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on Macroeconomics |
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Issue of 2018‒08‒27
114 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | George-Marios Angeletos; Fabrice Collard; Harris Dellas |
| Abstract: | We dissect the comovement patterns of the macroeconomic data, identify a single shock that accounts for the bulk of the business-cycle volatility in the key quantities, and use its empirical properties to appraise parsimonious models of the business cycle. Through this lens, the data appears to be at odds with theories that attribute a major role to fluctuations in TFP, to news about future productivity or the long run, and to demand shocks of the New Keynesian type. Instead, it appears to favor theories that allow for demand-driven fluctuations without nominal rigidities and Philips curves. Our findings can also be of use in the evaluation of larger models that employ a multitude of shocks. In this context, we argue that leading DSGE models seem to lack the propagation mechanism observed in the data. |
| JEL: | E00 E31 E32 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24875&r=mac |
| By: | Paludkiewicz, Karol |
| Abstract: | Exploiting a granular dataset of banks' security holdings I assess the impact of unconventional monetary policy on bank lending and security holdings. Using a difference-in-differences regression setup and holding the security composition of each bank constant at its level in January 2014, well in advance of an anticipation of the ECB's asset purchase program (APP), this paper provides evidence for the presence of a yield-induced portfolio rebalancing channel: Banks experiencing a higher average yield decline of their securities portfolio - induced by unconventional expansionary monetary policy - increase their real sector lending more strongly relative to other banks. The effect is stronger for banks facing many reinvestment decisions. Moreover, I find that banks with a higher average yield decline reduce their overall investments in securities more intensely, especially in those securities that had larger valuation gains. These novel findings suggest that banks target a specific yield level and shift their investments from the securities to the (higher-yielding) credit portfolio. Making use of data on bank-specific TLTRO uptakes, my results do not seem to be driven by alternative, liquidity-driven transmission channels. |
| Keywords: | Unconventional Monetary Policy,Quantitative Easing,Portfolio Rebalancing |
| JEL: | E44 E51 E52 E58 G21 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:222018&r=mac |
| By: | Luciana Barbosa |
| Abstract: | The recent euro area sovereign debt crisis put the financial sector under pressure and imposed several challenges, mainly in the countries most affected by the crisis. The sovereign-bank linkage can negatively affect the economic activity, especially by bank-dependent firms. This study explores the heterogeneity across banks in their funding structure, sovereign exposures, solvency, and availability of collateral, with the aim of investigating the effect of the crisis on firms' investment and employment decisions. Exploring a detailed database that covers virtually all bank loans granted to Portuguese firms, for the period 2007-2012, the results suggest an impact on investment and employment paths for firms whose lenders depend more heavily on interbank and market funding. Moreover, the results also stress the importance of assets eligible as collateral in monetary operations conducted by Central Bank. The findings suggest how a deterioration in sovereign creditworthiness can affect the real economy via the banking sector. |
| JEL: | E22 E24 E44 E51 G21 G31 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201708&r=mac |
| By: | Maxime Phillot; Rina Rosenblatt-Wisch |
| Abstract: | Expectations are key in modern macroeconomics. However, due to their scant measurability, policymakers often rely on survey data. It is thus of critical importance to know the limits of survey data use. We look at inflation expectations as measured through the Deloitte CFO Survey Switzerland and respondents' sensitivity to question ordering thereof. In particular, we investigate whether forecast inconsistencies - the discrepancies between point forecasts and measures of central tendency derived from density forecasts - change significantly depending on whether the point forecast or the density forecast is asked first. We find that a) forecast inconsistencies are sizeable in the data and b) question ordering matters. Specifically, both parametric and non-parametric evaluations of consistency show that c) point forecasts tend to be significantly higher than density forecasts only for those respondents who give a density forecast first. In addition, d) characteristics such as uncertainty, firm size and economic sector relate to inconsistencies. |
| Keywords: | Question effects, question ordering, inflation expectations, consistency of forecasts, point forecast, density forecast |
| JEL: | E31 E37 E58 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:snb:snbwpa:2018-11&r=mac |
| By: | Gauti B. Eggertsson; Manuel Lancastre; Lawrence H. Summers |
| Abstract: | This paper re-examines the relationship between population aging and economic growth. We confirm previous research such as Cutler, Poterba, Sheiner, and Summers (1990) and Acemoglu and Restrepo (2017) that show positive correlation between measures of population aging and per-capita output growth. Our contribution is demonstrating that this relationship breaks down when the adjustment of interest rates is inhibited by an effective lower bound on nominal rates as took place during the Great Financial Crisis decade. Indeed, during the “secular stagnation regime” of 2008-2015 that prevailed in a number of countries, aging had a negative impact on living standards, consistent with the secular stagnation hypothesis. |
| JEL: | E0 E31 E32 E5 E52 E58 O4 O42 O47 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24902&r=mac |
| By: | Andreas Neuhierl; Michael Weber |
| Abstract: | We document a large return drift around monetary policy announcements by the Federal Open Market Committee (FOMC). Stock returns start drifting up 25 days before expansionary monetary policy surprises, whereas they decrease before contractionary surprises. The cumulative return difference across expansionary and contractionary policy decisions amounts to 2.5% until the day of the policy decision and continues to increase to more than 4.5% 15 days after the meeting. Standard returns factors and time-series momentum do not span the return drift around FOMC policy decisions. The return drift is a market-wide phenomenon and holds for all industries and many international equity markets. A simple trading strategy exploiting the drift around FOMC meetings increases Sharpe ratios relative to a buy-and-hold investment by a factor of 4. |
| JEL: | E31 E43 E44 E52 E58 G12 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24748&r=mac |
| By: | Patrick J. Kehoe; Virgiliu Midrigan; Elena Pastorino |
| Abstract: | Modern business cycle theory focuses on the study of dynamic stochastic general equilibrium models that generate aggregate fluctuations similar to those experienced by actual economies. We discuss how this theory has evolved from its roots in the early real business cycle models of the late 1970s through the turmoil of the Great Recession four decades later. We document the strikingly different pattern of comovements of macro aggregates during the Great Recession compared to other postwar recessions, especially the 1982 recession. We then show how two versions of the latest generation of real business cycle models can account, respectively, for the aggregate and the cross-regional fluctuations observed in the Great Recession in the United States. |
| JEL: | E13 E32 E52 E61 E62 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24741&r=mac |
| By: | Hyeongwoo Kim; Shuwei Zhang |
| Abstract: | This paper shows that fiscal policy in the U.S. has become ineffective due to lack of coordination between monetary and fiscal policy. We present a New Keynesian model that generates strong output effects of government spending shocks only when monetary policy coordinates well with fiscal policy. Employing the post-war U.S. data, we report strong stimulus effects of fiscal policy during the pre-Volcker era, which rapidly dissipate when we shift the sample period to the post-Volcker era. Finding a negligible role of the real interest rate in the propagation of government spending shocks, we propose an alternative explanation using a consumer sentiment channel. Employing the Survey of Professional Forecasters data, we show that forecasters tend to systematically over-estimate real GDP growth in response to positive innovations in government spending when policies coordinate well with each other. On the other hand, they are likely to formulate pessimistic forecasts when the monetary authority maintains a hawkish stance that conflicts with the fiscal stimulus. The fiscal stimulus, under such circumstances, may generate consumer pessimism, which decreases private spending and ultimately weakens the output effects of fiscal policy. We also provide statistical evidence that confirms an important role of the sentiment channel under different regimes of policy coordination. |
| Keywords: | Fiscal Policy; Time-varying Effectiveness; Policy Coordination; Consumer Sentiment; Survey of Professional Forecasters |
| JEL: | E32 E61 E62 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:abn:wpaper:auwp2018-04&r=mac |
| By: | Dmitry Matveev |
| Abstract: | This paper studies optimal discretionary monetary and fiscal policy when the lower bound on nominal interest rates is occasionally binding in a model with nominal rigidities and long-term government debt. At the lower bound it is optimal for the government to temporarily reduce debt. This decline stimulates output, which is inefficiently low during liquidity traps, by lowering expected real interest rates following the lift-off of the nominal rate from the lower bound. Away from the lower bound, the long-run level of government debt increases with the risk of reaching the lower bound. The accumulation of debt pushes up inflation expectations so as to offset the opposite effect due to the lower bound risk. |
| Keywords: | Fiscal Policy, Monetary Policy |
| JEL: | E52 E62 E63 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:18-38&r=mac |
| By: | Robert J. Gordon |
| Abstract: | In the late 1960s the stable negatively sloped Phillips Curve (PC) was overturned by the Friedman-Phelps natural rate model. Their PC was vertical in the long run at the natural unemployment rate, and their short-run curve shifted up whenever unemployment was pushed below the natural rate. This paper criticizes the underlying assumption of the Friedman-Phelps approach that the labor market continuously clears and that changes in unemployment down or up occur only in response to “fooling” of workers, firms, or both. A preferable and resolutely Keynesian approach explains quantity rationing by inertia in price and wage setting. The positive correlation of inflation and unemployment in the 1970s and again in the 1990s is explained by joining the negatively sloped Phillips Curve with a positively sloped dynamic demand curve. For any given growth of nominal GDP, higher inflation caused by adverse supply shocks implies slower real GDP growth and higher unemployment. This “triangle” model based on inflation inertia, demand, and supply worked well to explain why inflation and unemployment were both positively and negatively correlated between the 1960s and 1990s, but in the past decade the slope of the short-run Phillips Curve has flattened as inflation exhibited a muted response to high unemployment in 2009-13 and low unemployment in 2016-2018. It remains to be seen whether a continuation of low unemployment will cause a modest and fixed extra amount of inflation, thus reviving the stable Phillips curve of the early 1960s, or whether inflation will continuously accelerate as Friedman and Phelps would have predicted. |
| JEL: | B22 C22 E24 E31 E64 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24891&r=mac |
| By: | In Do Hwang (Economic Research Institute, The Bank of Korea) |
| Abstract: | Although there is a well-established theoretical literature that links central bank (CB) reputation with inflation performance following Barro and Gordon, there is little empirical work testing the relationship rigorously. This paper empirically tests the impact of reputation on inflation-unemployment performance using a novel set of data on CB reputation--an annual local business manager survey on central bank policy covering 62 countries during 1995-2016. This paper finds that CB reputation is a significant determinant of inflation: the results of an FE panel and Arellano-Bond difference GMM model show that high-reputation CBs have achieved better inflation performances over the past 20 years with lower levels of inflation than others, holding the output gap and unemployment rate constant. This result remains robust to various control variables including money growth, past inflation levels, exchange rates, and financial crisis dummies. This paper also finds that high CB reputation is associated with a tight anchoring of inflation expectations to inflation targets in inflation-targeting countries. The effects of reputation on the volatility of inflation and unemployment rates are found to be not robust. This paper offers evidence of the opposite-direction causality as well that goes from high inflation to decreased CB reputation. |
| Keywords: | Reputation, Credibility, Monetary policy, Anchoring of inflation expectation |
| JEL: | E31 E52 E58 N10 |
| Date: | 2018–05–29 |
| URL: | http://d.repec.org/n?u=RePEc:bok:wpaper:1814&r=mac |
| By: | Mathias Klein; Ludger Linnemann |
| Abstract: | We estimate the effect of government spending shocks on the US economy with a time-varying parameter vector autoregression. The recent Great Recession period appears to be characterized by uniquely large impulse responses of output to fiscal shocks. Moreover, the particularity of this period is underlined by highly unusual responses of several other variables. The pattern of fiscal shock responses neither completely fits the predictions of the New Keynesian model of an economy subject to the zero lower bound on nominal interest rates, nor does it suggest regular variation of fiscal policy effects depending on the state of the business cycle. Rather, the Great Recession period seems special in that government spending shocks had a strongly negative effect on the spread between corporate and government bond yields and a strongly positive effect on consumer confidence and private consumption spending. |
| Keywords: | Fiscal policy, government spending, vector autoregression, time-varying parameters |
| JEL: | E32 E62 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1754&r=mac |
| By: | Nicoletta Batini (International Monetary Fund (IMF)); Giovanni Melina (International Monetary Fund (IMF)); Stefania Villa (Bank of Italy) |
| Abstract: | Focusing on Euro-Area countries, we show empirically that higher private debt leads to deeper recessions while higher public debt does not, unless its level is especially high. We then build a general equilibrium model that replicates these dynamics and use it to design a policy that can mitigate the recessionary consequences of private deleveraging. In the model, in the aftermath of financial shocks, recessions are milder and public debt is more contained when the government lends directly to those households and firms that face binding borrowing constraints. As a consequence, large fiscal buffers are critical to enhance macroeconomic resilience to financial shocks. |
| Keywords: | private debt, public debt, financial crisis, financial shocks, borrowing constraints, fiscal limits |
| JEL: | E44 E62 H63 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1186_18&r=mac |
| By: | Geiger, Felix; Schupp, Fabian |
| Abstract: | The estimation of dynamic term structure models (DTSMs) turns out to be challenging in the presence of a small sample. It is exacerbated if the sample is characterized by a prolonged period of low interest rates near a time-varying effective lower bound. These challenges all weigh heavily when estimating a DTSM for the euro area OIS yield curve. Against this background, we propose a shadow-rate term structure model (SRTSM) that includes a time-varying effective lower bound and accounts for the spread between the policy and short-term OIS rate. It also allows for future changes in the effective lower bound and incorporates survey information. The model allows to adequately assess short-term monetary policy rate expectations and it generates far-distant rate expectations that are correlated with an estimated equilibrium nominal short rate derived from a macroeconomic model set-up. Our results also highlight the signaling channel of non-standard monetary policy shocks in the run-up to asset purchases identified based on a non-linear high-frequency external instrument approach. Our model outperforms DTSM specifications without above modeling features from a statistical and economic perspective. We confirm our findings employing a Monte Carlo simulation. |
| Keywords: | term structure modeling,short rate expectations,lower bound,survey information,yield curve decomposition,monetary policy,euro area |
| JEL: | E32 E43 E44 E52 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:272018&r=mac |
| By: | Youngjin Yun (Economic Research Institute, The Bank of Korea) |
