nep-mac New Economics Papers
on Macroeconomics
Issue of 2018‒04‒23
ninety-one papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Does a financial accelerator improve forecasts during financial crises?: Evidence from Japan with Prediction Pool Methods By Hasumi, Ryo; Iiboshi, Hirokuni; Matsumae, Tatsuyoshi; Nakamura, Daisuke
  2. Monetary policy, de-anchoring of inflation expectations, and the 'new normal' By Lucio Gobbi; Ronny Mazzocchi; Roberto Tamborini
  3. Money in the Production Function By Prescott, Edward C.; Wessel, Ryan
  4. Monetary Policy and Liquid Government Debt By Andolfatto, David; Martin, Fernando M.
  5. Revisiting Public Support for the Euro, 1999-2017: Accounting for the Crisis and the Recovery By Roth, Felix; Baake, Edgar; Jonung, Lars; Nowak-Lehmann, Felicitas
  6. Central Banks Going Long By Ricardo Reis
  7. The Public Investment Multipliers: Evidence from Stock Returns of Narrowly Defined Industry in Japan By KANAZAWA, Nobuyuki
  8. Measuring the Impact of Monetary Policy Attention on Global Asset Volatility Using Search Data By Paul Wohlfarth
  9. A stochastic estimated version of the Italian dynamic General Equilibrium Model (IGEM) By Nicola Acocella; Giorgio Alleva; Elton Beqiraj; Giovanni Di Bartolomeo; Fabio Di Dio; Marco Di Pietro; Francesco Felici; Brunero Liseo
  10. Financial Intermediary Capital By Rampini, Adriano A.; Viswanathan, S.
  11. Regional Consumption Responses and the Aggregate Fiscal Multiplier By Dupor, William D.; Karabarbounis, Marios; Kudlyak, Marianna; Mehkari, M. Saif
  12. The enduring link between demography and inflation By Juselius, Mikael; Takáts, Előd
  13. Complementarity, Income, and Substitution: A U(C,N) Utility for Macro By Bilbiie, Florin Ovidiu
  14. Financial Bubbles in Interbank Lending By Luisa Corrado; Tobias Schuler
  15. Financial Bubbles in Interbank Lending By Luisa Corrado; Tobias Schuler
  16. Trends, Cycles and Lost Decades: Decomposition from a DSGE Model with Endogenous Growth By Hasumi, Ryo; Iibsoshi, Hirokuni; Nakamura, Daisuke
  17. R&D Growth and Business Cycles Measured with an Endogenous Growth DSGE Model By Hasumi, Ryo; Iiboshi, Hirokuni; Nakamura, Daisuke
  18. How the baby boomers' retirement wave distorts model-based output gap estimates By Wolters, Maik Hendrik
  19. The Effect of Monetary Policy on Global Fixed Income Covariances By Paul Wohlfarth
  20. Experimental Evidence on the Cyclicality of Investment By Cortney Rodet; Andrew Smyth
  21. Financial reforms and credit growth in Nigeria: Empirical insights from ARDL and ECM techniques By Adeleye, Ngozi; Osabuohien, Evans; Bowale, Ebenezer; Matthew, Oluwatoyin; Oduntan, Emmanuel
  22. Effects of Unconventional Monetary Policy on European Corporate Credit By Machiel van Dijk; Andrei Dubovik
  23. The Global Macrofinancial Model By Francis Vitek
  24. The Response of European Energy Prices to ECB Monetary Policy By Hipòlit Torró
  25. Fiscal Implications of the Federal Reserve's Balance Sheet Normalization By Cavallo, Michele; Del Negro, Marco; Frame, W. Scott; Grasing, Jamie; Malin, Benjamin A.; Rosa, Carlo
  26. Trade in Commodities and Business Cycle Volatility By Kohn, David; Leibovici, Fernando; Tretvoll, Hakon
  27. Endogenous Growth and Real Effects of Monetary Policy: R&D and Physical Capital Complementarities in a Cash-in-Advance Economy By Pedro Mazeda Gil; Gustavo Iglésias,
  28. Age Gap in Voter Turnout and Size of Government Debt By Ryo Arawatari; Tetsuo Ono
  29. A Growth-Friendly Path for Building Fiscal Buffers in the Caucuses and Central Asia By Edward R Gemayel; Lorraine Ocampos; Matteo Ghilardi; James Aylward
  30. Disentangling the effects of a banking crisis: evidence from German firms and counties By Huber, Kilian
  31. Rent Creation and Sharing: New Measures and Impactson TFP By Gilbert Cette; Jimmy Lopez; Jacques Mairesse
  32. Inflation and professional forecast dynamics: an evaluation of stickiness, persistence, and volatility By Elmar Mertens; James M. Nason
  33. The U. S. economy: an optimistic outlook, but with some important risks: remarks at the Greater Boston Chamber of Commerce Economic Outlook Breakfast, Boston, Massachusetts, April 13, 2018 By Rosengren, Eric S.
  34. No Pain, No Gain. Multinational Banks in the Business Cycle By Qingqing Cao; Raoul Minetti; Maria Pia Olivero
  35. Mortgage Design in an Equilibrium Model of the Housing Market By Adam M. Guren; Arvind Krishnamurthy; Timothy J. McQuade
  36. Earnings Inequality and the Minimum Wage: Evidence from Brazil By Engbom, Niklas; Moser, Christian
  37. Medical Expenses and Saving in Retirement: The Case of U.S. and Sweden By Nakajima, Makoto; Telyukova, Irina A.
  38. Intertemporal equilibrium with heterogeneous agents, endogenous dividends and collateral constraints By Pham, Ngoc-Sang; Le Van, Cuong; Bosi, Stefano
  39. Mongolia; Staff Report for the Third Review Under the Extended Fund Facility-Press Release; Staff Report; and Statement by the Executive Director for Mongolia By International Monetary Fund
  40. International transmissions of aggregate macroeconomic uncertainty in small open economies: An empirical approach By Jamie L. Cross; Chenghan Hou; Aubrey Poon
  41. Monetary Policy Peculiarities in Countries with Natural Resources, with Significant Changes in Terms of Trade By Dobronravova, Elizaveta
  42. Dirty float or clean intervention? The Bank of England on the foreign exchange market, 1952-72 By Alain Naef
  43. Monetary Policy obeying the Taylor Principle Turns Prices into Strategic Substitutes By Camille Cornand; Frank Heinemann
  44. The effects of unconventional monetary policy in the euro area By Adam Elbourne; Kan Ji; Sem Duijndam
  45. Evaluating the Aggregate Effects of Tax and Benefit Reforms By Michal Horvath; Matus Senaj; Zuzana Siebertova; Norbert Svarda; Jana Valachyova
  46. Slow Convergence in Economies with Organization Capital By Luttmer, Erzo G. J.
  47. Is it the natural rate or ysteresis hypothesis for unemployment in Newly Industrialized Economies? By Dieu Nsenga; Mirada Nach; Hlalefang Khobai; Clement Moyo; Andrew Phiri
  48. Empirical Evidence for Collective Motion of Prices with Macroeconomic Indicators in Japan By KICHIKAWA Yuichi; IYETOMI Hiroshi; AOYAMA Hideaki; YOSHIKAWA Hiroshi
  49. On the Measurement of the Government Spending Multiplier in the United States An ARDL Cointegration Approach By Ebadi, Esmaeil
  50. Pricing Sin Stocks: Ethical Preference vs. Risk Aversion By Giuliano Curatola; Stefano Colonnello; Alessandro Gioffré
  51. Central bank independence-the case of the National Bank of Republic of Macedonia By Anita Angelovska - Bezhoska
  52. When Do We Repair the Roof? Insights from Responses to Fiscal Crisis Early Warning Signals By Jiro Honda; Rene Tapsoba; Ismael Issifou
  53. Econophysics Beyond General Equilibrium: the Business Cycle Model By Victor Olkhov
  54. Mentoring and the Dynamics of Affirmative Action By Michèle Müller-Itten; Aniko Ory
  55. Do interest rates play a major role in monetary policy transmission in China? By Güneş Kamber; Madhusudan Mohanty
  56. Economic Cycles and Their Synchronization: A Comparison of Cyclic Modes in Three European Countries By Lisa Sella; Gianna Vivaldo; Andreas Groth; Michael Ghil
  57. "'America First,' Fiscal Policy, and Financial Stability" By Michalis Nikiforos; Gennaro Zezza
  58. The UK (and Western) productivity puzzle: does Arthur Lewis hold the key? By Oulton, Nicholas
  59. Benefit reentitlement conditions in unemployment insurance schemes By Andersen, Torben M; Kristoffersen,; Svarer, Michael
  60. L'impact budgétaire de 30 ans d'immigration en France : (I) une approche comptable By Xavier Chojnicki; Lionel Ragot; Ndeye-Penda Sokhna
  61. Firm types, price-setting strategies, and consumption-tax incidence? By Nordström Skans, Oskar; Harju, Jarkko; Kosonen, Tuomas
  62. Exchange Rate Developments and Policies in the Caucasus and Central Asia By Mark A Horton; Hossein Samiei; Natan P. Epstein; Kevin Ross
  63. Capital Accumulation Game with Quasi-Geometric Discounting and Consumption Externalities By Koichi Futagami; Kiyoka Akimoto
  64. Myanmar; 2017 Article IV Consultation - Press Release; Staff Report; and Statement by the Executive Director for Myanmar By International Monetary Fund
  65. The Macroeconomics of the Circular Economy Transition: A Critical Review of Modelling Approaches By Andrew McCarthy; Rob Dellink; Ruben Bibas
  66. Synchronization of world economic activity By Andreas Groth; Michael Ghil
  67. Modelling the Global Price of Oil: Is there any Role for the Oil Futures-spot Spread? By Daniele Valenti
  68. Markups Across Space and Time By Eric Anderson; Sergio Rebelo; Arlene Wong
  69. Modeling Inflation Expectations in the Russian Economy By Perevyshin, Yury; Rykalin, A.S.
  70. Capital Flow Management with Multiple Instruments By Viral V. Acharya; Arvind Krishnamurthy
  71. Islamic Republic of Iran; 2018 Article IV Consultation - Press Release; Staff Report; and Statement by the Executive Director for the Islamic Republic of Iran By International Monetary Fund
  72. A generalised stochastic volatility in mean VAR By Haroon Mumtaz;
  73. Walking a Fine Line; Public Investment Scaling-Up and Debt Sustainability in Burkina Faso By Malangu Kabedi-Mbuyi; Mame Astou Diouf; Constant A Lonkeng Ngouana
  74. Features of Interest Rate Policy Under the Inflation Targeting Regime By Kiyutsevskaya, Anna; Trunin, Pavel
  75. Modeling fiscal sustainability in dynamic macro-panels with heterogeneous effects: Evidence from German federal states By Feld, Lars P.; Köhler, Ekkehard A.; Wolfinger, Julia
  76. "The Economics of Instability: An Abstract of an Excerpt" By Frank Veneroso
  77. Macroeconomic Determinants of the Labour Share of Income: Evidence from OECD Economies By Trofimov, Ivan D.; Md. Aris, Nazaria; Bin Rosli, Muhammad K. F.
  78. Towards a European Full Employment Policy By Ritzen, Jo; Zimmermann, Klaus F.
  79. Bayesian vector autoregressions By Miranda-Agrippino, Silvia; Ricco, Giovanni
  80. Predicting International Equity Returns: Evidence from Time-Varying Parameter Vector Autoregressive Models By Rangan Gupta; Florian Huber; Philipp Piribauer
  81. Do Financial Frictions Explain Chinese Firms’ Saving and Misallocation? By Yan Bai; Dan Lu; Xu Tian
  82. Interpreting the Oil Risk Premium: do Oil Price Shocks Matter? By Daniele Valenti; Matteo Manera; Alessandro Sbuelz
  83. Cyclical Behavior of Fiscal Policy among Sub-Saharan African Countries By Tetsuya Konuki; Mauricio Villafuerte
  84. Driving time, productivity, and the Fundamental Law of Road Congestion By Jesús Rodríguez; José L. Torres
  85. Accounting for Factorless Income By Karabarbounis, Loukas; Neiman, Brent
  86. Does the Great Recession imply the end of the Great Moderation? International evidence By Amélie Charles; Olivier Darné; Laurent Ferrara
  87. A Principal Component Simulation of Age-Specific Ferility - Impacts of Family and Social Policy on Reproductive Behavior in Germany By Vanella, Patrizio; Deschermeier, Philipp
  88. Income Inequality in France, 1900-2014: Evidence from Distributional National Accounts (DINA) By Garbinti, Bertrand; Goupille-Lebret, Jonathan; Piketty, Thomas
  89. Perfect Public Offering: A Process to Provide Complete Ownership & Direction of Businesses to the Entire Public By Williams, Ronald
  90. Des jardins partagés dans les quartiers d'habitat social : un moyen de repenser les pratiques alimentaires ? By Darmon, N.; Martin, P.; Scheromm, P.; Ghestem, F.; Marchand, P.; Consalès, J.N.
