nep-mac New Economics Papers
on Macroeconomics
Issue of 2018‒06‒11
ninety papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Optimal Trend Inflation By Klaus Adam; Henning Weber
  2. Balance-of-payments-constrained Cyclical Growth with Distributive Class Conflicts and Productivity Dynamics By Nishi, Hiroshi
  3. Defense spending and fiscal multipliers: it's all in the variance By Jesús Rodríguez-López; Mario Solís-García
  4. Defense spending and fiscal multipliers: it's all in the variance By Rodriguez-Lopez, Jesus; Solis-Garcia, Mario
  5. "Twenty Years after the Fall of the Berlin Wall: Rethinking the Role of Money and Markets in the Global Economy" By W. Lee Hoskins; Walker F. Todd
  6. Frequency-Dependent Real-Time Effects of Uncertainty in the United States: Evidence from Daily Data By Yanele Nyamela; Vasilios Plakandaras; Rangan Gupta
  7. The ECB's Fiscal Policy By Hans-Werner Sinn
  8. Monetary Policy and Inequality under Labor Market Frictions and Capital-Skill Complementarity By Dolado, Juan J.; Motyovszki, Gergö; Pappa, Evi
  9. Technology and the Two Margins of Labor Adjustment: A New Keynesian Perspective By Francesco Furlanetto; Tommy Sveen; Lutz Weinke
  10. Central Bank sentiment and policy expectations By Fabien Labondance; Paul Hubert
  11. Is the Anchoring of Consumers' Inflation Expectations Shaped by Inflational Experience? By Lena Dräger; Michael Lamla
  12. Counteracting Unemployment in Crises: Non-Linear Effects of Short-Time Work Policy By Gehrke, Britta; Hochmuth, Brigitte
  13. A Sequential Bargaining Model of the Fed Funds Market with Excess Reserves By Schulhofer-Wohl, Sam; Clouse, James A.
  14. Inflation Dynamics in The Gambia By Cham, Tamsir
  15. Analyse de la transmission de la politique monétaire vers les taux souverains By Bennouna, Hicham; Bounader, Lahcen
  16. Savings, asset scarcity, and monetary policy By Altermatt, Lukas
  17. Monetary policy when households have debt: new evidence on the transmission mechanism By James Cloyne; Clodomiro Ferreira; Paolo Surico
  18. Alexandre Lamfalussy and the monetary policy debates among central bankers during the Great Inflation By Ivo Maes; Piet Clement
  19. The Impact of Shocks on Core Inflation; Evidence from India By Sahu, Priyanka
  20. Point versus Band Targets for Inflation By Beechey, Meredith; Österholm, Pär
  21. Taxes and growth: new narrative evidence from interwar Britain By Cloyne, James; Dimsdale, Nicholas; Postel-Vinay, Natacha
  22. What do Swiss franc Libor futures really tell us? By Lucas Marc Fuhrer; Basil Guggenheim; Matthias Jüttner
  23. Country-Specific Euro Area Government Bond Yield Reactions to ECB’s Non-Standard Monetary Policy Announcements By Ralf Fendel; Frederik Neugebauer
  24. Central bank policies and income and wealth inequality: A survey By Andrea Colciago; Anna Samarina; Jakob de Haan
  25. Gap-filling government debt maturity choice By Eidam, Frederik
  26. Lessons from historical monetary unions - is the European monetary union making the same mistakes? By Ryan, John; Loughlin, John
  27. Concerted efforts? Monetary policy and macro-prudential tools By Ferrero, Andrea; Harrison, Richard; Nelson, Ben
  28. Learning about fiscal multipliers during the European sovereign debt crisis: evidence from a quasi-natural experiment By Gόrnicka, Lucyna; Kamps, Christophe; Koester, Gerrit; Leiner-Killinger, Nadine
  29. Inspecting the Mechanism: Leverage and the Great Recession in the Eurozone By Philippe Martin; Thomas Philippon
  30. A Dynamic Analysis of Demand and Productivity Growth in a Two-sector Kaleckian Model By Nishi, Hiroshi
  31. Wage inflation and informal work By Bracha, Anat; Burke, Mary A.
  32. Die Unabhängigkeit der Europäischen Zentralbank By Neyer, Ulrike
  33. Does Public Debt Crowd Out Corporate Investment? International Evidence By Huang, Yi; Panizza, Ugo; Varghese, Richard
  34. Re-Exploring the Nexus between Monetary Policy and Banks' Risk-Taking By Melchisedek Joslem Ngambou Djatche
  35. An AB-SFC Model of Induced Technical Change along Classical and Keynesian Lines. By Lucrezia Fanti
  36. An AB-SFC Model of Induced Technical Change along Classical and Keynesian Lines By Fanti, Lucrezia
  37. Identification and estimation issues in Structural Vector Autoregressions with external instruments By G. Angelini; L. Fanelli
  38. Tunisia; 2017 Article IV Consultation and Second Review Under the Extended Fund Facility, and Request for Waivers of Nonobservance of Performance Criteria, and Rephasing of Access By International Monetary Fund
  39. Forecasting unemployment rates in Malta: A labour market flows approach By Reuben Ellul
  40. Inference in Structural Vector Autoregressions when the Identifying Assumptions are not Fully Believed: Re-evaluating the Role of Monetary Policy in Economic Fluctuations By Christiane Baumeister; James D. Hamilton
  41. Séries de pièces et billets socialement optimales: les coûts de production comptent-ils réellement ? By Bouhdaoui, Yassine
  42. The Transformation of Manufacturing and the Decline in U.S. Employment By Kerwin Kofi Charles; Erik Hurst; Mariel Schwartz
  43. An international comparison of the contribution to job creation by high growth firms By Anyadike-Danes, Michael; Bjuggren, Carl Magnus; Dumont, Michel; Gottschalk, Sandra; Hölzl, Werner; Johansson, Dan; Maliranta, Mika; Myrann, Anja; Nielsen, Kristian; Zheng, Guanyu
  44. Financial and Fiscal Shocks in the Great Recession and Recovery of the Spanish Economy By J. E. Boscá; R. Doménech; J. Ferri; R. Méndez; J. F. Rubio-Ramírez
  45. Asymmetric Inflation Expectations, Downward Rigidity of Wages, and Asymmetric Business Cycles By Baqaee, David Rezza
  46. Endogenous Growth and Entropy By Tiago Neves Sequeira; Pedro Mazeda Gil; Óscar Afonso
  47. Bail-in vs. Bailout: a False Dilemma? By Lorenzo Pandolfi
  48. Term structure of interest rates: modelling the risk premium using a two horizons framework By Georges Prat; Remzi Uctum
  49. Spillovers from Euro Area Monetary Policy: A Focus on Emerging Europe By Sona Benecka; Ludmila Fadejeva; Martin Feldkircher
  50. Historical Decoupling in the EU: Evidence from Time†Frequency Analysis By Svatopluk Kapounek; Zuzana Kucerova
  51. Foreign Effects of Higher U.S. Interest Rates By Matteo Iacoviello; Gaston Navarro
  52. Explaining Inflation in Colombia: A Disaggregated Phillips Curve Approach By Sergi Lanau; Adrian Robles; Frederik G Toscani
  53. Financial stability and the ECB By Christophe Blot; Jérôme Creel; Paul Hubert; Fabien Labondance; Xavier Ragot
  54. Agricultural Price Shocks and Business Cycles - A Global Warning for Advanced Economies By Jasmien De Winne; Gert Peersman
  55. Micro and macro policies in the Keynes +Schumpeter evolutionary models By Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Tania Treibich
  56. Banking on Deposits: Maturity Transformation without Interest Rate Risk By Itamar Drechsler; Alexi Savov; Philipp Schnabl
  57. Capital Income Taxation, Economic Growth, and the Politics of Public Education By Ono, Tetsuo; Uchida, Yuki
  58. Debt-Ridden Borrowers and Economic Slowdown (Latest version) By Keiichiro Kobayashi; Daichi Shirai
  59. Monetary Policy Effects on the Chilean Stock Market: An Automated Content Approach By Mario González; Raúl Tadle
  60. Optimal Inflation and the Identification of the Phillips Curve By Michael McLeay; Silvana Tenreyro
  61. The Cobb-Douglas function as a flexible function: Analysing the sustitution between capital, labor and energy By Frédéric Reynès
  62. Real Sectoral Spillovers: A Dynamic Factor Analysis of the Great Recession By Nan Li; Vance Martin
  63. Hidden figures behind two-vehicle crashes: An assessment of the risk and external costs of drunk driving in Spain By David Mesa-Ruiz; Yolanda Rebollo-Sanz; Jesús Rodríguez-López
  64. Identifying oil price shocks and their consequences: the role of expectations in the crude oil market By Takuji Fueki; Hiroka Higashi; Naoto Higashio; Jouchi Nakajima; Shinsuke Ohyama; Yoichiro Tamanyu
  65. Systemic Risk and Financial Fragility in the Chinese Economy: A Dynamic Factor Model Approach By Alexey Vasilenko
  66. “Free” Internet Content: Web 1.0, Web 2.0, and the Sources of Economic Growth By Nakamura, Leonard I.; Samuels, Jon; Soloveichik, Rachel
  67. Cross-Border Transmission of Fiscal Shocks: The Role of Monetary Conditions By Patrick Blagrave; Giang Ho; Ksenia Koloskova; Esteban Vesperoni
  68. Measuring Monetary Policy Spillovers between U.S. and German Bond Yields By Stephanie E. Curcuru; Michiel De Pooter; George Eckerd
  69. The Wider Impacts of High-Technology Employment: Evidence from U.S. Cities By Thomas Kemeny; Taner Osman
  70. The macroeconomic determinants of migration By Lewis, John; Swannell, Matt
  71. Montenegro; 2018 Article IV Consultation-Press Release and Staff Report By International Monetary Fund
  72. Empirical Estimation of Fiscal Multipliers in MENA Oil-Exporting Countries with an Application to Algeria By Maria Elkhdari; Moez Souissi; Andrew Jewell
  73. Life-cycle Wealth Accumulation and Consumption Insurance By Claudio Campanale; Marcello Sartarelli
  74. The Impact of U.S. Supply Shocks on the Global Oil Price By Thomas S. Gundersen
  75. Employment Time and the Cyclicality of Earnings Growth By Eran B. Hoffmann; Davide Malacrino
  76. Investment, Tobin's q, and Interest Rates By Lin, Xiaoji; Wang, Chong; Wang, Neng; Yang, Jinqiang
  77. Did the Black Death Cause Economic Development by "Inventing" Fertility Restriction? By Jeremy Edwards; Sheilagh Ogilvie
  78. The network of inter-industry flows in a SAM framework By Susana Santos; Tanya Araújo
  79. STIGMA? WHAT STIGMA? A Contribution to the Debate on the Effectiveness of IMF Lending By Beatrice D. Scheubel; Andrea Tafuro; Benjamin Vonessen
  80. Slower Productivity and Higher Inequality: Are They Related? By Jason Furman; Peter Orszag
  81. The Effects of Immigration in Developed Countries: Insights from Recent Economic Research By Anthony Edo; Lionel Ragot; Hillel Rapoport; Sulin Sardoschau; Andreas Steinmayr
  82. Spillovers in Sub-Saharan Africa’s sovereign Eurobond yields By Christian Senga; Danny Cassimon
  83. Economic Policy Implications of the Belt and Road Initiative for CESEE and Austria By Alexandra Bykova; Mahdi Ghodsi; Julia Grübler; Doris Hanzl-Weiss; Mario Holzner; Gabor Hunya; Robert Stehrer
  84. How sensitive are VAR forecasts to prior hyperparameters? An automated sensitivity analysis By Joshua C.C. Chan; Liana Jacobi; Dan Zhu
  85. Parenthood and labour market outcomes By Isabelle Sin; Kabir Dasgupta; Gail Pacheco
  86. Land Use Regulations, Migration and Rising House Price Dispersion in the U.S. By Wukuang Cun; M. Hashem Pesaran
  87. Optimal policies in International Macroeconomics By Zineddine Alla
  88. Exploring Brexit with dynamic spatial panel models : some possible outcomes for employment across the EU regions By Fingleton, Bernard
  89. Energy in Economic Growth: Is Faster Growth Greener? By Gregor Semieniuk
  90. Confederation debt management since 1970 By Basil Guggenheim; Mario Meichle; Thomas Nellen

  1. By: Klaus Adam; Henning Weber
    Abstract: Sticky price models featuring heterogeneous firms and systematic firm-level productivity trends deliver radically different predictions for the optimal inflation rate than their popular homogenous-firm counterparts: (1) the optimal steady-state inflation rate generically differs from zero and (2) inflation optimally responds to productivity disturbances. We show this by aggregating a heterogenous-firm model with sticky prices in closed form. Using firm-level data from the U.S. Census Bureau, we estimate the historically optimal inflation path for the U.S. economy. In the year 1977, the optimal inflation rate stood at 1.5%, but subsequently declined to around 1.0% in the year 2015. Inflation rates up to twice these numbers can be rationalized if one considers product demand elasticities more in line with the trade literature or if one considers firms that (partially) index prices to lagged inflation rates.