| Abstract: | Reserve accumulation is funded by the central bank's domestic borrowing as it always sterilizes reserve purchases by increasing domestic liabilities. The central bank borrowing could crowd out firms' borrowing under imperfect international capital mobility. I present a model that illustrates the mechanism and examine monthly balance sheets of Korean banks from September 2003 to August 2008 to find that bank lending to firms did decline after reserve accumulation. Controlling for individual effects and time effects, it is estimated that bank lending declined by 50 cents after one additional dollar of reserve accumulation. A causal relationship is verified by differences-in-differences identification. After one standard deviation reserve accumulation shock, primary dealer banks and foreign bank branches cut lending growth by 0.4 and 1.6 percentage points more than non-primary dealer banks and domestic banks, respectively. |
| Keywords: | Foreign exchange reserves, Sterilization, Crowding-out, Bank loans |
| JEL: | E22 E58 F31 |
| Date: | 2018–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:bok:wpaper:1815&r=mac |
| By: | Gary Gorton; Toomas Laarits; Andrew Metrick |
| Abstract: | The Financial Crisis began and accelerated in short-term money markets. One such market is the multi-trillion dollar sale-and-repurchase (“repo”) market, where prices show strong reactions during the crisis. The academic literature and policy community remain unsettled about the role of repo runs, because detailed data on repo quantities is not available. We provide quantity evidence of the run on repo through an examination of the collateral brought to emergency liquidity facilities of the Federal Reserve. We show that the magnitude of repo discounts (“haircuts”) on specific collateral is related to the likelihood of that collateral being brought to Fed facilities. |
| JEL: | E32 E44 E58 G01 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24866&r=mac |
| By: | Kevin Larcher (Department of Economics, Oklahoma State University); Jaebeom Kim (Department of Economics, Oklahoma State University); Youngju Kim (Economic Research Institute, The Bank of Korea) |
| Abstract: | This study investigates the impact of uncertainty shocks on macroeconomic activity in Korea. For this purpose, a Smooth Transition VAR model is employed to document the state-dependent dynamics of two distinct types of uncertainty shocks, namely, financial market based and news-based. When nonlinearity is allowed to play a role in our model, quantitatively very different asymmetric dynamics are observed. Following in inflation targeting, the responses tend to be smoother and less pronounced. Our empirical results support the view that the link between uncertainty and macroeconomic activity is clear over both recessions and expansions. Furthermore, the impact of uncertainty shocks is more pronounced when economic activity is depressed especially after shocks originate from the financial market, and not from news-based policy uncertainty in Korea. |
| Keywords: | Uncertainty shocks, Smooth transition vector autoregression, Asymmetric dynamics, Recessions |
| JEL: | C32 E32 E52 |
| Date: | 2018–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:bok:wpaper:1812&r=mac |
| By: | Bahaj, Saleem (Bank of England); Reis, Ricardo (London School of Economics) |
| Abstract: | Swap lines between advanced-economy central banks are a new important part of the global financial architecture. This paper analyses their monetary policy effects from three perspectives. First, from the perspective of the central banks, it shows that the swap line mimics discount-window credit from the source central bank to the recipient-country banks using the recipient central bank as the bearer of the credit risk. Second, from the perspective of the transmission of monetary policy, it shows that the swap-line rate puts a ceiling on deviations from covered interest parity, and finds evidence for it in the data. Third, from the perspective of the macroeconomic effects of policy, it shows that the swap line ex ante encourages inflows from recipient-country banks into assets denominated in the source-country’s currency by reducing the ex post funding risk. We find support for these predictions using difference-in-difference empirical strategies that exploit the fact that only some currencies saw changes in the terms of their dollar swap line, only some bonds in banks’ investments are exposed to dollar funding risk, only some dollar bonds are significantly traded by foreign banks, and only some banks have a significant US presence. |
| Keywords: | Liquidity facilities; currency basis; bond portfolio flows |
| JEL: | E44 F33 G15 |
| Date: | 2018–07–27 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0741&r=mac |
| By: | Carlo Pizzinelli (University of Oxford); Konstantinos Theodoridis (Cardiff Business School); Francesco Zanetti (Centre for Macroeconomics (CFM); University of Oxford) |
| Abstract: | This paper documents state dependence in labor market fluctuations. Using a Threshold Vector-Autoregression model, we establish that the unemployment rate, the job separation rate and the job finding rate exhibit a larger response to productivity shocks during periods with low aggregate productivity. A Diamond-Mortensen-Pissarides model with endogenous job separation and on-the-job search replicates these empirical regularities well. The transition rates into and out of employment embed state dependence through the interaction of reservation productivity levels and the distribution of match-specific idiosyncratic productivity. State dependence implies that the effect of labor market reforms is different across phases of the business cycle. A permanent removal of layoff taxes is welfare enhancing in the long run, but it involves distinct short-run costs depending on the initial state of the economy. The welfare gain of a tax removal implemented in a low-productivity state is 4.9 percent larger than the same reform enacted in a state with high aggregate productivity. |
| Keywords: | Search and matching models, State dependence in business cycles, Threshold vector autoregression |
| JEL: | E24 E32 J64 C11 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:1822&r=mac |
| By: | Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Zhihui Lv (School of Mathematics and Statistics, Northeast Normal University, China); Wing-Keung Wong (Department of Finance, Fintech Center, and Big Data Research Center, Asia University; Department of Medical Research, China Medical University Hospital, Taiwan; Department of Economics and Finance, Hang Seng Management College, Hong Kong, China; Department of Economics, Lingnan University, Hong Kong, China.) |
| Abstract: | This paper develops a change-point vector autoregressive (VAR) model and then analyzes the regime-specific impact of demand, supply, monetary policy, and spread yield shocks, identified using sign-restrictions, on real estate investment trusts (REITs) returns. The model first isolates four major macroeconomic regimes in the US since the 1970s, and discloses important changes to the statistical properties of REITs returns and its responses to the identified shocks. A variance decomposition analysis revealed aggregate supply shocks to have dominated in the early part of the sample period, and monetary policy spread shocks at the end. |
| Keywords: | Change-point VAR Model, Macroeconomic Shocks, US REITs Sector |
| JEL: | C32 E32 E42 R30 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:201849&r=mac |
| By: | Sasaki, Hiroaki |
| Abstract: | By building a growth model with two classes, workers and capitalists, this study investigates the existence and the stability of the long-run equilibrium along the lines of Pasinetti (1962) and Samuelson and Modigliani (1966). Unlike preceding studies in which the propensity to save of each class is exogenously given, this study assumes that workers solve a two-period overlapping generations model while capitalists solve an infinite-horizon dynamic optimization model. Depending on the combinations of both classes' time preference rate, the parameter of the production function, and the population growth rate, we obtain two kinds of long-run equilibria, the Pasinetti equilibrium and dual equilibrium \`a la Samuelson-Modigliani. We show that under realistic values of the parameters, the economy is likely to converge to the Pasinetti equilibrium. |
| Keywords: | workers and capitalists; intertemporal optimization; Pasinetti equilibrium; dual equilibrium |
| JEL: | E13 E21 E25 |
| Date: | 2018–08–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:88362&r=mac |
| By: | Engelbert Stockhammer (Kingston University); Rob Jump; Karsten Kohler; Julian Cavallero |
| Abstract: | Theories such as Minsky’s financial instability hypothesis or New Keynesian financial accelerator models assign a key role to financial factors in business cycle dynamics. We present descriptive statistics and a simple estimation framework to examine the financial-real interaction mechanisms that are at the core of these theories. Specifically, we examine cycle frequencies in seven OECD countries over the period 1970 to 2015, and find that interest rates, business debt, and household debt exhibit cycle lengths of 4-6, 8-11, and 14-26 years, respectively. We then estimate bivariate VAR models which provide evidence for financial-real interaction mechanisms, (i) at high frequencies between interest rates and GDP, and (ii) at low frequencies between business debt and GDP. In contrast, there is no evidence for a cycle mechanism between household debt and GDP. |
| Keywords: | Minsky, financial accelerator, financial cycle, business cycle |
| JEL: | E32 G01 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp1808&r=mac |
| By: | Adriano dos Reis M. Laureno Oliveira; Gilberto Tadeu Lima, Laura Carvalho |
| Abstract: | Paradoxically, the expansionary austerity hypothesis may find greater support in a theoretical framework that places an emphasis on the role of uncertainty for investment decisions not subject to a savings-in-advance constraint than in a more standard supply-led macroeconomic theory. This paper builds a demand-driven agent-based model featuring contagion across firms to explore whether fiscal consolidations may become expansionary due to a positive effect on investors’ expectations, which could be the result of a dominant public discourse on the need for austerity. Simulations suggest that while a wave of optimism affecting a small proportion of firms may lead to short-run positive output effects in the economy, these effects are not sufficient to neutralize the negative macroeconomic impacts of cutting government spending. These findings are in keeping with the scantiness (or absence) of empirical evidence in favor of the expansionary fiscal contraction hypothesis. |
| Keywords: | Expansionary fiscal consolidation; contagion; confidence; ABM; Keynesian Macroeconomics. |
| JEL: | E12 E22 E37 H30 |
| Date: | 2018–08–14 |
| URL: | http://d.repec.org/n?u=RePEc:spa:wpaper:2018wpecon13&r=mac |
| By: | Julia de Furquim Werneck Moreira (Cedeplar-UFMG); Gilberto de Assis Libânio (Cedeplar-UFMG) |
| Abstract: | During the 2008 crisis the mainstream macroeconomics was unable to provide an adequate set of tools to combat the economic recession, triggering a debate on the theoretical basis of the dominant macroeconomic thinking and consequently on the kind of macroeconomic policy that should be implemented during and after a crisis. This discussion may lead to a fundamental change in the general approach to the use of fiscal and monetary policies as a tool for economic recovery. In this sense, the objective of this dissertation is to support this debate through the empirical study of the Brazilian and Chinese experiences before, during and after 2008. Both countries used unconventional measures to face the crisis and obtained relative success. A Structural VAR (SVAR) is used to verify which type of macroeconomic policy most contributed to the GDP growth of each of the countries during the period between 2000 and 2016. The results show the importance of using both policies, but they indicate a greater relevance of interest rates and government revenue as macroeconomic tools in Brazil and China, respectively. The evaluation of the monetary and fiscal policies adopted by them shows the impossibility of maintaining macroeconomic stability aiming exclusively reasonable inflationary levels through the adjustment of interest rates. Rethinking the way macroeconomic policies are implemented is fundamental in order to adapt the mainstream macroeconomics to the current scenario of the world economy and to avoid the economic stagnation experienced by several developed economies today. |
| Keywords: | macroeconomics, fiscal policy, monetary policy, financial crisis. |
| JEL: | E65 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:cdp:texdis:td585&r=mac |
| By: | Nadav Ben Zeev (BGU) |
| Keywords: | Credit Supply Shocks, Total Factor Productivity, Input misallocation |
| JEL: | E23 E32 E44 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bgu:wpaper:1802&r=mac |
| By: | Prüser, Jan; Schlösser, Alexander |
| Abstract: | We study the time-varying impact of Economic Policy Uncertainty (EPU) on the US Economy by using a VAR with time-varying coefficients. The coefficients are allowed to evolve gradually over time which allows us to discover structural changes without imposing them a priori. We find three different regimes which match the three major business cycles of the US economy, namely the Great Inflation, the Great Moderation and the Great Recession. This finding is in contrast to previous literature which typically imposes two regimes a priori. Furthermore, we distinguish the effect of EPU on real economic activity and on financial markets. |
| Keywords: | TVP-FAVAR,economic policy uncertainty,fat data |
| JEL: | C11 C32 E20 E60 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:761&r=mac |
| By: | Cristina Manteu; Sara Serra |
| Abstract: | The purpose of this paper is to review developments in a number of uncertainty measures for Portugal and gauge their impact on macroeconomic developments in recent years, particularly on GDP, private consumption and GFCF. Our analysis shows that elevated uncertainty had a significant negative impact on economic activity during the financial and sovereign debt crises, while the unwindinding of uncertainty associated with the conclusion of the economic and financial assistance programme in 2014 boosted the subsequent recovery. |
| JEL: | C32 E27 E32 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201709&r=mac |
| By: | Mauro Napoletano (Observatoire français des conjonctures économiques); Lilit Popoyan (Laboratory of Economics and Management); andrea Roventini, (Observatoire français des conjonctures économiques) |
| Abstract: | We develop an agent-based model to study the macroeconomic impact of alternative macro-prudential regulations and their possible interactions with different monetary policy rules. The aim is to shed light on the most appropriate policy mix to achieve the resilience of the banking sector and foster macroeconomic stability. Simulation results show that a triple-mandate Taylor rule,focused onoutput gap, inflationand credit growth, and a BaselIII prudential regulationis the bestpolicymix to improve the stability ofthe banking sector and smooth output fluctuations. Moreover, we consider the different levers of Basel III and their combinations. We find that minimum capital requirements and counter-cyclical capital buffers allow to achieve results close to the Basel III first-best with a much more simplified regulatory framework. Finally, the components of Basel III are non-additive: the inclusion of an additional lever does not always improve the performance of the macro-prudential regulation. |
| Keywords: | Macro-prudential policy; Basel III regulation; Financial stability; Monetary policy; Agent based computational economics |
| JEL: | C63 E52 E6 G1 G21 G28 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/5hussro0tc951q0jqpu8quliqu&r=mac |
| By: | Mark Gertler; Simon Gilchrist |
| Abstract: | Since the onset of the Great Recession, an explosion of both theoretical and empirical research has investigated how the financial crisis emerged and how it was transmitted to the real sector. The goal of this paper is to describe what we have learned from this new research and how it can be used to understand what happened during the Great Recession. In the process, we also present some new evidence on the role of the household balance sheet channel versus the disruption of banking. We examine a panel of quarterly state level data on house prices, mortgage debt and employment along with a measure of banking distress. Then exploiting both panel data and time series methods, we analyze the contribution of the house price decline versus the banking distress indicator to the overall decline in employment during the Great Recession. We confirm a common finding in the literature that the household balance sheet channel is important for regional variation in employment. However, we also find that the disruption in banking was central to the overall employment contraction |
| JEL: | E32 E44 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24746&r=mac |
| By: | Toshihiko Mukoyama (Department of Economics, Georgetown University) |
| Abstract: | This paper analyzes a simple search and matching model with heterogeneous jobs. First, I derive an explicit formula that ensures the social efficiency of the equilibrium outcome. This formula generalizes the well-known Hosios condition and clarifies the role of externalities across labor markets for different types of jobs. Second, business cycle fluctuations with heterogeneous jobs are analyzed. Heterogeneity in productivity and job stability plays an important role in generating strong labor-market responses to the aggregate labor market to productivity shocks. |
| Keywords: | Search and matching; Unemployment; Heterogeneous jobs; Efficiency; Business cycles |
| JEL: | D61 E24 E32 J63 J64 |
| Date: | 2018–08–12 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~18-18-01&r=mac |