  91. Criteria for “good” justifications By Jan Fredrik Qvigstad; Tore Schei

  1. By: Hasumi, Ryo; Iiboshi, Hirokuni; Matsumae, Tatsuyoshi; Nakamura, Daisuke
    Abstract: Using a Markov-switching prediction pool method (Waggoner and Zha, 2012) in terms of density forecasts, we assess the time-varying forecasting performance of a DSGE model incorporating a financial accelerator a la Bernanke et al. (1999) with the frictionless model by focusing on periods of financial crisis including the so-called "Bubble period" and the "Lost decade" in Japan. According to our empirical results, the accelerator improves the forecasting of investment over the whole sample period, while forecasts of consumption and inflation depend on the fluctuation of an extra financial premium between the policy interest rate and corporate loan rates. In particular, several drastic monetary policy changes might disrupt the forecasting performance of the model with the accelerator. A robust check with a dynamic pool method (Del Negro et al., 2016) also supports these results.
    Keywords: Density forecast, Optimal prediction pool, Markov-switching prediction pool, Dynamic prediction pool, Bayesian estimation, Markov Chain Monte Carlo, Financial Friction.
    JEL: C3 C32 C53 E3 E32 E37
    Date: 2018–03
  2. By: Lucio Gobbi; Ronny Mazzocchi; Roberto Tamborini
    Abstract: Persistently low inflation rates in the Euro Area raise the question whether inflation is still credibly anchored to the Euro-system’s medium term target of below, but close to 2%. The purpose of this paper is twofold. First, we investigate why agents’ expectations that over the business cycle inflation will remain in line with the target begin to falter. Our hypothesis is that agents form expectations in terms of their confidence in the "normal regime", which is updated observing the state of the economy. Second, we study how the de-anchoring of expectations interacts with monetary policy determining whether the central bank is still able to achieve its target - and hence re-anchor inflation expectations - or whether the system drifts away towards depressed states of low inflation and output. Two are our main findings. The first is that, facing unfavourable shocks, if inflation expectations "fall faster" than the policy rate, and the zero lower bound is reached without correcting the shock, the system converges to a new steady state - the “new normal†- with permanent negative gaps. The second is that a more aggressive monetary policy is ineffective both at the ZLB and above the ZLB, when the shock is large and/or when the reactivity of inflation expectations is high enough. This last finding seems to support the necessity, in those conditions, to abandon conventional monetary policy and to switch to an aggressive reflationary policy that prevents the entrenchment of deflationary expectations
    Keywords: Monetary Policy, Zero Lower Bound, New Normal, Inflation Expectations
    JEL: E50 E52 E58
    Date: 2018
  3. By: Prescott, Edward C. (Federal Reserve Bank of Minneapolis); Wessel, Ryan (Arizona State University)
    Abstract: Businesses hold large quantities of cash reserves, which have average returns well below their investments in tangible capital. Businesses do this because these monetary assets provide services. One implication is that money services is a factor of production in capital theoretic valuation equilibrium models. Our aggregate production function is consistent with both the classical demand for money function relationship and with extended periods of near zero short-term nominal interest rates. In our model economy, there is a 100 percent reserve requirement on all demand deposits. Demand deposits are legal tender. We find (i) money services in the production function necessitates revisions in the national accounts; (ii) monetary and fiscal policy cannot be completely separated; (iii) for a given policy, equilibrium is either unique or does not exist; and (iv) Friedman’s monetary satiation is not optimal. We make quantitative comparisons between interest rate targeting regimes and between inflation rate targeting regimes. The best inflation rate target was 2 percent. {{p}} This paper is related to but fundamentally different from Staff Report 530: "Fiat Value in the Theory of Value.”
    Keywords: 100 percent reserve banking; Money in production function; Interest rate targeting; Inflation rate targeting; Friedman monetary satiation; zero lower bound
    JEL: E0 E4 E5 E6
    Date: 2018–04–10
  4. By: Andolfatto, David (Federal Reserve Bank of St. Louis); Martin, Fernando M. (Federal Reserve Bank of St. Louis)
    Abstract: We examine the conduct of monetary policy in a world where the supply of outside money is controlled by the fiscal authority-a scenario increasingly relevant for many developed economies today. Central bank control over the long-run inflation rate depends on whether fiscal policy is Ricardian or Non-Ricardian. The optimal monetary policy follows a generalized Friedman rule that eliminates the liquidity premium on scarce treasury debt. We derive conditions for determinacy under both fiscal regimes and show that they do not necessarily correspond to the Taylor principle. In addition, Non-Ricardian regimes may suffer from multiplicity of steady-states when the government runs persistent deficits.
    Keywords: monetary policy; in ation; Taylor rule; determinacy; Ri- cardian; liquid bonds
    JEL: E40 E52 E60 E63
    Date: 2018–01–16
  5. By: Roth, Felix (University of Hamburg); Baake, Edgar (University of Hamburg); Jonung, Lars (Department of Economics, Lund University); Nowak-Lehmann, Felicitas (University of Göttingen)
    Abstract: This paper explores the evolution and determinants of public support for the euro since its creation in 1999 until the end of 2017, thereby covering the pre-crisis experience of the euro, the crisis years and the recent recovery. Using uniquely large macro and micro databases and applying up-to-date econometric techniques, we revisit the growing literature on public support for the euro. First, we find that a majority of respondents support the euro in nearly all 19 euro area member states. Second, we offer fresh evidence that economic factors are the main determinants of changes in the level of support for the euro: crisis reduces support while periods of recovery bode well for public support. This result holds for both macroeconomic and microeconomic factors. Turning to a broad set of socio-economic variables, we find clear differences in support due to education and perceptions of economic status.
    Keywords: Euro; public support for the euro; ECB; EU; euro crisis; unemployment; inflation; monetary union
    JEL: C23 E24 E31 E32 E42 E58 J64 O52
    Date: 2018–04–18
  6. By: Ricardo Reis (Centre for Macroeconomics (CFM); London School of Economics (LSE))
    Abstract: Central banks have sometimes turned their attention to long-term interest rates as a target or as a diagnosis of policy. This paper describes two historical episodes when this happened—the US in 1942-51 and the UK in the 1960s—and uses a model of inflation dynamics to evaluate monetary policies that rely on going long. It concludes that these policies for the most part fail to keep inflation under control. A complementary methodological contribution is to re-state the classic problem of monetary policy through interest-rate rules in a continuous-time setting where shocks follow diffusions in order to integrate the endogenous determination of inflation and the term structure of interest rates.
    Keywords: Taylor rule, Yield curve, Pegs, Ceilings, Affine models
    JEL: E31 E52 E58
    Date: 2018–03
  7. By: KANAZAWA, Nobuyuki
    Abstract: This paper provides an evidence on the macroeconomic impacts of public investment. I extract public investment news shocks from the excess return of narrowly defined road pavement firms in Japan and use them as an instrument for future government spending. I found that the extracted news shocks predict the future government spending through changes in future public investment. The result shows that the public investment multiplier is 1.64 a year after the shock and about 5 after four years, which is considerably larger than fiscal multipliers estimated in previous studies. The findings highlight the importance of the types of government spending, in addition to the amount of the spending, in determining the overall effects of countercyclical fiscal policies.
    Keywords: Fiscal multiplier, Stock returns, Public Investment, Infrastructure, Investment
    JEL: E32 E62 H54
    Date: 2018–03
  8. By: Paul Wohlfarth (Birkbeck, University of London)
    Abstract: We study monetary policy introducing a novel measure for policy attention based on Google Trends data. We apply the obtained indices to fixed income data for the US and the Eurozone in a specification motivated by a preferred-habitat model to test for monetary policy transmission domestically and internationally. Our findings suggest an impact of monetary policy on variance processes only and provides evidence for an international channel of monetary transmission on both money and capital markets. This is, to our knowledge, the first attempt to use search-engine data in the context of monetary policy.
    Keywords: attention, internet search, Google, monetary policy, ECB, FED, international financial markets, macro-finance, sovereign bonds, international finance, bond markets, preferred habitat models.
    JEL: E52 E43 E44 G10 G15
    Date: 2018–03
  9. By: Nicola Acocella; Giorgio Alleva; Elton Beqiraj; Giovanni Di Bartolomeo; Fabio Di Dio; Marco Di Pietro; Francesco Felici; Brunero Liseo
    Abstract: We estimate with Bayesian techniques the Italian dynamic General Equilibrium Model (IGEM), which has been developed at the Italian Treasury Department, Ministry of Economy and Finance, to assess the effects of alter-native policy interventions. We analyze and discuss the estimated effects of various shocks on the Italian economy. Compared to the calibrated version used for policy analysis, we find a lower wage rigidity and higher adjustment costs. The degree of prices and wages indexation to past inflation is much smaller than the indexation level assumed in the calibrated model. No substantial difference is found in the estimated monetary parameters. Estimated fiscal multipliers are slightly smaller than those obtained from the calibrated version of the model.
    Keywords: Dynamic General equilibrium model, Bayesian estimation, simulation analysis, Italy
    JEL: E27 E30 E60
    Date: 2018–04
  10. By: Rampini, Adriano A.; Viswanathan, S.
    Abstract: We propose a dynamic theory of financial intermediaries that are better able to collateralize claims than households, that is, have a collateralization advantage. Intermediaries require capital as they have to finance the additional amount that they can lend out of their own net worth. The net worth of financial intermediaries and the corporate sector are both state variables affecting the spread between intermediated and direct finance and the dynamics of real economic activity, such as investment, and financing. The accumulation of net worth of intermediaries is slow relative to that of the corporate sector. The model is consistent with key stylized facts about macroeconomic downturns associated with a credit crunch, namely, their severity, their protractedness, and the fact that the severity of the credit crunch itself affects the severity and persistence of downturns. The model captures the tentative and halting nature of recoveries from crises.
    Keywords: Collateral; Financial constraints; Financial crises; Financial Intermediation; investment
    JEL: E32 E44 G21 G32
    Date: 2018–03
  11. By: Dupor, William D. (Federal Reserve Bank of St. Louis); Karabarbounis, Marios; Kudlyak, Marianna; Mehkari, M. Saif
    Abstract: We use regional variation in the American Recovery and Reinvestment Act (2009-2012) to analyze the effect of government spending on consumer spending. Our consumption data come from household-level retail purchases in Nielsen and auto purchases from Equifax credit balances. We estimate that a $1 increase in county-level government spending increases consumer spending by $0.18. We translate the regional consumption responses to an aggregate fiscal multiplier using a multi-region, New Keynesian model with heterogeneous agents and incomplete markets. Our model successfully generates the estimated positive local multiplier, a result that distinguishes our incomplete markets model from models with complete markets. The aggregate consumption multiplier is 0.4, which implies an output multiplier higher than one. The aggregate consumption multiplier is almost twice the local estimate because trade linkages propagate government spending across regions.
    Keywords: Consumer Spending; Fiscal Multiplier; Regional Variation; Heterogeneous Agents
    JEL: E21 E62 H31 H71
    Date: 2018–03–16
  12. By: Juselius, Mikael; Takáts, Előd
    Abstract: Demographic shifts, such as population ageing, have been suggested as possible explanations for the recent decade-long spell of low inflation. We identify age structure effects on inflation from cross-country variation in a panel of 22 countries from 1870 to 2016 that includes standard monetary factors. We document a robust relationship that is in line with the lifecycle hypothesis: a larger share of dependent population is inflationary, whereas a larger share of working age population is disinflationary. This relationship accounts for the bulk of trend inflation, for instance, about 7 percentage points of US disinflation since the 1980s. It predicts rising inflation over the coming decades.
    JEL: E31 E52 J11
    Date: 2018–04–06
  13. By: Bilbiie, Florin Ovidiu
    Abstract: In business-cycle, macro models the elasticity of intertemporal substitution (EIS) governs the economy's response to demand shocks and policy changes ("multipliers"). With general non-separable preferences, the EIS is determined by consumption-hours complementarity and the income effect on hours. Complementarity helps generate business-cycle co-movement following demand shocks, fiscal multipliers, and allows reconciling low EIS with low income-wealth effects. Yet existing utility functions restrict either complementarity, or income effects---or both---and artificially imply that EIS is exclusively a function of either. I propose a novel utility function where both complementarity and the income effect are arbitrary and can be calibrated separately.
    Keywords: business-cycle co-movement; consumption-hours complementarity; elasticity of intertemporal substitution; Fiscal multipliers; income and wealth effects; news shocks
    JEL: D11 E21 E62 H31
    Date: 2018–03
  14. By: Luisa Corrado; Tobias Schuler
    Abstract: As a result of the global financial crisis countercyclical capital requirements have been discussed to prevent financial bubbles generated in the banking sector and to mitigate the adverse effects of financial repression after a bubble burst. This paper analyses the effects of an endogenous capital requirement based on the credit-to-GDP gap along with other policy instruments. We develop a macroeconomic framework which endogenizes market expectations on asset values and allows for interbank transactions. We then show how a bubble in the banking sector relaxes financing constraints. In policy experiments we find that an endogenous capital requirement can effectively reduce the impact of a financial bubble. We show that central bank intervention (\leaning against the wind") instead has only a minor effect.