    Keywords: optimal inflation rate, sticky prices, firm heterogeneity
    JEL: E52 E31 E32
    Date: 2018
  2. By: Nishi, Hiroshi
    Abstract: This study builds a dynamic balance-of-payments-constrained (BOPC) model that incorporates the endogenous determination of the economic growth rate, conflictive wage/price distribution, and employment rate. Following the Kaleckian--Marxian literature, wages and commodity prices are determined by the reserve army effect and employment is determined by the reserve army creation effect. The relative strength of these two effects generates different outcomes for the transitional dynamics and comparative statics analysis. In particular, the model shows stability, instability, and a cyclical nature, the latter of concurs with the evidence reported by previous empirical studies.
    Keywords: Balance-of-payments-constrained model, Conflictive income distribution, Cyclical growth
    JEL: E12 E24 E32 F43
    Date: 2018–04
  3. By: Jesús Rodríguez-López (U. Pablo de Olavide); Mario Solís-García (Macalester College, St. Paul, MN(USA))
    Abstract: We provide estimates of U.S. government expenditure multipliers for defense and non-defense spending over 1939-2014, using a fairly standard DSGE model that includes anticipated military spending changes ("war news shocks"), and find the following. First, our model's war news shocks compare favorably to Ramey's (2011) narrative-based "defense news" shocks. Second, war news shocks have little effect on model variables regardless of the period under examination. Unanticipated military expenditure accounts for substantial movements in output, but only when observations from 1939 to 1954 are considered. Apart from that, movements in output are entirely driven by total factor productivity shocks. Third, our structural model can generate defense expenditure multipliers above unity under two conditions: (i) the multiplier is calculated using the peak of the impulse-response function and (ii) a large number of observations before and up to the Korean War are included. When multipliers are calculated according to Mountford and Uhlig's (2009) present-value definition, they never exceed unity, regardless of the sample under analysis.
    Keywords: Business cycles, news shocks, military expenditure, government multipliers.
    JEL: E32 E62 H56
    Date: 2018–05
  4. By: Rodriguez-Lopez, Jesus; Solis-Garcia, Mario
    Abstract: We provide estimates of U.S. government expenditure multipliers for defense and non-defense spending over 1939-2014, using a fairly standard DSGE model that includes anticipated military spending changes ("war news shocks"), and find the following. First, our model's war news shocks compare favorably to Ramey's (2011) narrative-based "defense news" shocks. Second, war news shocks have little effect on model variables regardless of the period under examination. Unanticipated military expenditure accounts for substantial movements in output, but only when observations from 1939 to 1954 are considered. Apart from that, movements in output are entirely driven by total factor productivity shocks. Third, our structural model can generate defense expenditure multipliers above unity under two conditions: (i) the multiplier is calculated using the peak of the impulse-response function and (ii) a large number of observations before and up to the Korean War are included. When multipliers are calculated according to Mountford and Uhlig's (2009) present-value definition, they never exceed unity, regardless of the sample under analysis.
    Keywords: Business cycles; news shocks; military expenditure; government multipliers
    JEL: E32 E62 H56
    Date: 2018–05–20
  5. By: W. Lee Hoskins; Walker F. Todd
    Abstract: Many of the hopes arising from the 1989 fall of the Berlin Wall were still unrealized in 2010 and remain so today, especially in monetary policy and financial supervision. The major players that helped bring on the 2008 financial crisis still exist, with rising levels of moral hazard, including Fannie Mae, Freddie Mac, the too-big-to-fail banks, and even AIG. In monetary policy, the Federal Reserve has only just begun to reduce its vastly increased balance sheet, while the European Central Bank has yet to begin. The Dodd-Frank Act of 2010 imposed new conditions on but did not contract the greatly expanded federal safety net and failed to reduce the substantial increase in moral hazard. The larger budget deficits since 2008 were simply decisions to spend at higher levels instead of rational responses to the crisis. Only an increased reliance on market discipline in financial services, avoidance of Federal Reserve market interventions to rescue financial players while doing little or nothing for households and firms, and elimination of the Treasury's backdoor borrowings that conceal the real costs of increasing budget deficits can enable the American public to achieve the meaningful improvements in living standards that were reasonably expected when the Berlin Wall fell.
    Keywords: Too Big To Fail; Moral Hazard; Section 13(3); Credit Allocation; Domestic Price Level Stability
    JEL: E42 E52 E58 E61 E63
    Date: 2018–06
  6. By: Yanele Nyamela (Department of Economics, University of Pretoria, Pretoria, South Africa); Vasilios Plakandaras (Department of Economics, Democritus University of Thrace, Greece); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa)
    Abstract: In this paper, we analyze the impact of uncertainty shocks at the daily-frequency on key macroeconomic variables for the United States. In doing so, we use a vector autoregressive (VAR) model, including the inflation rate, a real-time measure of economic activity and a measure of monetary policy as endogenous variables and decompose uncertainty effects into short, medium and long-term based on a discrete-time Fourier transformation. Aggregate results (prior to decomposition) show that an increase in economic uncertainty has a significant expansionary impact on monetary policy. However, when we decompose uncertainty into its short-, medium- and long-run components, we find that economic activity is affected negatively in a statistically significant manner to shocks in low-frequency uncertainty, while, statistically significant monetary expansion is observed under shocks to relatively high frequencies of uncertainty.
    Keywords: Uncertainty, Frequency-Dependence, Daily Data
    JEL: C32 E31 E32 E52
    Date: 2018–05
  7. By: Hans-Werner Sinn
    Abstract: While the ECB helped mitigate the euro crisis in the aftermath of Lehman, it has stretched its monetary mandate and moved into fiscal territory. This text describes and summarises the crucial role played by the ECB in the intervention spiral resulting from its bid to manage the crisis. It also outlines ongoing competitiveness problems in southern Europe, discusses the so-called austerity policy of the Troika, comments on QE and presents two alternative paths for the future development of Europe.
    JEL: E02 E50 E52 E58 H50 H60 H63
    Date: 2018
  8. By: Dolado, Juan J. (European University Institute); Motyovszki, Gergö (European University Institute); Pappa, Evi (European University Institute)
    Abstract: In order to improve our understanding of the channels through which monetary policy has distributional consequences, we build a New Keynesian model with incomplete asset markets, asymmetric search and matching (SAM) frictions across skilled and unskilled workers and, foremost, capital-skill complementarity (CSC) in the production function. Our main finding is that an unexpected monetary easing increases labor income inequality between high and low-skilled workers, and that the interaction between CSC and SAM asymmetry is crucial in delivering this result. The increase in labor demand driven by such a monetary shock leads to larger wage increases for high-skilled workers than for low-skilled workers, due to the smaller matching frictions of the former (SAM-asymmetry channel). Moreover, the increase in capital demand amplifies this wage divergence due to skilled workers being more complementary to capital than substitutable unskilled workers are (CSC channel). Strict inflation targeting is often the most successful rule in stabilizing measures of earnings inequality even in the presence of shocks which introduce a trade-off between stabilizing inflation and aggregate demand.
    Keywords: monetary policy, search and matching, capital-skill complementarity, inequality
    JEL: E24 E25 E52 J64
    Date: 2018–04
  9. By: Francesco Furlanetto (Norges Bank); Tommy Sveen (BI Norwegian Business School); Lutz Weinke (Humboldt-Universität zu Berlin)
    Abstract: Canova et al. (2010 and 2012) estimate the dynamic response of labor market variables to technological shocks. They show that investment-specifi?c shocks imply almost exclusively an adjustment along the intensive margin (i.e., hours worked), whereas for neutral shocks the largest share of the adjustment takes place along the extensive margin (i.e., employment). In this paper we develop a New Keynesian model featuring capital accumulation, two margins of labor adjustment and a hiring cost. The model is used to analyze a novel economic mechanism to explain that evidence.
    Keywords: Technological Shocks, Sticky Prices, Labor Market
    JEL: E22 E24 E32
    Date: 2018–05–15
  10. By: Fabien Labondance (Observatoire français des conjonctures économiques); Paul Hubert (Observatoire français des conjonctures économiques)
    Abstract: We explore empirically the theoretical prediction that optimism or pessimism have aggregate effects, in the context of monetary policy. First, we quantify the tone conveyed by FOMC policymakers in their statements using computational linguistics. Second, we identify sentiment as the unpredictable component of tone, orthogonal to fundamentals, expectations, monetary shocks and investors’ sentiment. Third, we estimate the impact of FOMC sentiment on the term structure of private interest rate expectations using a high-frequency methodology and an ARCH model. Optimistic FOMC sentiment increases policy expectations primarily at the one-year maturity. We also find that sentiment affects inflation and industrial production beyond monetary shocks.
    Keywords: Animal spirits; Optimism; Confidence; FOMC; Interest rate expectations; Central Bank Communication; Eurpean Central Bank; Aggregate Effects
    JEL: E43 E52 E58
    Date: 2017–03
  11. By: Lena Dräger; Michael Lamla
    Abstract: In this paper, we explore the degree of anchoring of consumers’ individual long-run inflation expectations utilizing the University of Michigan Survey of Consumer’s rotating panel micro-structure. Our results indicate that long-run inflation expectations became more anchored over the last decades, as the degree of co-movement between short- and long-run expectations fell significantly. While we observe that the anchoring of expectations increases for all age and birth cohorts, it seems that older cohorts, who experienced the high inflation period of the 1970s, remain less anchored in their long-run inflation expectations as compared to the young cohorts. Older cohorts show a higher volatility in their degree of anchoring and react more to adverse news shocks. This alludes to potentially long-lasting costs of high inflation spells.
    Keywords: anchoring, inflation expectations, micro data, birth cohort effects, news
    JEL: E31 E52 E58 D84 C25
    Date: 2018
  12. By: Gehrke, Britta (University of Erlangen-Nuremberg); Hochmuth, Brigitte (University of Erlangen-Nuremberg)
    Abstract: Short-time work is a labor market policy that subsidizes working time reductions among firms in financial difficulty to prevent layoffs. Many OECD countries have used this policy in the Great Recession. This paper shows that the effects of short-time work are strongly time dependent and non-linear over the business cycle. It may save up to 0.8 jobs per short-time worker in deep economic crises. The policy becomes more efficient as the recession deepens. In expansions, the effects are smaller and may turn negative. We disentangle discretionary short-time work from automatic stabilization in German data using smooth transition VARs.
    Keywords: short-time work, fiscal policy, labor market, non-linearity, smooth transition VARs, business cycle
    JEL: C32 E24 E32 E62
    Date: 2018–04
  13. By: Schulhofer-Wohl, Sam (Federal Reserve Bank of Chicago); Clouse, James A. (Board of the Governors of the Federal Reserve System)
    Abstract: We model bargaining between non-bank investors and heterogeneous bank borrowers in the federal funds market. The analysis highlights how the federal funds rate will respond to movements in other money market interest rates in an environment with elevated levels of excess reserves. The model predicts that the administered rate offered through the Federal Reserve's overnight reverse repurchase agreement facility influences the fed funds rate even when the facility is not used. Changes in repo rates pass through to the federal funds rate, but by less than one-for-one. We calibrate the model to data from 2017 and find in an out-of-sample test that the model quantitatively matches the increase in the federal funds rate in the first four months of 2018. The rise in the fed funds rate in 2018 is attributed to movements in repo rates and not to changes in the scarcity value of reserves.
    Keywords: Federal funds market; federal funds rate; Federal Reserve; interest rates; money market
    JEL: E42 E43 E47 E52 E58
    Date: 2018–05–01
  14. By: Cham, Tamsir (The Islamic Research and Teaching Institute (IRTI))
    Abstract: Gambia inflation rate has picked-up in recent years. This paper investigates the inflation dynamics in The Gambia using monthly time series data for the period 2005-2014. Several econometrics models are applied including single equation model, Structural Vector Autoregression (SVAR) model and Vector Error Correction Model (VECM). The empirical results confirm the existence of stable relation between money supply and inflation, and exchange rate and inflation. We found that the depreciation of the exchange rate has a much more immediate impact on inflation. In addition, the exchange rate pass-through for GMD/ US dollar exchange rate is stronger. The study shows that current inflation is affected significantly by past inflation. The results also reveal that inflation in neighboring country, Senegal, significantly influences inflation in the Gambia in all specifications. Furthermore, the empirical findings reveal that the artificial fixing of the exchange rate or fear of float in recent years further exert inflation pressure. In the short-run external shocks of money supply, exchange rate and prices in Senegal account for significant variations of inflation. However, in the medium term domestic demand and the exchange rate pass-through for GMD/US dollar exchange rate account for larger variations in inflation.