| By: | Yum, Minchul |
| Abstract: | In the United States, the employment rate is nearly flat across wealth quintiles with the exception of the first quintile. Correlations between wealth and employment are close to zero or moderately positive. However, incomplete markets models with a standard utility function counterfactually generate a strongly negative relationship between wealth and employment. Using a fairly standard incomplete markets model calibrated to match the distribution of wealth, I find that government transfers and capital income taxation increase the (non-targeted) correlations between wealth and employment substantially, bringing the model closer to the data. As the model`s fit with the distribution of wealth and employment improves, I find that the precautionary motive of labor supply is mitigated, thereby raising aggregate labor supply elasticities substantially. |
| Keywords: | Wealth distribution , employment , government transfers , capital income taxation , aggregate labor supply elasticity |
| JEL: | E24 E21 J22 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:mnh:wpaper:44432&r=mac |
| By: | Assaf Razin; Efraim Sadka |
| Abstract: | The economic link between globalization and income distribution has been rigorously studied from the perspectives of the international-trade paradigm. However, the international-trade viewpoint does not address the impact of globalization on inequality-reducing redistribution policies. Financial globalization, not much studied in relation to income inequality, has first-order effects on international allocation of capital. Consequently it may trigger tax competition, which is directly related to redistribution policy. To understand a key mechanism which links financial globalization to redistribution policy, this paper develops a stripped-down model, where easing the country access to the world capital markets induces political-economy based policy changes that impact income inequality. We motivate the model's assumptions and predictions with evidence on financial globalization, international tax competition, and changes in the generosity of the welfare state. |
| JEL: | E44 E62 F21 H0 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24754&r=mac |
| By: | Soumya Bhadury (National Council of Applied Economic Research); Taniya Ghosh (Indira Gandhi Institute of Development Research (IGIDR), Mumbai) |
| Abstract: | We investigate the predictive power of Divisia monetary aggregates in explaining exchange rate variations for India, Israel, Poland, UK and the US, in the years leading up to and following the 2007-08 recessions. One valid concern for the chosen sample period is that the interest rate has been stuck at or near the zero lower bound (ZLB) for some major economies. Consequently, the interest rate has become uninformative about the monetary policy stance. An important innovation in our research is to adopt the Divisia monetary aggregate as an alternative to the policy indicator variable. We apply bootstrap Granger causality method which is robust to the presence of non-stationarity in our data. Additionally, we use bootstrap rolling window estimates to account for the problems of parameter non-constancy and structural breaks in our sample covering the Great recession. We find strong causality from Divisia money to exchange rates. By capturing the time-varying link of Divisia money to exchange rate, the importance of Divisia is further established at ZLB. |
| Keywords: | Monetary Policy; Divisia Monetary Aggregates; Simple Sum; Nominal Exchange Rate; Real Effective Exchange Rate; Bootstrap Granger Causality |
| JEL: | C32 C43 E41 E51 E52 F31 F41 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:nca:ncaerw:113&r=mac |
| By: | Wojciech Zurowski (University of Lugano and Swiss Finance Institute) |
| Abstract: | I filter expected inflation, unemployment and log GDP Hodrick-Prescott filtered series in order to extrapolate different frequencies of shocks. These shocks are then regressed on contemporaneous yields to assess the impact of monetary policy ingredients on the current state of the economy. Furthermore, I obtain a single factor which contains information from the Taylor like monetary policy rule about the future state of the economy. This factor can predict between 32% and 74% of the variation of excess bond risk premia in the sample. Additionally, the factor unveils differences between monetary policy in the US and the UK through a variation in predictability across maturities. It also provides further evidence of importance of the macroeconomic variables and their predictive value for the term premia. This factor is highly correlated with other factors from previous studies yet it provides additional information to what is already captured by them. The out of sample results demonstrate that the factor can be a good predictor only if it is constructed under time variability assumption and the central bank's policy is not affected by additional tools such as quantitative easing. |
| Keywords: | bond risk premia, monetary policy, Haar filter |
| JEL: | G12 E44 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1742&r=mac |
| By: | Zhang Qun (Guangdong University of Foreign Studies); Didier Sornette (ETH Zürich and Swiss Finance Institute); Hao Zhang (Guangdong University of Foreign Studies) |
| Abstract: | We introduce a novel quantitative methodology to detect real estate bubbles and forecast their critical end time, which we apply to the housing markets of China's major cities. Building on the Log-Periodic Power Law Singular (LPPLS) model of self-reinforcing feedback loops, we use the quantile regression calibration approach recently introduced by two of us to build confidence intervals and explore possible distinct scenarios. We propose to consolidate the quantile regressions into the arithmetic average of the quantile-based DS LPPLS Confidence indicator, which accounts for the robustness of the calibration with respect to bootstrapped residuals. We make three main contributions to the literature of real estate bubbles. First, we verify the validity of the arithmetic average of the quantile-based DS LPPLS Confidence indicator by studying the critical times of historical housing price bubbles in the U.S., Hong Kong, U.K. and Canada. Second, the LPPLS detection methods are applied to provide early warning signals of the housing markets in China's major cities. Third, we determine the possible turning points of the markets in BeiJing, ShangHai, ShenZhen, GuangZhou, TianJin and ChengDu and forecast the future evolution of China's housing market via our multi-scales and multi-quantiles analyses. |
| Keywords: | real estate bubbles, forecasting, Log-Periodic Power Law Singularity, multi-scale analysis, quantile regression, DS LPPLS Confidence indicator |
| JEL: | C22 C51 C53 E31 E37 G01 G17 R30 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1718&r=mac |
| By: | Jonathan H. Wright |
| Abstract: | In the 2018 comprehensive update of the national income and product accounts, the Bureau of Economic Analysis released not seasonally adjusted data, and modified its seasonal adjustment procedures. I find some indication of residual seasonality in the seasonally adjusted data as published before this update. The evidence for residual seasonality is weaker in the seasonally adjusted data after the update. I also directly seasonally adjusted the aggregate not seasonally adjusted data, and this entirely avoids residual seasonality. The average absolute difference between my seasonally adjusted real GDP data and the current official published version is 1.1 percentage points in quarter-over-quarter annualized growth rates. |
| JEL: | C32 E01 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24895&r=mac |
| By: | Girish Bahal (National Council of Applied Economic Research); Mehdi Raissi; Volodymyr Tulin (International Monetary Fund, Washington DC) |
| Abstract: | This paper contributes to the debate on the relationship between public and private investment in India along the following dimensions. First, acknowledging major structural changes that the Indian economy has undergone in the past three decades, we study whether public investment in recent years has become more or less complementary to private investment in comparison to the period before 1980. Second, we construct a novel data-set of quarterly aggregate public and private investment in India over the period 1996-2015 using investment-project data from the CapEx-CMIE database. Third, embedding a theory-driven long-run relationship on the model, we estimate a range of Structural Vector Error Correction Models (SVECMs) to re-examine the public and private investment relationship in India. Identification is achieved by decomposing shocks into those with transitory and permanent effects. Our results suggest that while public investment crowds out private investment in India over the period 1950-2012, the opposite is true when we restrict the sample to post 1980 or conduct a quarterly analysis since 1996. This change can likely be attributed to the policy reforms which started during early 1980s and gained momentum after the 1991 crisis. |
| Keywords: | India; Public and private investment; Crowding in (out) |
| JEL: | C32 E22 H54 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:nca:ncaerw:114&r=mac |
| By: | Greg Kaplan; Giovanni L. Violante |
| Abstract: | We analyze the role of household heterogeneity for the response of the macroeconomy to aggregate shocks. After summarizing how macroeconomists have incorporated household heterogeneity and market incompleteness in the study of economic fluctuations so far, we outline an emerging framework that combines Heterogeneous Agents (HA) with nominal rigidities, as in New Keynesian (NK) models, that is much better aligned with the micro evidence on consumption behavior than its Representative Agent (RA) counterpart. By simulating consistently calibrated versions of HANK and RANK models, we convey two broad messages. First, the degree of equivalence between models crucially depends on the shock being analyzed. Second, certain interesting macroeconomic questions concerning economic fluctuations can only be addressed within HA models, and thus the addition of heterogeneity broadens the range of problems that can be studied by economists. We conclude by recognizing that the development of HANK models is still in its infancy and by indicating promising directions for future work. |
| JEL: | D1 D3 E0 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24734&r=mac |
| By: | Chadha, J. |
| Abstract: | We consider the role of money as a means of payment, store of value and medium of exchange. I outline a number of quantitative and qualitative experiences of monetary management. Successful regimes have sprung up in a variety of surprising places, and been sustained with state (centralised) interventions. Although the link between state and money, and its standard of identity and account may be clear, particularly in earlier stages of economic development, the extent to which the state is widely felt to hold responsibility for 'sound money' is less clear in modern democracies, where there are many other public responsibilities implying ongoing trade-offs. |
| Keywords: | money, gold standard, paper money, Samuelson |
| JEL: | B22 E02 E31 |
| Date: | 2018–08–02 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1842&r=mac |
| By: | Hannes Draack |
| Abstract: | The target problem considers the central bank's use of optimal tools and targets for purposes of stabilization and welfare optimization. In this study, this question is answered anew in a microfounded approach. By adding imperfect information to the model of [Berentsen and Waller, 2011], a divide between an interest rate policy and a money stock policy emerges. Given this, the usefulness of each policy is analyzed, with the ultimate result being the dominance of a pro-cyclical interest rate-based policy. This finding stands in contrast to the well-known macrofounded answer of [Poole, 1970]. The inconsistency is resolved by an examination of some of the axioms underlying New Keynesian and New Monetarist models. |
| Keywords: | Money, search, stabilization, monetary policy |
| JEL: | E41 E52 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:296&r=mac |
| By: | International Monetary Fund |
| Abstract: | Lower oil prices since 2014 placed the Angolan economy under stress. The authorities initially reacted to the oil price shock with significant fiscal tightening and exchange rate adjustments coupled with foreign exchange quantitative restrictions. The policy mix in the run-up to the August 2017 elections—fiscal expansion and pegged exchange rate—led to a further erosion of fiscal and external buffers. The Government of President João Lourenço has focused attention on improving governance and restoring macroeconomic stability. The Government’s macroeconomic stabilization program launched in early 2018 envisages: upfront fiscal consolidation; greater exchange rate flexibility; reducing the public debt-to-GDP ratio to 60 percent over the medium term; improving the public debt profile; settling domestic payments arrears; and strengthening the AML/CFT framework and ensuring its effective |
| Keywords: | Angola;Sub-Saharan Africa; |
| Date: | 2018–06–11 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/156&r=mac |
| By: | Junichi Fujimoto (National Graduate Institute for Policy Studies); Ko Munakata (Bank of Japan); Koji Nakamura (Bank of Japan); Yuki Teranishi (Keio University) |
| Abstract: | To reveal a policy mandate for financial stability, we introduce a frictional credit market with a search and matching process into a standard New Keynesian model with nominal rigidities in the goods market, and then investigate optimal policy under financial frictions. We show that a second-order approximation of social welfare includes terms for credit, in addition to terms for inflation and consumption, so that any optimal policy must hold responsibility for financial and price stabilities. We highlight this issue by considering several tools for monetary and macroprudential policy. We find that optimal monetary policy requires keeping the credit market countercyclical against the real economy. Also, optimal macroprudential policy, which poses constraints on supply and demand sides of credit, reduces excessive variations in lending and contributes to both financial and price stabilities. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:1200&r=mac |
| By: | Sushant Acharya (Federal Reserve Bank of New York); Julien Bengui (Université de Montréal); Keshav Dogra (Federal Reserve Bank of New York); Shu Lin Wee (Carnegie Mellon University Tepper School of Business) |
| Abstract: | We present a model in which temporary shocks can permanently scar the economy's productive capacity. Unemployed workers lose skill and are expensive to re-train, generating multiple steady state unemployment rates. Large temporary shocks push the economy into a liquidity trap, generating deflation. With nominal wages unable to adjust freely, real wages rise, reducing hiring and catapulting the economy towards the high-unemployment steady state. Even after a short-lived liquidity trap, the economy recovers slowly at best; at worst, it falls into a permanent unemployment trap. Because monetary policy may be powerless to escape such a trap ex-post, it is especially important to avoid it ex-ante: policy should be preventive rather than curative. The model can quantitatively account for the slow recovery in the U.S. following the Great Recession. The model also suggests that lack of swift monetary accommodation by the ECB can help explain stagnation in the European periphery. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:543&r=mac |
| By: | International Monetary Fund |
| Abstract: | Recent developments and outlook. After a series of weather calamities in 2017, the economy is stabilizing. Real GDP growth is projected to reach 4 percent in 2018, supported by a recovery in agriculture and industry as well as robust growth in services. Important progress has been made in fiscal consolidation and energy pricing reforms. The CBSL has effectively curbed credit growth and stabilized inflation despite recent pressures, while stepping up its pace of reserve accumulation. Focus of the Article IV Consultation. Building on the authorities’ ambitious Vision 2025 strategy, discussions focused on strengthening institutions to promote stability and inclusive growth. Key priorities include promoting fiscal consolidation through more robust fiscal rules and SOE reforms; modernizing monetary and exchange rate frameworks; and accelerating growth-enhancing reforms. |
| Keywords: | Sri Lanka;Asia and Pacific; |
| Date: | 2018–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/175&r=mac |
| By: | José R. Maria; Paulo Júlio |
| Abstract: | We present a medium scale small-open DSGE model for an euro-area economy that encompasses a financial accelerator mechanism and a well-developed fiscal block coupled to an overlapping generations scheme. This setup endogenously triggers myopia in households' decisions, breaking the traditional Ricardian equivalence in asset holders. We use Bayesian methods to estimate the model for the Portuguese economy and compute several byproducts of interest - namely historical and variance decompositions and key Bayesian impulse response functions. Finally, we carry out parameter stability tests. |
| JEL: | C11 C13 E20 E32 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201715&r=mac |
| By: | António Rua |
