges. Inflation has increased somewhat, partly reflecting the gradual exchange rate depreciation. Foreign exchange (FX) is in short supply, although inflows have recently picked up somewhat and the gross foreign reserve position is expected to remain broadly stable. Non-resource sector growth remains modest, underscoring the need for structural reform. In the lead-up to mid-2017 elections, the political situation has been more fluid than usual. |
| Keywords: | Article IV consultation reports;Economic conditions;Fiscal policy;Government expenditures;Fiscal reforms;Monetary policy;Flexible exchange rate policy;Economic indicators;Balance of payments statistics;Debt sustainability analysis;Staff Reports;Press releases;Papua New Guinea; |
| Date: | 2017–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:17/22&r=mac |
| By: | M. Ayhan Kose (Development Prospects Group, World Bank; Brookings Institution; CEPR; CAMA); Franziska Ohnsorge (Development Prospects Group, World Bank); Lei Sandy Ye (Development Prospects Group, World Bank); Ergys Islamaj (Development Prospects Group, World Bank) |
| Abstract: | Investment growth in emerging market and developing economies has slowed sharply since 2010. This paper presents a comprehensive analysis of the causes and implications of this slowdown and presents a menu of policy responses to improve investment growth. It reports four main results. First, the slowdown has been broad‐based and most pronounced in the largest emerging markets and in commodity exporters. Second, it reflects a range of obstacles: weak activity, negative terms‐of‐trade shocks, declining foreign direct investment inflows, elevated private debt burdens, heightened political risk, and adverse spillovers from major economies. Third, by slowing capital accumulation and technological progress embedded in investment, weak post‐crisis investment growth has contributed to sluggish growth of potential output in recent years. Finally, although specific policy priorities depend on country circumstances, policymakers can boost investment both directly, through public investment, and indirectly, by encouraging private investment, including foreign direct investment, and by undertaking measures to improve overall growth prospects and the business climate. |
| Keywords: | emerging markets; developing economies; investment slowdown; policy space; infrastructure investment; monetary policy; fiscal policy; structural reforms. |
| JEL: | E22 F2 F6 O1 O4 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:1707&r=mac |
| By: | Addae, Edna; Ackah, Ishmael |
| Abstract: | The study looks at the impact of price of petroleum prices on inflation in the Ghanaian economy in the pre and post deregulation era and associated direction of causality as well as the extent of pass through of high international petroleum products price to the domestic retail market. An ARDL model was applied on time series monthly data of various petroleum fuel prices as well as exchange rate.A pass-through formula use by Baig et al, (2007) was also applied. The results reveal that changes in LPG, Kerosene and premium prices have marginal impact on inflation. The pass through analysis revealed Ghana has not pass through more than 50% of increase price of international or import petroleum product of gasoline, kerosene and LPG to the ordinary consumers in the period of the study and this was lower in the post deregulation than pre deregulation. The study therefore recommends full deregulation to continue since it favours lower pass through of fuel price increase in the world market to ordinary consumers whiles may consider gasoline and premium price increase at the expense of kerosene and liquefied petroleum gas price if inflation is to be shielded from fuel price increase. |
| Keywords: | Inflation, Deregulation, Petroleum Prices, Ghana |
| JEL: | E3 E31 Q3 Q31 Q4 |
| Date: | 2017–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:77496&r=mac |
| By: | Knotek, Edward S. (Federal Reserve Bank of Cleveland); Zaman, Saeed (Federal Reserve Bank of Cleveland) |
| Abstract: | Financial data often contain information that is helpful for macroeconomic forecasting, while multistep forecast accuracy also benefits by incorporating good nowcasts of macroeconomic variables. This paper considers the role of nowcasts of financial variables in making conditional forecasts of real and nominal macroeconomic variables using standard quarterly Bayesian vector autoregressions (BVARs). For nowcasting the quarterly value of a variety of financial variables, we document that the average of the available daily data and a daily random walk forecast to fill in the missing days in the quarter typically outperforms other nowcasting approaches. Using real-time data and out-of-sample forecasting exercises, we find that the inclusion of financial variable nowcasts by themselves generally improves forecast accuracy for macroeconomic variables relative to unconditional forecasts, although we document several exceptions in which current-quarter forecast accuracy worsens with the inclusion of the financial nowcasts. Incorporating financial nowcasts and nowcasts of macroeconomic variables generally improves the forecast accuracy for all the macroeconomic indicators of interest, beyond including the nowcasts of the macroeconomic variables alone. Conditional forecasts generated from quarterly BVARs augmented with nowcasts of key financial variables rival the forecast accuracy of mixed-frequency dynamic factor models (MF-DFMs) and mixed-data sampling (MIDAS) models that explicitly link the quarterly data and forecasts to high-frequency financial data. |
| Keywords: | conditional forecasting; nowcasting; vector autoregressions; mixed-frequency models; Bayesian methods; |
| JEL: | C11 C32 C53 G17 |
| Date: | 2017–03–17 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:1702&r=mac |
| By: | Erotokritos Varelas (Department of Economics, University of Macedonia) |