    Keywords: Inflation; Money Supply; Exchange Rate
    JEL: C32 E31 E52
    Date: 2017–07–01
  15. By: Bennouna, Hicham (Bank Al-Maghrib, Département de la Recherche); Bounader, Lahcen (Bank Al-Maghrib, Département de la Recherche)
    Abstract: The objective of this study is to evaluate the monetary policy transmission along the sovereign bond yield curve (2, 5 and 10 years) in Morocco through the estimation of several SVAR models between 2007-2017. Two different approaches for identifying structural shocks were used: (1) recursive factorization of Christiano-Eichenbaum-Evans (1999) and (2) non-recursive identification of Sims-Zha (2006). The variance decomposition suggests that macroeconomic impulses account for the vast preponderance of 5-year and 10-year variability compared to 2-year government bills. Similarly, the impulse response functions show that tighter monetary policy makes the yield curve steeper, meaning that the long-end of the yield curve increases more than the short-end. Moreover, the results suggest that an important part of 5 and 10 years sovereign bond reaction is explained by the « risk premium » component while the 2-year treasury bills are driven by monetary policy shocks.
    Keywords: Courbe des taux; prime de risque; décomposition de la variance; chocs de politique monétaire.
    JEL: E43 E52 E58 G12
    Date: 2018–05–14
  16. By: Altermatt, Lukas (University of Basel)
    Abstract: This paper analyzes optimal monetary and fiscal policy in a model where money and savings are essential and asset markets matter. The model is able to match some stylized facts about the correlation of real interest rates and stock price-dividend ratios. The results show that fiscal policy can improve welfare by increasing the amount of outstanding government debt. If the fiscal authority is not willing or able to increase debt, the monetary authority can improve welfare of current generations by reacting procyclically to asset return shocks; however, this policy affects welfare of future generations if it is not coordinated with fiscal policy measures. The model also shows that policies like QE reduce welfare of future generations.
    Keywords: New monetarism, overlapping generations, zero lower bound, optimal stabilization
    JEL: E43 E44 E52 G12 G18
    Date: 2018–05–07
  17. By: James Cloyne (University of California Davis, NBER and CEPR); Clodomiro Ferreira (Banco de España); Paolo Surico (London Business School and CEPR)
    Abstract: How do changes in monetary policy affect consumption? Using household data for the US and the UK, we show that most of the aggregate response of consumption to interest rates is driven by households with a mortgage. Outright home owners do not adjust expenditure at all and renters change their spending but by less than mortgagors. Income rises for all households as interest rate cuts directly affect firm investment and household consumption, boosting aggregate demand. A key dierence between these housing tenure groups is the composition of their balance sheets: mortgagors hold sizable illiquid assets but little liquid wealth, consistent with a higher marginal propensity to consume.
    Keywords: monetary policy, household balance sheets, liquidity constraints
    JEL: E21 E32 E52
    Date: 2018–05
  18. By: Ivo Maes (National Bank of Belgium and Robert Triffin Chair, Université catholique de Louvain and ICHEC Brussels Management School, Boulevard de Berlaimont 14, 1000 Brussels, Belgium); Piet Clement (Bank for International Settlements.)
    Abstract: The 1970s were a turbulent period in postwar monetary history. This paper focuses on how central bankers at the Bank for International Settlements (BIS), especially Alexandre Lamfalussy, the BIS’s Economic Adviser, responded to the Great Inflation. The breakdown of Bretton Woods forced central bankers to look for new monetary policy strategies as the exchange rate lost its central role. Lamfalussy, in his early years a Keynesian in favour of discretionary policies, moved to a "conservative Keynesian" position, acknowledging that a medium term orientation and the credibility of monetary policy were important to break inflationary expectations. However, Lamfalussy never moved to “monetarist” positions. Lamfalussy certainly acknowledged that monetary targets could reinforce the credibility and independence of monetary policy. However, he rejected mechanical rules. In essence he aimed for a middle position: rules applied with a pragmatic sense of discretion. In the early 1980s, with the rise of financial innovations, Lamfalussy would stress even more the limitations of monetary targeting. His focus turned increasingly to systemic financial stability risks, preparing the ground for the macroprudential approach of the BIS. In Lamfalussy's view, central banking remained an art, not a science.
    Keywords: Great Inflation, monetary policy, central banking, Alexandre Lamfalussy, BIS
    JEL: B22 E58 F44
    Date: 2018–04
  19. By: Sahu, Priyanka
    Abstract: This paper attempts to investigate the impact of demand and supply shocks on core inflation in India. Firstly, it calculates core inflation through asymmetric trim mean approach and secondly autoregressive distributed model is used to explain the dynamic effects of shocks on core inflation. Empirical findings based on ARDL bound test confirms the existence of long run relationship between core inflation with other macroeconomic variables and CUSUM and CUSUMSQ test show stability of coefficients in the model. Overall, the response of core inflation to demand shock is high in case of real variables as compared to monetary variables and its response to skewness-based supply shock is high as compared to food and fuel inflation.
    Keywords: Headline Inflation, Core Inflation, Demand Shocks, Supply Shocks, Asymmetric trimmed Mean, Autoregressive Model, Bound Test.
    JEL: C22 E31 E51 E52
    Date: 2018–03–10
  20. By: Beechey, Meredith (Örebro University School of Business); Österholm, Pär (Örebro University School of Business)
    Abstract: Inflation targets come in different shapes and sizes. We explore the choice of a point or band target for inflation in a stylised economy in which agents learn about the inflation-generating process. We simulate under two conditions, namely i) a point inflation target and ii) a band inflation target from within which the central bank chooses its current spe-cific target. In many parameterizations of the model, the preferred target type rests on the inflation-output stabilization preferences of the central bank. A band target tends to be associated with higher volatility of inflation and lower volatility of the output gap than a point target. As such, a very strong preference for output stabilisation speaks in favour of a band inflation target.With preferences for inflation stabilisation closer to those thought to prevail in practice, a point target almost always outperforms a band target.
    Keywords: Inflation targeting; Learning; Constant gain least squares
    JEL: E52 E58
    Date: 2018–06–01
  21. By: Cloyne, James; Dimsdale, Nicholas; Postel-Vinay, Natacha
    Abstract: The impact of fiscal policy on economic activity is still a matter of great debate. And, ever since Keynes first commented on it, interwar Britain, 1918-1939, has remained a particularly contentious case - not least because of its high debt environment and turbulent business cycle. This debate has often focused on the effects of government spending, but little is known about the effects of tax changes. In fact, a number of tax reforms in the period focused on long-term and social objectives, often reflecting the personality of British Chancellors. Based on extensive historiographical research, we apply a narrative approach to the interwar period in Britain and isolate a new series of exogenous tax changes. We find that tax changes have a sizable effect on GDP, with multipliers around 0.5 on impact and exceeding 2 within two years. Our estimates contribute to the historical debate about fiscal policy in the interwar period and are remarkably similar to the sizable tax multipliers found after WWII.
    Keywords: Macroeconomic Policy; Fiscal Policy; Taxation; Public Finance; Fiscal History; Multiplier; Narrative Approach
    JEL: E23 E32 E62 H2 H30 N1 N44
    Date: 2018–05
  22. By: Lucas Marc Fuhrer; Basil Guggenheim; Matthias Jüttner
    Abstract: This paper sheds light on Swiss franc Libor futures, which are often used to measure interest rate expectations. We show that the differences between Libor futures and realized rates (excess returns) are, on average, positive over the last 25 years. Using interest rate surveys, we decompose excess returns into a (forward) term premium and forecast errors. The decomposition reveals that the bulk of excess returns arises from forecast errors, while the term premium is time varying but on average zero. We find that the term premium positively correlates with the business cycle, interest rate developments, and in absolute values increases with interest rate uncertainty. Our findings suggest that Libor futures should be adjusted by the term premium to extract risk-neutral interest rate expectations.
    Keywords: Term premium, Libor futures, Swiss franc
    JEL: E43 E44 E52
    Date: 2018
  23. By: Ralf Fendel; Frederik Neugebauer
    Abstract: This paper employs event study methods to evaluate the effects of ECB’s non-standard monetary policy program announcements on 10-year government bond yields of euro area member states. It covers data from 11 euro area countries from January 1, 2007 to August 31, 2017 and distinguishes between the more solvent countries (Austria, Belgium, Finland, France, Germany, the Netherlands) and the less solvent ones (Greece, Ireland, Italy, Portugal, Spain). The paper makes three contributions to the literature. First, it is the first paper to reveal that measurable effects of announcements arise with a one-day delay meaning that government bond markets take some time to react to ECB announcements. Second, it quantifies the country-specific extent of yield reduction which seems inversely related to the solvency rating of the corresponding countries. The reduction of the spread between both groups in response to an event is due to a stronger decrease in the less solvent group. Third, this result is confirmed by letting the announcement variable interact with the spread level, which is an innovation in this strand of literature. By employing different data as control variables, it turns out that the results are robust for a given event set.
    Keywords: ECB, non-standard monetary policy, government bond yields, event study
    JEL: E44 E52 E58 G14
    Date: 2018–06–06
  24. By: Andrea Colciago; Anna Samarina; Jakob de Haan
    Abstract: This paper takes stock of the literature on the relationship between central bank policies and inequality. A new paradigm which integrates sticky-prices, incomplete markets and heterogeneity among households is emerging, which allows to jointly study how inequality shapes macroeconomic aggregates and how macroeconomic shocks and policies affect inequality. While the new paradigm features multiple distributional channels of monetary policy, most empirical analyses analyse each potential channel of redistribution in isolation. Our review suggests that empirical research on the effect of conventional monetary policy on income and wealth inequality yields very mixed findings, although there seems to be a consensus that higher inflation, at least above some threshold, increases inequality. In contrast to common wisdom, the conclusions concerning the impact of unconventional monetary policies on income inequality are also not clear cut. This is so since these policies may reduce income inequality by stimulating economic activity, but may also increase inequality by boosting asset prices. Similarly, results concerning the impact of unconventional monetary policies on wealth inequality are rather mixed. The scant literature on the impact of macro-prudential policies on inequality finds evidence for redistributive effects, but in view of its limitations it may be too early to come to conclusions.
    Keywords: income inequality; wealth inequality; monetary policy; macro-prudential policy
    JEL: D63 E52 E58
    Date: 2018–05
  25. By: Eidam, Frederik
    Abstract: Do governments strategically choose debt maturity to fill supply gaps across maturities? Building on a new panel data set of more than 9,000 individual Eurozone government debt issues between 1999 and 2015, I find that governments increase long-term debt issues following periods of low aggregate Eurozone long-term debt issuance, and vice versa. This gap-filling behavior is more pronounced for (1) less financially constrained and (2) higher rated governments. Using the ECB's three-year LTRO in 2011-2012 as an event study, I find that core governments filled the supply gap of longer maturity debt, which resulted from peripheral governments accommodating banks' short-term debt demand for "carry trades". This gap-filling implies that governments act as macro-liquidity providers across maturities, thereby adding significant risk absorption capacity to government bond markets.
    Keywords: Sovereign Debt,Maturity Structure,Market Segmentation,Central Bank Liquidity Provision,Long-Term Refinancing Operations
    JEL: E58 E62 G11 H63
    Date: 2018
  26. By: Ryan, John; Loughlin, John
    Abstract: This article examines three historical monetary unions: the Latin Monetary Union (LMU), the Scandinavian Monetary Union (SMU), and the Austro-Hungarian Monetary Union (AHMU) in an attempt to derive possible lessons for the European Monetary Union (EMU). The term ‘monetary union’ can be defined either narrowly or broadly depending on how closely it conforms to Mundell’s notion of ‘Optimal Currency Area’. After examining each of the historical monetary unions from this perspective, the article concludes that none of them ever truly conformed to Mundell’s concept, nor does the EMU. Nevertheless, the article argues that some lessons may be learned from these historical experiences. First, it is necessary that there exist robust institutions such as a common central bank and a unified fiscal policy in order to withstand external shocks. The three early unions could not withstand the shock of WWI. Another important lesson is that continuing national rivalries can undermine any monetary union.
    Keywords: Latin monetary union; Scandinavian monetary union; Austro-Hungarian monetary union; European monetary union; Eurozone crisis; European Central Bank
    JEL: E42 E50 E52 F02 F50
    Date: 2018–04–04
  27. By: Ferrero, Andrea (Oxford University); Harrison, Richard (Bank of England); Nelson, Ben (Bank of England)
    Abstract: The inception of macro-prudential policy frameworks in the wake of the global financial crisis raises questions of how macro-prudential and monetary policies should be coordinated. We examine these questions through the lens of a macroeconomic model featuring nominal rigidities, housing, incomplete risk-sharing between borrower and saver households, and macro-prudential tools in the form of mortgage loan-to-value and bank capital requirements. We derive a welfare-based loss function which suggests a role for active macro-prudential policy to enhance risk sharing. Macro-prudential policy faces trade-offs, however, and complete macro-prudential stabilization is not generally possible in our model. Nonetheless, simulations of a house price boom and subsequent correction suggest that macro-prudential tools could alleviate debt-deleveraging and help avoid zero lower bound episodes, even when macro-prudential tools themselves impose only occasionally binding constraints on debt dynamics in the economy.