| Abstract: | Currency management is a core business function of a central bank. Understanding the factors driving cash demand and its denomination structure are vital for the smooth functioning of the economy. We pursue an analytical framework which allows to model the demand for each denomination individually as well as to capture the interactions between them, both over the short- and long-run. The approach builds on the DSUR estimator for the long-run relationships coupled with a SUR ECM for modelling the short-run dynamics. The focus is on a small open economy within the euro area monetary union. Such a context adds dimensions which go beyond the traditional drivers considered in the previous literature. In particular, the importance of currency migration through tourism ows is highlighted. Furthermore, the interconnections between demand for different denominations are found to be quite significant and the heterogeneous role of the determinants across denominations is documented. |
| JEL: | C32 E41 E50 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201710&r=mac |
| By: | Julia Schmidt; Marianna Caccavaio; Luisa Carpinelli; Giuseppe Marinelli |
| Abstract: | In this paper we provide empirical evidence on the impact of US and UK monetary policy changes on credit supply of banks operating in Italy and France over the period 2000-2015, exploring the existence of an international bank lending channel. Exploiting bank balance sheet heterogeneity, we find that monetary policy tightening abroad leads to a reduction of credit supply at home, in particular for US monetary policy changes. Our results show that USD funding plays an important role in the transmission mechanism, especially for French banks which rely to a larger extent on USD funding. We also show that banks adjust their euro and foreign currency lending differently, thus implying that funding sources in different currencies are not perfect substitutes. This is especially the case when tensions in currency swap markets are high, thus resulting in costly cross-currency funding. |
| Keywords: | Spillovers, Monetary Policy, International Banking |
| JEL: | E52 F42 G21 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:689&r=mac |
| By: | Adam M. Guren; Alisdair McKay; Emi Nakamura; Jón Steinsson |
| Abstract: | We provide new, time-varying estimates of the housing wealth effect back to the 1980s. We exploit systematic differences in city-level exposure to regional house price cycles to instrument for house prices. Our main findings are that: 1) Large housing wealth effects are not new: we estimate substantial effects back to the mid 1980s; 2) Housing wealth effects were not particularly large in the 2000s; if anything, they were larger prior to 2000; and 3) There is no evidence of a boom-bust asymmetry. We compare these findings to the implications of a standard life-cycle model with borrowing constraints, uninsurable income risk, illiquid housing, and long-term mortgages. The model explains our empirical findings about the insensitivity of the housing wealth effects to changes in the loan-to-value (LTV) distribution, including the dramatic rise in LTVs in the Great Recession. The insensitivity arises in the model for two reasons. First, impatient low-LTV agents have a high elasticity. Second, a rightward shift in the LTV distribution increases not only the number of highly sensitive constrained agents but also the number of underwater agents whose consumption is insensitive to house prices. |
| JEL: | E21 R21 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24729&r=mac |
| By: | Stephen Wright (Birkbeck, University of London); Charmaine Portelli (University of Malta) |
| Abstract: | The balance sheet of the European Central Bank (ECB) represents a very small fraction (onetenth) of the reported balance sheet of the Euro Area system as a whole. This paper presents evidence that the effective size of the ECB’s balance sheet is massively higher than this, and indeed is significantly higher even than the reported balance sheet of the Eurosystem as a whole. We point to strong evidence that most NCBs (especially those of the larger countries) effectively act on autopilot, as branches of a near-monolithic institution which we term the “Mega-ECB”. The lending behaviour of the “Mega-ECB” appears to have been driven primarily by the borrowing needs of the distressed countries of the EU’s southern periphery. |
| Keywords: | central bank balance sheet, capital key, ECB, Eurosystem, national central canks, Target2. |
| JEL: | E52 E58 F36 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:bbk:bbkefp:1807&r=mac |
| By: | NYONI, THABANI |
| Abstract: | Of uttermost importance is the fact that forecasting macroeconomic variables provides a clear picture of what the state of the economy will be in future (Sultana et al, 2013). Nothing is more important to the conduct of monetary policy than understanding and predicting inflation (Kohn, 2005). Inflation is the scourge of the modern economy and is feared by central bankers globally and forces the execution of unpopular monetary policies. Inflation usually makes some people unfairly rich and impoverishes others and therefore it is an economic pathology that stands in the way of any sustainable economic growth and development. Models that make use of GARCH, as highlighted by Ruzgar & Kale (2007); vary from predicting the spread of toxic gases in the atmosphere to simulating neural activity but Financial Econometrics remains the leading discipline and apparently dominates the research on GARCH. The main objective of this study is to model monthly inflation rate volatility in Zimbabwe over the period July 2009 to July 2018. Our diagnostic tests indicate that our sample has the characteristics of financial time series and therefore, we can employ a GARCH – type model to model and forecast conditional volatility. The results of the study indicate that the estimated model, the AR (1) – GARCH (1, 1) model; is indeed an AR (1) – IGARCH (1, 1) process and is not only appropriate but also the best. Since the study provides evidence of volatility persistence for Zimbabwe’s monthly inflation data; monetary authorities ought to take into cognisance the IGARCH behavioral phenomenon of monthly inflation rates in order to design an appropriate monetary policy. |
| Keywords: | ARCH, Forecasting, GARCH, IGARCH, Inflation Rate Volatility, Zimbabwe |
| JEL: | C1 C6 E52 G0 |
| Date: | 2018–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:88132&r=mac |
| By: | Mohammad Davoodalhosseini |
| Abstract: | Many central banks are contemplating whether to issue a central bank digital currency (CDBC). CDBC has certain potential benefits, including the possibility that it can bear interest. However, using CBDC is costly for agents, perhaps because they lose their anonymity when using CBDC instead of cash. I study optimal monetary policy when only cash, only CBDC, or both cash and CBDC are available to agents. If the cost of using CBDC is not too high, more efficient allocations can be implemented by using CBDC than with cash, and the first best can be achieved. Having both cash and CBDC available may result in lower welfare than in cases where only cash or only CBDC is available. The welfare gains of introducing CBDC are estimated as up to 0.64% for Canada. |
| Keywords: | Digital currencies, Monetary policy |
| JEL: | E42 E50 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:18-36&r=mac |
| By: | Dimitrios Bakas (Nottingham Trent University, Rimini Centre for Economic Analysis); Georgios Chortareas (King's College London); Georgios Magkonis (University of Portsmouth) |
| Abstract: | Conflicting theoretical approaches and diverse empirical evidence exist on the relationship between business cycle volatility and economic growth. While the average reported effect of volatility on growth is negative, the empirical estimates vary substantially across studies. We identify the factors that explain this heterogeneity of the estimates by conducting a meta†analysis. Our evidence suggests that researchers' choices regarding the measure of volatility, the control set of the estimated equation, the estimation methods, and the data characteristics can explain the differences in the reported estimates. Finally, the literature is found to be free of publication bias. |
| Keywords: | Economic Growth, Volatility, Meta†Analysis, Bayesian Model Averaging, Ordered Probit Model |
| JEL: | C83 E32 O40 |
| Date: | 2018–08–12 |
| URL: | http://d.repec.org/n?u=RePEc:pbs:ecofin:2018-04&r=mac |
| By: | Mawejje, Joseph; Lakuma, E. C. Paul |
| Abstract: | This paper examines the effects of mobile money, a rather new innovation in Uganda’s financial sector landscape on aggregate economic activity and other macroeconomic variables. We first estimate the long-run effect of mobile money deposits and value of transactions on monetary aggregates using vector error correction (VEC) techniques. We then estimate the short-term effects of mobile money on selected macroeconomic variables using Structural Vector Autoregressive (SVAR) methods. Results show modest macroeconomic impacts: mobile money has moderate positive effects on monetary aggregates, the consumer price index, and private sector credit. Mobile money deposits do respond to changes in monetary policy instruments, signalling possible ameliorating effects for the conduct of monetary policy. These results provide evidence for policy makers to continue supporting the growth of mobile money platforms. In particular, policy makers should provide the policy and regulatory framework through which mobile money balances can become interest-bearing assets, as this will further strengthen the monetary policy transmission mechanism. |
| Keywords: | Community/Rural/Urban Development, Demand and Price Analysis, Financial Economics, Public Economics, Resource /Energy Economics and Policy, Risk and Uncertainty |
| Date: | 2017–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:ags:eprcrs:260017&r=mac |
| By: | Edward P. Lazear; Kristin McCue |
| Abstract: | Most turnover reflects churn, where hires replace departures. Churn varies substantially by employer, industry and worker characteristics. In the LEHD (QWI) data, permanent employer differences account for 36% of the variation in churn. For example, leisure and hospitality turnover is more than double that of manufacturing. The cost of churn is proxied by the mean wage and the benefit by the variance in wages. QWI and JOLTS data confirm predictions. High mean wage occupations and industries experience less churn and high wage-variance ones experience more churn. Additionally, less educated, younger and male workers have higher separation and churn rates. |
| JEL: | E24 J0 J6 J63 M50 M51 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24873&r=mac |
| By: | Canova, Fabio (BI Norwegian Business School, CAMP, and CEPR); Matthes, Christian (Federal Reserve Bank of Richmond) |
| Abstract: | We describe how to use the composite likelihood to ameliorate estimation, computational, and inferential problems in dynamic stochastic general equilibrium models. We present a number of situations where the methodology has the potential to resolve well-known problems. In each case we consider, we provide an example to illustrate how the approach works and its properties in practice. |
| Keywords: | dynamic structural models; composite likelihood; identification; singularity; large scale models; panel data |
| JEL: | C10 E27 E32 |
| Date: | 2018–07–23 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:18-12&r=mac |
| By: | Elena Deryugina (Bank of Russia, Russian Federation); Natalia Karlova (Bank of Russia, Russian Federation); Alexey Ponomarenko (Bank of Russia, Russian Federation); Anna Tsvetkova (Bank of Russia, Russian Federation) |
| Abstract: | This paper examines the relative roles of region-specific and commodity-specific developments in the consumer price setting in Russia. For this purpose, we estimate a dynamic hierarchical factor model using inflation rates across regions and sectors. We found little evidence of association between region-specific factors and inflation developments, although there are several regions (mostly located in the Far East and North Caucasus) where the idiosyncratic component may contribute substantially. Conversely, the role of cross-commodity relative price changes in inflation developments in Russia is substantial. |
| Keywords: | dynamic hierarchical factor model, regional inflation, relative prices, Russia |
| JEL: | C38 E31 D4 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:bkr:wpaper:wps36&r=mac |
| By: | Valerio Scalone |
| Abstract: | Estimation of non-linear DSGE models is still very limited due to high computational costs and identification issues arising from the non-linear solution of the models. Besides, the use of small sample amplifies those issues. This paper advocates for the use of Approximate Bayesian Computation (ABC), a set of Bayesian techniques based on moments matching. First, through Monte Carlo exercises, I assess the small sample performance of ABC estimators and run a comparison with the Limited Information Method (Kim, 2002), the state-of-the-art Bayesian method of moments used in DSGE literature. I find that ABC has a better small sample performance, due to the more efficient way through which the information provided by the moments is used to update the prior distribution. Second, ABC is tested on the estimation of a new-Keynesian model with a zero lower bound, a real life application where the occasionally binding constraint complicates the use of traditional method of moments. |
| Keywords: | Monte Carlo analysis; Method of moments, Bayesian, Zero Lower Bound, DSGE estimation |
| JEL: | C15 C11 E2 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:688&r=mac |
| By: | Massimiliano Caporin (University of Padua); Loriana Pelizzon (Goethe University Frankfurt, Goethe University Frankfurt, and Ca Foscari University of Venice); Alberto Plazzi (USI and Swiss Finance Institute) |
| Abstract: | We investigate the impact of monetary announcements of the ECB and the FED on integration in the equity and sovereign CDS markets for a large cross-section of 18 Developed and 21 Emerging countries over 2006 to 2015. The effect of both announcements is negative or muted in the pre-crisis period, while it turns strongly positive during the financial crisis of 2007-2009. ECB interventions lead to more integration in the equity market during 2010 to 2012, but dis-integration in the CDS market in the ECB Quantitative Easing period (2013 to 2015), especially for emerging countries. In contrast, FED announcements are perceived as global factors in the CDS emerging market and are accompanied with an increase in integration both when the FED implements and unwinds its unconventional measures. The relation between the global factor and the U.S. market increases during FED interventions, the same does hold for the European market during ECB announcements. The exposure of emerging markets to outside monetary policy shocks can be explained in terms of their degree of trade and financial openness. |
| Keywords: | unconventional monetary policy, integration, international equity markets, CDS |
| JEL: | E58 G15 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1747&r=mac |
| By: | Thomas von Brasch; Arvid Raknerud; Diana-Cristina Iancu |
| Abstract: | In this paper, we reconcile two different strands of the literature: the literature on how new goods impact prices and the literature on productivity growth and firm turnover. The decomposition we propose generalises the framework currently used in the literature. Moreover, we extend the estimator for the demand elasticity, proposed by Feenstra (1994) and supplemented by Soderbery (2015). To illustrate the decomposition and estimator, we analyse the case of firm turnover in Norway. Our results indicate that net creation of new varieties from firm turnover contributes by about one half percentage point to annual aggregate productivity growth. |
| Keywords: | Aggregation, Productivity growth, New varieties, Demand elasticity, Panel data, Two-stage estimator |
| JEL: | C43 E24 O47 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:escoed:escoe-dp-2018-11&r=mac |
| By: | International Monetary Fund |
| Abstract: | The economy has adjusted to the large cumulative exchange rate appreciation that took place since the global financial crisis. Growth is expected to reach 2¼ percent this year and to stabilize around 1¾ percent over the medium term. A resurgence of capital inflows, abrupt policy tightening by major central banks, sharp adjustment in property prices and changes to long-term Swiss-EU relations pose two-sided risks to the outlook. The two-pronged approach to monetary policy has supported the return of modest inflation and the recovery of growth. A series of macroprudential measures was introduced targeting systemic risk in the real estate market, although prices remain high relative to household income. The fiscal position has remained strong with sustained small surpluses and declining public debt. Population aging and slower immigration will create funding gaps in the public pension system. Initiatives leading to abrupt institutional changes could undermine public confidence, and further delays in meeting international standards on corporate income taxation (CIT) could reduce Switzerland’s appeal as an investment destination. |
| Keywords: | Switzerland; |
| Date: | 2018–06–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/173&r=mac |
| By: | Ayşe İmrohoroğlu (University of Southern California); Kai Zhao (University of Connecticut) |