| Abstract: | This short article puts forward the possibility that bank-client corruption tends to raise lending rates. If it does and if bank-official corruption counteracts this tendency, bank lending corruption might be seen as a self-regulatory phenomenon, having little if none at all influence on the real economy. An anti-lending-corruption policy is deemed to be necessary only under a zero-lower -bound associated monetary policy and in any case, it should treat the two types of banking-sector corruption symmetrically. The negative effects of bank sector fraud on economic growth should be related to the large volume of cybercrime and money laundering rather than to fraud surrounding bank lending. |
| Keywords: | Bank lending corruption, Bank non-lending fraud, Economic activity. |
| JEL: | D21 D73 E43 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:mcd:mcddps:2017_03&r=mac |
| By: | Daniel Schäfer; Carl Singleton |
| Abstract: | Using a dataset covering a large sample of employees and their mostly very large employers, we study the dynamics of British wage inequality over the past two decades. Contrary to other studies, we find little evidence that recent increases in inequality have been driven by differences in the average wages paid by firms. Instead greater dispersion within firms can account for the majority of changes to the wage distribution. After controlling for the changing occupational content of employee wages, the role of average firm residual differences is approximately zero; the modestly increasing trend in between-firm wage inequality is explained by a combination of changes in between-occupation inequality and the occupational specialisation of firms. It is possible that previous studies, which assign some of the importance of changes in the between-firm component to industry, have misrepresented a significant role for occupations. These results are robust across measures of hourly, weekly and annual wages. |
| Keywords: | wage inequality, within-firm inequality, occupational wage premium |
| JEL: | E24 J31 |
| Date: | 2017–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:edn:esedps:277&r=mac |
| By: | Anne-Marie Rieu-Foucault |
| Abstract: | Dans le contexte où la crise financière de 2007-2009 a été, entre autres, une crise de liquidité, ce papier démontre que les interventions des banques centrales sur la liquidité ont changé de nature, passant d’une politique monétaire à une politique des liquidités. Après avoir défini les différents concepts de liquidité et la manière de les agencer, dans la pratique bancaire et dans la théorie économique, le papier analyse ce qu’il appelle une politique de liquidités, en premier en s’intéressant aux opérations du côté du passif des banques centrales puis ensuite du côté des mesures non conventionnelles, représentant les actifs des banques centrales comme contrepartie monétaire. Rapprochant alors ces observations pratiques de la théorie, il conclut à la nécessité de définir une politique de création de liquidité publique et de trouver une articulation avec les justifications de mesures non conventionnelles dans un objectif de stabilité des prix. Cette politique des liquidités fonde plusieurs rôles de dernier ressort des banques centrales. |
| Keywords: | Banques centrales – Mesures non conventionnelles - Liquidité. |
| JEL: | E52 E58 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2017-14&r=mac |
| By: | Juan Carlos Conesa; Pau S. Pujolas |
| Abstract: | Total Factor Productivity’s (TFP) growth during the 2002-2014 period in Canada has been only 0.16%. This figure is substantially smaller than that of the U.S. during the same period (1.33%), or for Canada during the 1970-2002 period (1.45%). We perform multiple counterfactual exercises to show that the lack of TFP growth cannot be accounted for by measurement issues in, nor misallocation of, factors of production. However, despite the lack of TFP growth Canada has experienced sustained income growth because on a prolonged period of appreciation of the terms of trade. In fact, computing TFP using real Gross Domestic Income (instead of real GDP) reveals a very similar performance in terms of productivity growth between Canada and the U.S., with productivity growth falling in 2002-2014 relative to 1970-2002 in both economies. |
| JEL: | E01 E24 O47 F43 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2017-04&r=mac |
| By: | Takao Asano (Okayama University); Masanori Yokoo (Okayama University) |
| Abstract: | By incorporating information imperfection into the model of Asano et al. (2012), which is a special case of Matsuyama's (2007) model, we develop a model of endogenous business cycles to analyze how information imperfection affects the dynamic nature of the model. Some sort of "noise" representing information imperfection is shown to transform Matsuyama's model into a continuous, eventually expanding, piecewise linear map on the interval with the Markov property, which implies the occurrence of observable chaotic dynamics in our setting. Unlike the models of Asano et al. (2012) and Matsuyama (2007), our model deals with observable chaos for a large set of parameter values. |
| Keywords: | Matsuyama model; credit cycle; piecewise linearity; chaotic dynamics; ergodic chaos |
| JEL: | E32 O14 O41 C62 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:967&r=mac |
| By: | Juha Kilponen (Bank of Finland – Monetary Policy and Research Department); Fabio Verona (Bank of Finland – Monetary Policy and Research Department, and University of Porto – cef.up) |
| Abstract: | We revisit the empirical performance of the Q theory of investment, explicitly taking into account the frequency dependence of investment, Tobin’s Q, and cash flow. The time series are decomposed into orthogonal components of different frequencies using wavelet multiresolution analysis. We find that the Q theory fits the data much better than might be expected (both in-sample and out-of-sample) when the frequency relationship between the variables is taken into account. Merging the wavelet approach and proxies for Q recently suggested in the investment literature also significantly improves the quality of short-term forecasts. |