    Keywords: Monetary policy; macro-prudential policy; time-consistent policy; policy coordination; occasionally binding constraints
    JEL: E32 E61
    Date: 2018–05–25
  28. By: Gόrnicka, Lucyna; Kamps, Christophe; Koester, Gerrit; Leiner-Killinger, Nadine
    Abstract: Identifying fiscal multipliers is usually constrained by the absence of a counterfactual scenario. Our new data set allows overcoming this problem by making use of the fact that recommendations under the EU’s excessive deficit procedure (EDP) provide both a baseline no-policy-change scenario and a fiscal-adjustment EDP scenario that entails a forecast of the macroeconomic impact of fiscal consolidation over the EDP horizon. For a sample of 24 EU countries to which 48 EDP recommendations were applied between 2009 and 2015, we derive country-specific fiscal multipliers as actually applied by forecasters during the crisis. Our results confirm Blanchard and Leigh’s (2013, 2014) presumption that forecasters learned during the crisis. According to our findings, fiscal multipliers as applied by the European Commission increased over time – from about 1/4 in the early years of the crisis to about 2/3 in the later years. However, different from Blanchard and Leigh (2013, 2014), we do not find evidence for the hypothesis that ex-post fiscal multipliers have been substantially above 1 during the crisis. JEL Classification: E32, E62, H20, H5
    Keywords: business cycle, fiscal consolidation, fiscal multipliers
    Date: 2018–05
  29. By: Philippe Martin (Département d'économie); Thomas Philippon (Department of Mechanical Engineering)
    Abstract: We provide a comprehensive account of the dynamics of eurozone countries from 2000 to 2012. We analyze private leverage, fiscal policy, labor costs and spreads, and we propose a model and an identification strategy to separate the impact of credit cycles, excessive government spending, and sudden stops. We then ask how periphery countries would have fared with different policies. We find that countries could have stabilized their employment if they had followed more conservative fiscal policies during the boom. Macro-prudential policies and an early intervention by the central bank to prevent market segmentation and reduce fiscal austerity would also have significantly reduced the recession.
    JEL: E00 E62 F41 F44 G01
    Date: 2017–01
  30. By: Nishi, Hiroshi
    Abstract: This study extends a two-sector Kaleckian model of growth and income distribution by incorporating the dynamics of labour productivity growth. The economy is composed of investment goods and consumption goods producing sectors, with the sectoral demand and productivity growth interaction dynamically formalized. The study analyses the conditions for the cyclical demand and productivity growth phenomena in a two-sector economy. The model reveals that each sector may present a different response in capacity utilization rate to a change in sectoral income distribution. These phenomena are specific to two-sector models, and cannot be observed with a conventional aggregate growth model.
    Keywords: Kaleckian model, Two-sector economy, Effective demand, Productivity growth
    JEL: E25 E32 O41
    Date: 2018–04
  31. By: Bracha, Anat (Federal Reserve Bank of Boston); Burke, Mary A. (Federal Reserve Bank of Boston)
    Abstract: Despite very low unemployment in the United States in recent months, wage inflation has remained modest. This paper investigates the possibility that there is hidden labor market slack in the form of informal or gig economy work, which may help explain this wage growth puzzle. Using unique data from 2015 and 2016 that we collected through the Survey of Informal Work Participation — part of the Federal Reserve Bank of New York’s Survey of Consumer Expectations — we find indirect and direct evidence for this hypothesis. First, we find that a measure of informal labor is negatively associated with wage growth at the census division level, while we observe no significant association between wage growth and the U-3 or U-6 unemployment rate. Second, most informal work participants in our survey report that for some increase in pay, they would drop hours of informal work in exchange for added hours of formal work. Together our results suggest that informal work represents an economically significant amount of potential labor supply to the formal market that may reduce pressure on measured wages. We also discuss other interpretations of our data.
    Keywords: wage inflation; gig economy; labor market slack
    JEL: E24 E26 J21
    Date: 2017–10–01
  32. By: Neyer, Ulrike
    Abstract: Die EZB ist formal unabhängig von Weisungen der Regierungen. Während und nach der Finanzkrise und der Staatsschuldenkrise im Euroraum hat die EZB neue Instrumente eingesetzt und neue Aufgaben und Verantwortlichkeiten übernommen, die zu Diskussionen über die Unabhängigkeit der EZB geführt haben. Vor diesem Hintergrund diskutiert diese Arbeit zwei Fragen. Erstens, stellen die neuen Instrumente und Aufgaben der EZB eine Gefahr für ihre Unabhängigkeit dar? Zweitens, ist der Einsatz der neuen Instrumente und die Übernahme der neuen Aufgaben von einer unabhängigen Institution in einer Demokratie zu rechtfertigen, oder besteht ein relevantes Demokratiedefizit? Bezüglich dieser beiden Fragen kommt die Arbeit zu dem Ergebnis, dass insbesondere das Programm zum Ankauf von Anleihen des öffentlichen Sektors (Public Sector Purchase Programme, PSPP) und die von der EZB übernommene Bankenaufsicht (Single Supervisory Mechanism, SSM) kritisch zu beurteilen sind.
    Keywords: Zentralbankunabhängigkeit,Eurosystem,Geldpolitik,Finanzkrise,Staatsschuldenkrise
    JEL: E42 E52 E58
    Date: 2018
  33. By: Huang, Yi; Panizza, Ugo; Varghese, Richard
    Abstract: Using data for advanced and emerging economies, we show that there is a negative correlation between public debt and corporate investment. Industry-level regressions show that high levels of government debt are particularly damaging for industries that need more external financial resources. Firm-level regressions show that government debt increases the sensitivity of corporate investment to cash flow. These results indicate that the relationship between public debt and investment is likely to be causal and that public debt crowds out corporate investment by tightening credit constraints.
    Keywords: Credit Constraints.; Crowding out; investment; public debt
    JEL: E22 E62 H63
    Date: 2018–05
  34. By: Melchisedek Joslem Ngambou Djatche (Université Côte d'Azur; GREDEG CNRS)
    Abstract: In this paper, we analyse the link between monetary policy and banks’ risk-taking behaviour. Some theoretical and empirical studies show that monetary easy whet banks’ risk appetite through asset valuation and search for yield process. However, since 2010, the low interest rate environment has cast doubt on these results. Our study deepens the analysis of the monetary risk-taking channel considering non-linearity, especially through threshold effects model. Using a dataset of US banks, we find that the impact of low interest rates on banks risk depend on the regime of the monetary stance, i.e on the deviation of monetary rate from the Taylor rule.
    Keywords: Monetary policy, financial stability, bank risk-taking, non-dynamic panel threshold model
    JEL: E44 E58 G21
    Date: 2018–05
  35. By: Lucrezia Fanti (Sapienza University of Rome (IT))
    Abstract: This paper introduces the classical idea about the so-called `directed' and `induced' technical change (ITC) within a Keynesian demand-side and evolutionary endogenous growth model in order to analyze the interplay among technical change, long-run economic growth and functional income distribution. An ITC process is analyzed within an Agent-Based Stock-Flow Consistent (AB-SFC) model, wherein credit-constrained heterogeneous firms choose both the intensity and the direction of the innovation towards a labor- or capital-saving choice of technique. In the longrun, the model reproduces the so-called `Kaldor stylized facts' (i.e. with a purely labor-saving technical change), however during the transitional phase the model shows a labor-saving/capitalusing innovation pattern, as the aggregate output-capital ratio decreases until it stabilizes in the long-run, as well as declining labor share for long time periods and we can ascribe these evidences mainly to the directed technical change process. In order to stress the e ective role of the innovation bias on the model dynamics, we compare the baseline scenario with a `counterfactual' scenario wherein a `neutral ' technical progress is at work.
    Keywords: Agent-Based Macroeconomics, Stock-Flow Consistent Models, Induced Technical Change, Directed Innovation, Choice of Techniques, Labor Share, Growth and Distribution.
    JEL: E24 E25 O30 O41
    Date: 2018–05
  36. By: Fanti, Lucrezia
    Abstract: This paper introduces the classical idea about the so-called directed and induced technical change (ITC) within a Keynesian demand-side and evolutionary endogenous growth model in order to analyze the interplay among technical change, long-run economic growth and functional income distribution. An ITC process is analyzed within an Agent-Based Stock-Flow Consistent (AB-SFC) model, wherein credit-constrained heterogeneous firms choose both the intensity and the direction of the innovation towards a labor- or capital-saving choice of technique. In the long-run, the model reproduces the so-called Kaldor stylized facts (i.e. with a purely labor-saving technical change), however during the transitional phase the model shows a labor-saving/capital-using innovation pattern, as the aggregate output-capital ratio decreases until it stabilizes in the long-run, as well as declining labor share for long time periods and we can ascribe these evidences mainly to the directed technical change process. In order to stress the effective role of the innovation bias on the model dynamics, we compare the baseline scenario with a counterfactual scenario wherein a neutral technical progress is at work.
    Keywords: Agent-Based Macroeconomics; Stock-Flow Consistent Models; Induced Technical Change; Directed Innovation; Choice of Techniques; Labor Share; Growth and Distribution.
    JEL: E24 E25 O33 O41
    Date: 2018–03–10
  37. By: G. Angelini; L. Fanelli
    Abstract: In this paper we discuss general identification results for Structural Vector Autoregressions (SVARs) with external instruments, considering the case in which r valid instruments are used to identify g ≥ 1 structural shocks, where r ≥ g. We endow the SVAR with an auxiliary statistical model for the external instruments which is a system of reduced form equations. The SVAR and the auxiliary model for the external instruments jointly form a `larger' SVAR characterized by a particularly restricted parametric structure, and are connected by the covariance matrix of their disturbances which incorporates the `relevance' and `exogeneity' conditions. We discuss identification results and likelihood-based estimation methods both in the `multiple shocks' approach, where all structural shocks are of interest, and in the `partial shock' approach, where only a subset of the structural shocks is of interest. Overidentified SVARs with external instruments can be easily tested in our setup. The suggested method is applied to investigate empirically whether commonly employed measures of macroeconomic and financial uncertainty respond on-impact, other than with lags, to business cycle uctuations in the U.S. in the period after the Global Financial Crisis. To do so, we employ two external instruments to identify the real economic activity shock in a partial shock approach.
    JEL: C32 C51 E44 G10
    Date: 2018–05
  38. By: International Monetary Fund
    Abstract: A consumption-led, timid recovery has increased macroeconomic vulnerabilities. Growth almost doubled to 1.9 percent in 2017, but record fiscal spending and strong credit growth, combined with dinar depreciation, pushed inflation to 7.1 percent in February 2018. The current account deficit widened to 10.1 percent of GDP over 2017 and reserve cover fell to 2.6 months of imports in early March 2018. Public and external debt finished 2017 at 71 percent and 80 percent of GDP, respectively. Discontent about economic conditions and the residual impact of several shocks—notably the 2015 terrorist attacks, political uncertainty, and spillovers from the Libyan conflict—continue to weigh on confidence and policy implementation.
  39. By: Reuben Ellul (Central Bank of Malta)
    Abstract: This study extends the flow approach to forecasting unemployment, as carried out by Barnichon and Nekarda (2013) and Barnichon and Garda (2016), to the Maltese labour market using a wider number of estimating techniques. The flow approach results in significant improvements in forecast accuracy over an autoregressive (AR) process. Particular improvements to forecasting accuracy are returned over shorter time horizons. When including flows, forecast improvements over both an AR process and non-flow forecasts are found when applying VECM methods. Bayesian and OLS VARs also show strong improvements over an AR, with or without the inclusion of flows. For Maltese data, the use of flows computed using aggregate data in these two latter methodologies does not bring about a significant improvement over the forecasts which exclude them.
    JEL: E24 E27 J64
    Date: 2018
  40. By: Christiane Baumeister; James D. Hamilton
    Abstract: Reporting point estimates and error bands for structural vector autoregressions that are only set identified is a very common practice. However, unless the researcher is persuaded on the basis of prior information that some parameter values are more plausible than others, this common practice has no formal justification. When the role and reliability of prior information is defended, Bayesian posterior probabilities can be used to form an inference that incorporates doubts about the identifying assumptions. We illustrate how prior information can be used about both structural coefficients and the impacts of shocks, and propose a new distribution, which we call the asymmetric t distribution, for incorporating prior beliefs about the signs of equilibrium impacts in a nondogmatic way. We apply these methods to a three-variable macroeconomic model and conclude that monetary policy shocks were not the major driver of output, inflation, or interest rates during the Great Moderation.