    Keywords: Financial bubbles, credit-to-GDP gap, endogenous capital requirement, stabilization policies
    JEL: E44 E52
    Date: 2018
  15. By: Luisa Corrado (DEF & CEIS,University of Rome "Tor Vergata"); Tobias Schuler (Ifo Institute)
    Abstract: As a result of the global financial crisis countercyclical capital requirements have been discussed to prevent financial bubbles generated in the banking sector and to mitigate the adverse effects of financial repression after a bubble burst. This paper analyses the effects of an endogenous capital requirement based on the credit-to-GDP gap along with other policy instruments. We develop a macroeconomic framework which endogenizes market expectations on asset values and allows for interbank transactions. We then show how a bubble in the banking sector relaxes financing constraints. In policy experiments we find that an endogenous capital requirement can effectively reduce the impact of a financial bubble. We show that central bank intervention ("leaning against the wind") instead has only a minor effect.
    Keywords: Financial bubbles, credit-to-GDP gap, endogenous capital requirement, stabilization policies
    JEL: E44 E52
    Date: 2018–04–06
  16. By: Hasumi, Ryo; Iibsoshi, Hirokuni; Nakamura, Daisuke
    Abstract: In this paper we incorporate endogenous productivity growth into a medium-scale new Keynesian dynamic stochastic general equilibrium (DSGE) model, to which a new shock regarding R&D activities is added. By matching the model parameters to the Japanese economy from 1980:Q2 to 2013:Q4 and decomposing the output into trend and cycle components, we find that the stagnation of the so-called lost decades was caused by a decline in economic growth as well as major recessions in the business cycle. The common trend estimated by our model is based on multiple time series data and is much more volatile than the trend extracted by either the Hodrick-Prescott or the band-pass filter.
    Keywords: endogenous TFP growth, New Keynesian DSGE, trend shift, technological change
    JEL: C32 E32 O47
    Date: 2018–01–31
  17. By: Hasumi, Ryo; Iiboshi, Hirokuni; Nakamura, Daisuke
    Abstract: We consider how and the extent to which a pure technology shock driven by R&D activities impacts on business cycles as well as economic growth, using a medium-scale neo-classical dynamic stochastic general equilibrium (DSGE) model following Comin and Gertler (2006). We try to identify a pure technology shock by adopting "intellectual property product" first entered in 2008 SNA which can be regarded as R&D activity, and by assuming "time to build" by Kydland and Prescott (1982) in the process converting from innovations to products. Our empirical result based on a Bayesian analysis reports a common stochastic trend driven by the pure technology shock is likely to be procyclical, and it accounts for nearly half of variation of the real GDP whose remaining is explained by business cycle components. Meanwhile, a TFP shock, substituting for the R&D shocks, seems to move the common trend independently with business cycle.
    Keywords: R&D shock, technology shock, dynamic stochastic general equilibrium model, common stochastic trend, endogenous growth model
    JEL: C32 E32 O47
    Date: 2017–08–24
  18. By: Wolters, Maik Hendrik
    Abstract: The paper illustrates based on an example the importance of consistency between the empirical measurement and the concept of variables in estimated macroeconomic models. Since standard New Keynesian models do not account for demographic trends and sectoral shifts, the authors proposes adjusting hours worked per capita used to estimate such models accordingly to enhance the consistency between the data and the model. Without this adjustment, low frequency shifts in hours lead to unreasonable trends in the output gap, caused by the close link between hours and the output gap in such models. The retirement wave of baby boomers, for example, lowers U.S. aggregate hours per capita, which leads to erroneous permanently negative output gap estimates following the Great Recession. After correcting hours for changes in the age composition, the estimated output gap closes gradually instead following the years after the Great Recession.
    Keywords: low frequency trends,demographic trends,hours per capita measurement,output gap estimates,DSGE models,Bayesian estimation
    JEL: C54 E32 J11
    Date: 2018
  19. By: Paul Wohlfarth (Birkbeck, University of London)
    Abstract: We analyse the effect of monetary policy on dynamic covariances on global fixed income markets, using a novel measure for monetary policy attention based on Google Search data. We filter covariances using a Dynamic Conditional Correlation model as baseline case and a BEKK model as well as a long-memory exponential smoother proposed by RiskMetrics for robustness. We find evidence for direct impact of policy on both asset variances and covariances domestically and internationally, supporting both signalling and portfolio rebalancing channels in the context of international policy transmission.
    Keywords: attention, internet search, Google, monetary policy, ECB, FED, policy effects, international financial markets, macro-finance, sovereign bonds, international finance, bond markets.
    JEL: E52 E44 G1 G10 G15 C32
    Date: 2018–02
  20. By: Cortney Rodet (Department of Economics, Ohio University); Andrew Smyth (Department of Economics, Marquette University and Economic Science Institute, Chapman University)
    Abstract: We report laboratory experiments investigating the cyclicality of investment. In our setting, optimal investment is counter-cyclical because investment costs fall following market downturns. However, we do not observe counter-cyclical investment. Instead, heuristic investment models where firms invest a fixed percentage of their liquidity, or a fixed percentage of anticipated market demand, better fit our data on average than does optimal investment. We also report a control treatment without cost changes and a treatment with asymmetric investment liquidity. Both of these extensions support our main result.
    Keywords: investment, business cycles, heuristics, experimental economics
    JEL: C90 D22 E22 E32 L16
    Date: 2018
  21. By: Adeleye, Ngozi; Osabuohien, Evans; Bowale, Ebenezer; Matthew, Oluwatoyin; Oduntan, Emmanuel
    Abstract: In the last 37 years Nigeria has undergone several stages of financial reforms with different impacts on the economy. Hence, this paper empirically analyses the impact of financial reforms on credit growth in Nigeria using annual data from 1980 to 2016. The research work hinges on the theoretical underpinning of the McKinnon-Shaw hypothesis on the relevance of financial reforms in a lagging economy. Analysing the data with autoregressive distributed lag (ARDL) error correction representation and bounds testing techniques, we notably find evidence to this hypothesis and state that at higher real interest rate there is increased financial intermediation evidenced by credit growth. Other findings are that in the long-run, financial system deposits, inflation rate and per capita GDP are strong asymmetrical predictors of credit growth and real interest rate (the financial reform indicator) while the short-run relationships are indicator-specific. We further show that a long-run cointegration relationship exists between domestic credit and other covariates and likewise between the real interest rate and its regressors.
    Keywords: autoregressive distributed lag; bounds testing, cointegration, credit growth, financial reform, interest rate
    JEL: E43 E44 G18 G19
    Date: 2017
  22. By: Machiel van Dijk (CPB Netherlands Bureau for Economic Policy Analysis); Andrei Dubovik (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: In this paper we investigate whether the targeted longer-term refinancing operations (TLTRO) and the asset purchase program (APP) led to lower interest rates on new corporate credit, and whether the signalling channel and the capital relief channel played any role in the transmission of these ECB policies. We find that both APP and TLTRO contributed to lower long-term interest rates on new corporate credit and to flatter yield curves, with APP having a stronger effect. However, we find no support that either the signalling or the capital relief channel were conducive in this respect.
    JEL: E43 E58 G21
    Date: 2018–02
  23. By: Francis Vitek
    Abstract: This paper documents the theoretical structure and empirical properties of the latest version of the Global Macrofinancial Model (GFM). This dynamic stochastic general equilibrium model of the world economy, disaggregated into forty national economies, was developed to support multilaterally consistent macrofinancial policy, risk and spillover analysis. It features a range of nominal and real rigidities, extensive macrofinancial linkages, and diverse spillover transmission channels. These macrofinancial linkages encompass bank and capital market based financial intermediation, with financial accelerator mechanisms linked to the values of the housing and physical capital stocks. A variety of monetary policy analysis, fiscal policy analysis, macroprudential policy analysis, spillover analysis, and forecasting applications of the GFM are demonstrated. These include quantifying the monetary, fiscal and macroprudential policy transmission mechanisms, accounting for business cycle fluctuations, and generating relatively accurate forecasts of inflation and output growth.
    Date: 2018–04–09
  24. By: Hipòlit Torró (University of Valencia, Department of Financial and Actuarial Economics)
    Abstract: To our knowledge, this paper is the first to discuss the response of European energy commodity prices to unexpected monetary policy surprises from the European Central Bank. Using the Rigobon (2003) identification through heteroscedasticity method, we find a significant and positive response during the crisis period for Brent and coal. Similar results are obtained by other authors for European financial assets in this period. This result reinforces the idea that during this period, financial assets and some commodities positively responded to conventional and unconventional expansionary monetary policy measures, increasing confidence about the survival of the European monetary union. The remaining European energy commodities (electricity, EUAs, and natural gas prices) seem to be unaffected by monetary policy actions. We think these results are of interest to those economic agents and institutions involved in European energy markets and are especially important for the European Central Bank in order to predict the consequences of its monetary policy on the inflation objective.
    Keywords: Brent, Monetary Policy, European Central Bank, Energy Commodities
    JEL: C26 E58 G13 Q41
    Date: 2018–03
  25. By: Cavallo, Michele (Federal Reserve Board); Del Negro, Marco (Federal Reserve Bank of New York); Frame, W. Scott (Federal Reserve Bank of Atlanta); Grasing, Jamie (University of Maryland); Malin, Benjamin A. (Federal Reserve Bank of Minneapolis); Rosa, Carlo (Federal Reserve Bank of New York)
    Abstract: The paper surveys the recent literature on the fiscal implications of central bank balance sheets, with a special focus on political economy issues. It then presents the results of simulations that describe the effects of different scenarios for the Federal Reserve's longer-run balance sheet on its earnings remittances to the U.S. Treasury and, more broadly, on the government's overall fiscal position. We find that reducing longer-run reserve balances from $2.3 trillion (roughly the current amount) to $1 trillion reduces the likelihood of posting a quarterly net loss in the future from 30 percent to under 5 percent. Further reducing longer-run reserve balances from $1 trillion to pre-crisis levels has little effect on the likelihood of net losses.
    Keywords: Central bank balance sheets; Monetary policy; Remittances
    JEL: E58 E59 E69
    Date: 2018–01–05
  26. By: Kohn, David; Leibovici, Fernando (Federal Reserve Bank of St. Louis); Tretvoll, Hakon
    Abstract: This paper studies the role of the patterns of production and international trade on the higher business cycle volatility of emerging economies. We study a multi-sector small open economy in which firms produce and trade commodities and manufactures. We estimate the model to match key cross-sectional differences across countries: emerging economies run trade surpluses in commodities and trade deficits in manufactures, while sectoral trade flows are balanced in developed economies. We find that these differences amplify the response of emerging economies to fluctuations in commodity prices. We show evidence consistent with these findings using cross-country data.
    Keywords: International business cycles; output volatility; emerging economies
    JEL: E32 F4 F41 F44
    Date: 2018–03–01
  27. By: Pedro Mazeda Gil (University of Porto, Faculty of Economics, and cef.up); Gustavo Iglésias, (University of Porto, Faculty of Economics)
    Abstract: We study the real long-run effects of inflation and of the structural stance of monetary policy in the context of a monetary model of R&D-driven endogenous growth complemented with physical capital accumulation. We look into the effects on a set of real macroeconomic variables that have been of interest to policymakers – the economic growth rate, the real interest rate, the physical investment rate, R&D intensity, and the velocity of money –, and which have been analysed from the perspective of different, separated, strands of the theoretical and empirical literature. Additionally, we analyse the theoretical predictions of our model as regards the effects of inflation on the effectiveness of real industrial policy shocks and on the market structure, assessed namely by the average firm size, and present novel cross-country evidence on the empirical relationship between the latter and the long-run inflation rate.
    Keywords: Keywords: Endogenous growth, R&D, physical capital, firm size, cash-in-advance, inflation, money.
    JEL: O41 O31 E41
    Date: 2018–04
  28. By: Ryo Arawatari (Graduate School of Economics, Nagoya University); Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: We consider a cross-country difference of age gap in voter turnout and its im-pact on fiscal policymaking in a multi-country, overlapping-generations model. We present con ict over fiscal policy between successive generations (i.e., the young and elderly). We show that higher turnout of the elderly in voting may have a non- monotone effect on the size of government debt, depending on voters' inter-temporal elasticity of substitution of public expenditure.
    Keywords: fiscal policy; voter turnout; public debt; probabilistic voting; small open economies.
    JEL: D70 E62 H63
    Date: 2016–10
  29. By: Edward R Gemayel; Lorraine Ocampos; Matteo Ghilardi; James Aylward
    Abstract: Since 2014, large and persistent external shocks have hit the CCA region, particularly a slump in global commodity prices and slower growth in its key economic partners. Fiscal accommodation, along with currency adjustment, has helped the CCA mitigate the impact of the external shocks. However, amid weakening revenues, increased public spending has widened budget deficits, weakened external balances, and increased public debts. Fiscal policy and strengthening fiscal frameworks must play a central role in helping build buffers and ensuring debt sustainability while supporting growth. This requires (1) tightening fiscal policies to reduce deficits to help restore external balance and fiscal sustainability, (2) strengthening tax systems and tax collection and tilting expenditure toward a more productive and growth-enhancing composition, and (3) implementing public financial management reforms and strengthening fiscal institutions, including through fiscal rules.
    Keywords: Fiscal analysis;Fiscal management;Fiscal policy;Growth acceleration;Economic growth;Production growth;Fiscal analysis;Fiscal management;Fiscal policy;Growth acceleration;Economic growth;Production growth
    Date: 2018–04–10
  30. By: Huber, Kilian
    Abstract: Lending cuts by banks directly affect the firms borrowing from them, but also indirectly depress economic activity in the regions in which they operate. This paper moves beyond firm-level studies by estimating the effects of an exogenous lending cut by a large German bank on firms and counties. I construct an instrument for regional exposure to the lending cut based on a historic, postwar breakup of the bank. I present evidence that the lending cut affected firms independently of their banking relationships, through lower aggregate demand and agglomeration spillovers in counties exposed to the lending cut. Output and employment remained persistently low even after bank lending had normalized. Innovation and productivity fell, consistent with the persistent effects.