| Keywords: | investment, Tobin’s Q, bond Q, intangible Q, intangible investment, cash flow, discrete wavelets, frequency estimation, forecast |
| JEL: | C49 E22 G31 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:por:cetedp:1701&r=mac |
| By: | Martin Barbie (University of Cologne); Marten Hillebrand (Johannes Gutenberg University Mainz) |
| Abstract: | Bubbly Markov Equilibria (BME) are recursive equilibria on the natural state space which admit a non-trivial bubble. The present paper studies the existence and properties of BME in a general class of overlapping generations (OLG) economies with capital accumulation and stochastic production shocks. Using monotone methods, we develop a general approach to construct Markov equilibria and provide necessary and sufficient conditions for these equilibria to be bubbly. Our main result shows that a BME exists whenever the bubbleless equilibrium is Pareto inefficient either due to overaccumulation of capital or inefficient risksharing between generations. |
| Keywords: | Asset Bubbles, Stochastic OLG, Production, Markov Equilibria, Pareto Optimality. |
| JEL: | C62 D51 E32 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:jgu:wpaper:1703&r=mac |
| By: | Shubhasis Dey (Indian Institute of Management Kozhikode) |
| Abstract: | Gold prices are quick to respond to world events. However, some of these events stand out, in the sense that they have had significant influence on the conditional mean and volatility of gold prices. In this paper, we have taken 30 historical events ranging from the suspension of dollar’s convertibility into gold in August 1971 to the end of the Quantitative Easing in the US in October 2014 and studied their impact on real gold prices. We find that the US economy and the current dollar-based monetary system is still the main driver of real gold prices. Our empirical exercise in this paper finds that the mean and variance of real gold prices have experienced significant changes primarily when the historical events in question either reinforced or challenged the economic dominance of the US and the role of dollar in the global monetary system. |
| Keywords: | Gold prices; historical events; hedge; safe haven |
| JEL: | E4 G1 C52 C58 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:iik:wpaper:198&r=mac |
| By: | Crespo Cuaresma, Jesus; Huber, Florian; Onorante, Luca |
| Abstract: | We propose a large-scale Bayesian VAR model with factor stochastic volatility to investigate the macroeconomic consequences of international uncertainty shocks on the G7 countries. The factor structure enables us to identify an international uncertainty shock by assuming that it is the factor most correlated with forecast errors related to equity markets and permits fast sampling of the model. Our findings suggest that the estimated uncertainty factor is strongly related to global equity price volatility, closely tracking other prominent measures commonly adopted to assess global uncertainty. The dynamic responses of a set of macroeconomic and financial variables show that an international uncertainty shock exerts a powerful effect on all economies and variables under consideration. |
| Keywords: | Factor stochastic volatility, vector autoregressive models, global propagation of shocks |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wus005:5462&r=mac |
| By: | Elena Del Rey; Maria Racionero; Jose I. Silva |
| Abstract: | We introduce parental leave policies in a labour search and matching model and study the e¤ect of leave duration on unemployment and wages. We show that the e¤ects are ambiguous and depend on whether the ratio of wage bargaining power of employer relative to worker is higher or lower than the ratio of the net value of the leave for employer relative to worker. Our theoretical results suggest that simulated labour market outcomes in search and matching models may be sensitive to the calibration of key parameters that we identify. |
| Keywords: | noncooperative game, aggregate game, con?ict, appropriation |
| JEL: | E24 J38 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:698&r=mac |
| By: | Steven Robins |
| Keywords: | Public Investments and Infrastructure |
| JEL: | E6 L3 R4 |
| URL: | http://d.repec.org/n?u=RePEc:cdh:ebrief:253&r=mac |
| By: | Kiyotaka NAKASHIMA (Faculty of Economics, Konan University, Japan); Masahiko SHIBAMOTO (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan); Koji TAKAHASHI (Department of Economics, University of California, San Diego, USA) |
| Abstract: | This paper proposes a novel method for identifying unconventional monetary policy shocks. Our identifying method incorporates the movement in two unconventional monetary policy indicators, namely the size and composition of the central bank’s balance sheet, after its policy decisions. Under some restrictions imposed in the vector autoregressive model, we identify two unconventional policy shocks, quantitative and qualitative shocks, as news shocks that best portend the current and future paths of the unconventional policy indicators in response to the policy shocks. The qualitative easing shocks have expansionary effects on real economy, while the quantitative easing shocks have contractionary effects. |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2017-05&r=mac |
| By: | Buiter, Willem H. |