    Keywords: structural vector autoregressions, set identification, monetary policy, impulse-response functions, historical decompositions, model uncertainty, informative priors
    JEL: C11 C32 E52
    Date: 2018
  41. By: Bouhdaoui, Yassine (Bank Al-Maghrib, Département de la Recherche)
    Abstract: By adding denominations to their coin and banknote series central banks can increase the efficiency of cash payments. In practice, however, they opt for a denominational structure with a relatively low density. The literature holds that this is because of the production costs involved. Bouhdaoui and Van Hove (2017) test this proposition by introducing a per-denomination fixed cost into the matching model of Lee et al. (2005) and parameterize the model with data on the production of US dollar banknotes. This paper aims to test this assumption using production figures of Moroccan banknotes. The results confirm that central banks could increase the density of their currency systems beyond the observed level without the efficiency gains for transactors being dwarfed by the additional production costs for the central bank itself. Our finding shows that the explanation for the low density rather lies with computational and habituation costs incurred by consumers and merchants - and anticipated by central banks - that are not yet in any of the extant models.
    Keywords: Divisions monétaires; Billets de banque; Banque centrale; Coût social; modèle de search.
    JEL: E40 E42 E47
    Date: 2018–05–14
  42. By: Kerwin Kofi Charles (Edwin A. and Betty L. Bergman Distinguished Service Professor, Harris School of Public Policy); Erik Hurst (V. Duane Rath Professor of Economics, Booth School of Business; Deputy Director of BFI); Mariel Schwartz (University of Chicago)
    Abstract: Using data from a variety of sources, this paper comprehensively documents the dramatic changes in the manufacturing sector and the large decline in employment rates and hours worked among prime-aged Americans since 2000. We use cross-region variation to explore the link between declining manufacturing employment and labor market outcomes. We find that manufacturing decline in a local area in the 2000s had large and persistent negative effects on local employment rates, hours worked and wages. We also show that declining local manufacturing employment is related to rising local opioid use and deaths. These results suggest that some of the recent opioid epidemic is driven by demand factors in addition to increased opioid supply. We conclude the paper with a discussion of potential mediating factors associated with declining manufacturing labor demand including public and private transfer receipt, sectoral switching, and inter-region mobility. Overall, we conclude that the decline in manufacturing employment was a substantial cause of the decline in employment rates during the 2000s particularly for less educated prime age workers. Given the trends in both capital and skill deepening within this sector, we further conclude that many policies currently being discussed to promote the manufacturing sector will have only a modest labor market impact for less educated individuals.
    Keywords: employment, manufacturing, labor market outcomes
    JEL: E24 J21 J23 R23
    Date: 2018–05
  43. By: Anyadike-Danes, Michael (Aston Business School and Enterprise Research Centre, UK); Bjuggren, Carl Magnus (Research Institute of Industrial Economics (IFN), Sweden); Dumont, Michel (Federal Planning Bureau and Ghent University, Belgium); Gottschalk, Sandra (ZEW, Germany); Hölzl, Werner (Austrian Institute of Economic Research (WIFO)); Johansson, Dan (Örebro University School of Business); Maliranta, Mika (ETLA and University of Jyväskylä, Finland); Myrann, Anja (Ragnar Frisch Centre for Economic Research, Norway); Nielsen, Kristian (Aalborg University, Denmark); Zheng, Guanyu (Productivity Commission, New Zealand)
    Abstract: This paper addresses three simple questions: how should the contribution of HGFs to job creation be measured? how much does this contribution vary across countries? to what extent does the cross-country variation depend on variation in the proportion of HGFs in the business population? The first is a methodological question which we answer using a more highly articulated version of the standard job creation and destruction accounts. The other two are empirical questions which we answer using a purpose-built dataset assembled from national firm-level sources and covering nine countries, spanning the ten three year periods from 2000/03 to 2009/12. The basic principle governing the development of the accounting framework is the choice of appropriate comparators. Firstly, when measuring contributions to job creation, we should focus on just job creating firms, otherwise we are summing over contributions from firms with positive, zero, and negative job creation numbers. Secondly, because we know growth depends in part on size, the ’natural’ comparison for HGFs is with job creation by similar-sized firms which simply did not grow as fast as HGFs. However, we also show how the measurement framework can be further extended to include, for example, a consistent measure of the contribution of small job creating firms. On the empirical side, we find that the HGF share of job creation by large job creating firms varies across countries by a factor of two, from around one third to two thirds. A relatively small proportion of this cross-country variation is accounted for by variations in the influence of HGFs on job creation. On average HGFs generated between three or four times as many jobs as large non-HGF job creating firms, but this ratio is relatively similar across countries. The bulk of the cross-country variation in HGF contribution to job creation is accounted for by the relative abundance (or rarity) of HGFs. Moreover, we also show that the measurement of abundance depends upon the choice of measurement framework: the ’winner’ of a cross-national HGF ’beauty context’ on one measure will not necessarily be the winner on another.
    Keywords: high-growth firms; firm growth; job creation
    JEL: D22 E24 L11 L25 L26 M13
    Date: 2018–05–08
  44. By: J. E. Boscá; R. Doménech; J. Ferri; R. Méndez; J. F. Rubio-Ramírez
    Abstract: In this paper we develop and estimate a new Bayesian DSGE model for the Spanish economy that has been designed to evaluate different structural reforms. The small open economy model incorporates a banking sector, consumers and entrepreneurs who accumulate debt, and a rich fiscal structure and monopolistic competition in products and labor markets, for a country in a currency union, with no independent monetary policy. The model can be used to evaluate ex-ante and ex-post policies and structural reforms and to decompose the evolution of macroeconomic aggregates according to different shocks. In particular, we estimate the contribution of financial and fiscal shocks to both the crisis of the Great Recession and the recovery of the Spanish economy.
    Date: 2018–06
  45. By: Baqaee, David Rezza
    Abstract: This paper shows that household expectations of the inflation rate are more responsive to inflationary news than to disinflationary news. This asymmetry in inflation expectations can be a source of downward nominal wage rigidity, since workers expectations adjust more quickly to inflationary shocks than disinflationary shocks. I embed asymmetric beliefs into a general equilibrium model and show that, in such a model, monetary policy has asymmetric effects on employment, output, and wage inflation consistent with the data. I microfound asymmetric household expectations using ambiguity-aversion: households, who do not know the quality of their information, overweight inflationary news since it reduces their purchasing power, and underweight deflationary news since it increases their purchasing power. Although wages are downwardly rigid in this environment, monetary policy need not have a bias towards using inflation to grease the wheels of the labor market.
    Date: 2018–05
  46. By: Tiago Neves Sequeira (Universidade da Beira Interior and CEFAGE-UBI); Pedro Mazeda Gil (cef.up, FEP, Universidade do Porto); Óscar Afonso (cef.up and FEP, Universidade do Porto, and CEFAGE-UBI)
    Abstract: This paper offers novel insights regarding the role of complexity in both the transitional and the long-run dynamics of the economy. We devise an endogenous growth model using the concept of entropy as a state-dependent complexity effect. This allows us to gradually diminish scale effects as the economy develops along the transitional dynamics, which conciliates evidence on the existence of scale effects in history with evidence of no or reduced scale effects in today’s economies. We show that empirical evidence supports entropy as a “first principle” operator of the complexity effect. The model features endogenous growth, with null or small (positive or negative) scale effects, or stagnation, in the long run. These different long-run possibilities have also policy implications. Then, we show that the model can replicate well the take-off after the industrial revolution and the productivity slowdown in the second half of the XXth century. Future scenarios based on in-sample calibration are discussed, and may help to explain (part of) the growth crises affecting the current generation.
    Keywords: endogenous economic growth; complexity effects; entropy.
    JEL: O10 O30 O40 E22
    Date: 2018–04
  47. By: Lorenzo Pandolfi (Università di Napoli Federico II and CSEF)
    Abstract: This paper analyzes the effects of bail-in policies on banks’ funding cost, incentives for loan monitoring, and financing capacity. In a model with moral hazard and two investment stages, a full bail-in turns out to be, ex post, the first-best policy to deal with failing banks. As a consequence, however, investors expect bail-ins rather than bailouts. Ex ante, this raises banks’ cost of debt and depresses bankers’ incentives to monitor. When moral hazard is severe, this time inconsistency leads to a credit market collapse unless the government pre-commits to an alternative resolution policy. The optimal policy is either a combination of bail-in and bailout or liquidation, depending on the severity of moral hazard and the shadow cost of the partial bailout.
    Keywords: bail-in; bailout; moral hazard, resolution policies; bank regulation.
    JEL: D82 E58 G21 G28
    Date: 2018–05–22
  48. By: Georges Prat; Remzi Uctum
    Abstract: This paper proposes a hybrid two-horizon risk premium model with one- and two-period maturity debts, among which the risky asset and the riskless one depend on agents’ investment horizon. A representative investor compares at each horizon the ex-ante premium offered by the market with the value they require to take a risky position, with the aim of choosing between a riskless and a risky strategy. Due to market frictions, the premium offered adjusts gradually to its required value determined by the portfolio choice theory. The required market risk premium is defined as a time-varying weighted average of the required 1- and 2-period horizon premia, where the weights represent the degree of preference of the market for each of the horizons. Our framework is more general than the standard model of the term structure of interest rates where it is assumed that the 1-period rate is the riskless rate at any time and for all agents. Setting one period equal to three months, we use 3-month ahead expected values of the US 3-month Treasury Bill rate provided by Consensus Economics surveys to estimate our 3- and 6-month horizon risk premium model using the Kalman filter methodology. We find that both 3- and 6-month maturity rates represent the riskless and the risky rates with a time-varying market preference for the former rate of about two-thirds. This result strongly rejects the standard model and shows the importance of taking into account the market preference for alternative horizons when describing risky strategies in interest rate term structure modelling.
    Keywords: interest rates, risk premium, survey data
    JEL: C51 D84 E43 G11 G14
    Date: 2018
  49. By: Sona Benecka; Ludmila Fadejeva; Martin Feldkircher
    Abstract: This paper investigates the international effects of a euro area monetary policy shock, focusing on countries from Central, Eastern, and Southeastern Europe (CESEE). To that end, we use a global vector autoregressive (GVAR) model and employ shadow rates as a proxy for the monetary policy stance during normal and zero-lower-bound periods. We propose a new way of modeling euro area countries in a multi-country framework, accounting for joint monetary policy, and a novel approach to simultaneously identifying shocks. Our results show that in most euro area and CESEE countries, prices adjust and output falls in response to a euro area monetary tightening, but with a substantial degree of heterogeneity.
    Keywords: Euro area monetary policy, global vector autoregression, spillovers
    JEL: C32 E32 F44 O54
  50. By: Svatopluk Kapounek (Department of Finance, Faculty of Business and Economics, Mendel University in Brno); Zuzana Kucerova (Department of Finance, Faculty of Business and Economics, Mendel University in Brno)
    Abstract: We investigate economic cycle comovements across the European Union after twenty years from euro adoption. We demonstrate the cycle comovement between France and the EU and the decoupling of Germany, the United Kingdom and countries in Southern Europe. We find that the Baltic countries represent a single economic area with common shocks. Using wavelet coherence analysis with phase shift, we identify directions of causal relationships and discuss the spread of asymmetric shocks across the European Union. Our results do not fully support the idea that monetary integration increases the synchronisation of economic cycles of monetary union members.
    Keywords: OCA Theory, Economic Cycles, Time†series co†movements, Wavelet Analysis, Phase Shift
    JEL: E32 F15 C14
    Date: 2018–06
  51. By: Matteo Iacoviello; Gaston Navarro
    Abstract: This paper analyzes the spillovers of higher U.S. interest rates on economic activity in a large panel of 50 advanced and emerging economies. We allow the response of GDP in each country to vary according to its exchange rate regime, trade openness, and a vulnerability index that includes current account, foreign reserves, inflation, and external debt. We document large heterogeneity in the response of advanced and emerging economies to U.S. interest rate surprises. In response to a U.S. monetary tightening, GDP in foreign economies drops about as much as it does in the United States, with a larger decline in emerging economies than in advanced economies. In advanced economies, trade openness with the United States and the exchange rate regime account for a large portion of the contraction in activity. In emerging economies, the responses do not depend on the exchange rate regime or trade openness, but are larger when vulnerability is high.
    Keywords: U.S. Monetary Policy ; Foreign Spillovers ; Local Projection ; Macroeconomic Transmission ; Panel Data
    JEL: F4 E5 C3
    Date: 2018–05
  52. By: Sergi Lanau; Adrian Robles; Frederik G Toscani
    Abstract: We study inflation dynamics in Colombia using a bottom-up Phillips curve approach. This allows us to capture the different drivers of individual inflation components. We find that the Phillips curve is relatively flat in Colombia but steeper than recent estimates for the U.S. Supply side shocks play an important role for tradable and food prices, while indexation dynamics are important for non-tradable goods. We show that besides allowing for a more detailed understanding of inflation drivers, the bottom-up approach also improves on an aggregate Phillips curve in terms of forecasting ability. In the baseline forecast scenario, both headline and core inflation converge towards the Central Bank’s inflation target of 3 percent by end-2018 but these favorable inflation dynamics are vulnerable to large supply shocks.