    JEL: E32 E44 G21 G32 R11 R23
    Date: 2018–03–01
  31. By: Gilbert Cette; Jimmy Lopez; Jacques Mairesse
    Abstract: This analysis proposes new measures of rent creation or (notional) mark-up and workers’ share of rents on cross-country-industry panel data. While the usual measures of mark-up rate implicitly assume perfect labor markets, our approach relaxes this assumption, and takes into account that part of firms’ rent created in an industry is shared with workers to an extent which can vary with their skills. Our results are based on a cross-country-industry panel covering 14 OECD countries and 19 industries over the 1985-2005 period. In a first part of our analysis we draw on OECD indicators of product and labor market (anticompetitive) regulations to test how they are related to our new measures of mark-up and rent-sharing. We find that anti-competitive Non-Manufacturing Regulations (NMR) affect mark-up rates positively, and hence firms’ rent creation and workers’ share of rent, whereas Employment Protection Legislation (EPL) has no impact on rent creation, but boosts workers’ wages per hour. However, we observe that these wage increases are offset by a negative impact from EPL on hours worked per output unit, leading to a non-significant impact of EPL on workers’ share of rents. The effects of EPL for low-skilled workers appear to be more pronounced than those for medium-skilled workers, both being much greater than for highly-skilled workers. In the second part of our analysis, we estimate the impacts of our new measures on Total Factor Productivity (TFP) in the framework of a straightforward regression model. We use the OECD regulations indicators as relevant instrument to take care of endogeneity and to make sure that the resulting estimates assess the proper regulation impacts of rent creation and sharing without being biased by other confounding effects. We find that less competition in the product and labor markets as assessed by our measures of mark-up and workers’ share of rents have both substantial negative impacts on TFP.
    JEL: C23 E22 E24 E30 L50 O43 O47
    Date: 2018–03
  32. By: Elmar Mertens; James M. Nason
    Abstract: This paper studies the joint dynamics of real-time U.S. inflation and average inflation predictions of the Survey of Professional Forecasters (SPF) based on sample ranging from 1968Q4 to 2017Q2. The joint data generating process (DGP) comprises an unobserved components (UC) model of inflation and a sticky information (SI) prediction mechanism for the SPF predictions. We add drifting gap inflation persistence to a UC model in which stochastic volatility (SV) affects trend and gap inflation. Another innovation puts a time-varying frequency of inflation forecast updating into the SI prediction mechanism. The joint DGP is a nonlinear state space model (SSM). We estimate the SSM using Bayesian tools grounded in a Rao-Blackwellized auxiliary particle filter, particle learning, and a particle smoother. The estimates show that (i) longer horizon average SPF inflation predictions inform estimates of trend inflation; (ii) gap inflation persistence is procyclical and SI inflation updating is frequent before the Volcker disinflation; and (iii) subsequently, gap inflation persistence turns countercyclical and SI inflation updating becomes infrequent.
    Keywords: inflation; unobserved components;professional forecasts; sticky information; stochastic volatility; time-varying parameters; Bayesian; particle filter
    JEL: E31 C11 C32
    Date: 2018–04
  33. By: Rosengren, Eric S. (Federal Reserve Bank of Boston)
    Abstract: Boston Fed President Eric Rosengren said that his own economic forecast and the forecasts of his colleagues on the Fed's policy committee are "quite positive" – citing fairly strong economic growth, job creation, falling unemployment, and inflation rising close to the Federal Reserve's 2 percent target. But Rosengren detailed both short-run and longer-run risks to that positive outlook.
    Keywords: monetary policy; labor markets; forecast risks; trade policy; fiscal policy; exports and tariffs; boom and bust; monetary buffers
    Date: 2018–04–13
  34. By: Qingqing Cao (Michigan State University); Raoul Minetti (Michigan State University); Maria Pia Olivero (Drexel University and Haverford College)
    Abstract: We study the role of multinational banks in the propagation of business cycles in host countries. In our economy, multinational banks can transfer liquidity across borders through internal capital markets. However, their scarce knowledge of local firms’ collateral hinders their allocation of liquidity to firms. We find that, through the interaction between the “liquidity origination” advantage and the “liquidity allocation” disadvantage, multinational banks can act as a stabilizer in the immediate aftermath of domestic liquidity shocks but be a drag on the subsequent recovery. Structural and cyclical policies can ameliorate the trade-off induced by the presence of multinational banks
    Keywords: Multinational Banks; Macroeconomic Stability; Business Cycle
    JEL: E44
    Date: 2018–04
  35. By: Adam M. Guren; Arvind Krishnamurthy; Timothy J. McQuade
    Abstract: How can mortgages be redesigned to reduce housing market volatility, consumption volatility, and default? How does mortgage design interact with monetary policy? We answer these questions using a quantitative equilibrium life cycle model with aggregate shocks, long-term mortgages, and an equilibrium housing market, focusing on designs that index payments to monetary policy. Designs that raise mortgage payments in booms and lower them in recessions do better than designs with fixed mortgage payments. The welfare benefits are quantitatively substantial: ARMs improve household welfare relative to FRMs by the equivalent of 0.83 percent of annual consumption under a monetary regime in which the central bank lowers real interest rates in a bust. Among designs that reduce payments in a bust, we show that those that front-load the payment reductions and concentrate them in recessions outperform designs that spread payment reductions over the life of the mortgage. Front-loading alleviates household liquidity constraints in states where they are most binding, reducing default and stimulating housing demand by new homeowners. To isolate this channel, we compare an FRM with a built-in option to be converted to an ARM with an FRM with an option to be refinanced at the prevailing FRM rate. Under these two contracts, the present value of a lender's loan falls by roughly an equal amount, as these contracts primarily differ in the timing of expected repayments. The FRM that can be converted to an ARM, which front loads payment reductions, improves household welfare by four times as much.
    JEL: E4 G0 G01 G2
    Date: 2018–03
  36. By: Engbom, Niklas (Princeton University); Moser, Christian (Federal Reserve Bank of Minneapolis)
    Abstract: We show that an increase in the minimum wage can have large effects throughout the earnings distribution, using a combination of theory and evidence. To this end, we develop an equilibrium search model featuring empirically relevant worker and firm heterogeneity. The minimum wage induces firms to adjust their equilibrium wage and vacancy policies, leading to spillovers on higher wages. We use the estimated model to evaluate the effects of a 119 percent increase in the real minimum wage in Brazil from 1996 to 2012. The policy change explains a large decline in earnings inequality, with spillovers reaching up to the 80th percentile of the earnings distribution. At the same time, employment and output fall only modestly as workers relocate to more productive firms. Using administrative linked employer-employee data and two household surveys, we find reduced-form evidence in support of the model predictions.
    Keywords: Worker and firm heterogeneity; Equilibrium search model; Minimum wage; Spillovers
    JEL: E23 E25 E61 E64 J31
    Date: 2018–03–12
  37. By: Nakajima, Makoto (Federal Reserve Bank of Minneapolis); Telyukova, Irina A. (Intensity Corporation)
    Abstract: Many U.S. households have significant wealth late in life, contrary to the predictions of a simple life-cycle model. In this paper, we document stark differences between U.S. and Sweden regarding out-of-pocket medical and long-term-care expenses late in life, and use them to investigate their role in discouraging the elderly from dissaving. Using a consumption-saving model in retirement with significant uninsurable expense risk, we find that medical expense risk accounts for a quarter of the U.S.-Sweden difference in retirees' dissaving patterns. Furthermore, medical expense risk affects primarily financial assets, while its impact on housing is limited.
    Keywords: Household finance; Aging; Retirement saving; Health; Cross-country analysis
    JEL: D14 E21 J14 J26
    Date: 2018–04–10
  38. By: Pham, Ngoc-Sang; Le Van, Cuong; Bosi, Stefano
    Abstract: We build a dynamic general equilibrium model with heterogeneous producers and financial frictions (collateral constraints and incompleteness). First, we provide a characterization to check whether a sequence is an equilibrium or not. Second, we study the effects of financial imperfections on output and land prices. Third, we develop a theory of valuation of land by introducing the notion of endogenous land dividends (or yields) and different concepts of land-price bubbles. Some examples of bubbles are provided in economies with and without short-sales.
    Keywords: Infinite-horizon, general equilibrium, collateral constraint, incomplete markets, asset valuation, rational bubbles.
    JEL: D5 D52 D9 E44 G1
    Date: 2018–03–11
  39. By: International Monetary Fund
    Abstract: The economy is recovering better than anticipated due to buoyant external demand and a return of confidence. The situation facing Mongolia has changed considerably. One year ago, public debt was on track to reach 100 percent of GDP, yields on government debt were nearly 20 percent, reserves were 2 months of imports and the exchange rate had depreciated over 20 percent. Since then, a pick-up in external demand for coal and a rise in commodity prices have triggered a large recovery in activity. Steady implementation of the second phase of the Oyu Tolgoi copper mine has driven a recovery in investment as well as related services and manufacturing. The fiscal deficit fell sharply due to a substantial pick up in revenues and strict expenditure control, helping reduce public debt to roughly 85 percent of GDP. Implementation of the government’s Economic Recovery Program with large support from key donors and the IMF helped restore confidence: external bonds maturing in 2018 have been rolled over at much lower interest rates than before, private and official inflows have boosted reserves by $1.3 billion more than targeted, and the authorities face no external private maturities until 2021.
    Date: 2018–04–04
  40. By: Jamie L. Cross; Chenghan Hou; Aubrey Poon
    Abstract: We estimate the effects of domestic and international sources of macroeconomic uncertainty in three commonly studied small open economies (SOEs): Australia, Canada and New Zealand. To this end, we propose a common stochastic volatility in mean panel VAR (CSVM-PVAR), and develop an efficient Markov chain Monte Carlo algorithm to estimate the model. Using a formal Bayesian model comparison exercise, our in-sample results suggest that foreign uncertainty spillovers shape the macroeconomic conditions in all SOEs, however domestic uncertainty shocks are important for Australia and Canada, but not New Zealand. The general mechanism is that foreign uncertainty shocks reduce real GDP and raise inflation in all SOEs, however the interest rate responses are idiosyncratic; being positive in Australia and New Zealand, and negative in Canada. Conversely, domestic uncertainty shocks tend to raise all three macroeconomic variables. Finally, in a pseudo out-of-sample forecasting exercise, the proposed model also forecasts better than traditional PVAR and CSV-PVAR benchmarks.
    Keywords: Bayesian VARs, International Spillovers, State-Space Models, Stochastic Volatility in Mean, Uncertainty
    JEL: C11 C32 C53 E37
    Date: 2018–04
  41. By: Dobronravova, Elizaveta (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: This paper assesses the reaction of the aggregate output, the real exchange rate and inflation in response to the shock of the terms of trade, both in the Russian economy and in the panel of countries specializing in oil exports. We divide shocks of world oil prices into positive and negative ones using Mork and Hamilton approaches. This could help us to show that changes in macroeconomic indicators in response to the positive and negative shocks in the terms of trade are asymmetric. The sharp negative dynamics of oil prices has a greater impact on the economy of the oil-exporting country in comparison with the unexpected increase in energy prices. It is shown that in the group of countries using the inflation targeting regime, output reacts to the shock of oil prices to a lesser extent than in the group of countries adhering to the fixed exchange rate regime.
    Date: 2018–03
  42. By: Alain Naef (University of Cambridge)
    Abstract: Using over 40,000 new observations on intervention and exchange rates, this paper is the first study of Bank of England foreign exchange intervention between 1952 and 1972. The main finding is that the Bank was unsuccessful in managing a credible exchange rate. By estimating a reaction function, I find that the Bank of England during most of the period refused to intervene on the forward market which was growing in importance. Analysing alternative exchange rates, I show how the Bank failed to maintain credibility in offshore markets. The Bank was eventually forced to manipulate the publication of its reserve figures to avoid a run on sterling.
    Keywords: Bretton Woods, Foreign exchange intervention, Bank of England, exchange rate
    JEL: F31 N24 E42 E58
  43. By: Camille Cornand (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Frank Heinemann (TUB - Technische Universität Berlin)
    Abstract: Monetary policy affects the degree of strategic complementarity in firms' pricing decisions if it responds to the aggregate price level. In normal times, when monopolistic competitive firms increase their prices, the central bank raises interest rates, which lowers consumption demand and creates an incentive for firms to reduce their prices. Thereby, monetary policy reduces the degree of strategic complementarities among firms' pricing decisions and even turns prices into strategic substitutes if the effect of interest rates on demand is sufficiently strong. We show that this condition holds when monetary policy follows the Taylor principle. By contrast, in a liquidity trap where monetary policy is restricted by the zero lower bound, pricing decisions are strategic complements. Our main contribution consists in relating the determinacy and stability of equilibria to strategic substitutability in prices. We discuss the consequences for dynamic adjustment processes and some policy implications. Abstract Monetary policy affects the degree of strategic complementarity in firms' pricing decisions if it responds to the aggregate price level. In normal times, when monopolis-tic competitive firms increase their prices, the central bank raises interest rates, which lowers consumption demand and creates an incentive for firms to reduce their prices. Thereby, monetary policy reduces the degree of strategic complementarities among firms' pricing decisions and even turns prices into strategic substitutes if the effect of interest rates on demand is sufficiently strong. We show that this condition holds when monetary policy follows the Taylor principle. By contrast, in a liquidity trap where monetary policy is restricted by the zero lower bound, pricing decisions are strategic complements. Our main contribution consists in relating the determinacy and stability of equilibria to strategic substitutability in prices. We discuss the consequences for dynamic adjustment processes and some policy implications.