| Abstract: | In this paper, we present a model economy that can account for the changes in the current account balance in China since the early 2000s. Our results suggest that the increase in the household saving rate and tighter financial constraints facing the firms played equally important roles in the increase in the current account surplus until 2008. We argue that inadequate insurance through government programs for the elderly and the decline in family insurance due to the one-child policy led to the increase in the household saving rate especially after 2000 as more and more families with only one child entered the economy. The increase in the saving rate coupled with the financial frictions preventing the increased household saving from being invested in domestic firms resulted in large current account surpluses until 2008. Our results also indicate that the decline in the current account surplus since 2008 was likely to be due to the relaxation of financial constraints facing domestic firms, which was a result of the large-scale fiscal stimulus plan launched by the Chinese government after 2008. These findings imply that the planned increases in China’s public pension coverage are likely to reduce the future current account balances. On the other hand, if financial constraints are tightened back to the pre-stimulus levels; the current account surplus may rise again. |
| JEL: | E00 E20 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2018-15&r=mac |
| By: | Ian Borg (Central Bank of Malta); Germano Ruisi |
| Abstract: | This study develops a suite of Bayesian Vector Autoregression (BVAR) models for the Maltese economy to benchmark the forecasting performance of STREAM, the traditional macro-econometric model used by the Central Bank of Malta for its regular forecasting exercises. Three different BVARs are proposed, containing an endogenous and exogenous block, and differ only in terms of the crosssectional size of the former. The small BVAR contains only three endogenous variables, the medium BVAR includes 17 variables, while the large BVAR includes 32 endogenous variables. The exogenous block remains consistent across the three models. By using a similar information set, the Bayesian VARs developed in this study are utilised to benchmark the forecast performance of STREAM. In general, for real GDP, the GDP deflator, and the unemployment rate, BVAR median projections for the period 2014-2016 improve the forecast performance at the one, two, and four-step ahead horizons when compared to STREAM. However, the latter does rather well at annual projections, but it is broadly outperformed by the medium and large BVARs. |
| JEL: | C11 C52 C53 E17 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:mlt:wpaper:0418&r=mac |
| By: | Lorenzo Caliendo; Fernando Parro; Alessandro Sforza; Luca David Opromolla |
| Abstract: | The economic effects from labor market integration are crucially affected by the extent to which countries are open to trade. In this paper we build a multi-country dynamic general equilibrium model with trade in goods and labor mobility across countries to study and quantify the economic effects of trade and labor market integration. In our model trade is costly and features households of different skills and nationalities facing costly forward-looking relocation decisions. We use the EU Labour Force Survey to construct migration flows by skill and nationality across 17 countries for the period 2002-2007. We then exploit the timing variation of the 2004 EU enlargement to estimate the elasticity of migration flows to labor mobility costs, and to identify the change in labor mobility costs associated to the actual change in policy. We apply our model and use these estimates, as well as the observed changes in tariffs, to quantify the effects from the EU enlargement. We find that new member state countries are the largest winners from the EU enlargement, and in particular unskilled labor. We find smaller welfare gains for EU-15 countries. However, in the absence of changes to trade policy, the EU-15 would have been worse off after the enlargement. We study even further the interaction effects between trade and migration policies and the role of different mechanisms in shaping our results. Our results highlight the importance of trade for the quantification of the welfare and migration effects from labor market integration. |
| JEL: | E24 F13 F16 F22 J61 R13 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201717&r=mac |
| By: | Adrien Bilal; Esteban Rossi-Hansberg |
| Abstract: | The location of individuals determines their job opportunities, living amenities, and housing costs. We argue that it is useful to conceptualize the location choice of individuals as a decision to invest in a ‘location asset.’ This asset has a cost equal to the location's rent, and a payoff through better job opportunities and, potentially, more human capital for the individual and her children. As with any asset, savers in the location asset transfer resources into the future by going to expensive locations with good future opportunities. In contrast, borrowers transfer resources to the present by going to cheap locations that offer few other advantages. As in a standard portfolio problem, holdings of this asset depend on the comparison of its rate of return with that of other assets. Differently from other assets, the location asset is not subject to borrowing constraints, so it is used by individuals with little or no wealth that want to borrow. We provide an analytical model to make this idea precise and to derive a number of related implications, including an agent's mobility choices after experiencing negative income shocks. The model can rationalize why low wealth individuals locate in low income regions with low opportunities even in the absence of mobility costs. We document the investment dimension of location, and confirm the core predictions of our theory with French individual panel data from tax returns. |
| JEL: | D14 E21 J61 J62 R13 R23 R30 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24867&r=mac |
| By: | International Monetary Fund |
| Abstract: | The National Bank of Romania (NBR) has a long experience in implementing macroprudential policy measures and as a result, a relatively sophisticated systemic risk monitoring framework. The NBR monitors several indicators to assess the build-up of systemic risk, many of which are derived from the nation-wide credit register and related data sources, and constructs summary indicators to facilitate overall risk assessment. The NBR also has various economic models to assess macro-financial developments and the effects of various shocks, and to assess policy actions. The NBR also subjects banks to regular solvency and liquidity stress tests. Nevertheless, data and information gaps remain, for instance, due to extensive NPL exposures being sold to asset management companies, which do not have to report to the credit registry. |
| Keywords: | Europe;Romania; |
| Date: | 2018–06–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/164&r=mac |
| By: | Toshihiko Mukoyama (Department of Economics, Georgetown University); Sophie Osotimehin (Department of Economics, University of Virginia) |
| Abstract: | We study how factors that hinder the reallocation of inputs across firms influence aggregate productivity growth. We extend Hopenhayn and Rogerson's (1993) general equilibrium firm dynamics model to allow for endogenous innovation. We calibrate the model using US data, and then evaluate the effects of firing taxes on reallocation, innovation, and aggregate productivity growth. In our baseline specification, we find that firing taxes reduce overall innovation and productivity growth. We also show that firing taxes can have opposite effects on the entrants' innovation and the incumbents' innovation, and thus the overall outcome depends on the relative strengths of these forces. |
| Keywords: | Innovation, R&D, Reallocation, Firing costs |
| JEL: | E24 J24 J62 O31 O47 |
| Date: | 2018–08–13 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~18-18-02&r=mac |
| By: | Carlos Medel |
| Abstract: | In this article, I conduct certain econometric estimations aiming at analysing to what extent inflation expectations from public agents are anchored to the Central Bank of Chile's inflation target. Expectations anchoring is an important feature for the monetary policy in a small-open economy under inflation targeting with a floating exchange rate. It is understood as another central bank instrument, as it promotes price stability through the ability of authorities to manage inflation expectations. I provide evidence suggesting that agents' expectations, based on survey data, are firmly anchored, because of Central Bank of Chile policy actions. Within the fully-fledged inflation targeting era—starting in 2000—three periods are detected. These are (i) the pre-Global Financial Crisis (GFC) period, (ii) the post-GFC period until mid-2015, and (iii) the low inflation period afterwards. Particularly for the last period, the anchoring effect is clearer and pronounced. |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:chb:bcchwp:825&r=mac |
| By: | Tyrowicz, Joanna (University of Warsaw); Makarski, Krzysztof (Warsaw School of Economics); Bielecki, Marcin (University of Warsaw) |
| Abstract: | We analyze the consumption and wealth inequality in an OLG model with mandatory pension systems. Our framework features within cohort heterogeneity of endowments and heterogeneity of preferences. We allow for population aging and gradual decline in TFP growth. We show four main results. First, increasing longevity translates to substantial increases in aggregate consumption inequality and wealth inequality. Second, a pension system reform from a defined benefit to a defined contribution works to reinforce consumption inequality and reduce wealth inequality. Third, minimum pension benefits are able to partially counteract an increase in inequality introduced by the defined contribution system, at a fiscal cost. Fourth the minimum pension benefit guarantee mostly addresses the sources of inequality which stem from differentiated endowments rather than those which stem from heterogeneous preferences. |
| Keywords: | consumption, wealth, inequality, longevity, defined contribution, defined benefit |
| JEL: | H55 E17 C60 C68 E21 D63 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11621&r=mac |
| By: | Michael Woodford |
| Abstract: | It is common to analyze the effects of alternative monetary policy commitments under the assumption of fully model-consistent expectations. This implicitly assumes unrealistic cognitive abilities on the part of economic decision makers. The relevant question, however, is not whether the assumption can be literally correct, but how much it would matter to model decision making in a more realistic way. A model is proposed, based on the architecture of artificial intelligence programs for problems such as chess or go, in which decision makers look ahead only a finite distance into the future, and use a value function learned from experience to evaluate situations that may be reached after a finite sequence of actions by themselves and others. Conditions are discussed under which the predictions of a model with finite-horizon forward planning are similar to those of a rational expectations equilibrium, and under which they are instead quite different. The model is used to re-examine the consequences that should be expected from a central-bank commitment to maintain a fixed nominal interest rate for a substantial period of time. “Neo-Fisherian” predictions are shown to depend on using rational expectations equilibrium analysis under circumstances in which it should be expected to be unreliable. |
| JEL: | E52 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24692&r=mac |
| By: | Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)) |
| Abstract: | Summary: The international debate about trade imbalances often puts the focus on the role of domestic GDP/foreign GDP and the role of real exchange rate changes – with respect to the latter adjustment channel, the standard question is whether or not the Marshall-Lerner condition is fulfilled. With outward foreign direct investment (FDI) and inward FDI becoming increasingly important, the question about the real exchange rate impact on the trade balance has to be restated as imports are proportionate to real gross national income and this indeed implies a new Marshall-Lerner condition. It is shown that with outward cumulated FDI, the modified condition is stricter than the traditional case and with both outward FDI and inward FDI, the elasticity requirement is ambiguous. “FDI globalization” might go along with unpleasant trade imbalance problems so that additional empirical research is needed as well as stronger international policy cooperation as high trade balance deficits/high trade balance surplus positions could be rather difficult to correct through exchange rate adjustments only. Looking at the import elasticities for all partner countries of the US – or country x – together is quite misleading for policymakers. Zusammenfassung: Die internationale Debatte zu Handelsbilanzungleichgewichten fokussiert häufig auf die Rolle von inländischem oder ausländischem Bruttoinlandsprodukt und die Rolle realer Wechselkursänderungen – dabei ist mit Blick auf letzteren Anpassungskanal ein gewichtige Standardfrage, ob die Marshall-Lerner Bedingung erfüllt ist. Mit der zunehmenden Bedeutung von Direktinvestitionsabflüssen und Direktinvestitionszuflüssen muss die Frage nach der Rolle des realen Wechselkurses mit Blick auf die Handelsbilanzreaktion neu gestellt werden, da die Güterimporte proportional zum realen Brutto-Nationaleinkommen sind; das bedeutet eine neue, veränderte Marshall-Lerner Bedingung. Gezeigt wird, dass bei kumulierten Auslandsdirektinvestitionen die modifizierte Bedingung strikter als die traditionelle Bedingung ist: Die Direktinvestitionsintensität, die ausländische Gewinnquote und die Größe des Landes relative zum Welteinkommen spielen nun zusätzlich eine wichtige Rolle. Hat man sowohl Zuflüsse wie Abflüsse bei Direktinvestitionen wird die Bedingung uneindeutig. “Direktinvestitions-Globalisierung” könnte von daher mit unerfreulichen Handelsbilanz-Ungleichgewichtsproblemen einhergehen, wobei zusätzliche empirische Forschung notwendig ist; ebenso zudem verstärkte international Politikkooperation, da hohe Defizit- oder Überschusspositionen kaum allein durch reale Wechselkursänderung zu korrigieren sind. Protektionismus-Politik, die zu Direktinvestitionen als Mittel zum Überspringen von Zollmauern führt, unterminiert die Handelsbilanzanpassung via reale Wechselkurse. Wenn man die Importelastizitäten für alle Handelspartner zusammen betrachtet, ist das irreführend für die Politik. |
| Keywords: | Trade balance, foreign direct investment, real exchange rate, macroeconomics, economic policy |
| JEL: | E22 E61 F10 F21 F31 F40 F41 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:bwu:eiiwdp:disbei248&r=mac |
| By: | Nicholas Garvin (Reserve Bank of Australia) |
| Abstract: | Interbank repo markets are arguably just as important as unsecured markets. Despite this, the global research community has not analysed the microstructure of interbank repo markets in the same detail as unsecured markets, because loan-level repo data have not been available. This paper provides and assesses an algorithm for extracting loan-level repo data from over-the-counter securities transactions data, and it applies to securities transactions data from Austraclear. This approach is similar to how loan-level unsecured data are typically obtained from payments data. False detection and false omission rates are estimated to be 3 per cent or less. While separate prudential data indicate a larger repo market than the algorithm data, likely reflecting repos transacted through foreign (i.e. non-Austraclear) infrastructure, the two datasets have a robust positive relationship. The algorithm data, capturing non-RBA repos of up to 14-days maturity from several 2-month data samples between 2006 and 2015, reveal various market features. From 2006 to 2015, the distribution of repo-rate spreads (to the cash rate) drifted up and tightened, and the market shifted towards overnight maturities. Loan-level repo rates depend on the loan size and the types of counterparties, but not how long the repo is open. In 2015, the market's network structure comprises a tightly integrated core, and a segmented periphery with few counterparties. Repo haircuts do not display obvious patterns, appearing randomly distributed around zero. |
| Keywords: | interbank markets; Furfine algorithm; false detection rates; repo markets; securities |
| JEL: | C63 E42 E43 G10 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:rba:rbardp:rdp2018-09&r=mac |
| By: | Lance Lochner (University of Western Ontario); Todd Stinebrickner (Western University); Utku Suleymanoglu (University of Michigan) |
| Abstract: | Using unique survey and administrative data from the Canada Student Loans Program, we document that parental support and personal savings substantially lower student loan repayment problems. We develop a theoretical model for studying student borrowing and repayment in the presence of risky labor market outcomes, moral hazard, and costly earnings verification. This framework demonstrates that non-monetary costs of applying for income-based repayment assistance are critical to understanding why resources other than earnings lead to greater repayment. We further show that eliminating these non-monetary costs may be inefficient and lead to undesirable redistribution. Empirically, we demonstrate that expanding Canada’s income-based Repayment Assistance Plan to automatically cover all borrowers would likely reduce program revenue by nearly one-half over early years of repayment. Finally, we show how student loan programs can be more efficiently designed to address heterogeneity in parental transfers in the presence of non-monetary earnings verification costs and moral hazard. |
| Keywords: | student loans, moral hazard, college, family investments |
| JEL: | H52 D81 E24 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2018-054&r=mac |
| By: | International Monetary Fund |
| Abstract: | The Bangladesh economy continues to perform well with robust and stable growth. Led by the ready-made garment sector, the economy has diversified away from an agrarian to a more manufacturing based economy with abundant low-cost labor. Poverty has declined steadily and other social indicators have improved. To sustain the strong economic performance, the country needs to promote productive investments, while preserving economic and financial stability. |