| Abstract: | This paper investigates the implications for the nominal exchange rate of a Border Tax Adjustment (BTA) when there is BTA neutrality. A border tax adjustment is a change from an origin-based system of taxation, that taxes exports but exempts imports to a destination-based system that taxes imports but exempts exports. Both indirect taxes (e.g. a VAT) and direct taxes (e.g. a cash-flow corporate profit tax) can be subject to a BTA. In the US, a BTA for the corporate profit tax is under discussion. There is BTA neutrality when the real equilibrium, including measures of profitability and competitiveness, of an open economy is unchanged when it moves from an origin-based to a destination-based tax. The conventional wisdom on the exchange rate implications of a neutral BTA is that the currency of the country implementing the BTA will strengthen (appreciate) by a percentage equal to the VAT or CPT tax rate. The main insight of this note is that this 'appreciation presumption' is not robust, even when all conditions for full BTA neutrality are satisfied. Indeed, plausible alternative assumptions about constancy (or stickiness) of nominal prices support a weakening (depreciation) of the currency by the same percentage as the tax rate. On the basis on the very patchy available empirical information, it is not possible to take a view with any degree of confidence on the implications of a BTA for the nominal exchange rate, even if full BTA neutrality prevailed. Whether BTA neutrality itself is a feature of the real world is also a disputed empirical issue. Therefore, buyer (or seller) beware. |
| Keywords: | border tax adjustment,neutrality,equivalence,exchange rate appreciation,nominal price and wage rigidities |
| JEL: | E31 E62 F11 F13 F41 H25 H87 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201710&r=mac |
| By: | Bracha, Anat (Federal Reserve Bank of Boston); Burke, Mary A. (Federal Reserve Bank of Boston) |
| Abstract: | Several recent studies find that as of 2015, a significant share of working-age adults in the United States participates in nonstandard work arrangements. Such arrangements tend to lack long-term employment contracts and are often referred to as “gig economy” jobs. This paper investigates the implications of nonstandard or “informal” work for the measurement of employment status and labor market slack. Using original survey data, we find that as of 2015 roughly 37 percent of nonretired U.S. adults participated in some type of informal work, and roughly 20 percent participated in informal income-generating activities that did not exclusively involve renting out their own property or selling their own goods. The survey also elicits an individual’s employment status according to the definitions of the Bureau of Labor Statistics (BLS). While not the majority, a significant share of those who engage in informal work are classified as not being in the labor force; if all informal workers were counted as employed, the U.S. labor force participation rate (as of 2015) would have been 2 percentage points higher. In addition, individuals who are classified as working “part-time for economic reasons”—those who would like a full-time job but cannot obtain full-time hours—have the highest participation rate in informal work and the highest average hours per month. This latter finding suggests that informal work embodies labor market slack, and we offer several pieces of evidence that support the thesis that workers engage in informal work as a way to compensate for weak labor demand and may therefore drop informal work as formal labor market conditions improve. To estimate the amount of labor market slack embodied in informal work, we convert the total hours of informal work performed by those classified as employed part-time into a number of full-time job equivalents. This exercise yields a figure that ranges from roughly 275,000 to roughly 400,000, depending on the specifics of the calculation. At the same time, we point out that a significant share of informal work hours offer higher wages than what the same individuals earn in their formal jobs. Therefore, formal wages may need to increase by a relatively large margin moving forward in order to attract additional labor into the formal sector. |
| Keywords: | informal work; gig economy; BLS employment status; labor market slack |
| JEL: | E26 J21 J22 J46 |
| Date: | 2016–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:16-29&r=mac |
| By: | Guglielmo Maria Caporale; Hector Carcel; Luis A. Gil-Alana |
| Abstract: | This paper analyses the stochastic properties of and the bilateral linkages between the central bank policy rates of the US, the Eurozone, Australia, Canada, Japan and the UK using fractional integration and cointegration techniques respectively. The univariate analysis suggests a high degree of persistence in all cases: the fractional integration parameter d is estimated to be above 1, ranging from 1.26 (US) to 1.48 (UK), with the single exception of Japan, for which the unit root null cannot be rejected. Concerning the bivariate results, Australian interest rates are found to be cointegrated with the Eurozone and UK ones, Canadian rates with the UK and US ones, and Japanese rates with the UK ones. The increasing degree of integration of international financial markets and the coordinated monetary policy responses following the global financial crisis might both account for such linkages. |
| Keywords: | Interest Rates; Long memory; Fractional integration and cointegration |
| JEL: | C22 C32 E47 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1648&r=mac |
| By: | Andres Solimano; Diego Calderón Guajardo |
| Abstract: | Historically, Chile has been an economy dominated by mineral and agro-industrial products and subject to frequent external shocks particularly in copper prices. Since the 1980s, the authorities have developed various mechanisms to cope with these shocks and dampen their effects on the domestic business cycle. These mechanisms include a fiscal rule, an economic and social stabilization fund, a pension reserve fund, and a (informal) ‘defence fund’. The first two sovereign wealth funds are regulated by a Fiscal Responsibility Law and complemented by a flexible exchange rate regime and an autonomous Central Bank. This paper recognizes that this macro framework has been associated (causality is another matter) with reasonably good macro outcomes. However, the paper highlights some trade-offs and questions not always recognized in evaluations of the Chilean case and cautions against a blind endorsement of macro rules as the cornerstone for good macro management. In general, this framework entails more discretion than often portrayed and includes: (i) frequent revisions in the methodology that affects the fiscal rule and the level of the structural balance by the authorities, thereby reducing its anchoring role on expectations and policy predictability; (ii) SWFs tend to have clear rules for accumulating resources at good times but no rules for using them at bad times; and (iii) a possible bias to overaccumulation of resources in SWFs without paying attention to the opportunity cost of overinvesting in stabilization funds at the cost of less resources being available for funding egalitarian social policy in a high-inequality country. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2017-53&r=mac |