    Keywords: monopolistic competition, monetary policy rule, pricing decisions, strategic complementarity, strategic substitutability
    Date: 2018–04–05
  44. By: Adam Elbourne (CPB Netherlands Bureau for Economic Policy Analysis); Kan Ji (CPB Netherlands Bureau for Economic Policy Analysis); Sem Duijndam (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: How effective are unconventional monetary policies? Through which mechanisms do they work? Central banks have been conducting monetary policy through unconventional means such as expanding their balance sheets or forward guidance because the conventional instrument of monetary policy, the short-term policy rate, has been at or close to the zero lower bound since shortly after the fall of Lehmann Brothers. These unconventional monetary policies are new and bring with them many questions, which were addressed in the CPB policy brief ‘Onderweg naar normaal monetair beleid’ [CPB policy brief 2017/07, 8 June 2017]. Understanding how and why unconventional monetary policy works is a crucial first step for answering subsequent questions, such as the likely effects of the withdrawal of unconventional monetary policy, or about how domestic policy makers can best respond. This discussion paper contains a detailed presentation of the new scientific evidence we reported in the policy brief, and adds to the relatively scarce literature in this field We estimate the effects of unconventional monetary policy shocks on output and inflation in the euro area using data from 2009 to 2016, which covers the period of all of the major unconventional monetary policies that the ECB has used. We employ a two stage estimation strategy: first, we identify unconventional monetary policy shocks in a dedicated euro area level structural vector autoregression (SVAR) model. Subsequently we use these unconventional monetary policy shocks in country level models. By estimating the effects of unconventional monetary policy shocks in the individual countries of the euro area, we aim to shed some light on the most important transmission mechanisms through which unconventional monetary policy works. We find weak evidence that expansionary unconventional monetary policy shocks increase output growth, but the effects on inflation at the aggregate euro area level are economically insignificant. At the individual country level we find a range of responses across the countries in our sample, and those differences in the magnitudes of output responses are consistent with some of the transmission channels that have been proposed for how unconventional monetary policy works. Interestingly, though, we find that healthier banking systems at the start of our sample and lower government debts are associated with larger peak output responses. This is the opposite of what the bank lending channel predicts, which is one of the most important proposed channels. We are not the only authors to have found this, for example Van Dijk and Dubovik (2018) also find no evidence of the bank lending channel when they focus on the effect of the announcement of the ECB’s Asset Purchase Programme in January 2015 on lending rates.
    JEL: C32 E52
    Date: 2018–02
  45. By: Michal Horvath (University of York); Matus Senaj (Council for Budget Responsibility); Zuzana Siebertova (Council for Budget Responsibility); Norbert Svarda (Council for Budget Responsibility); Jana Valachyova (Council for Budget Responsibility)
    Abstract: The paper introduces a new way of linking microsimulation models with dynamic general equilibrium frameworks to obtain an evaluation of the impact of detailed tax and benefit measures on the aggregate economy. The approach involving polynomial approximation to aggregated output from behavioural microsimulation permits the solution for the long-run steady state and the transition path in one numerical simulation of the dynamic aggregate economy. The practical usefulness of the approach is demonstrated by evaluating actual and hypothetical tax reforms in the context of Slovakia.
    Keywords: microsimulation, dynamic general equilibrium, unemployment, labour supply elasticity, tax reform
    JEL: E24 H24 H31 J22
    Date: 2018–04
  46. By: Luttmer, Erzo G. J. (Federal Reserve Bank of Minneapolis)
    Abstract: Most firms begin very small, and large firms are the result of typically decades of persistent growth. This growth can be understood as the result of some form of capital accumulation-organization capital. In the US, the distribution of firm size k has a right tail only slightly thinner than 1/k. This means that most capital accumulation must be accounted for by incumbent firms. This paper describes a range of circumstances in which this implies aggregate convergence rates that are only about half of what they are in the standard Cass-Koopmans economy. Through the lens of the models described in this paper, the aftermath of the Great Recession of 2008 is unsurprising if the events of late 2008 and early 2009 are interpreted as a destruction of organization capital.
    Keywords: Business cycles; Firm size distribution; Slow recoveries; Zipfs law
    JEL: E32 L11
    Date: 2018–01–19
  47. By: Dieu Nsenga (Department of Economics, Nelson Mandela University); Mirada Nach (Department of Economics, Nelson Mandela University); Hlalefang Khobai (Department of Economics, Nelson Mandela University); Clement Moyo (Department of Economics, Nelson Mandela University); Andrew Phiri (Department of Economics, Nelson Mandela University)
    Abstract: The focus of our study is on determining whether unemployment rates in 8 New Industrialized Economies conform to the natural rate hypothesis or the hysteresis hypothesis. To this end, we employ a variety of unit of unit root testing procedures to quarterly data collected between 2002:q1 and 2017:q1. In summary of our findings, conventional unit root tests which neither account for asymmetries or structural breaks produce the most inconclusive results. On the other hand, tests which incorporate structural breaks whilst ignoring asymmetries tends to favour the natural rate hypothesis for our panel of countries. However, simultaneously accounting for asymmetries and unobserved structural breaks seemingly produces the most robust findings and confirms hysteresis in all unemployment rates except for the Asian economies/countries of Thailand and the Philippines.
    Keywords: Natural rate hypothesis, hysteresis hypothesis, Unemployment, unit root tests, Fourier function approximation, Newly Industrialized Economies.
    JEL: C22 C51 E24 J60
    Date: 2018–04
  48. By: KICHIKAWA Yuichi; IYETOMI Hiroshi; AOYAMA Hideaki; YOSHIKAWA Hiroshi
    Abstract: We apply a complex Hilbert principal component analysis (CHPCA) to a set of Japanese economic data collected over the last 32 years, comprising individual price indices of middle classification level (imported goods, producer goods, consumption goods and services), indices of business conditions (leading, coincident, lagging), yen-dollar exchange rate, monetary stock, and monetary base. The CHPCA gives new insight into the dynamical linkages of price movements with business cycles and financial conditions. A statistical test identifies two significant eigenmodes with the largest and second largest eigenvalues. The lead-lag relations among domestic prices in the two modes are quite similar, indicating the individual prices behave in a collective way. However, the collective motion of prices is driven differently, namely, by the exchange rate at the upper stream side in the first mode and domestic demand at the lower stream side in the second mode. In contrast, the monetary variables play no important role in the two modes.
    Date: 2018–02
  49. By: Ebadi, Esmaeil
    Abstract: This paper applies annual data from 1962 to 2011 to investigate the long run relationship between government spending and Gross Domestic Product (GDP) based on Barro’s (1990) government spending model. The common approach only considers defense government spending to estimate the multiplier to overcome the identification problem and endogeneity in isolating the effect of changes in government spending on GDP. I use the Autoregressive Distributed Lag (ARDL) approach to cointegration, which works despite having endogenous regressors to estimate the spending multiplier. The results confirm that government spending can be treated as a ‘long-run forcing’ variable for the explanation of real GDP and the long-run multiplier is found to be 1.94.
    Keywords: Government Spending, Spending Multiplier, Cointegration, ARDL Approach
    JEL: E62
    Date: 2018–03–22
  50. By: Giuliano Curatola; Stefano Colonnello; Alessandro Gioffré
    Abstract: We develop a model that reproduces the average return and volatility spread between sin and non-sin stocks. Our investors do not necessarily boycott sin companies. Rather, they are open to invest in any company while trading off dividends against ethicalness. We show that when dividends and ethicalness are complementary goods and investors are sufficiently risk averse, the model predicts that the dividend share of sin companies exhibits a positive relation with the future return and volatility spreads. Our empirical analysis supports the model's predictions.
    Keywords: Asset Pricing, General Equilibrium, Sin Stocks
    JEL: D51 D91 E20 G12
    Date: 2018
  51. By: Anita Angelovska - Bezhoska (National Bank of the Republic of Macedonia)
    Abstract: This paper explores the level of independence of the National Bank of the Republic of Macedonia by primarily focusing on the legal provisions that pertain to the key aspects for achieving and maintaining price stability. It provides a historical perspective of the evolution of the independence since the first years of transition. The assessment of the independence of the NBRM is based on the index of Cukierman, Webb, and Neyapti (1992), as one of the most commonly used indices, and the index of Jacome and Vazquez (2005), which incorporates some specific aspects relevant for transition economies. Both indices indicate that throughout the years the legal independence of the NBRM has increased and that the current legal framework provides high level of independence. Yet, it should be emphasized that there is a room for further strengthening, in particular in the areas of policy formulation and the process of appointment of the non-executive members of the council of the NBRM. As the indices are based on the legal provisions, they can serve only as an indication of the actual independence of the central bank.
    Keywords: central bank independence, monetary policy, indices, Macedonia
    JEL: E42 E58
    Date: 2018
  52. By: Jiro Honda; Rene Tapsoba; Ismael Issifou
    Abstract: Should policymakers wait for fiscal crisis early warning signals before repairing the roof? We give an answer to this question by investigating the interlinkages between early warning signals for fiscal crisis, policy responses, and policy outcomes, using a broad panel of 119 countries. We find that fiscal adjsutment is a good remedy for countries that act proactively, reducing their likelihood of facing fiscal crisis by up to about 60 percent. For those waiting for wake-up calls from early-detection tools, however, fiscal adjustment may not fully prevent fiscal crisis occurrence, with the chance of fiscal crisis prevention not only smaller (about 30 percent) but also statistically not significant. These findings highlight the prominence of repairing the roof when the sun is shining, particularly in countries with weak institutions.
    Date: 2018–04–06
  53. By: Victor Olkhov
    Abstract: Current business cycle theory is an application of the general equilibrium theory. This paper presents the business cycle model without using general equilibrium framework. We treat agents risk assessments as their coordinates x on economic space and establish distribution of all economic agents by their risk coordinates. We suggest aggregation of agents and their variables by scales large to compare with risk scales of single agents and small to compare with economic domain on economic space. Such model is alike to transition from kinetic description of multi-particle system to hydrodynamic approximation. Aggregates of agents extensive variables with risk coordinate x determine macro variables as functions of x alike to hydrodynamic variables. Economic and financial transactions between agents define evolution of their variables. Aggregation of transactions between agents with risk coordinates x and y determine macro transactions as functions of x and y and define evolution of macro variables at points x and y. We describe evolution and interactions between macro transactions by hydrodynamic-like system of economic equations. We show that business cycles are described as consequence of the system of economic equations on macro transactions. As example we describe Credit transactions CL(tax,y) that provide Loans from Creditors at point x to Borrowers at point y and Loan-Repayment transactions LR(t,x,y) that describe repayments from Borrowers at point y to Creditors at point x. We use hydrodynamic-like economic equations and derive from them the system of ordinary differential equations that describe business cycle fluctuations of macro Credits C(t) and macro Loan-Repayments LR(t) of the entire economics. The nature of business cycle fluctuations is explained as oscillations of "mean risk" of economic variables on bounded economic domain of economic space.
    Date: 2018–03
  54. By: Michèle Müller-Itten (Department of Economics, University of Notre Dame); Aniko Ory (Cowles Foundation, Yale University)
    Abstract: We study the evolution of labor force composition when mentoring is more effective within members of the same socio-demographic type. Typically, multiple steady states exist. Some completely exclude juniors of one type. Even a mixed steady state tends to over-represent the type that is dominant in the population. In contrast, the efficient labor force balances talent recruitment against mentoring frictions. It may even underrepresent the dominant type and typically calls for persistent government intervention. This contrasts with the public discourse around temporary affirmative action. We consider specific policy instruments and show that hiring quotas can induce equilibrium employment insecurity.
    Keywords: Affirmative action, Continuous time overlapping generations, Human capital, Labor participation, Employment insecurity, Mentoring, Talent
    JEL: D62 E24 I2 J15 J16 J24
    Date: 2017–11
  55. By: Güneş Kamber; Madhusudan Mohanty
    Abstract: We explore the role of interest rates in monetary policy transmission in China in the context of its multiple instrument setting. In doing so, we construct a new series of monetary policy surprises using information from high frequency Chinese finan- cial market data around major monetary policy announcements. Our event analysis shows that monetary policy surprises have persistent effects on interest rates. We then use these surprise measures as external instruments to identify monetary pol- icy shocks in an SVAR. We find that a contractionary monetary policy surprise increases interest rates and significantly reduces inflation and economic activity. Our findings provide further support to recent studies suggesting that monetary policy transmission in China has become increasingly similar to that in advanced economies.