| Keywords: | Asia and Pacific;Bangladesh; |
| Date: | 2018–06–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/158&r=mac |
| By: | International Monetary Fund |
| Abstract: | To adjust to lower oil prices since 2014, Algeria initially relied solely on exchange rate policy before putting most of the burden on fiscal consolidation. In parallel, the government initiated several structural reforms and started designing a long-term plan to reshape the country’s growth model, while the central bank was modernizing its monetary policy framework. However, confronted with slowing growth, increasing unemployment, and financing difficulties, the authorities recently chose to boost activity through increased spending in 2018, to be followed by a steep fiscal consolidation from 2019 onward. With fiscal savings depleted and reluctant to borrow externally, they turned to monetary financing. To reduce the trade deficit and foster import substitution, they hardened import barriers. |
| Keywords: | Middle East;Algeria; |
| Date: | 2018–06–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/168&r=mac |
| By: | Jesus Fernandez-Villaverde (University of Pennsylvania); Federico Mandelman (Federal Reserve Bank of Atlanta); Francesco Zanetti (University of Oxford); Yang Yu (Shanghai University of Finance and Economics) |
| Abstract: | This paper develops a model with search complementarities in the inter-firm matching process that entails two steady-state equilibria. An active equilibrium with strong partnership formation, large production, and low unemployment and a passive equilibrium with low partnership formation, low production, and high unemployment. Changes in fundamentals move the system between the two equilibria, generating large and persistent business cycle fluctuations. Suciently adverse shocks in periods of low macroeconomic volatility trigger severe and protracted downturns. The magnitude of government intervention is critical to foster economic recovery in the passive equilibrium while it plays a limited role in the active equilibrium. Fiscal policy has a non-monotonic effect on output in the passive equilibrium and the scal multiplier depends on the interplay between macroeconomic volatility and the magnitude of government spending. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:386&r=mac |
| By: | Nicolas Chanut; Mario Marcel; Carlos Medel |
| Abstract: | This paper focuses on the value of five economic perceptions surveys for macroeconomic forecasting in Chile. We compare their main features in terms of timing, representativeness, questionnaires, and aggregation of responses. We note the shortcomings of composite indices that combine questions with different focus and time perspective and propose instead eight alternative measures distinguishing between current sentiment/future expectations and between personal/country-wide perceptions. Our results suggest that future and country-wide perceptions are formed with distinct information from personal and current sentiment, and the latter are somewhat affected by the former. When turning to the ability of the existing and alternative measures to contribute to macro-aggregates forecasting, we find a rather strong relationship between personal and aggregate perceptions, consumption actions and actual consumption, especially of durables, outpacing the predictive ability of the existing synthetic indicator. On the business side, the predictive value of surveys seems to be stronger for employment than for investment, while employment and investment seem to Grangercause personal sentiment/expectations. This suggests that while broad perceptions tend to be shaped by independent information, the assessment of the own situation is reassured through actual employment and investment actions. The low ability of economic perception measures to predict investment behavior, in turn, confirms that investment actions are far more complex and projectspecific to be captured by responses to rather broad questions. In all, while surveys of economic perceptions are a rich source of information, it is necessary to select the surveys and questions that are more revealing of present and prospective behavior. |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:chb:bcchwp:824&r=mac |
| By: | Aikman, David (Bank of England); Bridges, Jonathan (Bank of England); Kashyap, Anil (University of Chicargo Booth School of Business); Siergert, Caspar (Bank of England) |
| Abstract: | How well equipped are today’s macroprudential regimes to deal with a re-run of the factors that led to the global financial crisis? We argue that a large proportion of the fall in US GDP associated with the crisis can be explained by two factors: the fragility of financial sector — represented by the increase in leverage and reliance on short-term funding at non-bank financial intermediaries — and the build-up in indebtedness in the household sector. We describe and calibrate the policy interventions a macroprudential regulator would wish to make to address these vulnerabilities. And we compare and contrast how well placed two prominent macroprudential regulators — the US Financial Stability Oversight Council and the UK’s Financial Policy Committee — are to implement these policy actions. |
| Keywords: | Financial crises; macroprudential policy; leverage; short-term wholesale funding; credit crunch; household debt; aggregate demand externality; countercyclical capital buffer; loan to value ratio; loan to income ratio |
| JEL: | G01 G21 G23 G28 |
| Date: | 2018–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0747&r=mac |
| By: | Santiago Lago-Peñasa (Governance and Economics research Network (GEN), University of Vigo); Jorge Martinez-Vazquez (International Center for Public Policy (Georgia State University) & Governance and Economics research Network (GEN)); Agnese Sacchic (La Sapienza University of Rome (Italy) & Governance and Economics research Network (GEN)) |
| Abstract: | There is a longstanding debate in the economics literature on whether fiscally decentralized countries are inherently more fiscally unstable. The Great Recession provides a fertile testing ground for analyzing how the degree of decentralization does actually affect countries’ ability to implement fiscal stabilization policies in response to macroeconomic shocks. We provide an empirical analysis aiming at disentangling the roles played by decentralization design itself and several recently introduced budgetary institutions such as subnational borrowing rules and fiscal responsibility laws on country’s fiscal stability. We use OECD countries’ data since 1995, which includes both a boom period of worldwide economic growth and the Great Recession. Our main finding is that well-designed decentralized systems are not destabilizing. But, in addition, sub-national fiscal and borrowing rules should be at work to improve the overall fiscal stability performance of decentralized countries. |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1805&r=mac |
| By: | Choongryul Yang (University of Texas at Austin); Hassan Afrouzi (Columbia University) |
| Abstract: | We show that rationally inattentive firms are forward-looking in their information acquisition and study the implications of these incentives for inflation dynamics by deriving a new microfounded Phillips curve. The Phillips curve is forward looking and relates current inflation to the forecast errors of firms about future inflation and the growth rate of the output gap in the economy -- a feature that is absent in sticky and noisy information models. Unlike the forward-looking Phillips curves derived under nominal rigidities, we show inflation is not necessarily increasing in expected inflation, and it decreases with the forecast errors of firms about future inflation and output gap growth. We test this Phillips curve using the Survey of Professional Forecasters as a proxy for firms’ expectations and show that forecast errors about future significantly affect current inflation in the direction that is predicted by the model. We apply our findings to examine the effectiveness of forward guidance policies in a general equilibrium model. News about future interest rates affects inflation more if firms are more rationally inattentive or if they discount future profits less. The model also survives the forward guidance puzzle as the initial response of inflation decreases with the horizon of forward guidance. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:559&r=mac |
| By: | Francesco Saraceno (Observatoire français des conjonctures économiques) |
| Abstract: | This paper gives an assessment of the current state of the debate on fiscal policy effectiveness. I begin with an account of the theory of fiscal policy, and how it has evolved from the pre-Keynesians to the emergence of a “New Consensus” that dominated theory (and policy-making) until the crisis of 2008. Fiscal policy, a critical underpinning behind the full employment policies of the Post-WWII period, was removed from the policy-makers’ toolbox by the New Consensus, and preference given to rules over discretion in government interventions. The paper then highlights how the Economic and Monetary Union of the European Union (EMU) is an incarnation of the New Consensus, and argues that this had a rather negative impact on the growth performance of the Eurozone. The Stability and Growth Pact, the EMU fiscal rule, is then dissected to conclude that it is far from optimal even if it was never really applied. The paper then shows how the crisis has shaken the Consensus, and is leading to a reassessment of the utility of fiscal policy |
| Keywords: | Fiscal rules; Fiscal policy; EMU; Multipliers; History of economic thought; United States |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/eul7jlnf19iq8tdp0vlfv63n5&r=mac |
| By: | International Monetary Fund |
| Abstract: | A new government is in place, with a mandate to achieve ambitious development objectives. Liberia’s economy appears poised for recovery, as growth bottomed out in 2016 and edged to 2.5 percent in 2017. However, Liberia remains fragile with poor living conditions for the majority of the population. Moreover, a decline in aid inflows, which were elevated during 2014–16, has put pressure on the exchange rate and fiscal resources. The government is thus facing the daunting task of pursuing a demanding development agenda in the face of high expectations, while also managing near-term adjustments and safeguarding macroeconomic stability. |
| Keywords: | Liberia;Sub-Saharan Africa; |
| Date: | 2018–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/172&r=mac |
| By: | Yuko Imura; Malik Shukayev |
| Abstract: | Many central banks are contemplating whether to issue a central bank digital currency (CDBC). CDBC has certain potential benefits, including the possibility that it can bear interest. However, using CBDC is costly for agents, perhaps because they lose their anonymity when using CBDC instead of cash. I study optimal monetary policy when only cash, only CBDC, or both cash and CBDC are available to agents. If the cost of using CBDC is not too high, more efficient allocations can be implemented by using CBDC than with cash, and the first best can be achieved. Having both cash and CBDC available may result in lower welfare than in cases where only cash or only CBDC is available. The welfare gains of introducing CBDC are estimated as up to 0.64% for Canada. |
| Keywords: | Business fluctuations and cycles, Economic models, Firm dynamics, International topics, Monetary policy |
| JEL: | F44 E52 F12 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:18-37&r=mac |
| By: | Kasahara, Hiroyuki; Sawada, Yasuyuki; Suzuki, Michio |
| Abstract: | This article examines the effect of government capital injections into nancially troubled banks on corporate investment during the Japanese banking crisis of the late 1990s. By helping banks meet the capital requirements imposed by Japanese banking regulation, recapitalization enables banks to respond to loan demands, which could help firms increase their investment. To test this mechanism empirically, we combine the balance sheet data of Japanese manufacturing firrms with bank balance sheet data and estimate a linear investment model where the investment rate is a function of not only firm productivity and size but also bank regulatory capital ratios. We find that the coefficient of the interaction between a firm's total factor productivity measure and a bank's capital ratio is positive and significant, implying that the bank's capital ratio affects more productive firms. Counterfactual policy experiments suggest that capital injections made in March 1998 and 1999 had a negligible impact on the average investment rate, although there was a reallocation effect, shifting investments from low- to high-productivity firms. |
| Keywords: | Capital injection, Bank regulation, Banking crisis |
| JEL: | E22 G21 G28 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:hit:rcesrs:dp18-2&r=mac |
| By: | Eo, Yunjong; Lie, Denny |
| Abstract: | Does raising an inflation target require increasing the nominal interest rate in the short run? We answer this question using a New Keynesian model calibrated to the U.S. economy in which firms explicitly take into account changes in the inflation target in their price setting behavior. We find that the short-run comovement between the nominal rates and inflation conditional on the change in the inflation target is most likely positive. While this so-called Neo-Fisherism is less likely to hold the more backward-looking elements are incorporated into the model, two features play an important role in generating the positive comovement in spite of rich backward-looking elements in our model. First, a Taylor-type rule mitigates the impact of the backward-looking elements on forming inflation expectations compared to strict inflation targeting. Second, the additional forward-looking effect driven by firms' explicit consideration of inflation target adjustment in setting their prices enlarges the region of the parameter space exhibiting Neo-Fisherism. Our results are robust to empirically plausible parameterizations of the model. |
| Keywords: | Neo-Fisherism, inflation expectations, a Taylor-type rule, strict inflation targeting, hybrid NKPC, inflation target adjustment. |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2018-02&r=mac |
| By: | He, Yong |
| Abstract: | Sparked by Baumol’s revenue- versus profit-maximizing models of the firm, this paper using a growth model shows that if a nation seeks GDP-maximizing growth with capital expansion as driving force, the model could work only under the assumption that the consumers’ aversion to under-consumption, an unavoidable consequence of over-investment, remains constant, and the effects of under-consumption are not accumulative. Otherwise, it has to decelerate growth and ultimately converges to the neoclassical growth model with consumption optimality. The empirical evidence on growth models of ex-Soviet Union, China and Eastern Asia are examined to explore the extent to which the model captures the real world. |
| Keywords: | GDP-maximizing growth; under-consumption effects; transition between steady states; sustainability; Chinese model. |
| JEL: | E20 O40 O50 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:88549&r=mac |
| By: | International Monetary Fund |
| Abstract: | The economy is experiencing a steady upswing, with emerging signs of labor shortages and capacity constraints. The outlook is for continued robust growth with symmetric risks around the baseline projection. A combination of rising housing prices and high household debt leaves Denmark vulnerable to shocks. The current account surplus remains large. Banks are sound and profitable. |
| Date: | 2018–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/177&r=mac |
| By: | Richard Senner (ETH Zurich); Didier Sornette (ETH Zürich and Swiss Finance Institute) |
| Abstract: | Since the global financial crisis, the Swiss National Bank has been accumulating reserve assets amounting to the size of the Swiss GDP. Yet, the Swiss franc is still considered to be significantly over-valued. This paper analyzes the drivers behind the new situation and discusses challenges and opportunities for Swiss policy making, drawing on comparisons with other surplus countries. Our findings are fourfold. First, the recent upward pressure on the Swiss franc cannot be explained by safe haven effects alone, but has been driven by a pronounced decline in Swiss residents’ foreign investments. Second, other surplus countries typically purchase and manage significant amounts of foreign assets via central banks and sovereign wealth funds. Third, from a global perspective, such public intervention is subject to a mercantilist critique. Fourth, given the need to invest in the real economy to foster growth and avoid the present excess flushing of the financial system that boost asset prices in an insufficient productive way, we conclude that Switzerland should assess room for re-balancing and highlight the opportunity of building a Swiss sovereign wealth fund. This would be beneficial both for Swiss residents and for the world at large. |
| Keywords: | Surplus Countries, Central Bank Interventions, Sovereign Wealth Funds, Mercantilist Critique, Swiss Franc, Current Account Imbalance |
| JEL: | E5 F31 F32 O24 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1722&r=mac |
| By: | Pedro Bento; Diego Restuccia |