    Date: 2018–05–10
  53. By: Christophe Blot (Observatoire français des conjonctures économiques); Jérôme Creel (Observatoire français des conjonctures économiques); Paul Hubert (Observatoire français des conjonctures économiques); Fabien Labondance (Observatoire français des conjonctures économiques); Xavier Ragot (Observatoire français des conjonctures économiques)
    Abstract: For nearly two decades, the policy debate has focused on the attitude of central banks regarding financial stability and asset price bubbles. This debate is resurfacing with the recent episodes of expansionary monetary policies implemented through unconventional measures. The aim of this policy brief is to feed reflections on the risks for financial stability associated with the extension of quantitative easing (QE) by the ECB. We first recall that the theoretical and empirical literature does not provide a clear consensus on the influence of monetary policy on asset price bubbles. Then, we propose indicators of asset price bubbles for the euro area and we discuss the effect of monetary policy on these indicators. So far, there is no evidence of presence of asset price bubbles in the euro area. Besides, the change in the ECB balance sheet would not trigger bubbles in the stock and housing markets. However, it may be a concern for the bond market. From this, we argue that a gradual decline in ECB’s balance sheet would be important to limit the risk of a new banking crisis in the euro area.
    Keywords: financial stability; price bubbles
    JEL: E5
    Date: 2017–02
  54. By: Jasmien De Winne; Gert Peersman
    Abstract: For a panel of 75 countries, we find that increases in global agricultural commodity prices that are caused by unfavorable harvest shocks in other regions of the world significantly curtail domestic economic activity. The effects are much larger than for average global agricultural price shifts. The impact is also considerably stronger in high-income countries, despite the lower shares of food in household expenditures these countries have compared to low-income countries. On the other hand, we find weaker effects in countries that are net exporters of agricultural products, have higher shares of agriculture in GDP or lower shares of non-agricultural trade in GDP; that is, characteristics that typically apply to low-income countries. When we control for these country characteristics, we find indeed that the effects on economic activity become smaller when income per capita is higher. Overall, our findings imply that the consequences of climate change on advanced economies are likely larger than previously thought.
    Keywords: agricultural commodity prices, economic activity, climate change
    JEL: E32 F44 O13 O44 Q11 Q54
    Date: 2018
  55. By: Giovanni Dosi (Laboratory of Economics and Management); Mauro Napoletano (Observatoire français des conjonctures économiques); Andrea Roventini (Laboratory of Economics and Management (LEM)); Tania Treibich (Maastricht University)
    Abstract: Abstract This paper presents the family of the Keynes+Schumpeter (K+S, cf. Dosi et al, J Econ Dyn Control 34 1748–1767 2010, J Econ Dyn Control 37 1598–1625 2013, J Econ Dyn Control 52 166–189 2015) evolutionary agent-based models, which study the effects of a rich ensemble of innovation, industrial dynamics and macroeconomic policies on the long-term growth and short-run fluctuations of the economy. The K+S models embed the Schumpeterian growth paradigm into a complex system of imperfect coordination among heterogeneous interacting firms and banks, where Keynesian (demand-related) and Minskian (credit cycle) elements feed back into the meso and macro dynamics. The model is able to endogenously generate long-run growth together with business cycles and major crises. Moreover, it reproduces a long list of macroeconomic and microeconomic stylized facts. Here, we discuss a series of experiments on the role of policies affecting i) innovation, ii) industry dynamics, iii) demand and iv) income distribution. Our results suggest the presence of strong complementarities between Schumpeterian (technological)
    Keywords: Keynes; Schumpeter; Evolutionary models
    Date: 2017–01
  56. By: Itamar Drechsler; Alexi Savov; Philipp Schnabl
    Abstract: We show that maturity transformation does not expose banks to significant interest rate risk—it actually hedges banks' interest rate risk. We argue that this is driven by banks' deposit franchise. Banks incur large operating costs to maintain their deposit franchise, and in return get substantial market power. Market power allows banks to charge depositors a spread by paying deposit rates that are low and insensitive to market rates. The deposit franchise therefore works like an interest rate swap where banks pay the fixed-rate leg (the operating costs) and receive the floating-rate leg (the deposit spread). To hedge the deposit franchise, banks must therefore hold long-term fixed-rate assets; i.e., they must engage in maturity transformation. Consistent with this view, we show that banks' aggregate net interest margins have been highly stable and insensitive to interest rates over the past six decades, and that banks' equity values are largely insulated from monetary policy shocks. Moreover, in the cross section we find that banks match the interest-rate sensitivities of their income and expenses one-for-one, and that banks with less sensitive interest expenses hold substantially more long-term assets. Our results imply that forcing banks to hold only short-term assets (“narrow banking”) would make banks unhedged and, more broadly, that the deposit franchise is what allows banks to lend long term.
    JEL: E43 E52 G21 G31
    Date: 2018–05
  57. By: Ono, Tetsuo; Uchida, Yuki
    Abstract: This study considers the politics of public education and its impacts on economic growth and welfare across generations. Public education is funded by taxing the labor income of the working generation and capital income of the retired. We employ probabilistic voting to demonstrate the politics of taxes and expenditure and show that aging results in a shift of the tax burden from the old to the young and a slowdown of economic growth. We then consider three alternative constraints that limit the choice of taxes and/or expenditure: a minimum level of public education expenditure, an upper limit of the capital income tax rate, and a combination of the two. These constraints all create a trade-off between current and future generations in terms of welfare.
    Keywords: Public education, Economic growth, Capital income tax, Political equilibrium
    JEL: D70 E24 H52
    Date: 2018–02–20
  58. By: Keiichiro Kobayashi; Daichi Shirai
    Abstract: Economic growth slows for an extended period after a financial crisis. We construct a model in which the one-time buildup of debt can depress the economy persistently even when there is no shock on financial technology. We consider the debt dynamics of a firm under an endogenous borrowing constraint. When the initial debt is large, the borrowing constraint binds tight and production is inefficient for an extended period. A firm is called debt-ridden when it owes the maximum sustainable amount of debt. A debt-ridden firm pays all income every period as the interest payment on the debt. A noticeable result in the deterministic case is that a debt-ridden firm continues inefficient production permanently. Further, if the initial debt exceeds a certain threshold, the firm chooses to increase borrowing and become debt-ridden intentionally. The emergence of a substantial number of debt-ridden firms lowers economic growth persistently by reducing the growth rate of aggregate productivity. As lenders have no incentive to reduce debt, a policy intervention that provides debtridden borrowers with relief from excessive debt may thus be necessary to restore economic growth.
    Date: 2018–01
  59. By: Mario González; Raúl Tadle
    Abstract: The latest financial crisis has increased the interest in understanding how monetary policy announcements impact financial markets. For the US there are several studies that cover this area of research, however, for emerging markets the number of studies is scarce. This paper studies how the Chilean stock market is affected by monetary policy announcements made by the Central Bank of Chile. In their monthly monetary policy meetings the Central Bank of Chile decides the monetary policy rate and circulates press releases that effectively explain their decision. The information contained in those documents include policy decisions for the current month, the central bank's economic outlook, and the signals about likely future central bank policy decisions. We therefore examine these monetary policy changes and the corresponding additional information from the meeting statements. Using Automated Content Analysis, we identify qualitative information from the statement releases of the Central Bank of Chile and create a quantitative measure for the signals indicating likely future monetary policy. This quantitative measure, which we call them sentiment score - proxies for the monetary policy tilt. We then evaluate how the surprise component of the sentiment scores - together with unexpected policy changes - impact Chilean financial assets.
    Date: 2018–05
  60. By: Michael McLeay (Bank of England); Silvana Tenreyro (Bank of England; Centre for Macroeconomics (CFM); London School of Economics and Political Science (LSE); Centre for Economic Policy Research)
    Abstract: This note explains why inflation follows a seemingly exogenous statistical process, unrelated to the output gap. In other words, it explains why it is difficult to empirically identify a Phillips curve. We show why this result need not imply that the Phillips curve does not hold – on the contrary, our conceptual framework is built under the assumption that the Phillips curve always holds. The reason is simple: if monetary policy is set with the goal of minimising welfare losses (measured as the sum of deviations of inflation from its target and output from its potential), subject to a Phillips curve, a central bank will seek to increase inflation when output is below potential. This targeting rule will impart a negative correlation between inflation and the output gap, blurring the identification of the (positively sloped) Phillips curve.
    Date: 2018–04
  61. By: Frédéric Reynès (Nederlandse Organisatie voor Toegepast Natuurwetenschappelijk Onderzoek)
    Abstract: By defining the Variable Output Elasticities Cobb-Douglas function, this article shows that a large class of production functions can be written as Cobb-Douglas function with non-constant output elasticity. Compared to standard flexible functions such as the Translog function, this framework has several advantages. [1] It does not requires the use of a second order approximation. [2] This greatly facilitates the deduction of linear input demands function without the need of involving the duality theorem. [3] It allows for a generalization of the CES function to the case where the elasticity of substitution between each pair of inputs is not necessarily the same. [4] This provides a more general and more flexible framework compared to the traditional nested CES approach while facilitating the analyze of the substitution properties of nested CES functions. The case of substitutions between energy, capital and labor is provided.
    Keywords: Flexible production functions; Cobb-Douglas function; CES function; Substitution capital-labor-energy
    JEL: D24 E23
    Date: 2017–04
  62. By: Nan Li; Vance Martin
    Abstract: This paper studies changes in the transmission of common versus sectoral idiosyncratic shocks across different U.S. nonfarm business sectors during the Great Recession, and evaluates the cross-sectoral spillovers. Shocks are identified by dynamic factor methods. We find that the Great Recession is largely a time of heightened impact of common shocks— which accounts for 3/4 of aggregate volatility—and large spillovers of negative financerelated shocks. Moreover, in contrast with the earlier literature that failed to find a significant role of sectoral shocks (propagated through the input-output linkages across sectors) in driving variability in aggregate industry output, this study allows spillovers of shocks to operate through other mechanisms intertemporally. We find that prior to the recession the majority of aggregate fluctuations is explained by sector-specific shocks.
    Date: 2018–05–09
  63. By: David Mesa-Ruiz (U. Pablo de Olavide); Yolanda Rebollo-Sanz (U. Pablo de Olavide); Jesús Rodríguez-López (U. Pablo de Olavide)
    Abstract: This paper presents an assessment of the external cost of drunk driving in Spain between 2004-2015. Eventually we arrive at the following conclusions. Firstly, we find the relative risk of drunk drivers causing a crash during the night (20:00 p.m. to 5:00 a.m.) to be between 2.7 to 3.9 times higher than that of sober drivers. Secondly, we provide evidence that the relative number of drunk drivers versus sober drivers declined during nighttime hours after the implementation of the Penalty Points System for driving licenses in Spain on July 1st 2006. Thirdly, using logistic and count model regressions, we confirm hourly heterogeneity in the pattern of drunk driving, and estimate elasticities of fatal crashes with respect to drunk driving, which range between 0.5 and 0.7. When estimating the decline in fatalities after the Penalty Points System, our approach does a good job in capturing the change in fatalities during nighttime hours that can be accounted for by drunk driving. Finally, our assessment indicates a downturn in the external costs of drunk driving over the last decade in Spain. In addition, we estimate that the fine for drunk driving should be set at 1250€, in order to offset its external costs. Overall, our results point to a decline in drunk driving offences alongside an increase in its punition.
    Keywords: Road accidents, drunk driving, relative risk, multinomial probability, negative binomial, external costs.
    JEL: R49 E32 C22
    Date: 2018–05
  64. By: Takuji Fueki; Hiroka Higashi; Naoto Higashio; Jouchi Nakajima; Shinsuke Ohyama; Yoichiro Tamanyu
    Abstract: This paper proposes a simple but comprehensive structural vector autoregressive (SVAR) model to examine the underlying factors of oil price dynamics. The distinguishing feature is to explicitly assess the role of expectations on future aggregate demand and oil supply in addition to the traditional realized aggregate demand and supply factors. Our empirical analysis shows that identified future demand and supply shocks explain about 30-35 percent of historical oil price fluctuations. In particular, future oil supply shocks are more than twice as important as realized and future demand shocks in accounting for oil price developments. The empirical result indicates that the influence of oil price shocks on global output varies according to the nature of each shock. We also show that the financial factors and the development of shale-oil technology are additional relevant sources of oil price fluctuations.
    Keywords: oil demand and supply, oil price, structural vector autoregressive model
    JEL: C32 E44 G12 G15
    Date: 2018–05
  65. By: Alexey Vasilenko (Bank of Russia, Russian Federation;National Research University Higher School of Economics, Laboratory for Macroeconomic Analysis.)
    Abstract: This paper studies systemic risk and financial fragility in the Chinese economy, applying the dynamic factor model approach. First, we estimate a dynamic factor model to forecast systemic risk that exhibits significant out-of-sample forecasting power, taking into account the effect of several macroeconomic factors on systemic risk, such as economic growth slowdown, large corporate debt, rise of shadow banking, and real estate market slowdown. Second, we analyse the historical dynamics of financial fragility in the Chinese economy over the last ten years using factor-augmented quantile regressions. The results of the analysis demonstrate that the level of fragility in the Chinese financial system decreased after the Global Financial Crisis of 2007-2009, but has been gradually rising since 2015.