| By: | International Monetary Fund. |
| Abstract: | This 2016 Article IV Consultation highlights that Lebanon’s economic growth remains subdued. Following a sharp drop in 2011, growth edged upward briefly to 2–3 percent, but has now slowed again. The IMF staff estimates that GDP increased by 1 percent in 2015, and a similar growth rate in 2016 is projected. Lebanon’s traditional growth drivers—tourism, real estate, and construction—have received a significant blow and a strong rebound is unlikely based on current trends. In the absence of a turnaround in confidence, or a resolution of the Syrian conflict, growth is unlikely to return to potential (4 percent) soon. |
| Keywords: | Article IV consultation reports;Economic conditions;Economic growth;Fiscal risk;Public debt;Current account deficits;Fiscal policy;Fiscal consolidation;Monetary policy;Economic indicators;Balance of payments statistics;Debt sustainability analysis;Staff Reports;Press releases;Lebanon; |
| Date: | 2017–01–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:17/19&r=mac |
| By: | International Monetary Fund. |
| Abstract: | The recovery is strong and imbalances are falling fast, aided by past reforms. External tailwinds and expansionary fiscal policy also buoyed activity and job creation. The economy is now more resilient but adjustments are incomplete and structural weaknesses persist. In particular, high unemployment, elevated public debt and shortcomings in the regional fiscal framework, feeble productivity growth, and the still large negative net international investment position pose policy challenges. |
| Keywords: | Article IV consultation reports;Economic recovery;Economic growth;Fiscal policy;Labor markets;Unemployment;Labor market reforms;Fiscal reforms;Banking sector;Economic indicators;External Sector Report;Debt sustainability analysis;Staff Reports;Press releases;Spain; |
| Date: | 2017–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:17/23&r=mac |
| By: | Xavier Gabaix; David Laibson |
| Abstract: | We assume that perfectly patient agents estimate the value of future events by generating noisy, unbiased simulations and combining those signals with priors to form posteriors. These posterior expectations exhibit as-if discounting: agents make choices as if they were maximizing a stream of known utils weighted by a discount function, D(t). This as-if discount function reflects the fact that estimated utils are a combination of signals and priors, so average expectations are optimally shaded toward the mean of the prior distribution, generating behavior that partially mimics the properties of classical time preferences. When the simulation noise has variance that is linear in the event's horizon, the as-if discount function is hyperbolic, D(t)=1/(1+a t). Our agents exhibit systematic preference reversals, but have no taste for commitment because they suffer from imperfect foresight, which is not a self-control problem. In our framework, agents that are more skilled at forecasting (e.g., those with more intelligence) exhibit less discounting. Agents with more domain-relevant experience exhibit less discounting. Older agents exhibit less discounting (except those with cognitive decline). Agents who are encouraged to spend more time thinking about an intertemporal tradeoff exhibit less discounting. Agents who are unable to think carefully about an intertemporal tradeoff – e.g., due to cognitive load – exhibit more discounting. In our framework, patience is highly unstable, fluctuating with the accuracy of forecasting. |
| JEL: | D03 D14 E03 E23 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23254&r=mac |
| By: | Markus Brueckner; Joaquin Vespignani |
| Abstract: | This paper examines the relationship between trade uncertainty and income inequality. In countries where only a small share of the population is educated, an increase in trade uncertainty is associated with a significant increase in income inequality. As education of the population increases the relationship between trade uncertainty and income inequality becomes more muted. Trade uncertainty has no significant effect on income inequality in countries that are world leaders in education. Developing countries that want to reduce income inequality arising from trade uncertainty should therefore consider further improving their education system. |
| Keywords: | Trade Uncertainty, Inequality, Education |
| JEL: | F1 E2 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:acb:cbeeco:2017-648&r=mac |
| By: | João Silvestre |
| Abstract: | Sovereign default contagion in Eurozone has been under attention since the first problems in Greece at the end of 2009. Despite the improvements in the situation, in particular after several European Central Bank non- conventional monetary policy measures, the roots of the problem and policy prescriptions are still fiercely debated today. Using an agent-based model adapted from Tirole (2015), we simulate sovereign default contagion in a world where countries have random incomes, heterogeneous borrowing behaviors and risk aversion levels and where governments have the possibility to enter in ex-ante agreements to protect against default. We conclude that default contagion can be a very fast and ‘destructive’ process, higher spending countries tend to have lower disposable incomes and higher risk aversion levels are associated with lower default rates. |