    Keywords: monetary policy in China, structural VAR, external instruments
    JEL: C22 E5 G14
    Date: 2018–04
  56. By: Lisa Sella (Department of Economics and Statistics Cognetti de Martiis, University of Torino, Torino, Italy, IRCrES - Research Institute on Sustainaible Economic Growth (CNR - Consiglio Nazionale delle Ricerche)); Gianna Vivaldo (IMT - School for Advanced Studies Lucca); Andreas Groth (CERES-ERTI - Centre d'Enseignement et de Recherche sur l'Environnement et la Societé / Environmental Research and Teaching Institute - ENS Paris - École normale supérieure - Paris); Michael Ghil (Department of Atmospheric Sciences, Institute of Geophysics and Planetary Physics, University of California, Los Angeles, CA 90095-1565, United States, CERES-ERTI - Centre d'Enseignement et de Recherche sur l'Environnement et la Societé / Environmental Research and Teaching Institute - ENS Paris - École normale supérieure - Paris)
    Abstract: The present work applies singular spectrum analysis (SSA) to the study of macroeconomic fluctuations in three European countries: Italy, The Netherlands, and the United Kingdom. This advanced spectral method provides valuable spatial and frequency information for multivariate data sets and goes far beyond the classical forms of time domain analysis. In particular, SSA enables us to identify dominant cycles that characterize the deterministic behavior of each time series separately, as well as their shared behavior. We demonstrate its usefulness by analyzing several fundamental indicators of the three countries’ real aggregate economy in a univariate, as well as a multivariate setting. Since business cycles are international phenomena, which show common characteristics across countries, our aim is to uncover supranational behavior within the set of representative European economies selected herein. Finally, the analysis is extended to include several indicators from the U.S. economy, in order to examine its influence on the European economies under study and their interrelationships.
    Keywords: Spectral analysis,Synchronization,Business cycles synchronization,Advanced spectral methods, Business cycles, European Union,Frequency domain, Time domain,JEL classification: C15, C60, E32 * Corresponding author
    Date: 2016–09
  57. By: Michalis Nikiforos; Gennaro Zezza
    Abstract: The US economy has been expanding continuously for almost nine years, making the current recovery the second longest in postwar history. However, the current recovery is also the slowest recovery of the postwar period. This Strategic Analysis presents the medium-run prospects, challenges, and contradictions for the US economy using the Levy Institute’s stock-flow consistent macroeconometric model. By comparing a baseline projection for 2018–21 in which no budget or tax changes take place to three additional scenarios, the authors isolate the likely macroeconomic impacts of: (1) the recently passed tax bill; (2) a large-scale public infrastructure plan of the same “fiscal size†as the tax cuts; and (3) the spending increases entailed by the Bipartisan Budget Act and omnibus bill. Finally, Nikiforos and Zezza update their estimates of the likely outcome of a scenario in which there is a sharp drop in the stock market that induces another round of private-sector deleveraging. Although in the near term the US economy could see an acceleration of its GDP growth rate due to the recently approved increase in federal spending and the new tax law, it is increasingly likely that the recovery will be derailed by a crisis that will originate in the financial sector.
    Date: 2018–04
  58. By: Oulton, Nicholas
    Abstract: I propose a new explanation for the UK productivity puzzle. I graft the Lewis (1954) model onto a standard Solow growth model. What I call the neo-Lewis model is identical to the Solow model in good times. But in bad times foreign demand for a country’s exports is constrained below potential supply. This makes labour productivity growth depend negatively on the growth of labour input. I also argue that the neo-Lewis model can explain the fall in TFP growth, in the UK and elsewhere, after 2007. The predictions of the neoLewis model are tested on data for 23 advanced countries and also on a larger sample of 52 countries and find support.
    Keywords: Productivity; slowdown; TFP; capital; Lewis; immigration
    JEL: E24 F43 J24 O41 O47
    Date: 2018–03–25
  59. By: Andersen, Torben M; Kristoffersen,; Svarer, Michael
    Abstract: The past employment history - employment requirements - is part of the eligibility conditions for unemployment insurance in most western countries. In a standard search-matching model, we show how employment requirements strengthen the reentitlement effect and thereby changes the trade-off between insurance and incentives in the design of the optimal insurance scheme. Deploying employment requirements for benefit eligibility may thus allow for both higher benefit levels and longer duration, and yet labor market performance is improved. When the need for insurance increases due to higher risk aversion, employment requirements becomes less lenient, and oppositely when the environment becomes more risky.
    Keywords: incentives; job-search; Reentitlement effects; unemployment insurance.
    JEL: E32 H3 J65
    Date: 2018–03
  60. By: Xavier Chojnicki; Lionel Ragot; Ndeye-Penda Sokhna
    Abstract: Cet article e´value la contribution nette de l’immigration aux finances publiques en France depuis la fin des anne´es 70. Nous de´veloppons une me´thode comptable qui de´sagre`ge le de´ficit public primaire entre la contribution propre a` la population des immigre´s et celle des natifs. Cette contribution nette est calcule´e comme la diffe´rence entre les taxes, cotisations et impo^ts divers qu’ils versent aux finances publiques et l’ensemble des be´ne´fices qu’ils en retirent. Un des apports de cet article est de calculer cette contribution nette sur une pe´riode de temps relativement longue (1979-2011). Nous montrons que la contribution nette des immigre´s a ge´ne´ralement e´te´ ne´gative sur l’ensemble de la pe´riode, mais qu’elle n’a jamais e´te´ a` l’origine du de´ficit primaire de la France. Leur contribution est toujours reste´e contenue en dec¸a` de ±0, 5% du PIB (re´duit a` ±0, 2%, si on fait exception de l’anne´e 2011). Cette relative neutralite´ de la population immigre´e sur les comptes publics s’explique par une structure de´mographique favorable, qui compense leur moindre contribution nette individuelle. La crise de 2008, compare´e a` la re´cession des anne´es 90, a eu des effets plus marque´s. Alors que les immigre´s expliquent 8,3% du de´ficit primaire par habitant en France en 1995 (comparable a` leur poids dans la population totale), cette part est de plus de 17% en 2011. Cette diffe´rence s’explique en grande partie par le fait que les actifs immigre´s ont e´te´ beaucoup plus touche´s que les actifs natifs durant la crise de 2008, en particulier les moyennement et hautement qualifie´s. Les anne´es 2000 ont e´galement vue la contribution nette par te^te des immigre´s originaires de l’Union Europe´enne se de´grader sensiblement et rejoindre celle des immigre´s originaires de pays tiers.
    Keywords: Migration internationale;Finances publiques;Protection sociale
    JEL: E62 F22 H62
    Date: 2018–04
  61. By: Nordström Skans, Oskar (Uppsala Universitet, Nationalekonomiska institutionen); Harju, Jarkko (Labour Institute for Economic Research in Helsinki and CESifo); Kosonen, Tuomas (Labour Institute for Economic Research in Helsinki and CESifo)
    Abstract: We analyze price responses to large restaurant VAT rate reductions in two different European countries. Our results show that responses in the short and medium run were clustered around two focal points of zero passthrough and full pass-through. Differences between independent restaurants and chains is the key explanation for this pattern. While nearly all independent restaurants effectively ignored the tax reductions and left consumer prices unchanged, a substantial fraction of restaurants belonging to chains chose a rapid and complete pass-through. In the longer run, prices converged, but primarily through a price reversion among chain restaurants. The stark difference in price responses does not appear to arise because of different market characteristics such as location, initial price levels, meal types or restaurant segment.
    Keywords: firm types; VAT incidence; price setting; restaurants
    JEL: E31 H22 H32
    Date: 2018–04–12
  62. By: Mark A Horton; Hossein Samiei; Natan P. Epstein; Kevin Ross
    Abstract: Since late 2014, exchange rates (ERs) and ER regimes of the Caucasus and Central Asia (CCA) countries have come under strong pressure. This reflects the decline of oil and other commodity prices, weaker growth in Russia and China, depreciation of the Russian ruble, and appreciation of the U.S. dollar, to which CCA currencies have historically been linked. Weaker fiscal and current account balances and increased dollarization have complicated the picture. CCA countries entered this period with closely managed ER regimes and, in many cases, currencies assessed by IMF staff to be overvalued. CCA central banks have price stability as their main policy objective, and most have relied on ER stability to achieve this objective. Thus, the first policy response involved intervention in local foreign exchange (FX) markets, often with limited communication. In this context, the IMF staff has reviewed ER policy advice and implementation strategies for CCA countries.
    Date: 2016–05–16
  63. By: Koichi Futagami (Graduate School of Economics, Osaka University); Kiyoka Akimoto (Faculty of Sociology, Nara University)
    Abstract: This study introduces quasi-geometric discounting into a simple growth model of common capital accumulation that takes consumption externalities into account. We examine how present bias affects economic growth and welfare, and we consider two equilibrium concepts: the noncooperative Nash equilibrium (NNE) and the cooperative equilibrium (CE). We show that the growth rate in the NNE can be higher than that in the CE if individuals strongly admire the consumption of others regardless of the magnitude of present bias. Contrary to the results in the time-consistent case, we show that, when present bias is incorporated, the welfare level in the NNE can be higher than that in the CE in the initial period. However, in later periods, this relationship can be reversed depending on the difference in the speed of capital accumulation.
    Keywords: Capital accumulation game, Quasi-geometric discounting, Consumption externalities
    JEL: C73 E21 Q21
    Date: 2018–04
  64. By: International Monetary Fund
    Abstract: The economy is rebounding and macroeconomic imbalances have stabilized. The global recovery has supported a rebound in exports and continued strong FDI inflows. However, the recovery has been moderately weaker than anticipated and downside risks have increased. Latent banking sector risks are surfacing, following a period of strong credit growth and as banks adjust to updated prudential financial regulations. The humanitarian crisis in northern Rakhine state has created uncertainty over development partner finance and foreign investor sentiment. While direct economic impacts have been largely localized, the social costs and full impacts of the crisis are yet unfolding.
    Date: 2018–03–28
  65. By: Andrew McCarthy (OECD); Rob Dellink (OECD); Ruben Bibas (OECD)
    Abstract: This paper reviews the existing literature on modelling the macroeconomic consequences of the transition to a circular economy. It provides insights into the current state of the art on modelling policies to improve resource efficiency and the transition to a circular economy by examining 24 modelling-based assessments of a circular economy transition.
    Keywords: Circular economy, general equilibrium model, natural resources, raw materials, resource efficiency
    JEL: C68 O13 Q53
    Date: 2018–04–18
  66. By: Andreas Groth (IGPP - Institute of Geophysics and Planetary Physics [Los Angeles] - UCLA - University of California at Los Angeles [Los Angeles]); Michael Ghil (ENS Paris - Ecole normale supérieure - ENS Paris - École normale supérieure - Paris, PSL - PSL Research University)
    Abstract: Common dynamical properties of business cycle fluctuations are studied in a sample of more than 100 countries that represent economic regions from all around the world. We apply the methodology of multivariate singular spectrum analysis (M-SSA) to identify oscillatory modes and to detect whether these modes are shared by clusters of phase- and frequency-locked oscillators. An extension of the M-SSA approach is introduced to help analyze structural changes in the cluster configuration of synchronization. With this novel technique, we are able to identify a common mode of business cycle activity across our sample, and thus point to the existence of a world business cycle. Superimposed on this mode, we further identify several major events that have markedly influenced the landscape of world economic activity in the postwar era.
    Keywords: Business Cycles,Synchronization,Spectral Analysis
    Date: 2017
  67. By: Daniele Valenti (University of Milan, Department of Economics, Management and Quantitative Methods)
    Abstract: In this work, we propose an analysis of the global market for crude oil based on a revised version of the Structural Vector Autoregressive (SVAR) model introduced by Kilian and Murphy (2014). On this respect, we replace the global proxy for above-ground crude oil inventories with the oil futures-spot spread. The latter is defined as the percent deviation of the oil futures price from the spot price of oil and it represents a measure of the convenience yield but expressed with an opposite sign. The following model provides an economic interpretation of the residual structural shock, namely the financial market shock. This new shock is designed to capture an unanticipated change in the benefit of holding crude oil inventories that is driven by financial incentives. We find evidence that financial market shocks have played an important role in explaining the rises in the price of oil during the period 2003-2008.
    Keywords: Global Market for Crude Oil, Bayesian SVAR Model, Oil Futures-spot Spread, Oil
    JEL: Q40 Q41 Q43 E32
    Date: 2018–03
  68. By: Eric Anderson; Sergio Rebelo; Arlene Wong
    Abstract: In this paper, we provide direct evidence on the behavior markups in the retail sector across space and time. Markups are measured using gross margins. We consider three levels of aggregation: the retail sector as a whole, firm-level data, and product- level data. We find that: (1) markups are relatively stable over time and mildly procyclical; (2) there is large regional dispersion in markups; (3) there is a positive cross-sectional correlation between local income and local markups; and (4) differences in markups across regions are explained by differences in assortment, not by deviations from uniform pricing. We propose a simple model that is consistent with these facts.