    Keywords: systemic risk, financial fragility, factor model, quantile regressions, China .
    JEL: C58 E44 G2
    Date: 2018–03
  66. By: Nakamura, Leonard I. (Federal Reserve Bank of Philadelphia); Samuels, Jon (Bureau of Economic Analysis); Soloveichik, Rachel (Bureau of Economic Analysis)
    Abstract: The Internet has evolved from Web 1.0, with static web pages and limited interactivity, to Web 2.0, with dynamic content that relies on user engagement. This change increased production costs significantly, but the price charged for Internet content has generally remained the same: zero. Because no transaction records the “purchase” of this content, its value is not reflected in measured growth and productivity. To capture the contribution of the “free” Internet, we model the provision of “free” content as a barter transaction between the content users and the content creators, and we value this transaction at production cost. When we incorporate this implicit transaction into U.S. gross domestic product (GDP), productivity, and household accounts, we find that including “free” content raises estimates of growth, but not nearly enough to reverse the recent slowdown.
    Keywords: Internet; productivity; advertising; marketing; measurement; GDP
    JEL: C82 L81 L82 M3 O3 O4
    Date: 2018–05–24
  67. By: Patrick Blagrave; Giang Ho; Ksenia Koloskova; Esteban Vesperoni
    Abstract: Fiscal stimulus was widely advocated during the global crisis, a period characterized by monetary policy constrained by the effective lower bound (ELB) in many countries, in part because of expected positive spillovers. Standard New Keynesian models predict the cross-border transmission of fiscal shocks is stronger when monetary policy is constrained in recipients. However, the empirical evidence is scarce. This paper bridges this gap by looking at the impact of fiscal shocks in systemic (source) economies on output and demand components in a large group of (recipient) countries, under different monetary policy conditions. Empirical results are compared to simulations with a state-of-the-art estimated open-economy New Keynesian model. Our results corroborate model predictions, finding larger spillovers when recipients are at the ELB, driven by stronger responses of investment and consumption relative to normal times
    Date: 2018–05–09
  68. By: Stephanie E. Curcuru; Michiel De Pooter; George Eckerd
    Abstract: In this paper we estimate the magnitude of spillovers between bond markets in the U.S. and Germany following monetary policy communications by the FOMC and the ECB. The identification of policy-related co-movements following FOMC announcements, in particular, can be difficult because many foreign bond markets, including those in Germany, are closed at the time of the announcement. To address this issue we use intraday futures market data to estimate spillovers during a narrow and overlapping event window. We find that about half of the reaction in German domestic yields spills over to U.S. yields following ECB announcements, which is nearly identical to the spillover from U.S. yields to German Bund yields following FOMC announcements. This result contrasts with the conventional wisdom that FOMC announcements spill over to other countries but that there is not much effect in the other direction. We also find that spillover estimates are slightly higher in the post-crisis period, but that there is little difference in the spillover impact of conventional versus unconventional monetary policy. Our results based on futures prices differ noticeably from those using daily prices, which suggests that spillover estimates based on cash market data can be misleading.
    Keywords: Monetary policy ; Quantitative easing ; Interest rate differentials
    JEL: E5 F3
    Date: 2018–04
  69. By: Thomas Kemeny (Queen Mary, University of London); Taner Osman (University of California, Los Angeles)
    Abstract: Innovative, high-technology industries are commonly described as drivers of regional development. ‘Tech’ workers earn high wages, but they are also said to generate knock-on effects throughout the local economies that host them, spurring growth in jobs and wages in nontradable activities. At the same time, in iconic high-tech agglomerations like the San Francisco Bay Area, the home of Silicon Valley, the success of the tech industry creates tensions, in part as living costs rise beyond the reach of many non-tech workers. Across a large sample of U.S. cities, this paper explores these issues systematically. Combining annual data on wages, employment and prices from the Quarterly Census of Employment and Wages, the Department of Housing and Urban Development and the Consumer Price Index, it estimates how growth in tradable tech employment affects the real, living-cost deflated wages of local workers in nontradable sectors. Results indicate that high-technology employment has significant, positive, but modest effects on the real wages of workers in nontradable sectors. These effects appear to be spread consistently across different kinds of nontradable activities. In terms of substantive wider impacts, tech appears benign, though fairly ineffectual.
    Keywords: high-technology, inequality, real wages, nontradable services; specialization, housing
    JEL: E24 J21 J31 L86 O18 R11 R31
    Date: 2018–05
  70. By: Lewis, John (Bank of England); Swannell, Matt (Bank of England)
    Abstract: We estimate a gravity model of the determinants of migration flows using pairwise data from around 160 origin countries to 35 advanced economy destinations over the period 1990–2013. When we interact the various explanatory variables with freedom of movement we find that the elasticities of migration with respect to macroeconomic variables are not constant across country pairs. Under freedom of movement, the response to macroeconomic variables is stronger, and the response to distance and historical migrant stocks is weaker. However, the elasticity with regard to linguistic and historical variables does remain constant. Alongside macro variables commonly used in the literature, we also find a significant role for expected GDP growth. Migration flows are higher to destinations with stronger expected GDP growth, and from origins with weaker expected GDP growth. In addition, greater labour market flexibility in destination countries is associated with higher inward migration.
    Keywords: Migration; macroeconomics; common correlated effects; multilateral resistance
    JEL: C23 E00 F22
    Date: 2018–05–25
  71. By: International Monetary Fund
    Abstract: The economy has grown strongly since 2015, bolstered by large investment projects and buoyant tourism. Banking sector health continues to improve, with private credit growing and balance sheets strengthening. While the construction of the first phase of a major highway project has boosted economic growth, it has also raised government debt, with a cost of nearly ¼ of GDP. To strengthen fiscal sustainability, in 2017 the authorities began implementing a well-specified medium-term fiscal adjustment strategy, in line with staff advice.
    Date: 2018–05–21
  72. By: Maria Elkhdari; Moez Souissi; Andrew Jewell
    Abstract: At a time when Algeria must undertake considerable fiscal consolidation to restore sustainability, the issue of fiscal multipliers has come to the fore. This paper estimates short-term and long-term fiscal multipliers for Algeria applying several econometric methodologies, including Local Projection Methodology and Vector Autoregressive Models, and using both Algeria-specific and panel data. The paper also explores asymmetries related to the sign of the output gap as well as the direction of spending. The results suggest that (i) average fiscal multipliers for Algeria are generally moderate and below unity; (ii) the impact of public spending shocks is more important when the output gap is negative; (iii) fiscal spending multipliers are significantly larger during spending contraction than expansion; (iv) procyclicality in public spending does not appear to affect output, except for capital spending cuts when the output gap is negative; and (v) while multipliers associated with countercyclical public spending can be sizeable, a contraction in current spending does not materially affect non-oil GDP.
    Date: 2018–05–31
  73. By: Claudio Campanale (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy); Marcello Sartarelli (Departamento de Fundamentos del Analisis Economico, Universidad de Alicante, Spain.)
    Abstract: Households appear to smooth consumption in the face of income shocks much more than implied by life-cycle versions of the standard incomplete market model under reference calibrations. In the current paper we explore in detail the role played by the life-cycle profile of wealth accumulation. We show that a standard model parameterized to match the latter can rationalize between 83 and more than 97 percent of the consumption insurance against permanent earnings shocks empirically estimated by Blundell, Pistaferri and Preston (2008), depending on the tightness of the borrowing limit.
    Keywords: Precautionary savings, Epstein-Zin, Consumption insurance coefficients, Life-cycle.
    JEL: E21
    Date: 2018–05
  74. By: Thomas S. Gundersen
    Abstract: I examine the role of the U.S. shale oil boom in driving global oil prices. Using a structural vector autoregressive (SVAR) model that identifies separate oil supply shocks for the U.S. and OPEC, I find that U.S. supply shocks have exerted considerable negative pressure on the oil price. More specifically, U.S. supply shocks explain up to 13% of the oil price variation over the 2003–2015 period, considerably more than what has been found in other studies. However, the timing of the downward pressure on prices is delayed relative to the boom in U.S. shale oil production. This mismatch implies a temporary friction in the transmission of U.S. supply shocks to the rest of the world likely caused by logistical and technological challenges in the downstream supply chain.
    Keywords: : structural VARs, oil prices, demand and supply shocks, shale oil
    Date: 2018–04
  75. By: Eran B. Hoffmann; Davide Malacrino
    Abstract: We study how the distribution of earnings growth evolves over the business cycle in Italy. We distinguish between two sources of annual earnings growth: changes in employment time (number of weeks of employment within a year) and changes in weekly earnings. Changes in employment time generate the tails of the earnings growth distribution, and account for the increased dispersion and negative skewness in the distribution of earnings growth in recessions. In contrast, the cross-sectional distribution of weekly earnings growth is symmetric and stable over the cycle. Thus, models that rely on cyclical idiosyncratic risk, should separately account for the employment margin in their earnings process to avoid erroneous conclusions. We propose such a process, based on the combination of simple employment and wage processes with few parameters, and show that it captures the procyclical skewness in changes in earnings growth and other important features of its distribution.
    Date: 2018–05–16
  76. By: Lin, Xiaoji (Ohio State University); Wang, Chong (Naval Postgraduate School, Monterey); Wang, Neng (Columbia University); Yang, Jinqiang (Shanghai University of Finance and Economics)
    Abstract: To study the impact of stochastic interest rates and capital illiquidity on investment and firm value, we incorporate a widely-used arbitrage-free term structure model of interest rates into a standard q-theoretic framework. Our generalized q model informs us to use corporate credit-risk information to predict investments when empirical measurement issues of Tobin's average q are significant (e.g., equity is much more likely to be mis-priced than debt) as in Philippon (2009). Consistent with our theory, we find that credit spreads and bond q have significant predictive powers on micro-level and aggregate investments corroborating the recent empirical work of Gilchrist and Zakrajšek (2012). We also show that the quantitative effects of the stochastic interest rates and capital illiquidity on investment, Tobin's average q, the duration and user cost of capital, as well as the value of growth opportunities are substantial. These findings are particularly important in today's low interest-rate environment.
    JEL: E02 G12 G31
    Date: 2016–10
  77. By: Jeremy Edwards; Sheilagh Ogilvie
    Abstract: Voigtländer and Voth argue that the Black Death shifted England towards pastoral agriculture, increasing wages for unmarried women, thereby delaying female marriage, lowering fertility, and unleashing economic growth. We show that this argument does not hold. Its crucial assumption is inconsistent with the evidence: women wanting to do pastoral work after the Black Death did not have to remain unmarried, so improved pastoral opportunities did not necessitate later marriage. There is no consensus that late female marriage emerged after the Black Death. Furthermore, the relationship between pastoralism and female marriage age in England provides no support for this argument.
    Keywords: European marriage pattern, black death, land-labour ratio, arable and pastoral agriculture
    JEL: E02 J12 J13 N13 N33
    Date: 2018
  78. By: Susana Santos; Tanya Araújo
    Abstract: The networks of nominal flows between industries in a Social Accounting Matrix (SAM) framework are studied. The flows of the SAM submatrices of production (or output of goods and services) and intermediate consumption, are identified, which are constructed from the supply and use tables of the National Accounts. From these flows, the inter-industry networks are induced. The structure of these networks are analysed, as well as, the underlying generation of income. An application to Portugal illustrates the approach.
    Keywords: Social Accounting Matrix; Inter-Industries flows; Network Analysis
    JEL: C89 D57 E01
    Date: 2018–05
  79. By: Beatrice D. Scheubel; Andrea Tafuro; Benjamin Vonessen
    Abstract: There is a perception that IMF programmes are not catalytic and instead associated with large capital outflows, higher refinancing costs for sovereigns and adverse movements in stock markets. This has led to concerns that an expectation of adverse effects of IMF programmes may deter countries from asking for an IMF programme when they need one, a form of ‘IMF stigma’. We address these questions using monthly data by estimating how and to which extent adverse market reactions to a programme materialise and how past experience with adverse market reactions affects subsequent IMF programme participation. Our results, derived with a propensity score matching approach, indicate no role for ‘IMF stigma’ stemming from the fear of adverse market movements.
    Keywords: capital flows, IMF conditionality, IMF recidivism, global financial safety net, Asian crisis, treasury bill rates
    JEL: E02 F32 F33 F34
    Date: 2018
  80. By: Jason Furman (Peterson Institute for International Economics); Peter Orszag (Lazard Freres & Co.)
    Abstract: Income growth for typical American families has slowed dramatically since 1973. Slower productivity growth and an increase in income inequality have both contributed to this trend. This paper addresses whether there is a relationship between the productivity slowdown and the increase in inequality, specifically exploring the extent to which reduced competition and dynamism can explain both of these phenomena. Productivity growth has been uneven across the economy, with top firms earning increasingly skewed returns. At the same time, the between-firm disparities have been important in explaining the increase in labor income inequality. Both these findings are consistent with the observed reductions in competition, as evidenced by increasing concentration and economic rents, and business dynamism. The authors also explore the scenarios under which government policies can help mitigate, or contribute to, declining competition and dynamism.