| JEL: | C63 E62 G01 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp082017&r=mac |
| By: | Oasis Kodila-Tedika (University of Kinshasa, RDC); Akhenaton Izu-Makongo (University of Kinshasa, RDC) |
| Abstract: | Cet article tente de comprendre l’incidence de la croissance économique de la République démocratique du Congo sur l’évolution récente de la pauvreté. Les résultats obtenus ne semblent pas légitimer l’hypothèse de croissance pro-pauvres. Les élasticités totales de pauvreté présentent un signe positif et avec des coefficients faibles. En outre, les inégalités sont très importants que les effets de la croissance sur le ratio de pauvreté. |
| Keywords: | pauvreté, revenu, croissance, inégalité, RD Congo |
| JEL: | E60 F40 F59 D60 O55 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:17/003&r=mac |
| By: | Prettner, Klaus; Strulik, Holger |
| Abstract: | We analyze the effect of automation on economic growth and inequality in an R&D-based growth model with two types of labor: highskilled labor that is complementary to machines and low-skilled labor that is a substitute for machines. The model predicts that innovationdriven growth leads to increasing automation, an increasing skill premium, an increasing population share of graduates, increasing income and wealth inequality, a declining labor share, and (in an extension of the basic model) increasing unemployment. In contrast to Piketty's famous claim that faster economic growth reduces inequality, our theory predicts that faster economic growth promotes inequality. |
| Keywords: | Automation,R&D-Based Growth,Inequality,Wealth Concentration |
| JEL: | E23 E25 O31 O33 O40 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hohdps:082017&r=mac |
| By: | Kamiar Mohaddes (University of Cambridge); M. Hashem Pesaran |
| Abstract: | This paper investigates the global macroeconomic consequences of country-specific oil-supply shocks. Our contribution is both theoretical and empirical. On the theoretical side, we develop a model for the global oil market and integrate this within a compact quarterly model of the global economy to illustrate how our multi-country approach to modelling oil markets can be used to identify country-specific oil-supply shocks. On the empirical side, estimating the GVAR-Oil model for 27 countries/regions over the period 1979Q2 to 2013Q1, we show that the global economic implications of oil-supply shocks (due to, for instance, sanctions, wars, or natural disasters) vary considerably depending on which country is subject to the shock. In particular, we find that adverse shocks to Iranian oil output are neutralized in terms of their effects on the global economy (real outputs and financial markets) mainly due to an increase in Saudi Arabian oil production. In contrast, a negative shock to oil supply in Saudi Arabia leads to an immediate and permanent increase in oil prices, given that the loss in Saudi Arabian production is not compensated for by the other oil producers. As a result, a Saudi Arabian oil supply shock has significant adverse effects for the global economy with real GDP falling in both advanced and emerging economies, and large losses in real equity prices worldwide. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:927&r=mac |
| By: | Sara Moreira |
| Abstract: | This paper examines how the state of the economy when businesses begin operations affects their size and performance over the lifecycle. Using micro-level data that covers the entire universe of businesses operating in the U.S. since the late 1970s, I provide new evidence that businesses born in downturns start on a smaller scale and remain smaller over their entire lifecycle. In fact, I find no evidence that these differences attenuate even long after entry. Using new data on the productivity and composition of startup businesses, I show that this persistence is related to selection at entry and demand-side channels. |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:17-29&r=mac |
| By: | Stefano BOSI (EPEE, University of Evry); David DESMARCHELIER (BETA, University of Lorraine) |
| Abstract: | We provide necessary and sufficient conditions to detect local bifur- cations of three and four-dimensional dynamical systems in continuous time. We characterize not only the bifurcations of codimension one but also those of codimension two. The added value of this methodology rests on its tractability. To illustrate the simplicity of our approach, we provide two analytical applications of dimension three and four to environmental economics, complemented with numerical simulations. |
| Keywords: | local bifurcations, codimensions one and two, pollution, natural capital |
| JEL: | C61 E32 O44 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:eve:wpaper:17-01&r=mac |
| By: | Gustavo Hernández; Juan Mauricio Ramírez; Adrián Zuur |
| Abstract: | En este trabajo se construye una Matriz de Contabilidad Social con énfasis en el sector rural colombiano, la cual puede servir como insumo para el análisis de las estrategias recomendadas por la Misión para la Transformación del Campo, o de la Reforma Rural Integral contenida en los Acuerdos de Paz de la Habana. Esta base de datos busca capturar los principales rasgos y características del sector rural colombiano, enfatizando los siguientes aspectos: a) una sectorización de las actividades agropecuarias que permite identificar las actividades donde se concentra el sector empresarial y aquellas donde predominan la pequeña agricultura y la agricultura familiar; b) la consideración explícita de la formación de los ingresos laborales rurales a partir del trabajo familiar e independiente, y del trabajo asalariado, tanto en actividades agropecuarias como no agropecuarias; c) la diferenciación entre hogares rurales y hogares urbanos en términos de la formación de sus ingresos y sus patrones de gasto. |
| Keywords: | Matrices de Contabilidad Social, Sector Rural y Urbano, AgriculturaColombia |