    JEL: E3
    Date: 2018–03
  69. By: Perevyshin, Yury (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Rykalin, A.S. (Gaidar Institute for Economic Policy)
    Abstract: The study considers the following concepts of inflationary expectations: adaptive, rational, and limited rational. To quantify the inflation expectations of the population and firms obtained on the basis of surveys, apply probability, regression, balance and logistic methods. The Bank of Russia uses a probability method. We also construct series of inflation expectations of households based on the probability approach. Empirical studies on testing the method of generating inflation expectations are mainly based on methods of estimating time series. The results of their application to Russian data, detailed in the work, indicate that the hypothesis of rational expectations is not confirmed, but the inflationary expectations of Russian households and representatives of the expert community are not fully adaptive. The study found that the inflation expectations of Russian economic agents are not yet fully anchored. The Bank of Russia has the opportunity to increase the effectiveness of the inflation targeting policy by developing and implementing measures to increase the impact on inflation expectations.
    Date: 2018–03
  70. By: Viral V. Acharya; Arvind Krishnamurthy
    Abstract: We examine theoretically the role of reserves management and macro-prudential capital controls as ex-post and ex-ante safeguards, respectively, against sudden stops, and argue that these measures are complements rather than substitutes. Absent capital controls, reserves to be deployed ex post are partially undone ex ante by short-term capital flows, a form of moral hazard from the insurance provided by reserves in sudden stops. Ex ante capital controls offset this distortion and thereby increase the benefit of holding reserves. Thus, these instruments are complements. With foreign investment flows into both domestic and external borrowing markets, capital controls need to account for the possibility of regulatory arbitrage between the markets. Through the lens of the model, we analyze movements in foreign reserves, external debt, and the range of capital controls being employed by one large emerging market, viz. India.
    JEL: E44 F3 G01 G18
    Date: 2018–03
  71. By: International Monetary Fund
    Abstract: The recovery has broadened to the non-oil sector and the authorities sustained macroeconomic stability in challenging circumstances. Nevertheless, the legacy of sanctions and policies of that period have left incomes at the levels of a decade ago and unemployment high. A weak banking sector, structural bottlenecks and heightened uncertainty constrain Iran’s growth potential.
    Date: 2018–03–29
  72. By: Haroon Mumtaz (Queen Mary University of London);
    Abstract: This paper introduces a VAR with stochastic volatility in mean where the residuals of the volatility equations and the observation equations are allowed to be correlated. This implies that exogeneity of shocks to volatility is not assumed apriori and structural shocks can be identified ex-post by applying standard SVAR techniques. The paper provides a Gibbs algorithm to approximate the posterior distribution and demonstrates the proposed methods by estimating the impact of financial uncertainty shocks on the US economy.
    Keywords: VAR, Stochastic volatility in mean, error covariance
    JEL: C2 C11 E3
    Date: 2018–03–06
  73. By: Malangu Kabedi-Mbuyi; Mame Astou Diouf; Constant A Lonkeng Ngouana
    Abstract: This paper analyzes the macroeconomics of scaling up public investment in Burkina Faso under alternative financing options, including through foreign aid and a combination of tax adjustment and borrowing. Our findings are twofold: (1) raising official development assistance in line with the Gleneagles agreement provides scope for financing public investment at low cost and would have positive, but somewhat moderate, effects on aggregate output—the growth dividends in the nontradables sector would be partially offset by the Dutch disease in the tradables sector; and (2) the massive investment scaling-up contemplated under Burkina Faso’s “accelerated growth” strategy, while boosting medium- and long-term growth, would lead to unsustainable debt dynamics under a plausible tax adjustment and realistic concessional financing. A more gradual approach to closing Burkina Faso’s infrastructure gap is therefore desirable because it would take into account the needed time for the country to address its capacity constraints and to further improve investment efficiency.
    Keywords: Economic growth;Fiscal sustainability;Foreign aid;Foreign aid policy;investment, public investment, debt, environment, capital
    Date: 2016–04–11
  74. By: Kiyutsevskaya, Anna (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Trunin, Pavel (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: For inflation targeting central banks interest rate policy is the main way to achieve the ultimate goal of monetary policy and to influence the economy. However, despite the fact that in most cases the operational goal is to achieve a certain level of short-term money market rates, the features of the operational mechanism are determined by the characteristics of the domestic economy and the global economy as a whole. Moreover, instruments of interest-rate policy available for inflation-targeting central banks are used to solve a wide range of problems, including exchange rate dynamics and capital flow control.
    Date: 2018–03
  75. By: Feld, Lars P.; Köhler, Ekkehard A.; Wolfinger, Julia
    Abstract: In this paper, we extend Henning Bohn's (2008) fiscal sustainability test by allowing for slope heterogeneity and cross-sectional dependence (CD). In particular, our econometric approach is the first that allows fiscal reaction functions (FRF) to capture unobserved heterogeneous effects from business and fiscal policy cycles. We apply this econometric approach to sub-national public finance data of the German Laender between 1950 and 2015 and find that their fiscal policy only partly meets fiscal sustainability criteria. According to our results, politicians have significantly reacted to increasing debt levels by increasing budget surpluses since 1991. However, time-series evidence for longer periods does not indicate a significant and positive reaction to increasing debt levels in the West German Laender panel.
    Keywords: Fiscal Sustainability,Public Debt,Panel Data,Cross-Sectional Dependence
    JEL: H62 H77 H72 C23
    Date: 2018
  76. By: Frank Veneroso
    Abstract: The dominant postwar tradition in economics assumes the utility maximization of economic agents drives markets toward stable equilibrium positions. In such a world there should be no endogenous asset bubbles and untenable levels of private indebtedness. But there are. There is a competing alternative view that assumes an endogenous behavioral propensity for markets to embark on disequilibrium paths. Sometimes these departures are dangerously far reaching. Three great interwar economists set out most of the economic theory that explains this natural tendency for markets to propagate financial fragility: Joseph Schumpeter, Irving Fisher, and John Maynard Keynes. In the postwar period, Hyman Minsky carried this tradition forward. Early on he set out a “financial instability hypothesis†based on the thinking of these three predecessors. Later on, he introduced two additional dynamic processes that intensify financial market disequilibria: principal–agent distortions and mounting moral hazard. The emergence of a behavioral finance literature has provided empirical support to the theory of endogenous financial instability. Work by Vernon Smith explains further how disequilibrium paths go to asset bubble extremes. The following paper provides a compressed account of this tradition of endogenous financial market instability.
    Keywords: Financial Instability; Joseph Schumpeter; Irving Fisher; John Maynard Keynes; Hyman Minsky; Financial Markets; Macroeconomics
    JEL: D53 E44
    Date: 2018–04
  77. By: Trofimov, Ivan D.; Md. Aris, Nazaria; Bin Rosli, Muhammad K. F.
    Abstract: The study investigates the relationships between the labour share of income and several macroeconomic variables – the GDP growth, inflation, unemployment, as well as GDP gap and capacity utilization – in industrialised economies between 1960 and the 2010s. Three complementary hypotheses that relate macroeconomic determinants to the labour share dynamics are considered: 'overhead labour' hypothesis, 'realization theory/wage lag' hypothesis and the 'rising strength of labour' hypothesis. The study employs a sequential procedure: testing for the stationarity properties of the variables, using bounds test to identify the presence of cointegrating relationships, and estimating long-run relationships using ARDL or OLS methods. The results show that all three hypotheses are supported only in a limited number of economies, whilst in the majority of cases only certain relationships are prominent. On the whole, the GDP growth rate, the unemployment rate, and to a smaller extent capacity are found to be the principal determinants of the labour share, while change in the level of prices is of subsidiary importance.
    Keywords: Labour share; time series; macroeconomic determinants
    JEL: C22 E25 J30
    Date: 2018–03–15
  78. By: Ritzen, Jo; Zimmermann, Klaus F.
    Abstract: Full employment in the European Union member states is a challenge but feasible, also in downswings of the business cycle and during stages of increased robotization. It requires a labor legislation that ensures flexibility and retraining, responsive labor sharing during the business cycle and to individual life cycle needs, government interventions to supply supplemental employment and revamping dual education. The future of work is better ensured with coordinated European full employment labor policies establishing fair work conditions based on long-run business strategies as well as a fair distribution of national income between labor and capital.
    Keywords: Employment,full employment,future of work,robotization,fair work,work-sharing,employment regulations,basic income,vocational training
    JEL: J5 J8
    Date: 2018
  79. By: Miranda-Agrippino, Silvia; Ricco, Giovanni
    Abstract: This article reviews Bayesian inference methods for Vector Autoregression models, commonly used priors for economic and financial variables, and applications to structural analysis and forecasting.
    Keywords: Bayesian inference; Vector Autoregression Models; BVAR; SVAR; forecasting
    JEL: C30 C32 E0 E00
    Date: 2018–03–23
  80. By: Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Florian Huber (Department of Economics, WU Vienna University of Economics and Business); Philipp Piribauer (Austrian Institute of Economic Research (WIFO))
    Abstract: In this paper, we forecast monthly stock returns of eight advanced economies using a time varying parameter vector autoregressive model (TVP-VAR). Compared to standard TVP-VARs, our proposed model automatically detects whether time-variation in the parameters is needed through the introduction of a latent threshold process that is driven by the absolute size of parameter changes. The advantage of this framework is that it can dynamically detect whether a given regression coefficient is constant or time-varying during distinct time periods. We moreover compare the performance of this model with a wide range of nested alternative time-varying and constant parameter VAR models. Our results indicate that the threshold TVP-VAR outperforms its competitors in terms of point and density forecasts. A portfolio allocation exercise confirms the superiority of our proposed framework. In addition, a copula-based analysis also indicates that it pays off to adopt a multivariate modeling framework, especially during periods of stress, like the recent financial crisis.
    Keywords: International equity markets, Time-varying vector autoregression, Point and density forecasts, Portfolio allocation
    JEL: C32 G10 G17
    Date: 2018–04
  81. By: Yan Bai; Dan Lu; Xu Tian
    Abstract: We use firm-level data to identify financial frictions in China and explore the extent to which they can explain firms' saving and capital misallocation. We first document the features of the data in terms of firm dynamics and debt financing. State-owned firms have higher leverage and pay much lower interest rates than non-SOEs. Among privately owned firms, smaller firms have lower leverage, face higher interest rates, and operate with a higher marginal product of capital. We then develop a heterogeneous-firm model with two types of financial frictions, default risk, and a fixed cost of issuing loans. Our model generates endogenous borrowing constraints as banks consider the firm's productivity, asset, and debt when providing a loan. Using evidence on the firm size distribution and financing patterns, we estimate the model and find it can explain aggregate firms' saving and investment and around 50 percent of the dispersion in the marginal product of capital within private firms, which translates into a TFP loss as high as 12%.
    JEL: E2 G3
    Date: 2018–03
  82. By: Daniele Valenti (University of Milan, Department of Economics, Management and Quantitative Methods); Matteo Manera (FEEM and University of Milan-Bicocca, Department of Economics, Management and Statistics); Alessandro Sbuelz (Catholic University of Milan, Department of Mathematical Sciences, Mathematical Finance and Econometrics)
    Abstract: This paper provides an analysis of the link between the global market for crude oil and oil futures risk premium at the aggregate level. It offers empirical evidence on whether the compensation for risk required by the speculators depends on the type of the structural shock of interest. Understanding the response of the risk premium to unexpected changes in the price of oil can be useful to address some research questions, among which: what is the relationship between crude oil risk premium and unexpected rise in the price of oil? On average, what should speculators expect to receive as a compensation for the risk they are taking on? This work is based on a Structural Vector Autoregressive (SVAR) model of the crude oil market. Two main results emerge. First, the impulse response analysis provides evidence of a negative relationship between the risk premium and the changes in the price of oil triggered by shocks to economic fundamentals. Second, this analysis shows that the historical decline of the risk premium can be modelled as a part of endogenous effect of the oil market driven shocks.
    Keywords: Crude Oil Risk Premium, Bayesian SVAR Model, Oil Price Speculation
    JEL: Q40 Q41 Q43 E32
    Date: 2018–02
  83. By: Tetsuya Konuki; Mauricio Villafuerte
    Abstract: Excessively procyclical fiscal policy can be harmful. This paper investigates to what extent the fiscal policies of sub-Saharan African countries were procyclical in recent years and the reasons for the degree of fiscal procyclicality among these countries. It finds that a tendency for procyclical fiscal policy was particularly pronounced among oil exporters and after the global financial crisis. It also finds a statistically significant causal link running from deeper financial markets and higher reserves coverage to lower fiscal policy procyclicality. Fiscal rules supported by strong political commitment and institutions seem to be key to facilitating progress for deeper financial markets and stronger reserves coverage.