    Keywords: competition, productivity, inequality, economic dynamism
    JEL: D24 D31 D40 E25 K20 L40
  81. By: Anthony Edo; Lionel Ragot; Hillel Rapoport; Sulin Sardoschau; Andreas Steinmayr
    Abstract: The rise in international migration over the past decades and particularly the recent influx of refugees to the European Union has given more audience to the economic and political consequences of immigration. A major concern in the public debate is that immigrants could take jobs from natives, reduce their wages and negatively contribute to public finances. At the same time, the rise of right-wing populist movements has brought to light that the skepticism towards immigrants and refugees may not only be based only on economic but also on cultural considerations. This report is devoted to investigating these considerations by carefully relying on the existing evidence. We thus study the vast literature on the effects of immigration on the labor market and welfare system in host societies, as well as the more recent literature on the attitudinal and political consequences of immigration. The literature on the labor market impact of immigration indicates that immigration has a negligible average impact on the wages and employment of native workers. However, because adjustments take time, particularly when immigration is unexpected, the initial and longer run impacts of immigration can differ. The average impact of immigration on public finance is also negligible, sometimes slightly positive or slightly negative. We also document that immigration can have distributional consequences. In particular, the age and educational structure of immigrants plays an important role in determining their impact on the labor market and public finances. The fact that immigration is sometimes perceived as a factor depressing economic outcomes in host countries tends to affect native attitudes and electoral outcomes. In this regard, the literature first suggests that cultural concerns is the main driving force behind the skepticism towards immigration and that fiscal or labor market concerns only play a secondary role. Second, immigration tends to reduce the support for redistribution among native workers. Third, the effect of local level exposure to immigrants and refugees on native attitudes towards immigrants and extreme voting has been found to vary by context and can be positive or negative.
    Keywords: Immigration;Labour Market;Public finance;Redistribution; Voting
    JEL: D72 E62 F22 H62 J15
    Date: 2018–04
  82. By: Christian Senga (Institute of Development Policy (IOB), University of Antwerp; Institut Supérieur de Commerce de Goma (ISC)); Danny Cassimon (Institute of Development Policy (IOB), University of Antwerp)
    Abstract: This paper investigates the possibility of spillovers among Sub-Saharan African (SSA) eurobonds. Twelve SSA countries are examined from January 1, 2015 to June 30, 2017. Following the methodology of Diebold and Yilmaz (2012), we proceed as in Antonakakis and Vergos (2013) to compute both the overall and time-varying total spillover index and directional spillovers using secondary market daily yields. Ours results indicate significant contagion effects among these bonds as, on average, 66.37% of the forecast error variance in our model come from spillovers. The results of the time-varying analysis shows that the total spillover index has been sensitive to major economic events and news announcements over this period. More important, they suggest that less resilient economies transmit more to and receive less from their peers, but that this relationship is not linear: cases of extreme fragility such as that of Mozambique do no translate into higher spillovers to peers. This non-linear relationship between countries’ macroeconomic performance and spillover levels confirms to some extent the market discipline hypothesis in the case of SSA eurobonds as markets have proven able to factor-in and discriminate against issuers’ salient abnormal behaviors.
    Keywords: Spillover index, VAR models, Sub-Saharan Africa, Eurobonds
    JEL: C33 E44 G15 H63
    Date: 2018–04
  83. By: Alexandra Bykova (The Vienna Institute for International Economic Studies, wiiw); Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Julia Grübler (The Vienna Institute for International Economic Studies, wiiw); Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Gabor Hunya (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The Belt and Road Initiative (BRI), a vision to revive the ancient ‘Silk Road’ by means of massive infrastructure investments throughout Eurasia and Africa, was first presented by China’s President Xi Jinping in 2013. China has identified the region of Central East and Southeast Europe (CESEE) as the gateway to Western European markets. This was manifested by the investment in the Port of Piraeus (Greece) and the diplomatic initiative ‘16+1’, comprising eleven EU Member States and five Western Balkan countries, which is interesting for Austria due to its strong economic relations with this region. The Policy Brief analyses the most recent developments in trade and investment activities of China, Austria and the EU in CESEE, which are compared to the state of infrastructure in the region in the areas of transport, energy, information and communication technology as well as finance. Overall, CESEE has a high need for infrastructure investments, particularly in the transport sector. Chinese loans and investments in the region are becoming more important, especially for the Western Balkan countries, which have limited access to EU grants. The paper concludes with seven policy areas for future cooperation between Austria and China. The Policy Note is based on a study conducted for the Embassy of the People’s Republic of China in Austria. It is available upon request. Please contact Ms ZHANG Yiran ( or Mr CHEN Lin (
    Keywords: BRI, Belt and Road, New Silk Road, infrastructure, investment, FDI, transport, ICT, international trade, Gravity estimation, China, Austria, CESEE, Western Balkans
    JEL: E22 F21 H54 F13 F14 L9 O18
    Date: 2018–06
  84. By: Joshua C.C. Chan; Liana Jacobi; Dan Zhu
    Abstract: Vector autoregressions combined with Minnesota-type priors are widely used for macroeconomic forecasting. The fact that strong but sensible priors can substantially improve forecast performance implies VAR forecasts are sensitive to prior hyperparameters. But the nature of this sensitivity is seldom investigated. We develop a general method based on Automatic Differentiation to systematically compute the sensitivities of forecasts—both points and intervals—with respect to any prior hyperparameters. In a forecasting exercise using US data, we find that forecasts are relatively sensitive to the strength of shrinkage for the VAR coefficients, but they are not much affected by the prior mean of the error covariance matrix or the strength of shrinkage for the intercepts.
    Keywords: vector autoregression, automatic differentiation, interval forecasts
    JEL: C11 C53 E37
    Date: 2018–05
  85. By: Isabelle Sin (Motu Economic and Public Policy Research); Kabir Dasgupta (Auckland University of Technology); Gail Pacheco (Auckland University of Technology)
    Abstract: This paper is an initial exploration of what we can learn regarding the drivers of the gender pay gap in New Zealand from combining administrative wage data, birth records, and survey data on hours worked and earnings. Our particular focus is the role of parenthood penalties in this pay gap. In NZ, as internationally, the gender pay gap is larger among parents than non-parents, though the mechanisms driving this relationship are not entirely clear. We use administrative wage data to describe the distribution of how long women are out of paid employment after having their first child and how this differs with pre-parenthood income. We then look at employment rates and wage earnings among employed women each month in the five years before and ten years after birth of their first child. We also compare women who spend different lengths of time out of employment both overall and within each pre-parenthood earnings quartile. Although this does not strictly isolate the causal effect of length of time out of employment on subsequent monthly earnings, it does show how, within earnings quartiles, women who return quickly to work increase their earnings lead over those who return more slowly.
    Keywords: gender wage gap, parenthood, labour market
    JEL: E24 J12 J16 J17
    Date: 2018–05
  86. By: Wukuang Cun; M. Hashem Pesaran
    Abstract: This paper develops a dynamic spatial equilibrium model of regional housing markets in which house prices are jointly determined with migration flows. Agents optimize period-by-period and decide whether to remain where they are or migrate to a new location at the start of each period. The gain from migration depends on the differences in incomes, housing and migration costs. The agent’s optimal location choice and the resultant migration process is shown to be Markovian with the transition probabilities across all location pairs given as non-linear functions of income and housing cost differentials, which are endogenously determined. On the supply side, in each location the construction firms build new houses by combing land and residential structures. The regional land supplies are exogenously given. When a tightening of regional land-use regulation reduces local housing supply, upward pressure on house prices created by excess housing demand cascades to other locations via migration. It is shown that the deterministic version of the model has a unique equilibrium and a unique balanced growth path. We estimate the state-level supplies of new residential land from the model using housing market and urban land acreage data. These estimates are shown to be significantly negatively correlated with the Wharton Residential Land Use Regulatory Index. The model can simultaneously account for the rise in house price dispersion and the interstate migration in the U.S. during the period 1976-2014. Counterfactual simulations suggest that reducing either land supply differentials or migration costs could significantly lower house price dispersion. The model predicts substantially smaller impacts of land-use deregulation on population reallocation as compared to recent existing models of housing and migration that assume population are perfectly mobile.
    Keywords: house price dispersion, endogenous location choice, interstate migration, land-use restriction, spatial equilibrium
    JEL: E00 R23 R31
    Date: 2018
  87. By: Zineddine Alla (Département d'économie)
    Abstract: La crise financière mondiale qui a débuté en 2008, et la crise des dettes souveraines en zone euro qui l'a suivie, ont successivement forcé les macroéconomistes à repenser leur cadre conceptuel. Cette thèse est une modeste contribution aux efforts colossaux déployés par les macroéconomistes à travers le monde pour faire face à ce défi: renforcer la compréhension de l'utilisation optimale des outils de politique économique non conventionnels. A cette fin, elle est construite en deux parties. Chaque partie vise à explorer au plan théorique un "contexte macroéconomique-type" au sein duquel des outils de politique économique non conventionnels ont été employés ces dernières années. La première partie, intitulée "Politique Non Conventionelle Optimale en Economie Ouverte", analyse l'utilisation optimale d'instruments de politique économique non conventionels par une banque centrale en économie ouverte. En présence de frictions financières qui modifient la manière dont la politique monétaire affecte l'économie, ou en présence de chocs exogènes qui mettent en défaut la "divine coïncidence", cette partie décrit comment un banquier central devrait combiner un instrument de politique monétaire non conventionnelle et la politique monétaire conventionnelle à des fins de stabilisation macroéconomique. La seconde partie, "Politique Budgétaire Optimale en Union Monétaire", adopte le point de vue du gouvernement d'un pays situé en union monétaire (typiquement la zone euro). Un tel pays ne disposant d'une politique monétaire autonome (au plan national), cette partie étudie la possibilité pour un tel pays d'utiliser la politique budgétaire comme un outil de stabilisation, et décrit l'utilisation optimale des dévaluations fiscales en réponse à des chocs exogènes idiosyncratiques.
    Keywords: Unconventional monetary policy; Central bank reserves; Currency union; Fiscal policy
    Date: 2017–03
  88. By: Fingleton, Bernard
    Abstract: Starting with a reduced form derived from standard urban economics theory, this paper estimates the possible job-shortfall across UK and EU regions using a time-space dynamic panel data model with a Spatial Moving Average Random Effects (SMA-RE) structure of the disturbances. The paper provides a logical rational for the presence of spatial and temporal dependencies involving the endogenous variable, leading to estimates based on a dynamic spatial Generalized Moments (GM) estimator proposed by Baltagi, Fingleton and Pirotte (2018). Given state-of-the art interregional trade estimates, the simulations are based on a linear predictor which utilizes different regional interdependency matrices according to assumptions about interregional trade post-Brexit.
    Keywords: Brexit; Interregional trade; Urban economics theory; Panel data; Spatial lag; Spatio-temporal lag; Dynamic; Spatial moving average; Prediction; Simulation.
    JEL: C23 C33 C53 E27 F10 J21 R12
    Date: 2018–05–06
  89. By: Gregor Semieniuk (Department of Economics, SOAS University of London, UK)
    Abstract: An influential theoretical hypothesis holds that if aggregate productivity growth accelerates, then so does the decline in energy intensity. Whether faster growth is greener in this sense is crucial for modeling future growth and climate change mitigation, but empirical evidence is lacking. This paper characterizes the global, long-run historical relationship between changes in energy intensity and labor productivity growth rates. Basing estimates on an unbalanced panel of 180 countries for the period 1950-2014 and the world as a whole, it captures a significantly larger historical window than previous studies. The paper finds a stylized fact whereby the rate at which energy intensity changes is constant or even increases as labor productivity accelerates. Faster growth is not greener. This provides important new information for calibrating integrated assessment models, many of which make a green growth assumption in near term projections.
    Keywords: energy intensity, labor productivity, decoupling, green growth, stylized fact
    JEL: O44 O47 Q43 E17
    Date: 2018–04
  90. By: Basil Guggenheim; Mario Meichle; Thomas Nellen
    Abstract: This paper presents new data vintages on marketable debt emissions and total outstanding debt. The data are used to analyze the Swiss Confederation’s issuing behavior and debt management. Issuing behavior became more regular and demand-oriented during the early 1990s. The Treasury actively manages roll-over risk by increasing bond maturity with increasing marketable debt to GDP levels. Furthermore, the Treasury engages in active but asymmetric, one-sided interest rate positioning. In other words, the Treasury uses only bonds to affect debt maturity and does so only when the interest rate environment is favorable to lock-in interest rates by issuing longer-term bonds.
    Keywords: Government debt, government debt management, government debt maturity
    JEL: E63 H63
    Date: 2018

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