| JEL: | C82 E01 O18 |
| Date: | 2016–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:col:000124:015418&r=mac |
| By: | António Afonso; José Alves |
| Abstract: | We assess the e ects of stock- ow adjustments (SFA) on short and long-term interest rates for 14 European countries between 1970 and 2015, in panel and SUR analysis. We conclude that an increase in SFA reduces long- and short-term interest rates, with higher reductions for short-term rates. Furthermore, the decreasing e ects of an increment in the stock- ow have reduced since the 2008-2009 nancial crisis. As expected, there is also an upward push on both interest rates from a rise in the debt ratio. Key Words : Stock- ow adjustment; Debt; Interest rates; SUR; Panel. |
| JEL: | C33 E43 H63 H83 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp052017&r=mac |
| By: | Braun, R. Anton (Federal Reserve Bank of Atlanta); Kopecky, Karen A. (Federal Reserve Bank of Atlanta); Koreshkova, Tatyana (Concordia University) |
| Abstract: | Half of U.S. 50-year-olds will experience a nursing home (NH) stay before they die, and a sizeable fraction will incur out-of-pocket expenses in excess of $200,000. Given the extent of NH risk, it is surprising that only about 10 percent of individuals over age 62 have private long-term care insurance (LTCI). This market also has a number of other puzzling features. Many applicants are denied coverage by insurers. Coverage of those who have insurance is incomplete. Insurance premia are high relative to an actuarily fair benchmark. Using a model that features agents with private information about their NH entry risk and an insurer who optimally chooses menus of LTCI contracts subject to participation and incentive compatibility constraints, this paper shows that these puzzles can be attributed to adverse selection, overhead costs on the insurer, and Medicaid. The model also accounts for the lack of correlation between NH entry and LTCI ownership. This final property is novel because our setup has only one dimension of private information. |
| Keywords: | long-term care insurance; Medicaid; adverse selection; insurance rejections |
| JEL: | E62 H31 H52 H55 |
| Date: | 2017–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2017-03&r=mac |
| By: | Ryan van Lamoen; Simona Mattheussens; Martijn Dröes |
| Abstract: | This paper examines the impact of Quantitative Easing (QE) in the Eurosystem on government bond yields and to what extent QE is causing government bond prices to deviate from their fundamental determinants. We apply a novel recursive estimation procedure developed by Phillips et al. (2015) to examine the existence of exuberant price behavior. The results show that government bond markets experienced exuberant price behavior in Euro Area countries following the announcement and implementation of several QE programs in 2014 and 2015. Especially the Public Sector Purchase Program (PSPP) contributed to exuberant price behavior as all countries experienced a divergence between observed and fundamental yield levels. However, almost no evidence of exuberance in government bond markets is found when QE policies are treated as drivers of government bond yields in addition to the traditional determinants. Given the influence of QE on government bond yields and prices, our findings imply that caution is warranted when this policy is eventually reversed. |
| Keywords: | Government bond yields; asset price bubbles; monetary policy |
| JEL: | G12 G15 E52 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:548&r=mac |
| By: | Mohamed Trabelsi (Dubai Economic Council, Economic Policy and Research Center); Ibrahim Elbadawi; Dhuha Fadhel |
| Abstract: | This paper empirically investigates the relationship between the capital buffers maintained by banks and the business cycle in a panel covering 70 banks drawn from all six GCC countries during the period 2004-2011. We estimate a standard partial adjustment model accounting for GDP per capita growth, the chosen measure of economy-wide business cycle, and a set of control variables using dynamic GMM panel estimation. We find banks’ capital buffers and the business cycle to be robustly and negatively associated. However, we also find this evidence to be stronger for the case of large banks where the access to capital equity markets and public support is likely to constitute a strong incentive to increase credit exposure and lower capital bases accordingly. On the other hand, for small banks, the negative effect was attenuated by their small size, which could be explained by their limited access to equity markets and the difficulty they face in re-building their capital bases during economic recessions. Not surprisingly, therefore, our finding coheres with the observation that small banks are more likely to adopt more conservative practices where capital buffers are less responsive to short run changes of the business cycle. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:925&r=mac |
| By: | Masaru Inaba; Keisuke Otsu |
| Abstract: | We study the features of regional business cycles and growth in Japan. We fi nd evidence of unconditional convergence over the 1955- 2008 period. For the 1975-2008 period, we fi nd evidence of conver- gence conditional on TFP gap, population growth, private investment rate and TFP growth. We also nd that the consumption-output correlation puzzle exists, which implies that the idiosyncratic income shocks are not shared among prefectures and regions. Our analysis implies that frictions in fi nancial markets are responsible for the low consumption risk-sharing among prefectures. |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:cnn:wpaper:17-003e&r=mac |
| By: | Ishac Diwan (Harvard University); Tarik Akin |