    Keywords: Fiscal analysis;Fiscal policy;Cyclical indicators;Sub-Saharan Africa;Oil exporting states;fiscal policy, sub-saharan Africa, oil exporters, financial markets,
    Date: 2016–08–24
  84. By: Jesús Rodríguez (Department of Economics, University Pablo de Olavide); José L. Torres (Department of Economics, University of Málaga)
    Abstract: Road congestion is a negative externality associated to automobile use and can negatively affects drivers’ utility in several directions, such as delay time and wasted fuel, but also can have a negative impact on aggregate productivity. This paper develops a Dynamic Stochastic General Equilibrium model to study the interactions between roads, traffic, congestion and productivity over the business cycle. In our model households receive services from vehicles, depending on the flow kilometers driving and on the stock of cars, and they do not take into account their own impact on congestion, which also depends on the stock of roads. Following a positive aggregate productivity shock, traffic density and congestion tend to rise, so dampening its positive effects on aggregate activity. The model is then used to study the process behind the so-called ”Fundamental Law of Highways Congestion”, which states that an increase in the stock of roads produces a traffic density rise of same proportion, thus leaving congestion unaffected in the long run. Our model economy reproduce a rise in output in response to a road capacity expansion and predicts a traffic flow elasticity of 0.172, as a direct consequence of the positive impact of the higher stock of roads on economic activity. Finally, we derive a Pigouvian tax schedule that internalizes the social costs of congestion
    Keywords: Road traffic; Congestion; The Fundamental Law of Road Congestion; Dynamic General Equilibrium model
    JEL: E32 R41 R42 R48
    Date: 2018–04
  85. By: Karabarbounis, Loukas (Federal Reserve Bank of Minneapolis); Neiman, Brent (University of Chicago)
    Abstract: Comparing U.S. GDP to the sum of measured payments to labor and imputed rental payments to capital results in a large and volatile residual or “factorless income.” We analyze three common strategies of allocating and interpreting factorless income, specifically that it arises from economic profits (Case Π), unmeasured capital (Case K), or deviations of the rental rate of capital from standard measures based on bond returns (Case R). We are skeptical of Case Π as it reveals a tight negative relationship between real interest rates and markups, leads to large fluctuations in inferred factor-augmenting technologies, and results in markups that have risen since the early 1980s but that remain lower today than in the 1960s and 1970s. Case K shows how unmeasured capital plausibly accounts for all factorless income in recent decades, but its value in the 1960s would have to be more than half of the capital stock, which we find less plausible. We view Case R as most promising as it leads to more stable factor shares and technology growth than the other cases, though we acknowledge that it requires an explanation for the pattern of deviations from common measures of the rental rate. Using a model with multiple sectors and types of capital, we show that our assessment of the drivers of changes in output, factor shares, and functional inequality depends critically on the interpretation of factorless income.
    Keywords: Factor shares; Profits; Missing capital; Return to capital
    JEL: E01 E22 E25
    Date: 2018–03–28
  86. By: Amélie Charles (Audencia Recherche - Audencia Business School); Olivier Darné (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - UN - Université de Nantes); Laurent Ferrara (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In this paper we examine whether or not the Great Recession had a temporary or permanent effect on output growth volatility after years of low macroeconomic volatility since the early eighties. Based on break detection methods applied to a set of advanced countries, our empirical results do not give evidence to the end of the Great Moderation period but rather that the Great Recession is characterized by a dramatic short‐lived effect on the output growth but not on its volatility. We show that neglecting the breaks both in mean and in variance can have large effects on output volatility modeling based on GARCH specifications
    Date: 2018
  87. By: Vanella, Patrizio; Deschermeier, Philipp
    Abstract: This contribution proposes a simulation approach for the indirect estimation of age-specific fertility rates (ASFRs) and the total fertility rate (TFR) for Germany via time series modeling of the principal components of the ASFRs. The model accounts for cross-correlation and autocorrelation among the ASFR time series. The effects of certain measures are also quantified through the introduction of policy variables. Our approach is applicable to probabilistic sensitivity analyses investigating the potential outcome of political intervention. A slight increase in the TFR is probable until 2040. In the median scenario, the TFR will increase from 1.6 in 2016 to 1.68 in 2040 and will be between 1.46 and 1.92 with a probability of 75 percent. Based on this result, it is unlikely that the fertility level will fall back to its extremely low levels of the mid-1990s. Two simple alternate scenarios are used to illustrate the estimated ceteris paribus effect of changes in our policy variables on the TFR.
    Keywords: Fertility, Statistical Demography, Forecasting, Family Policy, Principal Component Analysis, Time Series Analysis
    JEL: C22 C49 C53 C54 E62 J11 J13 J38
    Date: 2018–04
  88. By: Garbinti, Bertrand; Goupille-Lebret, Jonathan; Piketty, Thomas
    Abstract: This paper presents "Distributional National Accounts" (DINA) for France. That is, we combine national accounts, tax and survey data in a comprehensive and consistent manner to build homogenous annual series on the distribution of national income by percentiles over the 1900-2014 period, with detailed breakdown by age, gender and income categories over the 1970-2014 period. Our DINA-based estimates allow for a much richer analysis of the long-run pattern found in previous tax-based series, i.e. a long-run decline in income inequality, largely due to a sharp drop in the concentration of wealth and capital income following the 1914-1945 capital shocks. First, our new series deliver higher inequality levels than the usual tax-based series for the recent decades, because the latter miss a rising part of capital income. Growth incidence curves look dramatically different for the 1950-1983 and 1983-2014 sub-periods. We also show that it has become increasingly difficult in recent decades to access top wealth groups with labor income only. Next, gender inequality in labor income declined in recent decades, albeit fairly slowly among top labor incomes E.g. female share among top 0.1% earners was only 12% in 2012 (vs. 7% in 1994 and 5% in 1970). Finally, we find that distributional changes can have large impact on comparisons of well-being across countries. E.g. average pre-tax income among bottom 50% adults is 30% larger in France than in the U.S., in spite of the fact that aggregate per adult national income is 30% smaller in France.
    Keywords: income distribution; Income inequality; National Accounts
    JEL: D31 E01 H2 N34
    Date: 2018–03
  89. By: Williams, Ronald
    Abstract: A process for a business to exclusively and completely sell its shares to a 501(c)3 charity to transfer full ownership & direction of the business to the entire public. Nonprofit universities are charities well positioned to completely own & operate businesses: to produce and allocate their goods and services to society efficiently, effectively and in harmony with the best interests of the entire public, especially when employees of acquired businesses become faculty of the university; When work becomes education in motion; When operating costs of the university and the acquired businesses are subsidized by the goods, services, amenities, and processes of the university and the businesses it acquires; And when socioeconomic order is naturally regulated via the infrastructures of universities. The social and economic efficiency and effectiveness of businesses completely owned and operated by nonprofit universities induce logic and peer-pressures which encourage global assimilation. The mechanism relies on an iterated prisoner’s dilemma scenario established amongst all businesses, created by global externalities produced from the localized interactions of an initial group of businesses being completely acquired by a nonprofit university, which uses an internet platform to localize their social and economic information and activities to help concentrate public understanding, trust and support to itself and the businesses, which initially join to benefit being first within their industry to be acquired. [1] The result, efficiently and effectively produces and allocates goods, services, knowledge, resources, jobs, and opportunities amongst society; Establishes Maslow's Hierarchy of Needs; And naturally resolves many socioeconomic issues.
    Keywords: Education, Publicly Provide Private Goods, Nationalization, Expropriation, Procott, Game Theory, Social Physics, Social Policy, Public Policy, Monetary Policy, Fiscal Policy,
    JEL: C7 D41 D64 E6 E61 G34 H4 H42 I25 P3 P35
    Date: 2017–09–08
  90. By: Darmon, N.; Martin, P.; Scheromm, P.; Ghestem, F.; Marchand, P.; Consalès, J.N.
    Abstract: Social inequalities in diet are attributed to sociocultural determinants, economic constraints, and unequal access to healthy food. Fruits and vegetables are lacking in the diets of disadvantaged populations. The objective was to test the hypothesis that, in poor neighborhoods, community gardeners will have larger supply of healthy food, especially fruit and vegetables, than non-gardeners. We examined community gardens from the perspective of production, economics and nutrition, and social and symbolic dimensions, through multidisciplinary investigations involving women with access to a community garden plot in a poor neighborhood of Marseille, France. Gardeners’ monthly household food supplies (purchases and garden production) were analyzed and compared with those of women with a similar socio-economic profile living in the same neighborhoods, without access to a garden. Twenty-one gardeners participated. Only eleven of them harvested during the month of the study, and the amount they collected averaged 53 g of produce per household member per day. Whether they harvested or not, most gardeners gave preference to diversity, taste and healthiness of produce over quantity produced. Interviews revealed a value assigned to social, cultural and symbolic dimensions: pride in producing and cooking their own produce, related self-esteem, and sharing their produce at the meal table. The only significant difference between the food supplies of gardener and non-gardener households was seen for fruit and vegetables (369 vs. 211 g/d per person). This difference was due to larger purchases of fruit and vegetables, and not to higher quantities produced. In spite of the cross-sectional nature of our study and the small quantities harvested, our results suggest that having access to a community garden could encourage socio-economically disadvantaged women to adopt dietary practices that more closely meet dietary recommendations. ....French Abstract: L’objectif de cette étude était de tester l’hypothèse selon laquelle, dans les quartiers pauvres, les jardiniers cultivant dans des jardins partagés auraient des approvisionnements en fruits et légumes plus élevés que des non-jardiniers. Une enquête pluridisciplinaire a été réalisée auprès de femmes ayant accès à une parcelle individuelle dans des jardins partagés de quartiers pauvres de Marseille. Les approvisionnements alimentaires mensuels des foyers de ces jardinières (achats et production du jardin) ont été analysés et comparés à ceux de femmes de profil socioéconomique similaire, vivant dans les mêmes quartiers mais n’ayant pas accès à un jardin. Au total, 21 jardinières ont participé à l’enquête. Seulement 11 d’entre elles ont récolté des produits potagers au jardin durant le mois d’enquête, les quantités produites s’élevant en moyenne à 53g de produits potagers par personne vivant dans le foyer et par jour. Qu’elles aient récolté ou non, les jardinières privilégiaient la diversité, le goût et la valeur santé des produits plutôt que les quantités produites. Les enquêtes ont révélé les valeurs sociale, culturelle et symbolique du jardinage (fierté de produire et de cuisiner sa propre production, estime de soi, commensalité). Concernant les approvisionnements alimentaires, la seule différence significative entre les foyers des jardinières et des non-jardinières concernait les fruits et légumes : 369 vs. 211 g par personne et par jour, respectivement, du fait d’achats plus importants de légumes dans les foyers des jardinières. Bien que l’étude soit transversale et malgré la faible quantité de produits potagers récoltés, nos résultats suggèrent que l’accès à un jardin partagé pourrait favoriser l’adoption de pratiques alimentaires plus favorables à la santé par les habitants de quartiers défavorisés
    JEL: D12 E21 R21
    Date: 2018
  91. By: Jan Fredrik Qvigstad (Norges Bank (Central Bank of Norway)); Tore Schei (Norges Bank (Central Bank of Norway))
    Abstract: Many institutions in a democratic society wield important power by virtue of the decisions they make. These decisions may concern individuals or have a more general impact on society. It goes without saying today that this exercise of power must be accounted for. A supreme court's reasoning is given in its judgements. A central bank's reasoning is given in the decision-making body's minutes. In this paper, we develop criteria for what constitute good written justifications for a decision, not what makes a good decision per se. We look at the two institutions we know best: supreme courts and central banks. Of course, these are not the only institutions that exercise power on behalf of the state, and we also ask whether our criteria could be applied more generally. We assess a selection of supreme court judgements and monetary policy decisions in various countries qualitatively against our criteria, and find that practice largely conforms to the criteria. There are some common features between supreme courts and central banks. In recent years there has been a development in the way the judgments are written in the UK Supreme Court. Earlier, each judge wrote his votum. Now they are writing a common text. With individual writing, there were many different formulations of the normative text. It is easier for the public to relate to one legislative text. The UK Supreme Court, under the presidency of Lord Neuberger, has therefore gradually moved towards writing a joint text. John Roberts, the US Chief Justice, thought that judges should be worried when they are writing separately about the effect on the court as an institution. What about the minutes of the central banks? Professor Alan Blinder at Princeton argues that a central bank that speaks with a cacophony of voices has no voice at all. Professor Otmar Issing, the former Chief Economist and Member of the Board of the ECB, believes that there is a danger that individual minutes provide an incentive for individual members to put themselves ahead of the institution We also test empirically whether the institutions' decisions and the justifications for these decisions are communicated in clear language. Our analysis is inspired by Bank of England chief economist Andrew Haldane's speech "A little more conversation, a little less action", and by the report "Bankspeak: The Language of World Bank Reports 1946-2012" by Franco Moretti and Dominique Pestre at Stanford Literary Lab. We analyse more than 6,000 central bank and supreme court decisions from the past decade and find considerable differences in length and readability across countries and institutions. The grand chamber decisions of the European Court of Human Rights are by far the longest, while the European Court of Justice employs the most complex language. The Danish central bank keeps things briefest and uses the clearest language, but also has the simplest regime to explain. The Swedish central bank's minutes stand out as both long and complex, while the Norwegian central bank is unusually concise. Moretti and Pestre analysed the text of all World Bank reports and found quantitative indications that the language of the reports had moved in the wrong direction in terms of readability. We perform the same tests on central banks and supreme courts and find that these institutions' language has not moved in the same negative direction. Former Bank of England governor Mervyn King argued that the design of an institution "must reflect history and experience", and there is no doubt that each institution's way of writing is influenced by its own history. This is what economists refer to as "path dependence". We wonder, however, whether there is rather too much path dependence in many cases, and whether the institutions in question might benefit from looking at trends and learning from other institutions both at home and abroad. In our work on this paper, we have been particularly wary of phrases along the lines of "based on a general assessment". Alarm bells sound whenever we see them, especially with any frequency, as they are liable to conceal rather than illuminate the true rationale.
    Keywords: Central Bank Organization, Constitutional Court, Constitutional Law, Constitutional Rights, Supreme Court
    JEL: E58 K10
    Date: 2018–04–10

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