| Abstract: | We construct a new dataset for the average employment size of establishments across sectors and countries from hundreds of sources. Establishments are larger in manufacturing than in services, and in each sector they are larger in richer countries. The cross-country income elasticity of establishment size is remarkably similar across sectors, about 0.3. We discuss these facts in light of several prominent theories of development such as entry costs and misallocation. We then quantify the sectoral and aggregate impact of entry costs and misallocation in an otherwise standard two-sector model of structural transformation with endogenous firm entry and firm-level productivity. We find that observed measures of misallocation account for the entire range of establishment-size differences across sectors and countries and almost 50 percent of the difference in non-agricultural GDP per capita between rich and poor countries. |
| Keywords: | establishment size, manufacturing, services, distortions, misallocation, productivity. |
| JEL: | O1 O4 O5 E02 E1 |
| Date: | 2018–08–18 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-612&r=mac |
| By: | Sopp, Heiko |
| Abstract: | Within a Salop framework, this paper shows that banks' profit smoothing can explain incomplete pass-through of market rates to the rates of core deposits. Using time series data of deposit and lending rates of local German banks, this paper will show that local banks pass through return variations to their depositors. To the degree to which market rates influence new business lending rates, there is, therefore, an indirect channel through which market rates affect the rate of core deposits. In the absence of capital market alternatives for core deposits, this indirect channel explains why changes in the market rate affect the rate of core deposits only slowly and fractionally. |
| Keywords: | interest rate pass-through |
| JEL: | G21 E43 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:252018&r=mac |
| By: | Juan Carlos Conesa (Stony Brook University); Akshar Saxena (Harvard University); Daniela Costa (Wharton); Gajendran Raveendranathan (McMaster University); Parisa Kamali (University of Minnesota); Timothy Kehoe (University of Minnesota) |
| Abstract: | This paper develops an overlapping generations model to study the macroeconomic implications of an aging population. We calibrate the model along a transition path from 1950 to 2100 that features rising survival probabilities, an increasing share of college graduates, and rising healthcare costs. The aging of the population leads to increased government spending on Medicare, Medicaid, and Social Security benefits. We find that the increase in the share of college graduates compensates for most of the increase in government spending. Consequently, taxes will only have to rise by a few percentage points to balance the budget in the future even if the current eligibility criteria and benefit levels for social insurance programs are preserved. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:930&r=mac |
| By: | Kanhaiya Singh (National Council of Applied Economic Research, New Delhi); M.R. Saluja (India Development Foundation, Gurugram & National Council of Applied Economic Research, New Delhi) |
| Abstract: | The input–output table for India has been constructed for the year 2013-14 consistent with the National Accounts estimates given in the National Accounts Statistics (NAS) 2015, while the supply use table (SUT) is for the year 2012-13. In order to allow for comparisons with the 2007-08 inputoutput table, the number of sectors has been kept the same. The validation has been done by physically comparing the output multipliers for these two tables. The 2012-13 SUT has 140 rows and 67 columns, which have been collapsed and expanded, respectively, to make the 130 x 130 input output table. |
| Keywords: | Input-output Table, Supply Use Table, National Account, India |
| JEL: | C67 E01 |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:nca:ncaerw:111&r=mac |
| By: | Timothy J. Goodspeed (Department of Economics, Hunter College & The Graduate Center) |
| Abstract: | The classic arguments of Musgrave (1959) and Oates (1972) are that the redistribution and stabilization functions should be assigned to the federal level of government. The argument is that redistribution is difficult to achieve at lower levels because the public good nature of redistribution and the mobility of individuals and firms. Likewise, stabilization is difficult to achieve because fiscal stimulus of lower levels of government is likely to be underused due to spillover effects and a limited ability to service debt obligations. These arguments suggest that under-provision of redistributive spending should accompany greater decentralization. They also suggest that subnational policies aimed at macroeconomic stabilization are likely to be less effective than national ones, an important issue in an economic crisis. In this paper I examine data on intra-country social protection transfers in the EU before and after the crisis. The results support the classic federalism assignment. For both reasons of redistribution and stabilization, social protection expenditures are best assigned to the central level of government. Regression results indicate that greater decentralization lowers social protection expenditures and a greater vertical fiscal imbalance and greater subnational deficits result in more spending on things other than social protection. |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1809&r=mac |
| By: | Lie, Denny |
| Abstract: | This paper investigates the role of observed offcial inflation-target adjustments in aggregate macroeconomic fluctuations in Indonesia, using an estimated Dynamic Sto- chastic General Equilibrium (DSGE) model. The paper finds that these adjustments or shocks play a non-trivial role in the fluctuations of inflation and nominal interest rate in Indonesia. Output fluctuations, however, are virtually unaffected. A counter- factual exercise shows that a gradual reduction in Bank Indonesia's inflation target may have not been optimal. The paper also provides additional insights on the con- tribution of various shocks in driving aggregate fluctuations in Indonesia. Technology and monetary-policy shocks are found to be the main driving factor for both output and inflation fluctuations. Movements in the nominal interest rate are mostly driven by preference and risk-premium shocks, with inflation-target shocks playing a larger role in the longer run. The inclusion of inflation-target shocks in the model is also shown to improve the model's fit and out-of-sample predictive performance.. |
| Keywords: | Inflation target, inflation-target adjustments or shocks, DSGE model for Indonesia, source of aggregate fluctuations, Bank Indonesia |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2018-01&r=mac |
| By: | Alessio Ruzza (University of Lugano and Swiss Finance Institute); Wojciech Zurowski (University of Lugano and Swiss Finance Institute) |
| Abstract: | Macroeconomic announcements increase trading activity, with potential consequences for liquidity. This paper studies the effect of FOMC announcements on the US corporate bond market liquidity. The releases do not seem to create adverse selection. We obtain the probability distribution of monetary policy outcomes from 30 day Fed funds Futures. Despite the low toxicity of the order flow, dealers increase the price for liquidity provision in the presence of monetary policy uncertainty and unexpected Fed rate changes. Trading costs decomposition reveals that inventory risk aversion drives the dealers' behaviour. We conclude that a dealership market falls short around macroeconomic announcements, even when adverse selection may be absent. |
| Keywords: | corporate bond market, inventory risk, FOMC, Fed funds futures |
| JEL: | G12 G14 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1768&r=mac |
| By: | Andrew Lynn (Bank of England); Ronan C Lyons (Trinity College Dublin) |
| Abstract: | In understanding the determinants of mortgage default, the consensus has moved from an 'option theory' model to the 'double trigger' hypothesis. Nonetheless, that consensus is based on within-country studies of default. This paper examines the determinants of mortgage default across five European countries, using a large dataset of over 2.3 million active mortgage loans originated between 1991 and 2013 across over 150 banks. The analysis finds support for the double trigger hypothesis: changes in unemployment are important determinants of default, while negative equity itself is a relatively small contributor to default. Nonetheless, the effect of variables such as the interest rate and unemployment is stronger for those in negative equity. The double trigger, however, varies by country: country-specific factors are found to have a large effect on default rates. For any given level of LTV, and as LTV changes, borrowers were more sensitive to the interest rate and unemployment in Ireland and Portugal than in the UK or the Netherlands. |
| Keywords: | mortgage default, negative equity, double trigger, European Union. |
| JEL: | G01 G21 D04 E58 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:tcd:tcduee:tep0718&r=mac |
| By: | Tischer, Johannes |
| Abstract: | This paper sheds light on the effect of quantitative easing (QE) on bank lending. Using data on German banks for 2014-2016, I show that QE encourages banks to rebalance from securities to loans. For identification, I use bond redemptions as exogenous variation in banks' need to rebalance their portfolio and hence their exposure to QE. I find that more exposed banks increase their loan growth during QE relative to other banks. The growth differential is larger when bond market yields decrease stronger than loan market yields and for banks with equity constraints. These results imply that QE can affect bank lending even if banks do not hold assets purchased under the QE program, by increasing incentives to invest in higher-yield assets. |
| Keywords: | quantitative easing,bank lending,proprietary trading,monetary transmission |
| JEL: | E51 E58 G11 G21 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:202018&r=mac |
| By: | Rajnish Mehra (National Council of Applied Economic Research, New Delhi, Department of Economics, Arizona State University & NBER); John Donaldson (Columbia Business School, Columbia University); Christos Koulovatianos; Jian Li (Department of Economics, University of Luxembourg) |
| Abstract: | Lucas (1990) argues that the neoclassical adjustment process fails to explain the relative paucity of FDI inflows from rich to poor countries. In this paper we consider a natural experiment: using China as the treated country and India as the control, we show that the dynamics of the relative FDI flows subsequent to the implementation of China’s one-child policy, as seen in the data, are consistent with neoclassical fundamentals. In particular, following the introduction of the one-child policy in China, the capital-labor (K/L) ratio of China increased relative to that of India, and, simultaneously, relative FDI inflows into China vs. India declined. These observations are explained in the context of a simple neoclassical OLG paradigm. The adjustment mechanism works as follows: the reduction in the (urban) labor force due to the one-child policy increases the savings per capita. This increases the K/L ratio and reduces the marginal product of capital (MPK). The reduction in MPK (relative to India) reduces the relative attractiveness of investment in China and is thus associated with lower FDI/GDP ratios. Our paper contributes to the nascent literature exploring demographic transitions and their effects on FDI flows. |
| Keywords: | Lucas paradox, capital-labor ratio, FDI-intensity, one-child policy |
| JEL: | F11 F21 J11 O11 E13 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:nca:ncaerw:112&r=mac |
| By: | International Monetary Fund |
| Abstract: | With one of the lowest scores in the Human Development Index, Niger is facing daunting development challenges, exacerbated by security concerns from terrorist incursions, low prices for key uranium exports, climate change, and excessive population growth. Nonetheless, GDP grew by a respectable 5 percent in the past two years and should gradually rise to 5¾ percent as reforms and substantial donor support bear fruit. The government is reform oriented and enjoys a comfortable parliamentary majority, but ongoing demonstrations signal a degree of social discontent. |
| Keywords: | Sub-Saharan Africa;Niger; |
| Date: | 2018–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:18/166&r=mac |
| By: | Leiashvily, Paata |
| Abstract: | В данной статье рассмотрена проблема самоорганизации экономических процессов в условиях совершенной конкуренции, основанной на взаимодействии индивидуальных и общественных экономических ценностей и рыночных цен. На основе диалектического анализа показано глубокое внутреннее единство проиозводства и потребления, спроса и предложения, полезности и затрат и др. категорий, которые обуславливают функциональную замкнутость и целостность экономической системы, как необходимое условие для понимания процесса формирования макроэкономического порядка из микроэкономического хаоса. На методологической основе диалектики дается новое понимание механизма саморегулирования рыночных процессов и экономической оптимизации. Предлагаемое теоретическое объяснение экономических процессов позволит создать более адекватные прикладные экономические модели и выработать эффективную экономическую политику. In this article, the problem of self-organization of economic processes in conditions of perfect competition, based on the interaction of individual and public economic values and market prices, is considered. On the basis of dialectical analysis, the deep internal unity of production and consumption, supply and demand, utility and costs, and other categories that determine the functional closeness and integrity of economic system as a necessary condition for to understand the formation process of a macroeconomic order from microeconomic chaos is shown. A new understanding of market processes' self-regulation mechanism and economic optimization on the methodological basis of dialectics is given. The proposed theoretical explanation of economic processes makes it possible to create more adequate applied economic models and develop an effective economic policy. |
| Keywords: | диалектика, саморегулирование, экономическое равновесие, экономическая ценность, рыночные цены, критерии оптимальности. dialectics, self-regulation, economic equilibrium, economic value, market prices, optimality criteria. |
| JEL: | A10 C00 D50 E00 |
| Date: | 2018–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:88364&r=mac |
| By: | Joshua Chan (University of Technology Sydney); Luca Benati (University of Bern); Eric Eisenstat (University of Queensland); Gary Koop (University of Strathclyde) |
| Abstract: | We make four contributions to the ‘news versus noise’ literature: (I) We provide a new identification scheme which, in population, exactly recovers news and noise shocks. (II) We show that our scheme is not vulnerable to Chahrour and Jurado’s (2018) criticism about the observational equivalence of news and noise shocks, which uniquely holds if the econometrician only observes a fundamental, and agents’ expectations about it. By contrast, we show that observational equivalence breaks down when the econometrician observes macroeconomic variables encoding information about the signal (and therefore about news and noise shocks), because they are chosen by agents conditional on all information, including the signal itself. (III) We propose a new econometric methodology for implementing our identification scheme, and we show, via a Monte Carlo study, that it has an excellent performance. (IV) We provide several empirical applications of our identification scheme and econometric methodology. Our results uniformly suggest that, contrary to previous findings in the literature, noise shocks play a minor role in macroeconomic fluctuations. |
| Date: | 2018–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:ecowps:41&r=mac |
| By: | McGuinness, Seamus (Economic and Social Research Institute, Dublin); Redmond, Paul (ESRI, Dublin) |
| Abstract: | On the 1st of January 2016 the Irish National Minimum Wage increased from €8.65 to €9.15 per hour, an increase of approximately six percent. We use a difference-in-differences estimator to evaluate whether the change in the minimum wage affected the hours worked and likelihood of job loss of minimum wage workers. The results indicate that the increase in the minimum wage had a negative and statistically significant effect on the hours worked of minimum wage workers, with an average reduction of approximately 0.5 hours per week. The effect on minimum wage workers on temporary contracts was higher at 3 hours per week. We found a corresponding increase in part-time employment of 2 percentage points for all minimum wage workers and 10 percentage points for those on temporary contracts. We find no clear evidence that the increase in the minimum wage led to an in-creased probability of becoming unemployed or inactive in the six-month period following the rate change. |
| Keywords: | minimum wage, hours of work, employment, unemployment |
| JEL: | E24 J22 J23 J31 J42 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11632&r=mac |
| By: | Luigi Bocola (Stanford University, FRB of Minneapolis); Guido Lorenzoni (Northwestern) |