| Abstract: | The paper looks at the evolution of public finance in a select number of MENA countries over the past 50 years. The review covers the size of government, how it is financed, and the composition of expenditures and revenue. The size of government expenditures has swung dramatically over time, moving from an average in the region of over 50% of GDP in the 1980s to about 25% of GDP in the 2000s. We evaluates how such changes were implemented over time and assess the current fiscal situation in light of the inheritance of the past. We also evaluate the extent to which these trends correspond to the various political economy stories used to characterize the past and the lead-up to the uprisings of 2011. |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:914&r=mac |
| By: | Mahmoud Al Iriani (Dubai Economic Council, UAE); Yahsob Al Eriani |
| Abstract: | The link between natural resource outcomes and the quality of institutions has attracted considerable attention in natural resource literature. But only very recently has its link to fiscal rules and institutions been discussed, focusing mainly on developed economies. We conduct an assessment of the role fiscal rules and institutions play in Yemen, both an oil-producing and developing country. The analysis attempts to evaluate fiscal discipline and the resulting fiscal side of macroeconomic policies in this populous Arab country. The structure and quality of fiscal institutions in Yemen, and the rules governing them, are central in determining the developmental impact of the country’s oil and natural gas endowments. We show that Yemen’s economic volatility, and hence poor development experience, was in fact a natural result of the two-way interaction between fiscal institutions and natural resource rents. On one hand, realizing the benefits from natural resource endowments in Yemen requires adopting an appropriate set of working rules that reduce the unfavorable effects of resource abundance on the quality of institutions. On the other hand, high quality institutions and rules may help improve resource management, contributing to the realization of better economic performance in the future. |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:935&r=mac |
| By: | Geloso, Vincent; Kufenko, Vadim |
| Abstract: | In this paper, we consider whether or not inequality forces society to expend more resources on supervision which imposes an extra cost to doing business. Some argue that since inequality deteriorates social capital, there is a greater need for supervisory labor which is a costly burden to bear. We propose an alternative (but not mutually exclusive) explanation. We argue that the war on drugs leads to institutional decay and lower levels of trust which, in turn, force private actors to deploy resources to supervise workers and protect themselves. Our explanation complements the argument regarding the link between inequality and guard labor. |
| Keywords: | Economic Growth,Inequality,Drugs,Guard Labor |
| JEL: | N11 N21 E31 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hohdps:062017&r=mac |
| By: | Simplice Asongu (Yaoundé/Cameroun) |
| Abstract: | The survey puts some structure on recent empirical studies from the African Governance and Development institute (AGDI) on inclusive development published between 2016 and 2017 for the most part. The emphasis is exclusively on the inequality adjusted human development index (IHDI) because of the sparse scholarly literature on the indicator which was first published in 2010. The review provides relationships between the IHDI and inter alia: foreign aid, globalisation, information and communication technology, business dynamics and knowledge economy, software piracy, finance, health worker migration and the feasibility of common cross-country policies aimed at improving the IHDI. The survey is of policy relevance because inclusive human development is fundamental to Africa’s growth agenda in the post-2015 sustainable development era. |
| Keywords: | Inclusive human development; Africa |
| JEL: | E60 F40 F59 D60 O55 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:17/004&r=mac |
| By: | Juliane Begenau; Berardino Palazzo |
| Abstract: | Among stock market entrants, more firms over time are R&D–intensive with initially lower profitability but higher growth potential. This sample-selection effect determines the secular trend in U.S. public firms’ cash holdings. A stylized firm industry model allows us to analyze two competing changes to the selection mechanism: a change in industry composition and a shift toward less profitable R&D–firms. The latter is key to generating higher cash ratios at IPO, necessary for the secular increase, whereas the former mechanism amplifies this effect. The data confirm the prominent role played by selection, and corroborate the model’s predictions. |
| JEL: | E3 G1 G3 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23249&r=mac |
| By: | Walid Bahloul (Governance, Finance and Accounting Laboratory, Faculty of Business and Economics, University of Sfax, Sfax, Tunisia); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa) |
| Abstract: | Unlike the literature on macroeconomic news surprises and oil markets, which concentrates on spot prices and US news primarily, we analyze the impact of macroeconomic news surprises of Canada, Euro area, Japan, and UK (besides the US) on returns and volatility of oil futures for the West Texas Intermediate and Brent crude. We look at futures markets, since it is widely believe to predict the spot market movements. In addition, we also analyze possibility of asymmetric impact due to good and bad macroeconomic news surprises, as well as, the role of economic uncertainty of these economies in affecting the oil futures markets movements. We can draw two major conclusions: (a) Macroeconomic surprises, as well as uncertainties, of other economies (over and above that of the US) are found to be important in driving oil futures, with the effect of these other economies being relatively stronger than the US in some instances, and; (b) There is strong evidence of asymmetric effects, especially for volatility. |
| Keywords: | Macroeconomic news surprises, Uncertainty, Oil Futures, Returns and Volatility |
| JEL: | C32 Q41 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:201715&r=mac |