| Abstract: | Modern macroeconomic models with a financial accelerator mechanism are built around two main ingredients: a collateral constraint and incomplete financial markets. The first ingredient implies that shocks affecting the balance sheet of productive agents propagate to the rest of the economy, while the second ingredient guarantees that agents cannot "hedge" these shocks. The commonly held view in the literature is that both ingredients are necessary for financial amplification. In this paper we revisit this view. We study a neoclassical model where risk averse entrepreneurs and households can trade a full set of Arrow securities, subject to a collateral constraint for entrepreneurs. We first show that, because of general equilibrium spillovers, the competitive equilibrium does not feature "perfect hedging" for entrepreneurs. Indeed, states of the world in which entrepreneurial net worth is low and the collateral constraint binds are also states in which households' income and consumption are low. Because households are risk averse, insuring those states requires a risk premium in equilibrium, a force that limits the ex-ante incentives of entrepreneurs to hedge. Numerical simulations show that this force is quantitatively relevant, as under plausible calibrations the competitive equilibrium with complete markets features the same degree of financial amplification as the one with incomplete markets. A social planner facing the same frictions can improve on the competitive equilibrium by subsidizing entrepreneurial savings toward bad states of the world. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:983&r=mac |
| By: | Michael Lamla (ETH Zurich); Damjan Pfajfar (Federal Reserve Board); Lea Rendell (University of Maryland) |
| Abstract: | In this paper we explore the consequences of losing confidence in the price-stability objective of central banks. We propose a new model that shows that losing confidence can lead to both, an inflation as well as a deflationary bias, depending on the perception of the objective function of the central bank. Both biases emerge as a steady state outcomes and increase the burden of the central bank to achieve its mandate. We validate the predictions of the model using a comprehensive new dataset on 50,000 individual observations across 9 countries and can identify and quantify inflation and the deflationary bias as a consequence of losing confidence in central banks objectives. We can confirm the predictions of our model as we can show that inflation bias exists for expectations above the target and a deflationary bias exist for expectations below. As one would expect both inflationary and deflationary bias are more pronounced for medium-run than short-run inflation expectations. Furthermore, we also test the prediction of the model that conservative or inflation-targeting central banks reduces the the magnitude of inflation and deflationary bias and find supporting evidence in our dataset. Among the Eurozone countries in our sample we can document, despite the same experience with the ECB, significant differences in levels of confidence and responses to it. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:945&r=mac |
| By: | Saroj Bhattarai (University of Texas at Austin); Konstantin Kucheryavyy (University of Tokyo) |
| Abstract: | We present a general, competitive open economy business cycle model with capital accumulation, trade in intermediate goods, production externalities in the intermediate and final goods sectors, and iceberg trade costs. Our main theoretical result shows that models developed in the modern international trade literature that feature comparative advantage, monopolistic competition and cost of entry, and firm heterogeneity and cost of exporting are isomorphic, in terms of aggregate equilibrium, to versions of this competitive dynamic model under appropriate restrictions on the externalities. In particular, the restrictions apply on the overall scale of externalities, the split of externalities between the different factors of production, and the identity of the sectors with production externalities. Our quantitative exercise assesses whether various restricted versions of the general model, in forms they are typically considered in the literature, are able to resolve the well-known aggregate empirical puzzles in international business cycle models. Our theoretical result on isomorphism between models then provides insights on why they fail to do so in many instances. We thus provide a unified theoretical and quantitative treatment of the international business cycles and trade literatures in a general dynamic framework. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:1259&r=mac |
| By: | Ehrlich, Isaac (University at Buffalo, SUNY); Cook, Adam (State University of New York); Yin, Yong (University at Buffalo, SUNY) |
| Abstract: | Maddison's international panel data show that technically it was the faster growth rate of the US economy that led to its overtaking the UK as economic superpower. We explore the contributing factors. Identifying the land-grant colleges system triggered by the 1862/1890 Morrill Acts (MAs) as a major contributor, we develop this hypothesis theoretically and test it via difference-in-differences regression analyses viewing the MAs as the experiment, the US or US states as treatment groups, and the UK as chief control group in the country-level comparisons. Using national and state-level data, we estimate that the MAs produced sizeable educational and economic returns which catapulted the US into its leading status. |
| Keywords: | aggregate human capital, public investment, education and research institutions, economic development, endogenous growth; institutions and growth, comparative studies of countries, economic history-education |
| JEL: | N3 E24 H42 I2 O1 O57 O4 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11647&r=mac |
| By: | Luís Martins; Manuel Coutinho Pereira |
| Abstract: | This paper uses a large multi-country database with data from the OECD PISA program to disentangle the effects of birthdate on educational performance. As far as age effects are concerned, we conclude that children are disadvantaged because they are the youngest in class (relative age effect), not because they are young per se. Our findings go against delaying mandatory school entry as a general policy, as there is no gain from a rise in entry age - keeping age differences among students constant - to make up for the shortening of length of schooling. This evidence that postponing school entry postpones learning is more marked for children belonging to disadvantaged households. In contrast, the relative age effect does not interact with family background, and remains stable across school entry age cohorts. The size of this effect, measured at the age 15 is not large, but its interaction with early grade retention and tracking may enhance long-term effects. Finally, we do not detect an association between birthdate and achievement originating in unobservable characteristics of students. |
| JEL: | E21 E60 F40 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201706&r=mac |
| By: | Asier Mariscal (U.Carlos III-Madrid) |
| Abstract: | The last 30 years in the US have seen: i- A rise in inequality with flat wages at the bottom of the wage distribution, ii-A reduction in the labor share (LS) of national income and, iii-A notable decline in the price of Information Technology (IT) capital. I show these facts can be rationalized with optimal capital choices of firms organized as hierarchies. The theory is consistent with capital-labor complementarity, for each skilled and unskilled labor, as in the data. In the model, cheaper IT capital enables faster managerial problem solving, and reallocates knowledge and wages away from the low levels of the hierarchy towards the higher ones. Larger firms use more IT capital, over time they reduce their marginal cost and expand more than smaller firms, hence capturing a larger share of aggregate value added. In the quantitative section, I discipline the model with firm-level moments and explain key features of firm organization. As firm value added increases there is 1-a lower LS of production costs, 2- a higher capital-labor ratio, and 3-higher wages conditional on the numbers of layers. Within a firm, as IT prices fall: 4- wage declines at low layers and increases at top layers, 5-increasing employment shares of managers; and, at the aggregate level, as a share of GDP: 6-increasing LS for managers, 7-declining LS for plant-level workers. Finally, the model explains: 8- the decline in the LS of value added of large firms, and 9-the decline in the aggregate LS. The last two results require both IT price declines and increasing mark-ups, the latter smaller than in recent demand-based explanations. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:1076&r=mac |
| By: | David Argente (University of Chicago); Munseob Lee (University of California San Diego); Sara Moreira (Northwestern University) |
| Abstract: | We exploit detailed product- and firm-level data to study the size of firms and products over their life cycles. We build a dataset that contains information on the product portfolio of each firm in the consumer goods sector over the period 2006-2015. We document that, with the exception of the first few quarters, sales of products decline at a steady pace throughout most of their life cycle. These dynamics are robust across very heterogenous types of products, and contrast with the profile of firms, which grow throughout most of their life cycle. Motivated by these results, we create a statistical framework of firm growth as a function of the vintages of products. Using this decomposition we quantify, for young and mature firms, the importance of new product introduction (both the intensive and extensive margins) and the impact of decreasing sales of older vintages. We find that firms must grow by continuously adding products that generate sufficiently large revenue in order to compensate the reduction in revenue accruing from previous vintages of products. We structurally estimate a model of heterogeneous multiproduct firms and decompose sales over the life cycle of the product to understand the mechanisms behind their decline. Our results indicate that demand-side factors are behind the decline in sales of products and are consistent with preferences for newer vintages of products. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:1174&r=mac |
| By: | Eric Eisenstat (University of Queensland); Joshua C.C. Chan (University of Technology Sydney); Rodney W. Strachan (University of Queensland) |
| Abstract: | This paper proposes a new approach to estimating high dimensional time varying parameter structural vector autoregressive models (TVP-SVARs) by taking advantage of an empirical feature of TVP-(S)VARs. TVP-(S)VAR models are rarely used with more than 4-5 variables. However recent work has shown the advantages of modelling VARs with large numbers of variables and interest has naturally increased in modelling large dimensional TVP-VARs. A feature that has not yet been utilized is that the covariance matrix for the state equation, when estimated freely, is often near singular. We propose a speci?cation that uses this singularity to develop a factor-like structure to estimate a TVP-SVAR for 15 variables. Using a generalization of the re-centering approach, a rank reduced state covariance matrix and judicious parameter expansions, we obtain e¢ cient and simple computation of a high dimensional TVP-SVAR. An advantage of our approach is that we retain a formal inferential framework such that we can propose formal inference on impulse responses, variance decompositions and, important for our model, the rank of the state equation covariance matrix. We show clear empirical evidence in favour of our model and improvements in estimates of impulse responses. |
| Keywords: | Large VAR; time varying parameter; reduced rank covariance matrix |
| JEL: | C11 C22 E31 |
| Date: | 2018–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:uts:ecowps:43&r=mac |
| By: | Andrii Parkhomenko (University of Southern California, Marshall School of Business) |
| Abstract: | Regulatory restrictions on housing supply have been rising in recent decades in the U.S. and have become a major determinant of house prices. What are the implications of the rise in regulation for aggregate productivity, and for wage and house price dispersion across metropolitan areas? To answer this question, I build a general equilibrium model with multiple locations, heterogeneous workers and endogenous regulation. Regulation is decided by voting: homeowners want more regulation and renters want less. In locations with faster exogenous productivity growth, labor supply and house prices also grow more rapidly. Homeowners in these places vote for stricter regulation, which raises prices further and leads to greater price dispersion. High-skilled workers, being less sensitive to housing costs, sort into productive places, which leads to larger wage dispersion. Thus, wage and house price differences are amplified by regulation choices. To quantify this amplification effect, I calibrate the model to the U.S. economy and find that the rise in regulation accounts for 23% of the increase in wage dispersion and 85% of the increase in house price dispersion across metro areas from 1980 to 2007. I find that if regulation had not increased, more workers would live in productive areas and output would be 2% higher. I also show that policy interventions that weaken incentives of local governments to restrict supply could reduce wage and house price dispersion, and boost productivity. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:275&r=mac |
| By: | Gordon Menzies (University of Technology Sydney); Thomas Simpson (Blavatnik School of Government, University of Oxford); Donald Hay (University of Oxford); David Vines (Department of Economics, Balliol College, St Antony’s College, and Institute for New Economic Thinking (INET) at the Oxford Martin School, University of Oxford; Crawford School of Public Policy, Australian National University; and Centre for Economic Policy Research) |
| Abstract: | Bonuses in finance represents a bad equilbrium among multiple equilibria. Motivating agents with bonuses can promote untruthfulness, via motivation crowding out, justifying the decision to pay them bonuses. In the equilibrium that works in other professions, moral norms are upheld enough to not require bonuses. Escaping the bad equilibrium is difficult if banks engage in an ‘optimal’ amount of deceit (moral optimization). Restoring trust instead requires that untruthfulness be ruled out a priori (moral prioritization). Reinstating truth telling in finance must contend with a tendency for ethics to be confined to the private domain and motivation crowding out in finance. |
| Keywords: | Bank Bonuses; Trust; Deregulation |
| JEL: | G21 G28 H12 E52 |
| Date: | 2018–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:ecowps:48&r=mac |
| By: | Harold Cole; Daniel Neuhann; Guillermo Ordoñez |
| Abstract: | How does investors' information about a country's fundamentals, and the fact that this information may be asymmetrically held, affect a country's financing cost? Motivated by this question, and by the observation that sovereign bonds are usually auctioned in large lots to a large number of potential investors, we develop a novel model of auctions with asymmetric information that relies on price-taking and rational expectations. We first characterize sovereign bond prices for different degrees of asymmetric information under two commonly-used protocols: discriminatory-price auctions and uniform-price auctions. We show that there is trade-off between these protocols if information is sufficiently asymmetric: expected bond yields are higher when pricing is discriminatory, but yield volatility is higher when pricing is uniform. We then study endogenous information acquisition and find that (i) discriminatory auctions may display multiple welfare-ranked informational equilibria, and (ii) investors are less likely to acquire information in uniform auctions. |
| JEL: | D4 D44 D53 E4 E5 F34 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24890&r=mac |
| By: | YENER GÖK, ZEYNEP |
| Abstract: | Parasal iktisat literatüründeki modeller genellikle paranın değerli olduğunu kabul ederek para miktarını ilgi odağına alan modellerdir. Yeni Parasalcı İktisat akımının görüşüne göre ise parasal teori ve politika analizinde gelişme sağlanabilmesi için karşılıksız paraya değişim aracı rolü veren - yani aslen değersiz bir varlık olan karşılıksız paranın değişim işlemlerinde nasıl değişim aracı rolü üstlendiğini gösteren, açık modeller kurulması gerekmektedir. Bunun için dağınık piyasada değişim sürecinin nasıl geliştiğini, oyuncuların faydalarını maksimize etmeleri sürecinde neler olduğunu modelleyebilmek gerekir. Bu modelleme için en uygun araç arama ve eşleştirme yaklaşımıdır. Bu çalışmada; değişim sürecinin ve özellikle paranın değişim aracı rolünün modellenebilmesini sağlayan denge arama modelleri incelenmiştir. |
| Keywords: | Yeni Parasalcılık, Arama ve Eşleşme Teorisi, Para Teorisi |
| JEL: | B41 E40 |
| Date: | 2018–08–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:88349&r=mac |
| By: | Silke Stapel-Weber; Paul Konijn; John Verrinder; Henk Nijmeijer |
| Abstract: | Globalisation presents significant statistical challenges, particularly for small and open economies in terms of measuring macroeconomic level and growth indicators and communicating the results in a meaningful way. In the aftermath of the so-called “Irish case”, Eurostat with its partners in the European Statistical System is looking into how, within the existing accounting frameworks, additional indicators and presentations of the accounts that allow users to follow domestic and global developments could be conceived. The work takes account of recommendations which have been developed by a high level group in Ireland for improving insight into the Irish economy2. However it goes beyond that, as any new indicator or breakdown, particularly in a European context, should be comparable across countries and not be seen as a GDP or GNI "a la carte" for each country to choose from under specific circumstances. The paper presents the findings of the respective European work streams to date in terms of methodology, indicators, building new statistical infrastructural elements and new cooperation models between statistical compilers. It invites a critical review of the suggestions put forward. |
| JEL: | E01 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24859&r=mac |